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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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DIGITAL COMMERCE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 7389 54-1766836
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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575 HERNDON PARKWAY, HERNDON, VIRGINIA 20170
(703) 456-6500
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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ROBERT E. CRAWFORD, JR., ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
575 HERNDON PARKWAY, HERNDON, VIRGINIA 20170
(703) 456-6500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
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BRUCE A. CHEATHAM, ESQ. ROBERT E. CRAWFORD, JR., ESQ. NEIL GOLD, ESQ.
JAMES R. GRIFFIN, ESQ. DIGITAL COMMERCE CORPORATION BEVERLY CHANEY, ESQ.
WINSTEAD SECHREST & MINICK P.C. SENIOR VICE PRESIDENT, FULBRIGHT & JAWORSKI L.L.P.
5400 RENAISSANCE TOWER SECRETARY AND GENERAL COUNSEL 666 FIFTH AVENUE
1201 ELM STREET 575 HERNDON PARKWAY NEW YORK, NEW YORK 10103
DALLAS, TEXAS 75270 HERNDON, VIRGINIA 20170 (212) 318-3000
(214) 745-5400 (703) 456-6500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [X]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, par value $0.01 per share.................... $115,000,000 $30,360.00
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) of 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
DIGITAL COMMERCE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION , 2000.
[DCC LOGO]
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SHARES
COMMON STOCK
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This is the initial public offering of Digital Commerce Corporation. We are
offering shares of our common stock at a price between $ and $
per share.
Prior to this offering, there has been no public market for our common stock. We
anticipate our common stock will be approved for quotation on the Nasdaq
National Market under the symbol "DCCN."
SEE "RISK FACTORS" BEGINNING ON PAGE TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PER SHARE TOTAL
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Initial public offering price $ $
Underwriting discount $ $
Proceeds, before expenses, to Digital Commerce $ $
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If the underwriters sell more than shares of common stock, the
underwriters have the option to purchase up to an additional shares from
us at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares to purchasers on , 2000.
DEUTSCHE BANC ALEX. BROWN ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
PROSPECTUS DATED , 2000.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that
investors should consider before investing in our common stock. Investors should
read the entire prospectus carefully.
DIGITAL COMMERCE CORPORATION
We are a leading provider of business-to-government e-commerce solutions
for the procurement of products and services. Our solutions enable government
entities at the federal, state and local levels to locate vendors, compare
prices, negotiate transaction terms, and execute and track purchases. We provide
government entities and buyers with a simple, cost-effective and reliable method
of implementing business-to-government e-commerce. Our solutions also enable
vendors to access multiple government buyers efficiently, automate the
transaction process and comply with government-specific purchasing requirements.
By leveraging the capabilities of the Internet to address the special
characteristics of government purchasing, we seek to streamline procurement and
lower the costs of transactions for the government and its vendors.
We currently serve more than 13,000 registered users at the federal level,
including buyers in the U.S. Departments of Defense, Treasury, Justice and
Health and Human Services. In addition, our solutions are used at the state and
local levels by the State of Connecticut and the Fairfax County, Virginia School
Board. As of March 31, 2000, we had 260 vendors listing more than 2.6 million
different products and services on our federal e-marketplace, and we had
agreements with an additional 420 vendors to list their products and services.
Nationally recognized vendors using our solutions include CompUSA, Office Depot,
Polaroid and Xerox.
OUR MARKET
According to the Department of Commerce, federal executive departments and
agencies and state and local governments together purchased approximately $400
billion of goods and services in 1999. As in the private sector, government
procurement has historically been paper-based and subject to considerable
inefficiency. In addition, we believe that the government procurement process
has special characteristics that include:
- a high degree of fragmentation, with more than 60 federal entities and
over 300,000 vendors involved in procurement at the federal level;
- multiple methods of procurement;
- entity-specific forms and requirements;
- extensive record keeping; and
- special policy objectives, including consideration for small and
disadvantaged businesses.
The U.S. government has adopted several initiatives to promote e-commerce,
including amending the Office of Federal Procurement Policy Act to mandate that
federal government buyers use e-commerce for procurement to the maximum extent
practicable and cost-effective. We believe that these initiatives and the
special characteristics of the procurement process make government procurement
particularly well-suited for our products.
OUR PRODUCTS
FEDERAL
- FedCenter.com. FedCenter is a web-based marketplace linking federal
government buyers and vendors for purchases of products and services.
FedCenter is free to government buyers and is a cost-effective way to
comply with the Congressional mandate to use e-commerce. Vendors use
FedCenter to list their products and services in a customized FedCenter
web site, or FedSite, linked to the FedCenter marketplace.
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- MarketLink. MarketLink is a software product that enables vendors to
identify and respond to requests for quotes and requests for proposals
from government entities.
STATE AND LOCAL
- OrderLink. OrderLink is a web-based purchasing solution that enables
state and local government buyers to transact with vendors through
pre-negotiated contracts.
- StateGovCenter.com. StateGovCenter is a web-based solution that enables
state and local government buyers to purchase products and services
through pre-negotiated contracts or in the open market through vendors'
price schedules.
OUR STRATEGY
We seek to become the leading provider of e-commerce solutions to
government entities by implementing the following key strategies:
- increasing usage by federal government buyers;
- penetrating state and local markets;
- expanding our base of vendors;
- enhancing the functionality and services of our solutions; and
- pursuing strategic alliances.
RECENT DEVELOPMENTS
Sale of Series D Preferred Stock. In March 2000, we sold 8,709,902 shares
of our Series D redeemable convertible preferred stock for $50.8 million to a
group of investors, including Weston Presidio Capital, Highland Capital Partners
and SAP Investments. The proceeds are being used to fund working capital. At the
closing of this offering, all of our outstanding series of preferred stock will
automatically convert into 16,724,131 shares of our common stock.
Spin-Off of PowerTrust.com, Inc. In 2000, we spun off
PowerTrust.com, our wholly-owned subsidiary, to our then existing security
holders. PowerTrust.com was formed to assist residential consumers in
deregulated energy markets in accessing alternative sources of natural gas. We
determined that PowerTrust.com was not part of our long-term strategic plan. Our
financial information in this prospectus excludes the assets, liabilities and
operations of PowerTrust.com.
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Our principal executive offices are located at 575 Herndon Parkway,
Herndon, Virginia 20170. Our telephone number is (703) 456-6500, and our
Internet web sites are www.digitalcommerce.com, www.fedcenter.com,
www.stategovcenter.com, orderlink.dmx.com and www.mygovclub.com. The information
on our web sites is not a part of this prospectus.
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THE OFFERING
Shares offered by Digital Commerce......... shares
Common stock to be outstanding after this
offering................................... shares(1)
Estimated net proceeds to Digital
Commerce...................................
Use of proceeds............................ For general corporate purposes,
principally additional sales and marketing expenses, investing in our technology
and working capital.
Proposed Nasdaq National Market symbol..... DCCN
Risk Factors............................... See "Risk Factors" for a
discussion of factors you should
carefully consider before
deciding to invest in shares of
our common stock.
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(1) The number of shares of our common stock that will be outstanding after this
offering is based on 7,749,598 shares of common stock outstanding as of
March 31, 2000 and gives effect to the conversion of all of our outstanding
preferred stock into a total of 16,724,131 shares of common stock upon the
closing of this offering. It excludes:
- shares of common stock issuable upon exercise of stock options
outstanding as of , 2000 at a weighted average exercise price of
$ per share;
- shares of common stock available for future grant under our stock
option plans as of , 2000; and
- 884,920 shares of common stock issuable upon exercise of warrants
outstanding as of March 31, 2000 that are currently exercisable at an
exercise price of $12.00 per share.
Except as otherwise noted, all information in this prospectus assumes no
exercise of the underwriter's overallotment option.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth our consolidated statement of operations
data for the periods presented. We acquired the business of Datamatix in August
1999. The unaudited pro forma consolidated statement of operations data gives
effect to the acquisition of Datamatix as if it occurred on January 1, 1999.
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THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
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PRO FORMA
1997 1998 1999 1999 1999 2000
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(UNAUDITED) (UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Revenues.......................... $ 518 $ 1,375 $ 1,437 $ 2,731 $ 241 $ 1,599
Gross profit (loss)............... (462) 133 467 1,443 18 969
Loss from operations.............. (5,717) (11,386) (14,738) (15,164) (2,490) (9,189)
Net loss.......................... (6,192) (8,597) (16,093) (16,545) (2,676) (9,490)
Net loss per share -- basic and
diluted......................... (11.86) (5.87) (3.31) (3.26) (0.61) (1.23)
Weighted average shares
outstanding -- basic and
diluted......................... 522,247 1,464,255 4,867,685 5,086,253 4,380,737 7,720,303
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The following table sets forth a summary of our consolidated balance sheet data
at March 31, 2000:
- on an actual basis; and
- on an as adjusted basis to reflect the conversion of our outstanding
preferred stock into 16,724,131 shares of common stock upon the closing
of this offering and the sale of shares of common stock in this
offering at an assumed initial public offering price of $ per
share, after deducting underwriting discounts and commissions and our
estimated offering expenses of $ million.
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MARCH 31, 2000
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AS
ACTUAL ADJUSTED
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(UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $41,455
Working capital............................................. 32,801
Total assets................................................ 48,104
Total indebtedness.......................................... 1,665
Redeemable convertible preferred stock...................... 47,762
Total stockholders' deficit................................. (10,752)
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RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information set forth in this prospectus, before purchasing shares of
our common stock. Each of these risk factors could adversely affect the value of
an investment in our common stock. This investment involves a high degree of
risk.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF LOSSES, ANTICIPATE CONTINUED LOSSES AND MAY BE UNABLE TO
ACHIEVE POSITIVE CASH FLOW OR PROFITABILITY.
We have never been profitable and expect to continue to incur losses for
the foreseeable future. It is possible that we will never achieve positive cash
flow or profitability. We have incurred net losses in each accounting period
since our inception in June 1995. Our net loss was $16.1 million in 1999 and
$9.5 million in the three months ended March 31, 2000. As of March 31, 2000, we
had an accumulated deficit of $47.3 million. We anticipate that our losses will
increase in the future, as we expect substantial increases in our costs and
expenses as a result of:
- expanding our sales force;
- marketing and promoting our products and services, including building
recognition of our brand name;
- expanding and enhancing our operating infrastructure, including hardware
and software systems and administrative personnel;
- extending the functionality and scope of our e-commerce solutions; and
- expanding our services.
BECAUSE WE HAVE ONLY RECENTLY INTRODUCED OUR SOLUTIONS, YOU MAY HAVE DIFFICULTY
ASSESSING OUR BUSINESS AND OUR FUTURE PROSPECTS.
Prior to December 1998, our operations consisted primarily of consulting
services unrelated to our current business and the planning and development of
our government e-commerce solutions. We introduced the current version of our
primary product, FedCenter, to the public in January 1999. Because we have
introduced our solutions only recently, it is difficult to evaluate our business
and our future prospects. In addition, due to our limited operating history, we
believe period-to-period comparisons of our revenues and results of operations
are not meaningful.
OUR ABILITY TO GENERATE REVENUES AND PROFITS IS UNPROVEN.
Our business is new and our ability to generate revenues or profits from
the development of our solutions is unproven. Our business is focused on the
business-to-government e-marketplace. It is difficult to predict whether
government buyers will accept our e-marketplaces as a viable e-commerce
procurement solution. Even if government buyers use our solutions, we cannot
predict how much revenue we can expect to generate. It is also difficult to
predict whether vendors will use our e-marketplaces. We have entered into the
majority of our vendor contracts only within the last six months and
transactions on our e-marketplaces to date have been minimal. Our business will
be seriously harmed, and we may fail entirely, if buyers and vendors do not use
our e-marketplaces.
In addition, as a result of our limited operating history, the emerging
nature of our market and the evolving nature of our business, we are unable to
forecast accurately our revenues. We incur expenses based predominantly on
operating plans and estimates of future revenues. Our
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expenses are, to a large extent, fixed. We may be unable to adjust our spending
in a timely manner to compensate for any unexpected revenue shortfalls.
Accordingly, a failure to meet our revenue projections would have an immediate
and negative impact on our profitability.
SIGNIFICANT CHANGES IN THE CONTRACTING OR FUNDING POLICIES OF GOVERNMENT
ENTITIES COULD MATERIALLY AND ADVERSELY AFFECT OUR OPERATIONS.
Our business is premised on the current procurement process utilized by
government entities. We believe the success and development of our business will
continue to depend on significant purchases by government entities. Even
temporary changes in government contracting or funding policies could directly
affect our financial performance. Among the factors that could materially and
adversely affect purchases by government entities and contracting programs are:
- changes in the governmental procurement processes or requirements;
- curtailment of the use of technology by governmental agencies in their
procurement function;
- budgetary constraints affecting governmental spending generally, or
specific departments or entities in particular, and changes in fiscal
policies or available funding;
- increased privatization of government services and the associated
procurement;
- the adoption of new restrictive laws or regulations;
- governmental shutdowns, such as the one that occurred during the federal
government's 1996 fiscal year; or
- a downturn in general economic conditions.
These or other factors could cause government entities to reduce or curtail
their purchases and could materially and adversely affect our business and your
investment.
GOVERNMENT ENTITIES AND VENDORS THAT HAVE ALREADY INVESTED SUBSTANTIAL RESOURCES
IN TRADITIONAL METHODS OF PROCUREMENT OR IN-HOUSE E-COMMERCE SOLUTIONS MAY BE
RELUCTANT TO ADOPT OUR E-COMMERCE SOLUTIONS.
Our business is premised on our ability to increase the use of our
e-commerce solutions by government entities and our ability to expand our vendor
base. Government entities that have developed, or in the future develop, their
own e-commerce procurement solutions may be reluctant to adopt our solutions. In
addition, vendors that have developed in-house e-commerce solutions to supply
products and services to their customers may be reluctant to use our solutions.
The failure of government entities or vendors to adopt our solutions could
materially and adversely affect our business and your investment.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO EXPAND OUR VENDOR AND GOVERNMENT
BUYER BASE.
Our success is dependent in large part on our ability to expand our vendor
base and build a critical mass of products and services offered by these
vendors. To attract and maintain vendors, we must attract a critical mass of
government entities and their procurement agents using our solutions.
Procurement agents must perceive value in our solutions. This depends in part
upon the breadth of the product and service offerings from our vendors. If we
are unable to maintain our existing vendors, add additional vendors and expand
the breadth of products and services offered, the attractiveness of our
solutions to government buyers will be diminished. This could materially and
adversely affect our business and your investment.
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IF WE CANNOT TIMELY AND ACCURATELY ADD NEW VENDORS AND VENDOR DATA, OUR BUSINESS
AND REPUTATION COULD BE MATERIALLY AND ADVERSELY AFFECTED AND WE COULD LOSE
VENDORS.
We establish dedicated sites for our vendors on FedCenter.com and
StateGovCenter.com. As part of that effort, we must enter product information
into our database, categorize the information for search purposes and configure
the vendor's web site. During the three months ended March 31, 2000, we entered
into contracts with vendors to establish web sites at a substantially higher
rate than we were able to activate vendor web sites. Our backlog of vendors with
signed agreements that have not yet been added to our FedCenter web site has
increased from 145 as of December 31, 1999 to 420 as of March 31, 2000. We do
not recognize revenues from a vendor until its information is loaded in our
system and its web site has been activated. We are generally obligated under our
vendor agreements to enter the information into our database and activate the
web site within a specified period of time following delivery from the vendor.
Our current vendor backlog could make it difficult for us to meet our
obligations. Furthermore, if we do not increase our operations staff responsible
for implementing new vendor web sites, our backlog may continue to grow. Timely
loading of product and service information in our database and the activation of
the vendor's web site depends on a number of factors, including the timeliness
and accuracy of the information provided to us by vendors, the file formats in
which the data is provided to us and our ability to automate and expand our
operations to load the data accurately.
IF OUR VENDORS DO NOT SUPPLY US WITH ACCURATE INFORMATION IN A TIMELY MANNER,
OUR BUSINESS COULD SUFFER.
We rely on our vendors to provide us with accurate, complete and up-to-date
information about the products and services they offer, and we do not
independently verify the information they provide. For example, a vendor must
provide us with the type and price of the products and services offered and, if
applicable, its status as a certified small or disadvantaged business
enterprise. If our vendors do not provide us in a timely manner with accurate,
complete and current information about the products and services they offer and
promptly update this information when it changes, our database will be less
useful to government buyers and may not aid them in complying with governmental
regulations. This could reduce our revenues and have a negative effect on our
results of operations and financial condition.
WE DO NOT HAVE LONG-TERM AGREEMENTS WITH OUR VENDORS.
The majority of our vendor agreements are for one year or less. We hope
that our vendors will continue their relationship with us for an extended period
of time. If our vendors decide not to continue to use our solutions, our
business may not become profitable.
OUR SUCCESS DEPENDS ON OUR ABILITY TO CONTINUOUSLY ENHANCE OUR SOLUTIONS.
Our future success will depend on our ability to enhance our solutions and
to continue to develop and introduce new services that keep pace with
competitive introductions and technological developments, satisfy diverse and
evolving government and vendor requirements and otherwise achieve market
acceptance. We may not be successful in developing and marketing future versions
or upgrades of our solutions, including the integration of our federal and state
solutions into comprehensive web sites, or offering new services that respond to
technological advances or new market requirements. Any failure by us to
anticipate or respond adequately to changes in technology and government and
vendor preferences, or any significant delays in our development efforts, could
make our solutions unmarketable or obsolete. This could materially and adversely
affect our business and your investment.
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FAILURE TO RETAIN OUR KEY PERSONNEL COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS AND YOUR INVESTMENT.
Our continued success is highly dependent on the continued services and
contributions of our senior management and other key personnel. In particular,
our success is largely dependent on the following executives:
- Tony Bansal, our President and Chief Executive Officer;
- William H. Seippel, our Executive Vice President and Chief Financial
Officer;
- Gabriel S. Leung, our Senior Vice President and Chief Technology Officer;
- James C. Daly, our Vice President-Sales; and
- Norman W. Montgomery, our Senior Vice President.
Many of our executive officers and other employees have joined us only recently
and have had a limited time to work together. We cannot assure you that they
will be able to work together effectively to manage our growth and operations or
that they will continue to provide services to us. The loss of their services
could adversely affect our planned development and growth and could materially
and adversely affect our business and your investment.
IF WE ARE UNABLE TO ATTRACT AND RETAIN SKILLED PERSONNEL OR EFFECTIVELY TRAIN
AND MANAGE OUR GROWING WORK FORCE, YOUR INVESTMENT COULD BE MATERIALLY AND
ADVERSELY AFFECTED.
Our future success depends on our continuing ability to attract, hire,
train and retain a substantial number of highly skilled managerial, technical,
sales, marketing and customer support personnel. We have increased and expect to
continue to increase the scope of our operations and our work force. We are
particularly dependent on hiring additional personnel to increase our sales,
marketing and technical groups. New hires frequently require extensive training
before they achieve desired levels of productivity. Competition for qualified
personnel is intense, and we may fail to retain or attract enough highly
qualified personnel.
IF WE FAIL TO CONTINUE TO IMPROVE OUR FINANCIAL AND MANAGERIAL CONTROLS AND
REPORTING SYSTEMS AND PROCEDURES, OUR BUSINESS WILL SUFFER AND YOUR INVESTMENT
COULD BE MATERIALLY AND ADVERSELY AFFECTED.
Successful implementation of our business plan requires an effective
planning and management process. Our business will suffer if we do not
effectively manage our growth. We expect that we will need to continue to
improve our financial and managerial controls and reporting systems and
procedures. Our growth has placed, and our anticipated future growth will place,
a significant strain on these controls, systems and procedures.
BECAUSE OUR INDUSTRY IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS TO ENTRY, WE MAY
NOT BE ABLE TO COMPETE EFFECTIVELY.
The e-commerce market is new, rapidly evolving and intensely competitive,
and we expect competition to intensify in the future. Barriers to entry are
minimal and competitors may develop and offer similar services in the future.
Any of these competitors may dominate the market in the future. We expect
additional companies will offer competing e-commerce solutions in the future. We
have encountered and expect to encounter competition from other providers
including:
- government solutions which exist or may be developed, particularly the
General Services Administration's electronic purchasing initiative, GSA
Advantage;
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- e-commerce providers, such as American Management Systems, Inc., eFed,
Free Markets, Inc., GovCon and ProcureNet.com that currently provide
procurement services to government entities;
- e-commerce providers, such as ezGov, govWorks, Inc. and LINK2GOV.com,
that facilitate interaction between government and citizens;
- enterprise software purchasing system providers such as Ariba, Inc.,
Commerce One, Inc., Intelysis Electronic Commerce, Inc. and
PurchasePro.com, Inc., which presently conduct business-to-business
e-commerce and may introduce business-to-government e-commerce services;
- enterprise resource planning software developers such as Oracle
Corporation, PeopleSoft, Inc., SYSCOM Incorporated and SAP, which are
developing software that can be used as a platform for electronic
procurement with integrated back-end systems;
- consulting firms, such as Andersen Consulting, CACI, Computer Sciences
Corporation, Electronic Data Systems, IBM, Science Applications
International Corporation and Unisys; and
- e-commerce web sites of business retailers, which may also be used by
government buyers.
Many of our current and potential competitors have longer operating
histories, larger customer bases and greater brand recognition in business and
Internet markets. They also have significantly greater financial, marketing,
technical and other resources than we do. In addition, other e-commerce service
providers may be acquired by, receive investments from or enter into other
commercial or strategic relationships with larger, better-established and
better-financed companies. Increased competition may result in reduced operating
margins, loss of market share and diminished value in our brand, any of which
could materially and adversely affect your investment. New technologies and the
expansion of existing technologies may increase the competitive pressures on us
by enabling our competitors to offer a similar but lower-cost service or
services with more or expanded features. We cannot assure you that we will be
able to compete successfully against current and future competitors.
IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR
COMPETITORS MAY BE ABLE TO DUPLICATE OUR SERVICES.
Our success and ability to compete depend on our ability to develop and
maintain the proprietary aspects of our technology. We rely in part upon our
proprietary technology, including various software programs, to operate our
solutions. If we fail to protect our intellectual property rights adequately,
our competitors might be able to duplicate our solutions. We have not applied
for patents on our technology and processes. We are applying for trademark
registrations for some of our brand names and our marketing materials are
copyrighted. These protections may not be adequate. Although we require our
employees to enter into confidentiality agreements and some key employees are
subject to non-competition agreements, these agreements may not satisfactorily
safeguard our intellectual property.
Third parties may infringe on or misappropriate our intellectual property
rights or may independently develop similar proprietary information. Any
infringement, misappropriation or independent development could harm our future
financial results. We may, at times, have to incur significant legal costs and
spend time defending our intellectual property rights. Any litigation efforts,
whether successful or not, would divert both time and resources from the
operation and growth of our business.
There is also significant uncertainty regarding the applicability of
existing laws regarding matters such as property ownership, copyrights and other
intellectual property rights to the
9
<PAGE> 12
Internet. The vast majority of the legislation related to these issues was
adopted prior to the advent of the Internet and, as a result, this legislation
does not contemplate or address the unique issues of the Internet and related
technologies. We cannot be sure what laws and regulations may ultimately affect
our business or intellectual property rights.
OTHERS MAY ASSERT THAT OUR TECHNOLOGY INFRINGES ON THEIR INTELLECTUAL PROPERTY
RIGHTS.
The defense of any claims of infringement made against us by third parties
could involve significant legal costs and require our management to divert time
from our business operations. This could have a material adverse effect on your
investment. If we are unsuccessful in defending any claims of infringement, we
may be forced to obtain licenses or to pay royalties. We may not be able to
obtain necessary licenses on commercially reasonable terms or at all. If we fail
to obtain necessary licenses or other rights, or if these licenses are too
costly, our operating results may suffer either from reductions in revenues
through our inability to serve customers or from increases in costs to license
third-party technology.
FAILURES OF THE INTERNET, OUR HARDWARE SYSTEMS OR OUR SOFTWARE COULD RESULT IN
SERVICE AND DEVELOPMENT DELAYS THAT COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS AND YOUR INVESTMENT.
A significant disruption in our online solutions could seriously undermine
our vendors' and buyers' confidence in our business. During these disruptions,
participants may lose their online connection or transactions may be delayed.
Any interruptions in our service may undermine confidence in the reliability of
our business. Our solutions require the successful technical operation of the
Internet and an entire chain of software, hardware and telecommunications
equipment. This chain includes the personal computers and network connections of
vendors and government buyers, our network servers, operating systems, databases
and networking equipment. A failure of the Internet or any element in this chain
could partially or completely disrupt our business.
WE DO NOT MAINTAIN A REDUNDANT DATA CENTER.
We are dependent on a third-party Internet service provider to host our
solutions and do not maintain a redundant data center at a separate location. In
addition, hardware and software are potentially vulnerable to damage or
interruption from human error, sabotage, fire, flood, earthquake, power loss,
telecommunications failure and similar events. We do not have a formal disaster
recovery plan and do not carry sufficient business interruption insurance to
compensate us for all of the losses that may occur as a result of any system
failure or disruption.
OTHERS MAY REFUSE TO LICENSE IMPORTANT TECHNOLOGY TO US OR MAY INCREASE THE FEES
THEY CHARGE US FOR THIS TECHNOLOGY.
We rely on third parties to provide us with portions of the software and
hardware used to deliver our solutions. For example, we use GlobalCenter for the
hosting of our web sites and we license a significant portion of our internal
software systems from InterWorld Corporation. These third parties may increase
their fees significantly or refuse to license their software or provide their
hardware to us. While other vendors may provide the same or similar technology,
we cannot be certain that we can obtain the required technology on acceptable
terms, if at all. If we are unable to obtain required technology at a reasonable
cost, our growth prospects and operating results may be harmed and our business
and your investment materially and adversely affected.
10
<PAGE> 13
WE MAY NOT BE ABLE TO PREDICT ACCURATELY THE RATE OF INCREASE IN THE USAGE OF
OUR E-COMMERCE SOLUTIONS, WHICH MAY AFFECT OUR ABILITY TO EXPAND AND UPGRADE OUR
SYSTEMS.
Our ability to maintain our e-commerce marketplaces successfully and
provide acceptable levels of customer service largely depends on the efficient
and uninterrupted operation of our computer and communication systems. Traffic
in our e-marketplaces may increase to the point where we must expand and upgrade
some of our transaction processing systems and related hardware and software. If
we do not upgrade our systems and related hardware and software appropriately,
we may experience degraded performance, which could materially and adversely
affect our business and your investment.
OUR QUARTERLY RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, AND OUR STOCK
PRICE MAY DECLINE IF WE DO NOT MEET EXPECTATIONS OF INVESTORS AND ANALYSTS.
We expect our quarterly operating results will fluctuate significantly due
to many factors, a number of which are outside of our control, including:
- demand for and market acceptance of our e-commerce solutions;
- seasonal fluctuations in the government procurement cycle;
- inconsistent growth, if any, of our vendor base;
- timing of our recognition of revenues;
- variations in the dollar value of transactions effected through our
e-marketplaces; and
- introduction of new services or enhancements, or changes in pricing
policies, by us and our competitors.
We believe quarterly revenues, expenses and operating results are likely to
vary significantly in the future, that period-to-period comparisons of results
of operations are not necessarily meaningful and that, as a result, such
comparisons should not be relied upon as indications of future performance. Due
to these and other factors, it is possible that our operating results will be
below market analysts' expectations in some future quarters, which could cause
the market price of our stock to decline.
WE COULD BE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS AND THIRD-PARTY
LIABILITY CLAIMS RELATED TO PRODUCTS AND SERVICES PURCHASED THROUGH OUR
E-COMMERCE SOLUTIONS.
Our vendors use our e-commerce solutions to provide products and services
and our government buyers use our solutions for the procurement of these
products and services. Any errors, defects or other performance problems in
these products and services could result in financial or other damages to our
vendors and government buyers. A product liability claim brought against us,
even if not successful, would likely be time consuming and costly and could
materially and adversely harm our business, financial results and your
investment.
WE MAY SEEK TO EXPAND OUR BUSINESS THROUGH ACQUISITIONS THAT COULD RESULT IN
DIVERSION OF RESOURCES AND EXTRA EXPENSES, WHICH COULD DISRUPT OUR BUSINESS AND
HARM OUR FINANCIAL CONDITION.
We may in the future pursue acquisitions of businesses, services or
technologies, or the establishment of joint venture arrangements, to expand our
business. The negotiation of potential acquisitions or joint ventures as well as
the integration of an acquired or jointly
11
<PAGE> 14
developed business, technology or services could cause a diversion of
management's time and our resources. Future acquisitions could result in:
- potentially dilutive issuances of equity securities;
- the incurrence of debt and contingent liabilities;
- amortization of goodwill and other intangibles; and
- other acquisition-related expenses.
For example, our acquisition of substantially all of the assets of
Datamatix will result in the amortization of approximately $1.3 million of
goodwill over the three year period ending in August 2002. Acquired businesses
or joint ventures may not be successfully integrated with our operations. If any
acquisition or joint venture were to occur, we may not receive the intended
benefits of the acquisition or joint venture. If future acquisitions disrupt our
operations, our business may suffer.
WE MAY BE REQUIRED TO ISSUE ADDITIONAL WARRANTS TO SOME OF OUR EXISTING
WARRANTHOLDERS.
One of our warrantholders has alleged that a financing transaction in 1998
triggered the anti-dilution provisions of his warrants. As a result, he alleges
that he is entitled to receive additional warrants to reverse the effect of this
alleged dilution. A substantial amount of our outstanding warrants contain
similar anti-dilution provisions. If this allegation proves to be correct, we
believe we could be required to issue additional warrants to purchase
approximately 120,000 shares of our common stock. However, if a court determined
that the anti-dilution provision of these warrants had been triggered, it could
decide that a higher number of warrants should be issued. In addition, we may be
liable to persons who purchased our securities after this financing transaction
based on representations made by us regarding our then current capitalization.
If we are found liable for a breach of these representations, your investment
could be materially and adversely affected.
WE MAY RECOGNIZE GAIN AND INCUR FEDERAL INCOME TAX IN CONNECTION WITH OUR
SPIN-OFF OF POWERTRUST.
In 2000, we distributed all of the stock of our wholly-owned
subsidiary, PowerTrust.com, Inc., to our then existing security holders. As a
result of this distribution, we will recognize gain for federal income tax
purposes if the value of the PowerTrust stock distributed exceeds our tax basis
in the stock. We have obtained a third-party valuation of PowerTrust to assist
us in calculating the tax impact, if any, of the spin-off. However, the IRS is
not bound by this valuation. If this valuation is challenged by the IRS and the
value of PowerTrust is determined to be higher than the third-party valuation,
we may be required to recognize more gain and pay additional federal income
taxes.
RISKS RELATED TO THE E-COMMERCE INDUSTRY
OUR SUCCESS DEPENDS ON THE INTERNET'S ABILITY TO ACCOMMODATE GROWTH IN
E-COMMERCE.
The use of the Internet for retrieving, sharing and transferring
information among businesses, buyers and vendors has only recently begun to
develop. If the Internet is not able to accommodate growth in e-commerce, our
business will suffer. The growth in the use of the Internet has caused periods
of performance degradation. Our ability to sustain and improve our solutions is
limited, in part, by the speed and reliability of the networks operated by third
parties. The growth of the market for our solutions is dependent on the
continuous expansion and improvement of the Internet infrastructure.
12
<PAGE> 15
SECURITY RISKS OF ELECTRONIC COMMERCE MAY DETER USE OF OUR PRODUCTS AND
SERVICES.
The secure transmission of information over public networks is required to
conduct e-commerce. If our customers are not confident in the security of
e-commerce, they may not effect transactions on our e-marketplaces. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments could result in the compromise or breach of the software we use to
protect transactions on our e-marketplaces or information in our databases.
Anyone who is able to circumvent our security measures could misappropriate,
modify or destroy proprietary information or confidential customer information,
as well as place false orders or cause interruptions in our operations. We may
be required to incur significant costs to protect against security breaches or
to alleviate problems caused by breaches. A well-publicized compromise of
security could deter people from using the Internet to conduct transactions that
involve transmitting confidential information. Our failure to prevent security
breaches, or well-publicized security breaches affecting the Internet in
general, could materially and adversely affect our business and your investment.
THE INABILITY TO ACQUIRE OR MAINTAIN EFFECTIVE WEB DOMAIN NAMES COULD CREATE
CONFUSION AND DIVERT TRAFFIC AWAY FROM OUR E-MARKETPLACES.
We currently hold various Internet web addresses for our e-marketplaces.
Our inability to prevent third parties from acquiring web addresses that are
similar to our addresses could create confusion that diverts traffic to
competing web sites, thereby adversely affecting our business. The acquisition
and maintenance of web addresses generally is regulated by third-party
organizations granted control over Internet registrations by the government. The
regulation of web addresses in the United States is subject to change. As a
result, we may not be able to acquire or maintain relevant web addresses. The
relationship between rules governing these addresses and laws protecting
proprietary rights, such as trademark laws, is unclear.
WE MAY BE SUBJECT TO LEGAL LIABILITY FOR CONTENT ON OUR NETWORK, WHICH COULD
MATERIALLY AND ADVERSELY AFFECT YOUR INVESTMENT.
We may be subject to legal claims relating to the content in our network,
or the downloading and distribution of this content. Claims could involve
matters such as fraud, defamation, invasion of privacy and copyright
infringement. Providers of Internet products and services have been sued in the
past, sometimes successfully, based on the content of material. Our insurance
may not cover claims of this type, or may not provide sufficient coverage. Even
if we are ultimately successful in our defense of these types of claims, any
litigation is costly and these types of claims could materially and adversely
affect our business and your investment.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR THE GROWTH OF THE
INTERNET, DECREASE DEMAND FOR OUR SERVICES AND INCREASE OUR COST OF DOING
BUSINESS.
The laws governing Internet transactions remain largely unsettled, even in
areas where there has been some legislative action. The adoption or modification
of laws or regulations relating to the Internet could increase our costs and
administrative burdens. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel, consumer
protection and taxation apply to the Internet.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The growth and development of the
e-commerce market may prompt calls for more stringent laws governing consumer
protection and the taxation of e-commerce. Non-compliance with any newly adopted
laws and regulations could expose us to significant liabilities.
13
<PAGE> 16
IF OUR WEB SITES BECOME THE SUBJECT OF ELECTRONIC ATTACK, OUR BUSINESS COULD BE
HARMED.
Recently, several prominent web sites have been the subject of electronic
attack. These attacks include the defacing and, in some cases, the total
shutdown of the web site through electronic means. Several government-related
web sites have been the subject of these types of attacks. We may experience
these types of attacks in the future. An electronic attack on our web sites
could seriously harm our business and materially and adversely affect your
investment.
RISKS RELATED TO THIS OFFERING OF OUR COMMON STOCK
WE WILL HAVE BROAD DISCRETION OVER THE USE OF THE NET PROCEEDS FROM THIS
OFFERING. OUR SUCCESS AND GROWTH DEPENDS ON THE BENEFICIAL USE OF THE NET
PROCEEDS.
We intend generally to use the net proceeds from this offering for general
corporate purposes, principally additional sales and marketing expenses,
investing in our technology and working capital. However, our board of directors
and management will have broad discretion in the use of the net proceeds from
this offering. Investors will be relying on the judgment of our board of
directors and management regarding the application of the proceeds of this
offering.
AS A RESULT OF THE LIMITED NUMBER OF OUR SHARES THAT WILL TRADE IN THE PUBLIC
MARKET, SUBSTANTIAL SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
In this offering, we will sell shares of common stock, which
represent approximately % of the total number of shares of our common
stock that will be outstanding upon the completion of this offering. If new
investors or our current stockholders sell substantial amounts of our common
stock in the public market following this offering, including shares issued upon
the exercise of outstanding options and warrants, the market price of our common
stock could fall. The negative effect of these sales on the market price of our
common stock could be more pronounced given the small number of shares offered
to the public in this offering relative to the total number of shares of our
common stock to be outstanding following this offering. In addition, these sales
could create the perception to the public of difficulties or problems with our
products and services. As a result, these sales may make it more difficult for
us to sell equity or equity-related securities in the future at a time and price
that we deem appropriate.
Upon completion of this offering, we will have outstanding shares of
common stock. Of these shares, the shares sold in this offering are freely
tradable. The remaining shares, or approximately % of our
outstanding common stock, will become eligible for sale in the public market as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<S> <C>
............... Immediately upon the offering
............... 90 days after the date of this prospectus if
the sales meet the conditions of Rule 701
under the federal securities laws
............... 180 days after the date of this prospectus,
if the sales meet the conditions of Rule 144
under the federal securities laws
............... More than 180 days after the date of this
prospectus, if the sales meet the conditions
of Rule 144 under the federal securities laws
</TABLE>
The above table gives effect to the lock-up arrangements with the
underwriters under which our directors, officers and some of our current
stockholders have agreed not to sell or
14
<PAGE> 17
otherwise dispose of an aggregate of shares of common stock. The
underwriters may remove these lock-up restrictions prior to 180 days after the
offering without prior notice.
OUR STOCK HAS NO PRIOR TRADING MARKET, AND YOU MAY NOT BE ABLE TO RESELL YOUR
STOCK AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
Before this offering, there has been no public trading market for our
common stock and an active trading market may not develop or be sustained after
this offering. Further, the trading market price of our common stock may decline
below our initial public offering price. The initial public offering price has
been determined by negotiations between the representatives of the underwriters
and us.
INTERNET RELATED STOCK PRICES ARE ESPECIALLY VOLATILE, AND THIS VOLATILITY MAY
DEPRESS OUR STOCK PRICE.
The stock market, and specifically the stock prices of Internet related
companies, have been extremely volatile. This volatility is often not related to
the operating performance of the companies affected. This broad market
volatility and industry volatility may reduce the price of our common stock
without regard to our operating performance. Due to this volatility, the market
price of our common stock could significantly decrease. Factors that could
affect the market price of our common stock include:
- quarterly fluctuations in our operating results;
- changes in securities analysts' estimates of our financial performance;
- changes in market valuations of similar companies; and
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments.
OUR EXISTING STOCKHOLDERS WILL CONTROL ALL MATTERS REQUIRING A STOCKHOLDER VOTE.
THEIR INTERESTS MAY CONFLICT WITH YOURS.
Upon the closing of this offering, our management, Atocha, L.P., Weston
Presidio Capital and Highland Capital Partners will control approximately
% of our outstanding voting stock. If all of these stockholders were to
vote together as a group, they would have the ability to exert significant
influence over our board of directors and its policies. For instance, these
stockholders would, if they voted together, be able to control the outcome of
all stockholder votes, including votes concerning director elections, bylaw
amendments and possible mergers, corporate control contests and other
significant corporate transactions. This concentration of ownership may have the
effect of delaying, deferring or preventing a change in control, a merger,
consolidation, takeover or other business combination. This concentration of
ownership could also discourage a potential acquirer from making a tender offer
or otherwise attempting to obtain control of Digital Commerce, which in turn
could have an adverse effect on the market price of our common stock.
AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in net tangible book value. Upon the
consummation of this offering, book value per share will be $ ,
representing an immediate dilution to you of $ per share.
15
<PAGE> 18
WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS THAT COULD PREVENT AN
ACQUISITION OF US AT A PREMIUM PRICE.
Some of the provisions of our charter and bylaws could discourage, delay or
prevent an acquisition of us at a premium price even if our stockholders believe
the change in control would be in our and their best interests. These
provisions:
- stagger directors' terms on our board of directors, where stockholders
elect only a minority of the board of directors each year;
- permit our board of directors to increase its own size and fill the
resulting vacancies;
- permit our board of directors, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting and other
rights as the board of directors may determine;
- require advance notification of matters to be brought before stockholder
meetings;
- prohibit stockholder action by unanimous written consent; and
- limit the persons who may call special meetings of stockholders.
In addition, Section 203 of the Delaware General Corporation Law also
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements, other than statements of historical fact, included in this
prospectus are forward-looking statements. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "plan," "seek," or
"believe." We believe that the expectations reflected in these forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will occur. Our actual future performance could differ materially from these
statements. Factors that could cause or contribute to such differences include,
but are not limited to:
- our ability to induce additional government buyers and vendors to
participate in our e-commerce solutions;
- our ability to activate vendor web sites in a timely manner;
- our success in becoming the primary e-commerce solution for
business-to-government procurement;
- the passage of legislation or the rendering of court decisions adversely
affecting the Internet and e-commerce industry;
- competition in the e-commerce industry; and
- the advent of new technology.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus. Except as required by law, we are not
obligated to publicly release any revisions to these forward-looking statements
to reflect events or circumstances occurring after the date of this prospectus
or to reflect the occurrence of unanticipated events. Important factors that
could cause our actual results to differ materially from our expectations are
discussed under "Risk Factors" and elsewhere in this prospectus. All subsequent
written and oral forward-looking statements attributable to us, or persons
acting on our behalf, are expressly qualified in their entirety by the
statements in those sections.
16
<PAGE> 19
USE OF PROCEEDS
We estimate the net proceeds we will receive from the sale of our common
stock in this offering will be approximately $ million, at an assumed
initial offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and our estimated offering expenses.
We intend to use the net proceeds of the offering for general corporate
purposes, principally additional sales and marketing expenses, investing in our
technology and working capital. The net proceeds used for working capital will
be used to support the growth of our business.
We may also use a portion of the net proceeds for the possible acquisition
of additional businesses and technologies or the establishment of joint ventures
that are complementary to our current or future business. We have no specific
plans or commitments with respect to any acquisitions or joint ventures. We
cannot be certain that we will complete any acquisition or joint venture or,
that if completed, any acquisition or joint venture will be successful.
Pending use of the net proceeds of this offering, we intend to invest the
net proceeds in short-term interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
To effect the spin-off of PowerTrust.com, in , 2000, we declared a
stock dividend payable to our existing security holders. Purchasers of shares in
this offering will not receive this stock dividend.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of March 31, 2000:
- on an actual basis; and
- on an as adjusted basis to reflect the conversion of all our outstanding
preferred stock into 16,724,131 shares of common stock upon the closing
of this offering and the sale of shares of common stock in this
offering at an assumed initial public offering price of $ per
share, after deducting underwriting discounts and commissions and our
estimated offering expenses of $ million.
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $41,455 $
======= ===
Series D redeemable convertible preferred stock, $0.01 par
value; 8,709,902 shares designated; 8,709,902 shares
issued and outstanding, actual; no shares issued and
outstanding on an as adjusted basis....................... $47,762 $--
Stockholders' deficit:
Series A convertible preferred stock, $0.01 par value;
300,000 shares designated; no shares issued and
outstanding, actual and on an as adjusted basis........ -- --
Series B convertible preferred stock, $0.01 par value;
6,000,000 shares designated; 5,463,764 shares issued
and outstanding, actual; no shares issued and
outstanding on an as adjusted basis.................... 55 --
Series C convertible preferred stock, $0.01 par value;
3,500,000 shares designated; 2,550,465 shares issued
and outstanding, actual; no shares issued and
outstanding on an as adjusted basis.................... 25 --
Common Stock, $0.01 par value, 200,000,000 shares
authorized; 7,749,598 shares issued and outstanding,
actual; shares issued and outstanding on an as
adjusted basis......................................... 78
Additional capital........................................ 36,436
Accumulated deficit....................................... (47,346)
------- ---
Total stockholders' deficit....................... (10,752)
------- ---
Total capitalization.............................. $37,010 $
======= ===
</TABLE>
18
<PAGE> 21
DILUTION
As of March 31, 2000, we had a pro forma net tangible book value of $
, or $ per share of common stock. Pro forma net tangible book
value per share is equal to our total tangible assets less total liabilities,
divided by the number of shares of our outstanding common stock assuming the
conversion of all outstanding shares of our convertible preferred stock into
common stock upon completion of this offering. After giving effect to the
issuance of shares of common stock at an assumed public offering price of
$ per share, and after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses, our pro forma net tangible book
value after this offering would have been approximately $ , or
approximately $ per share of common stock. This represents an immediate
increase in pro forma net tangible book value of $ per share to our
existing stockholders and an immediate dilution of $ per share to new
investors in this offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $
Pro forma net tangible book value per share before this
offering............................................... $
Increase per share attributable to new investors.......... $
--------
Pro forma net tangible book value per share after this
offering.................................................. $
--------
Dilution per share to new investors......................... $
========
</TABLE>
As of March 31, 2000, the following table summarizes, on a pro forma basis
for the conversion of all outstanding shares of our preferred stock into common
stock, the difference between existing stockholders and the new investors with
respect to the number of shares of common stock purchased, the total
consideration paid and the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............
New investors....................
-------- --- -------- ---
Total.................. 100% 100%
======== === ======== ===
</TABLE>
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table presents selected financial data about us. You should
read this information together with "Summary Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated financial statements and the notes relating to
those statements and our unaudited pro forma consolidated statement of
operations and the notes relating to that statement appearing elsewhere in this
prospectus.
We acquired the business of Datamatix in August 1999. The unaudited pro
forma consolidated statement of operations data gives effect to the acquisition
of Datamatix as if it occurred on January 1, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------------------- ---------------------
PRO FORMA
1995(1) 1996 1997 1998 1999 1999 1999 2000
----------- ------- ------- --------- --------- ----------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $ -- $ 97 $ 518 $ 1,375 $ 1,437 $ 2,731 $ 241 $ 1,599
Costs of revenues................. -- 389 980 1,242 970 1,288 223 630
------- ------- ------- --------- --------- --------- --------- ---------
Gross profit (loss)............... -- (292) (462) 133 467 1,443 18 969
Operating expenses:
Sales and marketing.............. 106 712 27 328 6,194 6,197 1,093 5,867
Product development.............. 289 176 258 704 721 721 126 792
General and administrative....... 486 3,315 3,258 5,322 7,518 8,487 927 3,142
Depreciation and amortization.... -- 885 1,200 1,361 747 1,177 337 332
Non-cash employee stock
compensation................... -- 424 512 3,804 25 25 25 25
------- ------- ------- --------- --------- --------- --------- ---------
Total operating expenses... 881 5,512 5,255 11,519 15,205 16,607 2,508 10,158
------- ------- ------- --------- --------- --------- --------- ---------
Loss from operations.............. (881) (5,804) (5,717) (11,386) (14,738) (15,164) (2,490) (9,189)
Interest expense, net............. -- (289) (475) (1,401) (1,526) (1,552) (186) (301)
------- ------- ------- --------- --------- --------- --------- ---------
Loss before extraordinary item.... (881) (6,093) (6,192) (12,787) (16,264) (16,716) (2,676) (9,490)
Extraordinary item -- gain on debt
restructuring.................... -- -- -- 4,190 171 171 -- --
------- ------- ------- --------- --------- --------- --------- ---------
Net loss.......................... $ (881) $(6,093) $(6,192) $ (8,597) $ (16,093) $ (16,545) $ (2,676) $ (9,490)
======= ======= ======= ========= ========= ========= ========= =========
Net loss per share -- basic and
diluted:
Loss before extraordinary item... $ (2.31) $(12.92) $(11.86) $ (8.73) $ (3.34) $ (3.29) $ (0.61) $ (1.23)
Extraordinary item............... -- -- -- 2.86 0.03 0.03 -- --
------- ------- ------- --------- --------- --------- --------- ---------
Net loss......................... $ (2.31) $(12.92) $(11.86) $ (5.87) $ (3.31) $ (3.26) $ (0.61) $ (1.23)
======= ======= ======= ========= ========= ========= ========= =========
Weighted average shares
outstanding -- basic and
diluted.......................... 382,000 471,664 522,247 1,464,255 4,867,685 5,086,253 4,380,737 7,720,303
======= ======= ======= ========= ========= ========= ========= =========
</TABLE>
- ------------
(1) Period from June 5, 1995 (date of inception) to December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------- MARCH 31,
1995 1996 1997 1998 1999 2000
----- ------- ------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $ 4 $ 402 $ 2,824 $ 3,713 $41,455
Working capital (deficit)................................... (600) (2,231) (8,607) 138 (7,220) 32,801
Total assets................................................ 5 3,067 2,187 3,989 7,020 48,104
Total indebtedness.......................................... 443 3,832 5,308 5,828 12,490 1,665
Redeemable convertible preferred stock...................... -- -- -- -- -- 47,762
Total stockholders' deficit................................. (594) (3,264) (6,992) (3,938) (10,806) (10,752)
</TABLE>
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<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that we believe
is relevant to an assessment and understanding of our financial condition and
consolidated results of operations. This discussion should be read together with
our consolidated financial statements and related notes and the pro forma
consolidated statement of operations and the notes related to that statement
appearing elsewhere in this prospectus.
OVERVIEW
We are a leading provider of business-to-government e-commerce solutions
for the procurement of products and services. Our solutions enable government
buyers at the federal, state and local levels to locate vendors of desired
products and services more efficiently, compare prices among those vendors and
execute and track their purchases. At the same time, we enable vendors to access
multiple government entities efficiently, automate the order process and comply
with specialized government purchasing requirements.
We were incorporated in Delaware in 1995 with an initial focus on
establishing a non-government e-commerce site for buying and selling a variety
of products. In 1996, we acquired all of the outstanding common stock of
InterFed Group, Inc. InterFed had developed a web site known as FedCenter.com,
which was an information-only site for government vendors. From 1996 through
1997, we primarily conducted research and development relating to FedCenter and
provided consulting services to government agencies. During this period, the
majority of our revenues and costs of revenues were generated from consulting
services.
In 1998, we retained our current president and revised our business plan to
develop FedCenter into an e-commerce procurement solution for the
business-to-government market. We developed a new version of FedCenter
incorporating a transaction capability, which we launched in January 1999. In
August 1999, we enhanced our product offering through the acquisition of
substantially all of the assets of Datamatix, Inc. in exchange for our common
stock. The Datamatix acquisition provided us with our MarketLink and OrderLink
products. To support our products, we bolstered our management team,
substantially increased the size of our sales force and initiated an aggressive
marketing campaign to increase our name recognition in the marketplace. We also
retained additional operations and financial personnel to support our growth.
In late 1999, we elected to spin-off PowerTrust.com, our wholly-owned
subsidiary, to our existing security holders. PowerTrust.com was formed to
assist residential consumers in deregulated energy markets in accessing
alternative sources of natural gas. This decision was made to further emphasize
our focus on our business-to-government e-commerce solutions. The spin-off of
PowerTrust.com occurred in 2000.
REVENUE SOURCES AND REVENUE RECOGNITION
Our revenues are generated from site construction, subscription and
transaction fees from our vendors. Site construction fees for the development
and activation of dedicated vendor web sites linked to our e-marketplaces are
recognized upon completion and delivery of the site. Amounts received in advance
of delivery of the site are deferred and recognized upon delivery. Monthly
subscription fees to keep vendor sites active are recognized monthly as earned.
Fees earned for transactions processed electronically through the vendor sites
are recognized as revenue when the transaction occurs. To date, transaction fees
have been minimal. However, we expect transaction fees to increase as we expand
our base of vendors and government buyers. At no point during the process do we
take possession of the products being bought and sold or bear inventory risk
associated with the products offered on our system.
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<PAGE> 24
We also earned revenues in 1999 and prior periods from software sales and
professional consulting fees, which we expect to decline in future years.
COSTS OF REVENUES AND OPERATING EXPENSES
Costs of revenues. Our costs of revenues consist of all direct costs
associated with performance under our contractual agreements, including labor
costs associated with site construction and activation, upgrades and consulting
services. Costs of revenues also include our Internet service provider costs.
Sales and marketing expenses. Our sales and marketing expenses primarily
consist of compensation for sales and marketing personnel and marketing and
advertising costs. All advertising costs are expensed as incurred. Sales and
marketing expenses also include account development costs associated with
training for buyers and customer support for buyers and vendors. We expect sales
and marketing expenses to continue to increase significantly as we continue to
expand our sales force and increase our marketing and advertising.
Product development expenses. Product development expenses include
expenses for the continued development and enhancement of our solutions. These
costs include compensation for development and engineering personnel and
payments to third-party consultants. Product development expenses are expensed
as incurred until technological feasibility has been established, after which
such costs are capitalized. To date, product development expenses have been
expensed, as the time period between technological feasibility and general
release of a product has not been significant and the expenses incurred during
that time period have not been material. These costs are expected to increase in
future periods to support our anticipated growth through the hiring of
additional development and engineering personnel and through development of new
products and services.
General and administrative expenses. General and administrative expenses
primarily consist of management and executive compensation and benefits,
professional services such as legal and accounting expenses, and other general
corporate expenses such as facilities costs. We expect general and
administrative expenses to continue to increase as we invest in our
infrastructure to support our anticipated growth.
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<PAGE> 25
QUARTERLY OPERATING RESULTS
The following table sets forth financial information for each of our five
most recent quarters. You should note that due to our limited operating history
and significant growth, period-to-period comparisons of our revenues and
consolidated results of operations are not necessarily meaningful. You should
read this table in conjunction with our audited consolidated financial
statements and related notes appearing elsewhere in this prospectus. We have
prepared this unaudited information on the same basis as our audited statements,
and we believe it includes all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of our
consolidated operating results for the quarters presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1999 1999 1999(1) 1999(1) 2000(1)
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues................... $ 241 $ 162 $ 482 $ 552 $ 1,599
Costs of revenues.......... 223 246 243 258 630
------- ------- ------- ------- -------
Gross profit (loss)........ 18 (84) 239 294 969
Operating expenses:
Sales and marketing...... 1,093 867 1,960 2,274 5,867
Product development...... 126 201 95 299 792
General and
administrative......... 927 1,080 1,871 3,640 3,142
Depreciation and
amortization........... 337 64 116 230 332
Non-cash employee stock
compensation........... 25 -- -- -- 25
------- ------- ------- ------- -------
Total operating
expenses........ 2,508 2,212 4,042 6,443 10,158
------- ------- ------- ------- -------
Loss from operations....... (2,490) (2,296) (3,803) (6,149) (9,189)
Interest expense, net...... (186) (333) (454) (553) (301)
------- ------- ------- ------- -------
Loss before extraordinary
item..................... (2,676) (2,629) (4,257) (6,702) (9,490)
Extraordinary item......... -- -- -- 171 --
------- ------- ------- ------- -------
Net loss.......... $(2,676) $(2,629) $(4,257) $(6,531) $(9,490)
======= ======= ======= ======= =======
</TABLE>
- ------------
(1) Includes the results of operations of Datamatix since the date of
acquisition in August 1999.
RESULTS OF OPERATIONS
The consolidated results of operations include the operations of Datamatix
from the date of its acquisition by us in August 1999. As a result of the
spin-off of PowerTrust in 2000, our historical consolidated financial
statements exclude PowerTrust's operations since its inception in 1999.
THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 1999
Revenues. Revenues for the three months ended March 31, 2000, or the 2000
period, increased to $1.6 million from $241,000 for the three months ended March
31, 1999, or the 1999 period. Revenues from FedCenter site construction fees
increased to $685,000 in the 2000 period from $39,000 in the 1999 period, as we
activated 151 vendor sites during the 2000 period compared to seven vendor sites
during the 1999 period. FedCenter subscription fee revenues increased to
$204,000 in the 2000 period from $44,000 in the 1999 period, as our vendor base
increased to 260 active sites as of March 31, 2000 from 33 active sites as of
March 31, 1999. Revenues in the 2000 period include $680,000 relating to
MarketLink and OrderLink due to the acquisition of Datamatix in August 1999. We
had $158,000 of revenues
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<PAGE> 26
from professional consulting services in the 1999 period. There were no revenues
from professional consulting services in the 2000 period.
Costs of revenues. Costs of revenues increased to $630,000 in the 2000
period from $223,000 in the 1999 period. The increase in costs of revenues
resulted primarily from additional site construction costs offset by a decrease
in professional consulting services costs. Gross profit percentage increased to
60.6% in the 2000 period from 7.5% in the 1999 period due primarily to high
labor costs associated with consulting contracts completed during 1999. In
addition, gross profit in the 2000 period was higher due to increased revenues
from subscription fees, which have relatively low associated costs. We expect
subscription fees to comprise a larger portion of our revenues as our active
vendor base grows.
Sales and marketing expenses. Sales and marketing expenses increased to
$5.9 million in the 2000 period from $1.1 million in the 1999 period. This
increase was primarily attributable to the growth of our sales force to 113
sales representatives in 11 sales offices as of March 31, 2000 from 12 sales
representatives in one sales office as of March 31, 1999 and increased marketing
and advertising activities. In late 1999, we initiated an account development
team, which grew to 24 representatives as of March 31, 2000 from none as of
March 31, 1999. Sales commissions and bonuses increased to $2.5 million in the
2000 period from $17,000 in the 1999 period. Marketing and advertising
expenditures increased to $1.9 million in the 2000 period from $930,000 in the
1999 period.
Product development expenses. Product development expenses increased to
$792,000 in the 2000 period from $126,000 in the 1999 period. This increase was
primarily attributable to the growth of our product development group to 40
employees as of March 31, 2000 from 11 employees as of March 31, 1999. The
increased personnel and associated costs relate primarily to continued
modifications of our solutions to support growth and the addition of products
such as StateGovCenter, MarketLink and OrderLink.
General and administrative expenses. General and administrative expenses
increased to $3.1 million in the 2000 period from $927,000 in the 1999 period.
The primary components of this increase were compensation expenses of $2.2
million in the 2000 period compared to $473,000 in the 1999 period, as we
increased the size of our management team. In addition, professional fees
increased to $719,000 in the 2000 period from $161,000 in the 1999 period due
primarily to our use of third-party consultants to design and implement a human
resources management program.
Depreciation and amortization. Depreciation and amortization was $332,000
for the 2000 period and $337,000 for the 1999 period. During the 2000 period,
depreciation and amortization was primarily comprised of depreciation of our
computer equipment and goodwill amortization of $109,000 related to our
Datamatix acquisition in August 1999. During the 1999 period, there was $290,000
of amortization related to our InterFed acquisition. The goodwill from the
InterFed acquisition became fully amortized during the second quarter of 1999.
Non-cash employee stock compensation. There was $25,000 of non-cash
employee stock compensation expense in the 2000 period and the 1999 period as a
result of the issuance of common stock to our president under his employment
agreement.
Interest expense, net. Net interest expense increased to $301,000 in the
2000 period from $186,000 in the 1999 period. This increase was attributable to
increased average indebtedness outstanding during the 2000 period compared to
the 1999 period, partially offset by an increase in interest income to $120,000
in the 2000 period from $12,000 in the 1999 period. During March 2000, all
convertible related party notes outstanding were converted into preferred stock.
As a result, we expect that interest expense for the remainder of 2000 will be
lower than in 1999.
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<PAGE> 27
YEAR ENDED DECEMBER 31, 1999 VS. YEAR ENDED DECEMBER 31, 1998
Revenues. Revenues were $1.4 million in 1999 and 1998. However, the
sources of these revenues varied between the two periods. Revenues from
FedCenter site construction fees and subscription revenues increased to $597,000
in 1999 from $140,000 in 1998, as we activated 93 vendor sites during 1999
compared to 25 vendor sites during 1998 and increased our vendor base to 115
active sites as of December 31, 1999 from 26 active sites as of December 31,
1998. Revenues in 1999 include $486,000 relating to MarketLink and OrderLink due
to the acquisition of Datamatix in August 1999. Revenues from professional
consulting services decreased to $334,000 in 1999 from $1.2 million in 1998,
primarily due to the completion of two consulting contracts in the first quarter
of 1999.
Costs of revenues. Costs of revenues decreased to $970,000 in 1999 from
$1.2 million in 1998. The decrease in costs of revenues resulted primarily from
the shift in the source of revenues from professional consulting services to our
e-commerce solutions. Gross profit as a percentage of revenues increased to
32.5% in 1999 from 9.7% in 1998. The gross profit percentage increased as a
result of the lower costs associated with our e-commerce solutions, compared to
the higher labor costs associated with our consulting contracts.
Sales and marketing expenses. Sales and marketing expenses increased to
$6.2 million in 1999 from $328,000 in 1998. This increase was primarily
attributable to the marketing and advertising campaign that we launched during
1999. Marketing and advertising costs increased to $4.2 million in 1999 from
$313,000 in 1998. In addition, our sales force increased to 61 sales
representatives in seven sales offices as of December 31, 1999 from four sales
representatives in one sales office as of December 31, 1998. Sales commissions
and bonuses increased to $1.8 million in 1999 from none during 1998.
Product development expenses. Product development expenses were $721,000
in 1999 and $704,000 in 1998. The expenses in 1998 related to the cost of
developing the current version of FedCenter, including adding a transaction
capability. In 1999, the development department focused on enhancing the
functionality of our solutions, including adding new product categories and
modifying our software to increase scalability.
General and administrative expenses. General and administrative expenses
increased to $7.5 million in 1999 from $5.3 million in 1998. The primary
components of this increase were compensation expense of $3.6 million in 1999
compared to $2.0 million in 1998 due to an increase in the size of our
management team and an accrual of additional compensation and related expenses
owed to a former officer. Further, professional fees increased to $1.3 million
in 1999 from $638,000 in 1998. In addition, we incurred $375,000 in 1999 for the
settlement of a litigation matter.
Depreciation and amortization. Depreciation and amortization decreased to
$747,000 in 1999 from $1.4 million in 1998. This was primarily attributable to a
decrease in the amortization of goodwill related to our InterFed acquisition to
$290,000 in 1999 from $1.2 million in 1998 as goodwill became fully amortized in
the second quarter of 1999. This was partially offset by goodwill amortization
of $146,000 related to our Datamatix acquisition.
Non-cash employee stock compensation. Non-cash employee stock compensation
expense decreased to $25,000 in 1999 from $3.8 million in 1998. The 1999 expense
was a result of the issuance of common stock to our president under his
employment agreement. The 1998 expense was the result of the acceleration of all
options outstanding under our 1996 incentive stock option plan due to a change
of control provision in the 1996 plan triggered upon the conversion of a related
party note.
Interest expense, net. Net interest expense was $1.5 million in 1999 and
$1.4 million in 1998.
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<PAGE> 28
Extraordinary item -- gain on debt restructuring. Extraordinary gains on
restructuring declined to $171,000 in 1999 from $4.2 million in 1998. These
gains related to the restructuring of our notes payable and other obligations, a
substantial majority of which were restructured in the fourth quarter of 1998.
YEAR ENDED DECEMBER 31, 1998 VS. YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues in 1998 increased to $1.4 million from $518,000 for
1997. Revenues during 1998 were derived primarily from professional consulting
services under two consulting contracts. These consulting contracts accounted
for $1.2 million of revenues in 1998 and $381,000 of revenues in 1997.
Costs of revenues. Costs of revenues increased to $1.2 million in 1998
from $980,000 in 1997. The increase in costs of revenues primarily related to
the level of services provided under the consulting contracts.
Sales and marketing expenses. Sales and marketing expenses increased to
$328,000 in 1998 from $27,000 in 1997. This increase was primarily attributable
to marketing and advertising costs of $313,000 during 1998.
Product development expenses. Product development expenses increased to
$704,000 in 1998 from $258,000 in 1997. This increase was attributable to
shifting our focus during 1998 to enhancing FedCenter. During 1998, we developed
the current version of FedCenter, including a transaction capability, which we
launched in January 1999.
General and administrative expenses. General and administrative expenses
increased to $5.3 million in 1998 from $3.3 million in 1997. The primary
components of this increase were compensation expense of $2.0 million in 1998
compared to $1.6 million in 1997, related to the increase in the size of our
management team and an increase in professional fees to $638,000 in 1998 from
$115,000 in 1997.
Depreciation and amortization. Depreciation and amortization increased to
$1.4 million in 1998 from $1.2 million in 1997 due to depreciation recognized on
fixed asset additions during 1998.
Non-cash employee stock compensation. Non-cash employee stock compensation
expense increased to $3.8 million in 1998 from $512,000 in 1997. During 1998, we
recognized non-cash compensation expense in conjunction with the acceleration of
all options outstanding under our 1996 incentive stock option plan due to a
change of control provision in the 1996 Plan triggered upon the conversion of a
related party note. Prior to the acceleration of vesting, the expense was being
recognized over the vesting period.
Interest expense, net. Net interest expense increased to $1.4 million in
1998 from $475,000 in 1997. The increase was due to higher average borrowings
during 1998 at higher effective interest rates than in 1997 and the recognition
of $324,000 of interest expense upon the induced conversion of a related party
note.
Extraordinary item -- gain on debt restructuring. During 1998, we recorded
an extraordinary gain of $4.2 million related to the restructuring of our notes
payable and other obligations. There was no extraordinary gain recorded in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, cash and cash equivalents totaled approximately $41.5
million. The primary sources of our funding since inception have been from
private sales of our common stock, preferred stock and convertible notes, the
net proceeds of which totaled approximately $79.5 million. At March 31, 2000,
all of our convertible notes have been converted into our
26
<PAGE> 29
common stock and convertible preferred stock. The outstanding shares of our
convertible preferred stock will convert to common stock upon the completion of
this offering.
Cash used in operating activities was $5.6 million in the 2000 period,
$12.1 million in 1999, $4.9 million in 1998 and $3.2 million in 1997. Cash used
in operating activities for each of these periods primarily related to enhancing
and developing our FedCenter web site, including personnel costs, as well as
implementing an aggressive sales and marketing campaign, which includes
salaries, bonuses and commissions to our sales and marketing personnel and
direct marketing and advertising costs.
Cash used in investing activities was $1.5 million in the 2000 period,
$931,000 in 1999, $448,000 in 1998 and $16,000 in 1997. Cash used in investing
activities has been primarily for infrastructure development, chiefly through
the purchase of computer and network equipment.
Cash provided by financing activities was $44.8 million in the 2000 period,
$13.9 million in 1999, $7.8 million in 1998 and $3.6 million in 1997. Cash
provided by financing activities has been primarily provided through the
issuance of common stock, preferred stock and convertible notes.
We believe that the net proceeds of this offering, together with our
existing cash and cash equivalents, will be sufficient to meet our anticipated
cash requirements for at least the next twelve months. Our expenses have
exceeded, and in the foreseeable future are expected to exceed, our revenues.
Accordingly, we do not expect to be able to fund our operations solely from
internally generated funds for the foreseeable future. Our cash requirements
depend on several factors, including the level of expenditures on marketing and
advertising, the rate of market acceptance, the ability to expand our vendor and
buyer base and other factors. The actual amount and timing of future capital
requirements may differ materially from our estimates.
If capital requirements vary materially from those currently planned, we
may require additional financing sooner than anticipated. Any additional equity
financing may be dilutive to our stockholders, and debt financing, if available,
may involve restrictive covenants with respect to dividends, raising capital and
other financial and operational matters that could restrict our operations or
finances. Any failure to obtain necessary financing may require that we delay or
abandon our plans for expanding our base of government buyers and vendors, which
could have a material adverse effect on our business, consolidated results of
operations and financial condition.
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 as amended by SFAS No. 137, is effective for our fiscal
year beginning January 1, 2001. We do not expect the adoption of this Statement
to have a significant impact on our consolidated results of operations,
financial position or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, Revenue Recognition in Financial Statements, which
provides guidance related to revenue recognition based on interpretations and
practices followed by the SEC. SAB 101 is effective the second fiscal quarter of
fiscal years beginning after December 15, 1999. We do not expect the adoption of
SAB 101 to have a significant impact on our consolidated results of operations,
financial position or cash flows.
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<PAGE> 30
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We have assessed our vulnerability to certain market risks, including
interest rate risk associated with financial instruments included in cash and
cash equivalents. Due to the short-term nature of these investments and our
investment policies and procedures, we have determined that the risks associated
with interest rate fluctuations related to these financial instruments do not
pose a material risk to us.
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<PAGE> 31
BUSINESS
OVERVIEW
We are a leading provider of business-to-government e-commerce solutions
for the procurement of products and services. Our solutions enable government
entities at the federal, state and local levels to locate vendors, compare
prices, negotiate transaction terms, and execute and track purchases. We provide
government entities and buyers with a simple, cost-effective and reliable method
of implementing business-to-government e-commerce. Our solutions also enable
vendors to efficiently access multiple government buyers, automate the
transaction process and comply with government-specific purchasing requirements.
By leveraging the capabilities of the Internet to address the special
characteristics of government purchasing, we seek to streamline procurement and
lower the costs of transactions for the government and its vendors.
Our federal procurement solutions are delivered through FedCenter and
MarketLink. FedCenter is a web-based marketplace that enables federal government
buyers to purchase a broad range of products and services based on
pre-negotiated contracts and in the open market based on vendors' price
schedules. FedCenter is provided to government buyers free of charge. MarketLink
is a software product that provides an automated solution for collecting and
distributing requests for quotations, commonly known as RFQs, and requests for
proposals, commonly known as RFPs, for large volume purchases, products with
unique specifications or complex products not offered through FedCenter. We
offer our state and local procurement solutions through OrderLink and the
recently launched StateGovCenter. OrderLink facilitates web-based procurement
through pre-negotiated state government contracts, while StateGovCenter enables
buyers to purchase through pre-negotiated contracts, as well as execute open
market purchases based on vendors' price schedules. We intend to integrate our
solutions to enable buyers to complete contract purchases, open market purchases
and RFQ and RFP purchases at the federal level through FedCenter and at the
state and local level through StateGovCenter.
We currently serve more than 13,000 registered users on FedCenter including
buyers in the U.S. Departments of Defense, Treasury, Justice and Health and
Human Services. In addition, our state procurement solutions are currently being
used at the state and local levels by the State of Connecticut and the Fairfax
County, Virginia School Board. As of March 31, 2000, we had 260 vendors listing
more than 2.6 million different products and services on FedCenter, and we had
agreements with an additional 420 vendors to list their products and services on
FedCenter.
INDUSTRY BACKGROUND
Growth of the Internet and Business-to-Business Electronic Commerce. The
Internet is dramatically changing how businesses and individuals communicate and
share information. The widespread adoption and acceptance of the Internet as a
business communications platform has created a foundation for
business-to-business electronic commerce that we believe will enable
organizations to streamline complex processes, lower costs and improve
productivity. At the same time, businesses are facing competitive pressures to
lower costs, decrease inventories and improve sales and marketing productivity.
To address these challenges, businesses are replacing paper-, phone- and
fax-based transactions with Internet based e-commerce solutions. These solutions
provide cost-effective and efficient channels for transacting business with
suppliers, distributors and customers. Forrester Research estimates that the
U.S. business-to-business e-commerce market will grow from $406 billion in 2000
to approximately $2.7 trillion in 2004.
Business-to-Government Commerce. According to the Department of Commerce,
federal executive departments and agencies and state and local governments
together purchased
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<PAGE> 32
approximately $400 billion of goods and services in 1999. Historically, the
process for making these purchases has been manual, decentralized and subject to
significant reporting and record-keeping requirements, resulting in significant
inefficiencies.
Characteristics and Inefficiencies of the Government Procurement
Process. We believe the government procurement process has special
characteristics that include:
- High degree of fragmentation -- The procurement process is highly
fragmented. Over 60 federal entities purchased approximately $200 billion
in 1999 from more than 300,000 vendors. Further, each entity is
represented by multiple buyers. We believe similar fragmentation exists
at the state and local level. The fragmented and decentralized nature of
government purchasing makes it difficult for government entities to
manage purchases, control spending and monitor duplicative or
unauthorized orders.
- Multiple methods of procurement -- Government buyers must employ multiple
procurement methods depending on the size and availability of the
products and services involved. Purchases may be made through
pre-negotiated contracts, open market purchases or RFQs and RFPs.
- Entity specific forms and requirements -- The forms and requirements used
by government entities to procure products may vary from entity to entity
and, in some cases, within each entity. It is time-consuming and
complicated for vendors to comply with different policies, information
requirements and formats each time they submit a proposal to a different
entity. Furthermore, even minor errors in completing the form can result
in rejection of the transaction.
- Documentation of purchase alternatives -- Government buyers must often
obtain multiple alternatives for each purchase and prepare extensive
documentation regarding the alternatives considered. For example, federal
government buyers must typically obtain and compare at least three
different quotes for aggregate purchases over $2,500 and create
documentation comparing the quotes. We believe there is currently no
comprehensive or standard method for government buyers to accurately
document these alternatives. Once a purchase is made, government buyers
may have difficulty tracking purchase data and government entities may
have difficulty aggregating this data.
- Small and disadvantaged business considerations -- Government purchasing
processes often incorporate public policy objectives such as support of
small and disadvantaged businesses. At the federal level, buyers are
encouraged to direct portions of their purchasing to such businesses.
Buyers are required to maintain detailed records to comply with these
objectives and there is no automated system in place to track compliance.
THE OPPORTUNITY FOR AN INTERNET-BASED SOLUTION FOR GOVERNMENT PROCUREMENT
The fragmentation and complexity of the government procurement process has
created an opportunity for a comprehensive business-to-government e-commerce
solution. The U.S. government has adopted several initiatives to promote
e-commerce, including amending the Office of Federal Procurement Policy Act in
1997 to mandate that federal government buyers use e-commerce for procurement to
the maximum extent practicable and cost effective. These initiatives have
accelerated pressure to adopt e-commerce at the federal level. According to
International Data Corporation, the amount of web-based purchasing by all
government agencies within the United States is expected to increase from $4.2
billion in 1998 to $69.8 billion in 2003.
To date, federal government entities seeking to comply with the
Congressional mandate to implement e-commerce have relied on customized
solutions that are costly, difficult to implement and fail to maximize the
benefits of electronic purchasing because they link only a
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<PAGE> 33
limited number of participants. At the same time, more broad-based Internet
purchasing solutions that have been developed for private business-to-business
transactions fail to address adequately the special characteristics of the
business-to-government procurement process. We believe that buyers and vendors
alike seek an Internet-based solution that is cost-effective and easy to
implement. This type of a solution should incorporate the information and record
keeping requirements with which government buyers must comply while providing
vendors with a single point of entry to multiple government entities and buyers.
BENEFITS OF THE DIGITAL COMMERCE SOLUTION
We seek to deliver a comprehensive e-commerce solution that links
government buyers across multiple government entities to vendors and their
product lines. Our solution enables buyers to easily locate vendors, compare
prices, negotiate pricing and terms and execute and track purchases. At the same
time, we provide vendors with a platform that allows them to efficiently access
multiple government entities and complete transactions. As more buyers join our
e-marketplaces and realize the benefits of our solution, we believe they will
attract more vendors and more products to our solutions, which will in turn,
encourage additional buyers to participate. The result is a network effect,
where we believe the value of our solution to all participants increases
significantly with the addition of each new participant.
We believe our solution provides the following benefits:
Benefits to Government Buyers:
- Cost-effective, Outsourced Solution. We provide government buyers with a
rapidly deployable outsourced solution that enables them to purchase
products electronically from a broad range of vendors. Our FedCenter
product is easy to use and free to government buyers. It can be accessed
with a standard Internet browser instead of expensive enterprise
purchasing software systems and provides a cost-effective way of
complying with the Congressional e-commerce mandate.
- Reduced Procurement Costs and Increased Productivity. Our e-commerce
solutions streamline the purchasing process, provide centralized tracking
and record-keeping, and allow government buyers to lower their
procurement costs by reducing the time required to identify and contact
potential vendors. We seek to enhance the potential for cost savings by
allowing buyers to locate vendors offering the most competitive prices
and terms and complete recurring purchases without repetitive
documentation.
- Enhanced Aggregation and Search Capabilities. We provide easy-to-use
search capabilities that enable buyers to quickly locate vendors
supplying the desired product and obtain pricing and delivery information
from multiple vendors in one central location. Vendor information,
product descriptions and pricing is also available on dedicated vendor
sites, all of which share common site format and tools to facilitate
navigation by the buyer.
- Improved Management and Reporting. We enable government buyers to
proactively manage procurement. Our products generate inquiry and
transaction records facilitating improved documentation and audit
records. Our products can also be used to generate reports that
facilitate compliance with government purchasing policies, including
those related to purchases from small and disadvantaged businesses.
Benefits to Vendors:
- Efficient, Flexible Solution. We enable vendors to easily establish an
online sales platform targeting government buyers with minimal startup
costs. We provide vendors with a customized site linked to our
marketplace that maintains their branding and merchandising while
providing transaction and reporting capabilities.
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- Access to a Broad Base of Government Buyers. Our e-marketplaces enable
vendors to reach multiple buyers across multiple government entities
through a common platform without a significant increase in marketing
costs. Vendors on our network gain equal access to buyers, regardless of
the vendor's size.
- Process Automation. We enable vendors to automate transactions with the
government. This reduces costs and eliminates errors. If a government
form is required, our solution automatically enters the relevant vendor
data on the applicable form and in the required format of the government
entity.
- Timely Information. We allow vendors to easily update our database of
information, providing them with enhanced control over pricing and other
descriptive information about their products and services compared to
traditional paper catalogues. We also provide vendors responding to RFPs
and RFQs with electronic access to historical information regarding
pricing and terms of federal government contracts awarded over the last
seven years.
THE DIGITAL COMMERCE STRATEGY
We seek to become the leading provider of e-commerce solutions to
government entities by implementing the following key strategies:
Increase usage by federal government buyers. We intend to aggressively
increase the number of federal government entities using our solutions and to
drive the adoption of our e-marketplaces by buyers within those entities. To
achieve these objectives, we intend to further expand our account development
teams responsible for providing training and support to buyers. We also plan to
increase our use of traditional and online advertising to increase the
visibility of our brands and educate buyers regarding the benefits of our
solutions.
Penetrate state and local markets. We believe that there is a significant
opportunity to expand our presence in state and local markets. We have recently
launched our StateGovCenter product and are initially targeting existing
FedCenter vendors to participate in StateGovCenter, as well as seeking to
attract new vendors at the state and local level. We are currently retaining
dedicated account development personnel to target specific state and local
entities.
Expand base of vendors. We intend to expand the base of vendors using our
products to increase the breadth and depth of products offered. We believe that
these efforts are critical to effectively serving government buyers and
increasing transaction volume. As of March 31, 2000, we had agreements with 680
vendors to list their products and services on FedCenter. We believe there is
significant opportunity for expansion as there are more than 300,000 vendors
that sell goods to the federal government and additional vendors that sell to
state and local governments. To build our base of vendors, we are expanding our
direct sales force which has increased from 21 as of September 30, 1999 to 113
as of March 31, 2000.
Enhance value-added functionality and services. We continually seek to
enhance the functionality of our solutions to increase their value to government
buyers and vendors. We intend to develop an interface with government purchasing
systems to allow them to track historical purchasing information. We also intend
to connect our e-marketplaces to the inventory management and purchasing systems
of vendors. This will automate the procurement process, allow for real-time
product and pricing updates and automate order fulfillment. We plan to integrate
our products to enable buyers to complete pre-negotiated contract purchases,
open market purchases, and RFQ and RFP purchases at the federal level through
FedCenter and at the state and local level through StateGovCenter.
Pursue strategic alliances. We believe strategic alliances are important
to broadening the acceptance of our e-marketplaces and extending the
functionality of our technology. We have entered into an alliance with SAP
Public Sector and Education, Inc. designed to enable
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procurement transactions executed over our e-marketplaces to be electronically
captured by vendors' and government entities' logistical and financial systems.
We believe SAP's existing government relationships provide us with additional
opportunities to sell our products. We plan to pursue additional alliances.
OUR E-MARKETPLACES
We offer the following e-marketplace solutions:
Federal
FedCenter.com FedCenter is a web-based marketplace designed to link
federal government buyers and vendors for purchases of products and services.
Buyers include government entities and individuals within government entities
who have purchasing responsibilities. FedCenter automates the procurement
process by providing vendor product and service information and pricing data
through a secure, web-based solution, allowing buyers to locate vendors, compare
prices among vendors and purchase desired products or services. FedCenter
supports purchases based on pre-negotiated contracts and open market purchases.
FedCenter:
- is available free of charge to all government buyers;
- allows for quick deployment and ease of use;
- facilitates compliance with government reporting requirements; and
- is a cost-effective method of complying with the Congressional e-commerce
mandate.
Government buyers join FedCenter by registering with us at
www.fedcenter.com. Once a buyer becomes a registered user, he or she may search
the vendor database by product name, product number, product type, contract
type, product line item number, manufacturer name, supplier name, supplier type
or buyer criteria, such as whether the vendor qualifies as a small or
disadvantaged business. Users may further narrow a search with more detailed
criteria. Once a search is completed, the buyer is presented with the search
results in a lowest-to-highest pricing format. The buyer can compare pricing
among vendors and send a request to a vendor for different pricing based on
volume. When ready to make a purchase, the buyer can load a shopping cart with
desired items and execute a purchase or forward the cart to his or her
supervisor via e-mail for approval and execution. Our solution also assists the
buyer with completing the specific government form if required for the purchase.
Once an order is placed, the buyer can choose from multiple shipping
options for the purchase. These options include the ability to have purchases
shipped to multiple destinations. Although payment options vary from vendor to
vendor, FedCenter supports payments by SmartPay cards, government purchase
orders or cash on delivery, as well as Visa, MasterCard, American Express and
Discover. A buyer can save the types of purchases, shipping methods and payment
methods in an online shopping cart to facilitate recurring purchases.
Vendors on FedCenter list their products and services in a customized
FedCenter web site, or FedSite, linked to the central FedCenter marketplace. Our
operations group works with the vendor to create the vendor's FedSite using a
series of templates. The FedSite maintains the branding and look of the vendor,
while incorporating common search capabilities and site navigation features.
This enables buyers to easily navigate all FedSites on our system. The vendor
provides us with product and merchandising information, pricing-related data,
and contact names and numbers which we include on our system. Visitors to the
FedCenter web site are able to search and access product and pricing information
from FedCenter or by visiting a vendor's FedSite directly.
Vendors pay us a one-time site construction fee for the development and
activation of their FedSites. They also pay us a monthly subscription fee to
include their products and services on
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our FedCenter web site and a transaction fee for every purchase completed on
FedCenter. In general, vendors are permitted to modify their listing once each
month at no additional cost as part of their subscription fee and are charged a
nominal fee for additional changes.
MarketLink. MarketLink is a software product that enables vendors to
receive specified types of RFQs and RFPs from federal entities. Federal entities
typically use RFQs and RFPs for large volume purchases and for products with
non-standard specifications. Vendors responding to these requests can submit
bids, receive contract awards and generate purchase orders and invoices through
MarketLink.
MarketLink electronically gathers publicly available RFPs and RFQs
primarily from the Department of Defense's Defense Logistics Agency and the
Federal Acquisition Computer Network, the federal government's electronic
procurement request and proposal system. These requests are then forwarded to
vendors based on product preference criteria they provide. Once a vendor
receives this information and chooses to bid, the vendor may complete the
required form and forward the bid through MarketLink. MarketLink collects all
responses submitted and electronically forwards the resulting information to the
buyer. MarketLink also provides vendors responding to RFPs and RFQs with
electronic access to information regarding pricing and terms of federal
government contracts awarded during the past seven years.
We charge vendors a monthly fee and a fee for each request received by the
vendor or response transmitted back to the buyer. For the quarter ended March
31, 2000, we disseminated approximately 319,000 RFPs and RFQs through
MarketLink, and processed approximately 27,000 purchase orders.
We intend to implement a next-generation product that integrates the
features of our FedCenter and MarketLink products. This product will provide a
comprehensive web-based solution for the federal government procurement process
that covers pre-negotiated contracts, open market purchases and RFQs and RFPs.
State and Local
OrderLink. OrderLink is our web-based purchasing solution linking vendors
and buyers from state and local government entities. OrderLink enables buyers to
easily research, compare and purchase products and services from multiple
vendors based on pre-negotiated contracts. OrderLink lists these pre-negotiated
contracts in an electronic format, and allows state and local government buyers
to search for desired products and services and place orders. OrderLink is
currently used by the State of Connecticut pursuant to a contract that makes
OrderLink available to Connecticut state and local entities. OrderLink is also
used by the Fairfax County School Board in Fairfax, Virginia in connection with
the purchase of textbooks and other goods and services generally sold under
master contracts.
StateGovCenter.com. We recently launched a new purchasing solution for
state and local government buyers which we call StateGovCenter. Building on our
FedCenter technology, StateGovCenter is designed to provide similar features to
FedCenter including multiple vendor-specific sites that may be accessed
individually or through a common search capability, easily accessible product
and service information and pricing data across multiple buyers. It also offers
secure transaction execution as well as tracking and reporting capabilities. We
intend to integrate OrderLink into StateGovCenter, along with our RFP and RFQ
capability, to provide a complete purchasing solution for state and local
buyers.
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PARTICIPANTS IN OUR E-MARKETPLACES
Government Users. We recruit users at all levels of federal, state and
local governments. We currently serve more than 13,000 registered users from
approximately 82 entities including the following:
Department of Agriculture
Department of Commerce
Department of Defense
Department of Energy
Department of Health and Human Services
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Treasury
Department of Veterans Affairs
Fairfax County, Virginia School Board
General Services Administration
National Aeronautics & Space Administration
State of Connecticut
United States Postal Service
Vendors. As of March 31, 2000, we had 260 vendors listing products and
services on FedCenter and we had agreements with an additional 420 vendors to
list their products and services on FedCenter. Recognized national vendors using
our solutions include:
AT&T Wireless
CompUSA
Office Depot
Polaroid
Skytel
Sprint
Xerox
Our vendors currently list over 7.8 million line items for sale on
FedCenter representing approximately 2.6 million different products and
services. We group these products and services into the following categories:
Biomedical and Related
Computer and Related
Health and Fitness
Industrial Supplies and Maintenance,
Repair and Operations
Instruments, Equipment and
Electronics
Office Supplies and Furniture
Publications
Security, Law Enforcement and
Military Services
Telecom and Wireless
As of March 31, 2000, we also had 508 vendors subscribing to our MarketLink
solution and 120 vendors listing products and services on OrderLink.
SALES AND MARKETING
We sell to vendors primarily through our direct sales force. As of March
31, 2000, we had 113 sales professionals located in 11 locations. Our sales
force focuses on recruiting vendors who are capable of driving large sales
volumes through our e-marketplaces as well as vendors who meet our buyers'
requirements for small and disadvantaged business purchases. We intend to expand
our sales force and to establish additional sales offices.
We support our sales efforts with marketing campaigns aimed at increasing
brand awareness and educating government buyers and vendors about the benefits
of our offerings. Our marketing activities include print, radio and outdoor
advertising in areas with a high concentration of government entities and
workers, such as our current advertising campaign in Washington, D.C. We also
use direct mailings, trade shows and seminars. We conduct comprehensive public
relations programs, including establishing and maintaining relationships with
trade press, business press and industry analysts.
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To increase usage of FedCenter and foster loyalty of government buyers, we
introduced MyGovClub.com in December 1999. MyGovClub.com is a portal site
designed for use by government and military employees, active and retired, and
their families. Membership to this site is free and provides the following
benefits:
- an online shopping mall with approximately 230 vendors, including
Amazon.com, eToys, Pets.com; barnesandnoble.com, and LandsEnd;
- content provided by multiple sources including CBS Sportsline, CBS
Marketwatch, MapQuest.com and Weather.com;
- localized content related to the interests of government employees; and
- a range of offers including the ability to obtain Internet access,
e-mail, calendars and an affinity credit card.
OPERATIONS AND ACCOUNT DEVELOPMENT
Our operations group assists FedCenter vendors in constructing their web
sites and listing their products and services. Vendors choose one of our six web
site templates and send us colors, text and images for their marketing pages, as
well as their product and pricing data. Using the selected template, our
operations group creates the web site, integrates the data and activates the web
site on our e-marketplace. Following the web site launch, our account
development group maintains the relationship with the vendor and is responsible
for all vendor service and support. In addition, our account development teams
assist our sales group in selling additional products to vendors as well as
providing vendors with cooperative marketing opportunities.
Our account development teams also focus on encouraging buyers within
federal, state and local governments to use our solutions. These teams typically
target their efforts to senior managers who are able to influence purchasing
decisions for multiple government buyers. For example, we have recently entered
into a pilot program with the Department of Commerce. Under this program, the
Department of Commerce has agreed to implement FedCenter in four domestic
locations. Our account development teams expect to introduce this program at
other Department of Commerce locations as well. Our account development teams
also work with government buyers to provide free training and support, as well
as demonstrations of how to use our solutions.
TECHNOLOGY
We have integrated a broad array of specialized web site management, search
technologies, product and pricing content management applications, shopping cart
technologies and transaction processes. We are using a combination of internally
developed and customized software applications and hardware equipment developed
primarily by InterWorld, Compaq, Microsoft and Sun Microsystems. As a result,
our e-commerce solutions can be expanded to accommodate larger numbers of users
and transactions, as well as added features. We believe this will allow us to
quickly add new buyers and vendors without significant redesign.
Our e-marketplaces are available on a 24 hour a day, seven day a week
basis, subject to scheduled maintenance. We own all of our servers and web site
hardware. Our vendors' web sites run off a redundant server hosted at
GlobalCenter's data center in Herndon, Virginia. This data center provides a
secure environment, 24 hour systems support, redundant communications lines and
emergency power backup. We expect to continue to spend a significant amount of
time and resources on systems development to ensure the continued reliability
and scalability of our technology as our business grows.
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INTELLECTUAL PROPERTY
Our success and ability to compete depends on our ability to develop and
maintain the proprietary aspects of our technology. We rely on a combination of
copyright, trademark and trade secret laws and contractual restrictions to
establish and protect the proprietary aspects of our technology. We seek to
protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. Finally, we seek to avoid
disclosure of our intellectual property by restricting access to our source code
and by requiring employees and consultants with access to our proprietary
information to execute confidentiality agreements with us.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our solutions or to obtain and use information
that we regard as proprietary. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets and to
determine the validity and scope of the proprietary rights of others. Any
resulting litigation could result in substantial costs and diversion of
resources and could seriously harm our business.
Our success and ability to compete also depends on our ability to operate
without infringing the proprietary rights of others. We cannot be certain our
services do not infringe on patents or other intellectual property rights that
may relate to our solutions. In the event of a successful claim of infringement
against us and our failure or inability to license the infringed technology, our
business would be seriously harmed.
COMPETITION
The e-commerce market is new, rapidly evolving and intensely competitive,
and we expect competition to intensify in the future. Barriers to entry are not
significant, and competitors may develop and offer similar services in the
future. Although we believe there may be opportunities for several providers of
products and services similar to ours, a single provider may dominate the
market. We expect additional companies will offer competing e-commerce solutions
in the future. Competition is based upon cost, functionality, breadth and depth
of product offerings, user base and ease of use.
We face, or may in the future face, competition with entities providing
e-commerce solutions for the procurement function. These competitors include:
- government solutions which exist or may be developed, particularly the
General Services Administration's electronic purchases initiative, GSA
Advantage;
- e-commerce providers, such as American Management Systems, Inc., eFed,
Free Markets, Inc., GovCon and ProcureNet.com, that currently provide
procurement services to governmental entities;
- e-commerce providers, such as ezGov, govWorks, Inc. and LINK2GOV.com,
that facilitate interaction between government and citizens;
- enterprise software purchasing system providers such as Ariba, Inc.,
Commerce One, Inc., Intelysis Electronic Commerce, Inc. and
PurchasePro.com, Inc., which presently conduct business-to-business
e-commerce and may introduce business-to-government e-commerce services;
- enterprise resource planning software developers such as Oracle
Corporation, PeopleSoft, Inc., SYSCOM Incorporated and SAP, which are
developing software that can be used as a platform for electronic
procurement with integrated back-end systems;
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- consulting firms, such as Andersen Consulting, CACI, Computer Sciences
Corporation, Electronic Data Systems, IBM, Science Application
International Corporation and Unisys; and
- e-commerce web sites of business retailers which may also be used by
government buyers.
We compete with vendors offering a traditional procurement process as well
as with in-house developed procurement systems that can be utilized by potential
buyers as an alternative to electronic procurement. As a strategic response to
changes in the competitive environment or otherwise, we may, from time to time,
make certain pricing, service or marketing decisions or acquisitions that could
materially and adversely affect your investment.
GOVERNMENT REGULATION
In addition to regulations applicable to businesses generally, we are
subject to the laws and regulations applicable to e-commerce.
E-Commerce Regulations. Few laws or regulations are currently directly
applicable to access to the Internet. However, because of the Internet's
popularity and increasing use, new laws and regulations may be adopted. Such
laws and regulations may cover issues such as:
- user privacy;
- pricing;
- taxation;
- content;
- copyrights;
- distribution; and
- characteristics and quality of products and services.
In addition, the growth of the Internet and e-commerce, coupled with
publicity regarding Internet fraud, may lead to the enactment of more stringent
laws and regulations. These laws may impose additional burdens on our business.
The enactment of any additional laws or regulations may impede the growth of the
Internet, which could decrease our potential revenues from e-commerce or
otherwise adversely affect your investment.
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. Congress has already enacted
Internet laws regarding online copyright infringement. Although not yet enacted,
Congress is considering laws regarding Internet taxation. There is uncertainty
regarding the marketplace impact of these and other laws or regulations that may
be enacted in the future. In addition, various jurisdictions already have
enacted laws that are not specifically directed to e-commerce but that could
affect our business. The applicability of many of these laws to the Internet is
uncertain and could expose us to substantial liability.
Any new legislation or regulation regarding the Internet, or the
application of existing laws and regulations to the Internet, could materially
and adversely affect your investment. If we were alleged to violate federal,
state or foreign, civil or criminal law, even if we could successfully defend
such claims, the cost of such defense and the unfavorable publicity could
materially and adversely affect your investment.
We believe our use of third-party material currently included in our
e-marketplaces is permitted under current provisions of copyright law and our
contractual relationships. However,
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because legal rights of certain aspects of Internet content and commerce are not
clearly settled, our ability to rely upon exemptions or defenses under copyright
law is uncertain.
Several telecommunications carriers are seeking to have telecommunications
over the Internet regulated by the Federal Communications Commission in the same
manner as other telecommunications services. Additionally, local telephone
carriers have petitioned the Federal Communications Commission to regulate
Internet providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on such providers. If
either of these petitions is granted, the costs of communicating on the Internet
could increase substantially. This, in turn, could slow the growth of use of the
Internet. Any such legislation or regulation could materially and adversely
affect your investment.
EMPLOYEES
At March 31, 2000, we had approximately 285 employees, all of whom are
employed full-time. None of our employees is represented by a labor union. We
consider our relations with our employees to be good.
FACILITIES
Our corporate headquarters are located at 575 Herndon Parkway, Herndon,
Virginia, where we lease approximately 56,000 square feet of office space for a
monthly fee of approximately $128,000 under a lease that expires in February
2007. This facility houses substantially all of our primary operations,
including our executive staff and our sales, operations, account development,
and programming and development personnel.
We also lease a site in King of Prussia, Pennsylvania for $13,140 per month
under a lease agreement that expires in December 2003. We lease an office
facility in Santa Monica, California for use by one of our subsidiaries. This
lease covers approximately 7,500 square feet at a rent of $15,540 per month.
This lease expires in February 2005. In addition, we have entered into leases
for sales offices in several cities. The rents for these sales offices range
from $1,000 per month to $5,325 per month.
LEGAL PROCEEDINGS
We have received a letter from an attorney representing one of our
warrantholders alleging, among other things, that the value of the warrants held
by him was improperly diluted by a financing transaction in 1998. As a result of
this transaction, the warrantholder alleges that he is entitled to a sufficient
number of additional warrants to reverse the effect of the dilution. We believe
that these allegations are without merit and intend to vigorously defend
ourselves in the event we are required to do so. A substantial amount of our
outstanding warrants also contain these anti-dilution provisions. If we are
required to defend ourselves, and if we are unsuccessful, we believe we could be
required to issue additional warrants to purchase approximately 120,000 shares
of our common stock. However, because the anti-dilution provisions of the
warrants require a determination of the then-current fair market value, the
exact amount of the adjustment cannot, at this time, be definitively determined.
If a court determined that the anti-dilution provisions of these warrants have
been triggered, it could decide that a higher number of warrants should be
issued. In addition, if these anti-dilution provisions were triggered, we could
be liable to persons who purchased our securities after this financing
transaction based on representations made by us regarding our then existing
capitalization.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Our executive officers, directors and key employees and their ages are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Thomas J. Cirrito..................... 52 Chairman of the Board and Director
Tony Bansal........................... 46 President, Chief Executive Officer and
Director
William H. Seippel.................... 43 Executive Vice President, Chief
Financial Officer and Director
Robert E. Crawford, Jr. .............. 49 Senior Vice President, Secretary and
General Counsel
James W. Handlon...................... 54 Senior Vice President
Gabriel S. Leung...................... 43 Senior Vice President and Chief
Technology Officer
Norman W. Montgomery.................. 41 Senior Vice President
Alan Krenek........................... 44 Vice President - Finance and Assistant
Secretary
Dr. John M. Poindexter................ 63 Director
Carlo A. von Schroeter................ 36 Director Nominee
Paul A. Maeder........................ 45 Director Nominee
KEY EMPLOYEES
Robert L. Akers....................... 46 Director of Client Services
James C. Daly......................... 36 Vice President - Sales
Matthew J. Gibbons.................... 40 Vice President of Account Development
Kenneth W. Kreisch.................... 44 Vice President and General Manager of
StateGovCenter
Alan R. Kruml......................... 47 Vice President of Customer Service and
Chief Information Officer
Kasha O. Laiks........................ 28 Vice President of Marketing
David L. Levine....................... 33 Director of Financial Planning and
Treasurer
</TABLE>
Executive Officers and Directors
Thomas J. Cirrito has served as a member of our board of directors since
January 1998 and as Chairman of the Board since February 1998. Since July 1996,
Mr. Cirrito has served as the General Partner of Atocha, L.P., a limited
partnership involved in investments in technology companies. Prior to joining
our board of directors, from September 1993 to May 1997, Mr. Cirrito was a
co-founder, director, and President of the Consumer Division of Telco
Communications Group.
Tony Bansal has served as our President and Chief Executive Officer since
March 1998 and was elected to our board of directors in February 1998. From
August 1997 until March 1998, Mr. Bansal served as an independent consultant to
us. From May 1994 to March 1998, Mr. Bansal served in various management
capacities with ICF Kaiser International, an engineering and consulting firm,
including Senior Vice President and Chief Information Officer from March 1995 to
January 1997, and President of ICF Kaiser Systems, a first-tier subsidiary of
ICF Kaiser International, from January 1997 to March 1998.
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William H. Seippel, our Executive Vice President and Chief Financial
Officer, joined us in October 1999 as our Chief Financial Officer, Secretary and
as a member of our board of directors. Mr. Seippel was named our Executive Vice
President in April 2000. From October 1996 until September 1999, Mr. Seippel was
the Executive Vice President of Finance and Chief Financial Officer of Global
Telesystems Group, Inc., a network and services operations company. From July
1992 to October 1996, he served as Vice President - Finance and Chief Financial
Officer of Landmark Graphics Corporation, a developer of oil and gas exploration
and production software. Prior to 1992, Mr. Seippel held various operational,
marketing and finance positions at COVIA Partnership, a division of United
Airlines, and Digital Equipment Corporation. Mr. Seippel will be named our Chief
Operating Officer upon the closing of this offering.
Robert E. Crawford, Jr. has served as our Senior Vice President, Secretary
and General Counsel since April 2000. For more than the past five years, Mr.
Crawford was an equity shareholder of the law firm of Winstead Sechrest & Minick
P.C. in Dallas, Texas, where he specialized in corporate, securities and mergers
and acquisitions transactions, primarily for clients in the technology and
telecommunications industries. Mr. Crawford remains affiliated with Winstead
Sechrest & Minick P.C. in a non-compensatory capacity.
James W. Handlon joined us as our Senior Vice President in April 2000. From
May 1994 until April 2000, Mr. Handlon served with Ernst & Young LLP in the
Management Consulting Services practice as a market leader executive,
specializing in business transformation management, business performance
improvement, merger integration, high growth companies' business strategies and
implementation, and human resources management. From November 1988 until May
1994, Mr. Handlon served with the international professional services firm of
Towers Perrin.
Gabriel S. Leung has served as our Senior Vice President and Chief
Technology Officer since April 2000. From December 1997 until April 2000, Mr.
Leung was our Senior Vice President - Technology and E-Business Strategy. From
May 1997 to December 1997, Mr. Leung was the Lead Information System Engineer
for MITRE Corporation, a think tank for the Department of Defense and the
Federal Aviation Administration. From May 1993 until May 1997, Mr. Leung was
employed by ICF Kaiser International as the Director of Technical Infrastructure
where he implemented worldwide information systems.
Norman W. Montgomery has served as our Senior Vice President since April
2000. From March 1999 until April 2000, Mr. Montgomery served as our Vice
President and General Manager of FedCenter. From January 1990 until March 1999,
he served in various positions at American Express, most recently as Vice
President of Sales and Account Development.
Alan Krenek was named our Assistant Secretary in April 2000 and our Vice
President - Finance in January 2000. Mr. Krenek joined us as our Controller in
December 1999. From January 1997 until December 1999, Mr. Krenek served as Vice
President - Corporate Accounting of Global Telesystems Group, Inc. From July
1995 until December 1996, Mr. Krenek served as the Controller of Landmark
Graphics Corporation and from August 1993 until July 1995, Mr. Krenek served as
Controller of Noble Drilling Corporation, an oilfield drilling company. Mr.
Krenek will be named our Chief Financial Officer upon the closing of this
offering.
Dr. John M. Poindexter has served as a member of our board since July 1998.
Dr. Poindexter is the Senior Vice President - Information Systems for Syntek
Technologies, Inc., an engineering consultant firm, a position he has held since
January 1996. From January 1995 until January 1996, Dr. Poindexter served as
Vice President of TP Systems, Inc., a software development company. Dr.
Poindexter previously served as National Security Advisor to President Ronald
Reagan, where he was responsible for providing recommendations on national
security, foreign policy, and defense policy.
41
<PAGE> 44
Carlo A. von Schroeter will be appointed to our board of directors in May
2000. Mr. von Schroeter is a General Partner of Weston Presidio Capital, a
private equity and venture capital firm, which he joined at inception in August
1992. From August 1990 until August 1992, he served in various capacities with
Security Pacific Capital, including as Vice President. Mr. von Schroeter serves
on the board of directors of MapQuest.com, an online mapping company, and
Medscape Inc., an online healthcare information company. Mr. Schroeter will
serve as one of the two directors appointed by our Series D preferred
stockholders.
Paul A. Maeder will be appointed to our board in May 2000. Mr. Maeder has
been the Managing General Partner of Highland Capital Partners since 1988.
Before forming Highland Capital Partners, Mr. Maeder was a general partner at
Charles River Ventures. Mr. Maeder will serve as one of the two directors
appointed by our Series D preferred stockholders.
Our board of directors currently has three vacancies, two of which will be
filled by Mr. von Schroeter and Mr. Maeder. The remaining vacancy will be filled
by an individual who is not an officer or employee of Digital Commerce and will
be appointed by our entire board, including Mr. von Schroeter and Mr. Maeder.
Key Employees
Robert L. Akers was named our Director of Client Services in April 2000.
From November 1999 until April 2000, Mr. Akers served as our Director of
Operations. From May 1995 until November 1999, Mr. Akers served as Director of
Programs and later as Director - Finance Operations for Global Telesystems
Group, Inc. From June 1993 until April 1995, Mr. Akers served on active duty in
the United States Air Force as a project manager for and Military Assistant to
the deputy Undersecretary of Defense (Acquisition Reform).
James C. Daly, our Vice President - Sales, joined us in October 1999. From
May 1996 to October 1999, Mr. Daly was employed by Teleglobe Communications
Corporation, a telecommunications company where he served as the Senior Vice
President, General Business Division. From August 1989 until May 1996, Mr. Daly
served as the Director of Sales - East Coast for Frontier Corporation, a
telecommunications service provider.
Matthew J. Gibbons, our Vice President of Account Development, joined us in
December 1999. From August 1993 until November 1999, Mr. Gibbons held various
positions within sales, business development, account development and government
services with American Express, most recently as Director of Business
Development. From September 1986 until August 1993, he was employed by United
Airlines where he held various positions.
Kenneth W. Kreisch joined us as our Vice President and General Manager of
StateGovCenter in April 2000. From January 1998 until April 2000, Mr. Kreisch
was the Vice President of Sales for CIT Technology Rentals & Services, an
equipment rental and leasing company. From January 1991 until January 1998, Mr.
Kreisch was employed by GE Capital/TMS Computer Rentals & Services, most
recently as Vice President of Sales.
Alan R. Kruml, our Vice President of Customer Service and Chief Information
Officer, joined us in January 2000. From August 1994 until December 1999, Mr.
Kruml was the Director of Corporate Information Technology for Landmark Graphics
Corporation. Prior to Landmark Graphics Corporation, Mr. Kruml held a variety of
information technology management and consulting positions at Ernst & Young,
Sara Lee Corporation and Arthur Andersen.
Kasha O. Laiks was appointed Vice President of Marketing in April 2000. Ms.
Laiks joined us in October 1999 as our Director of Marketing and Director of
MyGovClub.com. From June 1999 until September 1999, Ms. Laiks served as Business
Development Manager for USAToday.com, an online news and publishing company, and
from October 1998 until May 1999, she served as a Program Marketing Manager for
America Online, Inc., an Internet service provider. From December 1996 until
October 1998, Ms. Laiks held positions in marketing
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<PAGE> 45
management at the Fairfax County Chamber of Commerce, a business membership
organization. From April 1995 through December 1996, Ms. Laiks was Marketing
Manager for Security Assistance International, a government contractor
consulting firm.
David L. Levine joined us as our Director of Financial Planning and
Treasurer in March 2000. From May 1997 to March 2000, Mr. Levine served as Vice
President in the Investment Banking Department of Prudential Securities
Incorporated, a financial services firm. From August 1991 to May 1997, Mr.
Levine served in various positions, most recently as Vice President, in the
Corporate Finance Group of Ladenburg Thalmann & Co. Inc., a securities firm.
From July 1989 until August 1991, Mr. Levine was employed in the Investment
Banking Department of Goldman Sachs & Co.
Our board of directors names our executive officers at the first board of
directors meeting following our annual meeting of stockholders. The board of
directors has the exclusive authority to elect our Chairman of the Board,
President, Secretary and other officers it may designate. Our board shares the
power to elect our Treasurer, Vice Presidents and assistant officers with our
President. Each officer serves at the pleasure of the board of directors, or the
President, depending on the party appointing or electing the officer, and until
their successors are elected and appointed or until the earlier of their death,
resignation or removal.
TERM AND COMPENSATION OF DIRECTORS
Our board is divided into three classes, with each class serving a
staggered three-year term. Mr. Cirrito serves as a director in the class having
a term first ending in 2001, Mr. Seippel serves as a director in the class
having a term first ending in 2002, and Messrs. Bansal and Poindexter serve as
directors in the class having a term first ending in 2003. Mr. Maeder will be
appointed to the class having a term first ending in 2001 and Mr. von Schroeter
will be appointed to the class having a term first ending in 2002.
Messrs. Cirrito, Bansal and Seippel do not receive compensation for their
services as members of our board of directors. Our non-employee directors are
paid $500 for each meeting of the board in which they participate and are
reimbursed for travel and lodging expenses in connection with attendance at
board of directors and Committee meetings.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
Audit Committee. The members of our audit committee, all of whom are
independent directors, are Messrs. , , and . The audit
committee is responsible for recommending to the board of directors the
engagement of our outside auditors and reviewing our accounting controls and the
results and scope of audits and other services provided by our auditors.
Compensation Committee. The members of our compensation committee are
Messrs. , , and . The compensation committee is responsible
for reviewing and recommending to the board of directors the amount and type of
consideration to be paid to senior management, administering our stock option
plans and establishing and reviewing general policies relating to compensation
and benefits of our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
After this offering, our compensation committee will determine management's
compensation. During 1999, our board of directors as a whole determined the
compensation of our executive officers, Tony Bansal, our President and Chief
Executive Officer, and William H. Seippel, our Executive Vice President and
Chief Financial Officer, as members of the board of directors, participated in
deliberations of the board of directors with respect to compensation of
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<PAGE> 46
all executive officers, other than themselves, during 1999. In addition, Mr.
Bansal determines Mr. Seippel's bonus as set forth in Mr. Seippel's letter
agreement.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation for services rendered which
was paid to our Chief Executive Officer and our other most highly compensated
executive officers, other than the Chief Executive Officer, whose total annual
compensation exceeded $100,000 in 1999, referred to in total as "the named
executive officers:"
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- ---- -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Tony Bansal............................. 1999 $200,000 $ 0 0 $25,000(1)
President and Chief Executive Officer
Gabriel S. Leung........................ 1999 $132,833 $ 0 50,000(2) 0(3)
Senior Vice President and Chief
Technology Officer
Norman W. Montgomery.................... 1999 $103,417 $ 0 50,000(4) 0(3)
Senior Vice President
</TABLE>
- ------------
(1) Represents shares of our common stock issued to Mr. Bansal as compensation
pursuant to his employment contract.
(2) In March 1999, Mr. Leung was granted an option to purchase 50,000 shares of
our common stock pursuant to the 1998 stock plan. The option vests over
three years from December 1997 and expires five years from the date of
grant. This option will vest upon the closing of this offering.
(3) These executive officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites or
other benefits the aggregate cost of which did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus for such officer.
(4) In March 1999, Mr. Montgomery was granted an option to purchase 50,000
shares of our common stock pursuant to the 1998 stock plan. The option vests
over three years and expires five years from the date of grant. This option
will vest upon the closing of this offering.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during fiscal 1999 to each of the named executive officers. To date, none of
those options have been exercised.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENTAGE RATES OF STOCK
SECURITIES OF TOTAL PRICE APPRECIATION
UNDERLYING GRANTED FOR OPTION TERM(3)
OPTIONS IN FISCAL EXERCISE ---------------------
NAME GRANTED 1999(1) PRICE(2) EXPIRATION DATE 5% 10%
- ---- ---------- ---------- -------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tony Bansal................. 0 -- -- -- -- --
Gabriel S. Leung............ 50,000 4.4% $1.00 March 2004 $14,000 $30,500
Norman W. Montgomery........ 50,000 4.4% $1.00 March 2004 $14,000 $30,500
</TABLE>
- ------------
(1) Based on options to purchase an aggregate of 1,124,537 shares of common
stock granted during fiscal 1999.
(2) The exercise price was fixed at the date of the grant and represented the
fair market value per share of common stock as determined by the board of
directors.
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<PAGE> 47
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of the future value of our common stock. There can be no
assurance that any of the values reflected in the table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table contains the value of the in the money options, meaning
a positive spread between the assumed initial public offering price and the
exercise price held by our named executive officers. These values have not been,
and may never be, realized. The options might never be exercised and the value,
if any, will depend on the share price on the exercise date. No shares were
acquired during 1999 by our named executive officers as a result of the exercise
of options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------------- -------------------------
<S> <C> <C>
Tony Bansal................................... 500,000/531,739(2) /
Gabriel S. Leung.............................. 41,334/16,666(2) /
Norman W. Montgomery.......................... 16,667/33,333(2) /
</TABLE>
- ------------
(1) Assumes a per share fair market value equal to $ , the initial public
offering price.
(2) All of these options will vest upon the consummation of this offering.
EMPLOYMENT AGREEMENTS
Tony Bansal. In January 1999, we entered into an employment agreement with
Tony Bansal, naming Mr. Bansal our President and Chief Executive Officer and as
a nominee to our board of directors. The Agreement has an initial term of 3
years and will automatically renew for a successive three year period unless
notice of termination is given by Mr. Bansal or us at least 30 days prior to
December 31, 2002. We have agreed to pay Mr. Bansal an annual salary of
$200,000, together with annual increases plus bonuses as each are determined by
the board of directors, as well as specified fringe benefits. In addition, we
issued Mr. Bansal options to purchase 1,031,739 shares of our common stock at an
exercise price of $1.00 per share. Of this amount, 700,000 options are currently
vested, with 200,000 vesting in March 2001 and 131,739 in March 2002. All then
unvested options will vest automatically upon the closing of this offering. In
addition, Mr. Bansal is entitled to receive, as payment for previous services,
shares of our common stock at the beginning of each year of the contract in an
amount having a fair market value of $25,000. In the event that Mr. Bansal's
employment is terminated by us without cause or is terminated by Mr. Bansal for
good reason, Mr. Bansal is entitled to receive fifty percent of his base salary
for the remaining term of his employment agreement and may exercise all vested
options and one-half of his unvested options, as well as other benefits. In
addition, upon termination of Mr. Bansal's employment, if we pay Mr. Bansal
$100,000, we may prohibit Mr. Bansal from competing against us or soliciting any
of our employees for a one-year period.
William H. Seippel. In October 1999, we entered into a letter agreement
with William H. Seippel, naming Mr. Seippel our Chief Financial Officer. The
letter agreement provides that Mr. Seippel will be appointed to our board of
directors, subject to approval by the board of directors, which approval was
granted. The letter agreement calls for the employment of Mr. Seippel at will
and does not provide for a specific term. Under the letter agreement, we are
required to pay Mr. Seippel an annual salary of $175,000 plus bonuses as
determined by our President, as well as specified fringe benefits. In addition,
we issued Mr. Seippel options to purchase up to 300,000 shares of our common
stock at an exercise price of $2.86 per share. These options will vest upon the
consummation of this offering.
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<PAGE> 48
Retention Agreements. In connection with the grant of options pursuant to
our Executive Retention Plan, we require each executive officer to enter into a
retention agreement which sets forth the terms of the officer's employment. The
retention agreements describe the compensation of each officer, define the
methods of termination, and require the officers to enter into noncompete
agreements and confidentiality agreements.
Noncompete Agreements. In connection with the grant of options pursuant to
our Executive Retention Plan, we generally require each executive officer to
enter into a noncompete agreement which limits his or her ability to compete
with us in the event of termination of employment with us. The noncompete
agreements prevent the former officers from directly or indirectly competing
against us or soliciting our customers or employees for a period of one year
following their termination of employment.
Confidentiality Agreements. In connection with the grant of options
pursuant to our Executive Retention Plan, we require each executive officer to
enter into a confidentiality agreement which prohibits the officer from
communicating confidential information about us or our business during and after
his or her employment with us.
STOCK INCENTIVE AND STOCK OPTION PLANS
1996 Stock Incentive Plan. In June 1996, we adopted the 1996 Stock
Incentive Plan for key employees, directors, and consultants. The 1996 Plan
authorized our compensation committee to issue either qualified or non-qualified
stock options to purchase, in the aggregate, up to 3,000,000 shares of our
common stock. The 1996 plan generally provided that options granted under the
1996 plan would be exercisable for seven years from date of grant, although the
compensation committee was authorized to provide for a shorter term. The options
granted under the 1996 plan terminate if not exercised during specified periods
following the optionee's termination from employment with us. In December 1998,
our board of directors terminated the 1996 plan. As of March 31, 2000, there
were outstanding options to acquire 199,816 shares of our common stock granted
under the 1996 plan at an exercise price of $5.00 per share. No options have
been exercised under the 1996 plan.
1998 Stock Option Plan. In December 1998, we adopted the 1998 Stock Option
Plan for key employees, directors, and consultants. The board of directors
amended the 1998 plan in March 1999 and in December 1999. Our board of
directors, acting as the stock option committee, is authorized to issue either
incentive stock options qualified under the Internal Revenue Code or
non-statutory stock options to purchase, in the aggregate, up to 2,872,000
shares of our common stock. The 1998 plan grants the board of directors broad
discretion over the period during which options may be exercised. The board of
directors has authority, in certain instances, to vary the terms of the 1998
plan. The board of directors may not grant options under the 1998 plan after
December 2008. As of , 2000, there were outstanding options to
acquire shares of our common stock granted under the 1998 plan at
exercise prices ranging from $1.00 to $5.84 per share. No options have been
exercised under the 1998 plan. In the event of a change of control, all options
outstanding under the 1998 plan become immediately exercisable.
Executive Retention Plan. In February 2000, we adopted the Executive
Retention Plan for our executive management team. The Executive Retention Plan
authorizes the board of directors, or a committee thereof, to grant
non-qualified stock options to purchase up to 3,600,000 shares of our common
stock. As of March 31, 2000, there were outstanding options to acquire 1,350,000
shares of our common stock granted under this plan at an exercise price of
$5.84.
In April 2000, we granted additional stock options to our executive
officers pursuant to the Executive Retention Plan. The options have an exercise
price of $5.84 per share. One-half of the options granted to each executive
officer vest over four years while the other half vest
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<PAGE> 49
according to the performance of our common stock or, if not sooner vested, in
three annual tranches commencing on the fourth anniversary of the grant of the
options. The options expire ten years from the date of grant. The following
officers have been granted options to purchase shares of our common stock at an
exercise price of $5.84 per share pursuant to the Executive Retention Plan as
set forth below:
<TABLE>
<S> <C>
Tony Bansal.............................................. 725,000
William H. Seippel....................................... 620,000
Gabriel S. Leung......................................... 150,000
Norman W. Montgomery..................................... 150,000
Alan Krenek.............................................. 150,000
Robert E. Crawford, Jr. ................................. 148,000
James W. Handlon......................................... 100,000
James C. Daly............................................ 100,000
Matthew J. Gibbons....................................... 100,000
Alan R. Kruml............................................ 100,000
Kenneth W. Kreisch....................................... 60,000
Kasha O. Laiks........................................... 40,000
</TABLE>
2000 Flexible Incentive Plan. In 2000, we adopted the 2000 Flexible
Incentive Plan for employees, non-employee directors and consultants. The 2000
plan authorizes our board of directors to issue shares of our common
stock under incentive compensation awards, including any of the following types
of incentive compensation awards:
- stock options;
- stock appreciation rights;
- restricted stock awards;
- dividend equivalent rights; and
- performance shares or performance units.
Our board of directors can also grant other forms of awards related to our
common stock if they determine that the form of award is consistent with the
purposes of the 2000 plan. The 2000 plan also gives the board of directors broad
discretion to set the specific terms of incentive compensation awards granted
under the 2000 plan and determine the period over which these awards may be
exercised. No awards have been granted under the 2000 plan.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Certificate of Incorporation and bylaws require us to indemnify our
officers, directors, agents, and employees to the fullest extent permitted under
Delaware law. In addition, our Certificate of Incorporation provides that,
subject to certain exceptions under Delaware law, no director will be monetarily
liable for any amount in proceedings brought against such director by or on
behalf of Digital Commerce, or brought by or on behalf of the stockholders of
Digital Commerce, alleging a breach of the director's fiduciary duties owed to
Digital Commerce and its stockholders. Each of our directors has entered into an
indemnification agreement with us where we have agreed to indemnify each of them
to the fullest extent authorized or permitted by law for claims relating to the
fact that the individual is or was one of our directors. In addition, we have
entered into indemnification agreements with Messrs. Crawford, Krenek and
Levine. We also provide director and officer liability insurance for our
officers, directors, agents, and employees.
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<PAGE> 50
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the voting securities of Digital Commerce as of March 31, 2000 by:
- each person who is known to us to be the beneficial owner of more than 5%
of the voting securities of Digital Commerce;
- each director and director nominee of Digital Commerce; and
- each named executive officer and all executive officers and directors of
Digital Commerce as a group.
The table assumes the conversion of all of our outstanding shares of
preferred stock into our common stock upon the closing of this offering.
Unless otherwise indicated, the persons named below have the sole power to
vote and dispose of the shares of voting securities beneficially owned by them,
subject to community property laws, where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PRIOR TO BENEFICIAL OWNERSHIP AFTER THE
THE OFFERING OFFERING
----------------------------- ------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Tony Bansal(1)..................... 729,285(5) 8.6% 1,061,024(15)
Gabriel S. Leung(1)................ 55,232(6) * 71,898(16)
Thomas J. Cirrito(2)............... 11,099,331(7) 70.1% 11,099,331(7)
William H. Seippel(1).............. 1,573,427 20.3% 1,873,427(17)
Norman W. Montgomery(1)............ 16,667(8) * 50,000(18)
Dr. John M. Poindexter............. 30,400(9) * 30,400(9)
Carlo A. von Schroeter(3).......... 2,570,809(10) 24.9% 2,570,809(10)
Paul A. Maeder(4).................. 2,570,809(11) 24.9% 2,570,809(11)
Atocha, L.P.(2).................... 11,099,331(12) 70.1% 11,099,331(19)
Weston Presidio Capital III,
L.P.(3).......................... 2,570,809(13) 24.9% 2,570,809
Highland Capital Partners V Limited
Partnership(4)................... 2,570,809(14) 24.9% 2,570,809
All directors and executive officers
as a group (11 persons).......... 18,681,668 85.7% 19,488,406
</TABLE>
- ------------
* Less than 1%
(1) The address of Messrs. Bansal, Leung, Seippel and Montgomery is 575 Herndon
Parkway, Herndon, Virginia 20170.
(2) The address of Mr. Cirrito and Atocha, L.P. is 7716 Carleton Place, McLean,
Virginia 22102.
(3) The address of Mr. von Schroeter and Weston Presidio Capital III, L.P. is
One Federal Street, Boston, Massachusetts 02210.
(4) The address of Mr. Maeder and Highland Capital Partners V Limited
Partnership is Two International Place, Boston, Massachusetts 02110.
(5) Includes options to purchase 700,000 shares of our common stock that are
currently exercisable.
(6) Includes options to purchase 41,334 shares of our common stock that are
currently exercisable.
(7) Includes all of the shares beneficially owned by Atocha, of which Mr.
Cirrito is the general partner.
(8) All of which represent options to purchase shares of our common stock that
are currently exercisable.
(9) Represents warrants to purchase 400 shares of our common stock and an
option to purchase 30,000 shares of common stock, all of which are
currently exercisable.
(10) Includes shares held by Weston Presidio Capital III, L.P. and its
affiliates. Mr. von Schroeter disclaims beneficial ownership of the shares
beneficially held by Weston Presidio Capital III, L.P., an entity in which
he is the general partner.
(11) Includes shares held by Highland Capital Partners V Limited Partnership and
its affiliates. Mr. Maeder is a Senior Managing Director of Highland
Management Partners V, Inc., the general partner of Highland Management
Partners V Limited Partnership, or HMP, and HEF V Limited Partnership, or
HEF. HMP is the general partner of Highland Capital Partners V Limited
Partnership and Highland Capital Partners V-B Limited Partnership and HEF
is
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<PAGE> 51
the general partner of Highland Entrepreneurs' Fund V Limited Partnership.
Mr. Maeder disclaims beneficial ownership of the shares beneficially held
by Highland Capital Partners, an entity in which he is a Senior Managing
Director of its general partner.
(12) Represents (A) 3,018,286 shares of common stock held outright, (B)
5,463,764 shares of our Series B preferred stock which are convertible into
5,463,764 shares of our common stock, (C) 2,550,465 shares of our Series C
preferred stock which are convertible into 2,550,465 shares of our common
stock and (D) warrants and options to purchase 66,816 shares of our common
stock that are currently exercisable.
(13) Represents 2,570,809 shares of our Series D preferred stock which are
convertible into 2,570,809 shares of our common stock.
(14) Represents 2,570,809 shares of our Series D preferred stock which are
convertible into 2,570,809 shares of our common stock.
(15) Includes options to purchase 1,031,739 shares of our common stock, of which
331,739 will vest upon the closing of this offering.
(16) Includes options to purchase 58,000 shares of our common stock, of which
16,666 will vest upon the closing of this offering.
(17) Includes options to purchase 300,000 shares of our common stock which will
vest upon the closing of this offering.
(18) Represents options to purchase 50,000 shares of our common stock, of which
33,333 will vest upon the closing of this offering.
(19) Includes warrants and options to purchase 66,816 shares of our common stock
that are currently exercisable.
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<PAGE> 52
TRANSACTIONS WITH RELATED PARTIES
Since our inception, we have been supported primarily through private sales
of common stock, preferred stock and convertible notes to related parties and
other investors.
In December 1997, we issued a convertible promissory note in the principal
amount of $500,000 to Atocha, L.P., an entity controlled by Thomas J. Cirrito,
our Chairman of the Board. The convertible note bore interest at 18.0% and was
due and payable in June 1998. The terms of the note provided that if the note
was not repaid by June 1998, the principal and interest would automatically
convert into common stock at $10.68 per share. In addition, as part of this
transaction, Atocha received options to purchase 10,000 shares of our common
stock at an exercise price of $5.00 per share. In January 1998, Atocha converted
the note into 9,363 shares of our common stock and warrants to purchase 9,363
shares of our common stock at an exercise price of $12.00 per share in
connection with the purchase of an additional 37,453 shares of our common stock
and 37,453 warrants to purchase shares of our common stock at an exercise price
of $12.00 per share for $2,000,000. As part of the purchase, Atocha was granted
an additional option to purchase 10,000 shares of our common stock at an
exercise price of $5.00 per share.
In July 1998, we issued a convertible note to Atocha in the amount of
$800,000. This convertible note bore interest at a rate of 18.0% per annum and
was due and payable in September 1998. The terms of the note provided that, if
we defaulted, the note would automatically convert into the number of shares of
our common stock that, upon conversion and taken together with the number of
shares of our common stock already owned by Atocha, would vest ownership in
Atocha of 51% of our common stock on a fully diluted basis. We defaulted and, as
a result, the note converted into 2,971,470 shares of our common stock which,
when combined with the other shares held by Atocha, constituted 51% of our
common stock then outstanding on a fully diluted basis.
In October 1998, we issued a convertible note to Atocha in the amount of
$5.0 million. This convertible note bore interest at a rate of 6.0% per annum
and was due and payable in October 2000. A condition to the issuance of this
note was the acceptance by a sufficient number of our then existing creditors of
the restructuring offer discussed in the paragraph immediately below. In
addition, we also issued a convertible note to Atocha in the principal amount of
$60,000. This convertible note bore interest at a rate of 6.0% per annum and was
due and payable in October 2000. At the time of the issuance of our Series D
preferred stock in March 2000, Atocha converted the outstanding principal and
interest on these notes into 5,463,764 shares of our Series B preferred stock at
a conversion price of $1.00 per share. These preferred shares will automatically
convert into 5,463,764 shares of our common stock upon the completion of this
offering.
In November 1998, we restructured most of our liabilities. In this
restructuring, the holders of approximately $4.1 million of our outstanding
convertible notes agreed to exchange the outstanding principal and interest due
on these notes for 775,975 shares of our common stock, $590,000 of new
promissory notes and $481,000 in cash. In addition, some of our trade creditors
agreed to accept $440,000 in full payment for claims in the aggregate of
approximately $1.1 million. Furthermore, employees owed approximately $664,000
agreed to accept cash payments of approximately $185,000 and options to purchase
115,982 shares of our common stock at a price of $1.00 per share to settle their
claims in full.
Between April 1999 and November 1999, Atocha loaned us $7.0 million under a
convertible note. The note bore interest at a rate of 6.0% per annum and was due
and payable in April 2001. At the time of the issuance of our Series D preferred
stock, Atocha converted the outstanding principal and interest on this note into
2,550,465 shares of our Series C preferred stock at a conversion price of $2.86
per share of Series C preferred stock. These
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<PAGE> 53
shares will automatically convert into 2,550,465 shares of our common stock upon
the completion of this offering.
In October 1999, we raised net proceeds of $8.3 million through a private
placement of 2,916,455 shares of our common stock at a price of $2.86 per share.
In that private placement, Mr. Seippel purchased 1,573,427 shares, Mr. Leung
purchased 13,898 shares and Mr. Crawford purchased 10,000 shares.
In March 2000, we raised $50.8 million through the sale of 8,709,902 shares
of our Series D redeemable convertible preferred stock at $5.8347 per share to a
group of investors. Mr. von Schroeter is the General Partner of Weston Presidio
Capital, affiliates of which purchased 2,570,809 shares of our Series D
preferred stock. Mr. Maeder is the Managing General Partner of Highland Capital
Partners, affiliates of which purchased 2,570,809 shares of our Series D
preferred stock. Pursuant to the terms of the Certificate of Designations
governing our Series D preferred stock, the principal holders of our Series D
preferred stock have the right to appoint two directors to our board of
directors. This right will expire immediately prior to the completion of this
offering. Messrs. von Schroeter and Maeder will serve as the directors appointed
by the holders of our Series D preferred stock. The shares of Series D preferred
stock will automatically convert into 8,709,902 shares of our common stock upon
the completion of this offering.
In the Series D preferred stock offering, Mr. Crawford purchased 8,569
shares, Mr. Daly purchased 47,132 shares, Mr. Krenek purchased 17,139 shares,
Mr. Kruml purchased 17,139 shares and Mr. Levine purchased 41,133 shares.
In connection with the private placement of our Series D preferred stock,
we entered into a letter agreement with Atocha which provided for the conversion
of all of the principal and interest related to Atocha's convertible notes
discussed above. Additionally, Atocha waived a right of first refusal it held
with respect to sales of our stock and we waived Atocha's obligations to
purchase additional shares of our common stock with respect to a January 1998
subscription agreement.
Mr. Crawford, our Senior Vice President, Secretary and General Counsel, is
affiliated, in a non-compensatory capacity, with Winstead Sechrest & Minick
P.C., our outside legal counsel and, prior to joining us in April 2000, was
employed by Winstead Sechrest and Minick P.C. In 1999, we paid Winstead Sechrest
& Minick P.C. $131,000 for legal services. In addition, in March 2000, Winstead
Sechrest & Minick P.C. acquired 20,850 shares of Series D preferred stock in
lieu of fees for legal services. For the 2000 fiscal year, we have paid Winstead
Sechrest & Minick P.C. approximately $630,000 for legal services.
REGISTRATION RIGHTS AGREEMENT
In connection with the Series D preferred stock offering, we entered into a
registration rights agreement with Weston Presidio Capital and its affiliates,
Highland Capital Partners and its affiliates, Atocha, Messrs. Bansal and Seippel
and other investors. The registration rights agreement provides for the
registration of applicable shares of our common stock issuable upon the
conversion of the Series D preferred stock. The registration rights agreement
grants two demand registration rights and unlimited short-form registration
rights on Form S-3 and piggy-back rights to the parties, provided applicable
conditions are met. Please read "Description of Capital Stock -- Registration
Rights" for a description of the terms of the registration rights agreement.
These registration rights may not be exercised until six months from the date of
the closing of this offering and expire three and one-half years from the date
of the closing of this offering.
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<PAGE> 54
STOCKHOLDERS AGREEMENT
In connection with the Series D preferred stock offering, we entered into a
stockholders agreement with Weston Presidio Capital and its affiliates, Highland
Capital Partners and its affiliates, Atocha, Messrs. Bansal and Seippel and
certain other investors. The stockholders agreement provides for transfer
restrictions and co-sale rights for our Series D preferred stock. The
stockholders agreement also provides that the parties shall vote their shares in
such manner to elect pre-determined individuals to our board of directors. The
stockholders agreement will terminate upon the completion of this offering.
FILMSTUFF
Tony Bansal, our President and Chief Executive Officer, owns a 10.0%
non-voting equity interest in FilmStuff.com, LLC, an entity in which we own a
45.0% equity interest and a 50.1% voting interest. FilmStuff is an
Internet-based marketplace for film and television production, linking studios,
networks and producers with suppliers of goods and services.
In November 1999, FilmStuff issued a promissory note to Atocha in the
amount of $1.0 million. This note bears simple interest at a rate of 6.0% per
year and is due and payable in November 2000.
We do not anticipate allocating any of our resources to FilmStuff following
this offering.
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<PAGE> 55
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
As of March 31, 2000, our authorized capital stock consisted of:
- 200,000,000 shares of common stock, par value $.01 per share, of which
7,749,598 shares were outstanding and held by approximately 128 record
holders; and
- 50,000,000 shares of preferred stock, par value $.01 per share, of which
16,724,131 shares were outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our stockholders. Cumulative voting of shares of
common stock is not permitted. The holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the board of directors out of the assets legally available therefor, subject to
the payment of any preferential dividends and the setting aside of sinking funds
or redemption accounts, if any, with respect to any preferred stock that from
time to time may be outstanding. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of the holders of any outstanding preferred stock. The holders of common
stock have no preemptive or conversion rights or other subscription rights, and
there are no redemption or sinking fund provisions applicable to the common
stock. All of the outstanding shares of common stock are fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all of our outstanding preferred stock
will be converted into an aggregate of 16,724,131 shares of our common stock.
Our board of directors, without further action by our stockholders, is
authorized to issue up to 50,000,000 shares of preferred stock. These shares of
preferred stock may be issued in one or more series and the board may fix and
determine as to any series any and all of the relative rights and preferences of
shares in such series, including, without limitation, preferences, limitations
or relative rights with respect to redemption rights, conversion rights, voting
rights, dividend rights and preferences on liquidation.
WARRANTS
As of March 31, 2000, there were warrants outstanding to purchase 884,920
shares of our common stock at an exercise price of $12.00 per share. These
warrants are fully exercisable and expire as follows:
<TABLE>
<S> <C>
During the fourth quarter of 2000........................ 382,000
During the first quarter of 2001......................... 85,855
During the second quarter of 2001........................ 163,343
During the third quarter of 2001......................... 26,000
During the fourth quarter of 2001........................ 12,000
During the first quarter of 2002......................... 6,000
During the second quarter of 2002........................ 59,000
During the third quarter of 2002......................... 0
During the fourth quarter of 2002........................ 39,045
During the first quarter of 2003......................... 48,816
During the second quarter of 2003........................ 62,861
-------
Total.......................................... 884,920
</TABLE>
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<PAGE> 56
REGISTRATION RIGHTS
Common stock issued on conversion of Series D Preferred Stock
Set forth below is a summary of the registration rights contained in the
registration rights agreement we entered into in connection with the issuance of
our Series D preferred stock.
Demand Registrations. The holders of a majority of the shares having
registration rights, or registrable securities, may request that we register
shares of common stock held by them, subject to our right, upon advice of our
underwriters, to reduce the number of shares proposed to be registered among the
demanding holders and other holders. We will be obligated to effect only two
registrations pursuant to such a request by holders of registration rights.
Piggyback Registration Rights. The holders who have registration rights
have unlimited rights to request that shares be included in any
company-initiated registration of common stock other than pursuant to this
offering and other registrations relating primarily to employee benefit plans,
business combinations and convertible debt. In subsequent registrations, the
underwriters may, for marketing reasons, exclude all or part of the shares
requested to be registered on behalf of all stockholders having the right to
request inclusion in the registration. In addition, we have the right to
terminate any registration we initiate prior to its effectiveness regardless of
any request for inclusion by any stockholders.
Form S-3 Registrations. After we have qualified for registration on Form
S-3, which will not be until at least 12 months after the closing of this
offering, holders of a majority of the shares having registration rights may
request in writing that we effect a registration of these shares on Form S-3,
provided that the holders requesting registration have requested we register at
least 10% of the registrable securities. The holders may request an unlimited
number of registrations on Form S-3.
Future Grants of Registration Rights. Without the consent of the holders
of at least a majority of the then outstanding registrable securities, we may
not grant further registration rights to a holder of our securities which would
require us to effect a registration or include the holders' securities in a
registration statement, unless the grant of registration rights would not
prejudice the registration rights of the holders of the registrable securities.
Warrants
The holders of approximately 250,000 of our outstanding warrants have the
right to request that we register the shares underlying their warrants
concurrently with any public offering by us, subject to cutback by the
underwriters.
ANTI-TAKEOVER PROVISIONS
Delaware Law. We are subject to Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person becomes an
interested stockholder, unless:
- our board of directors approved the business combination or the
transaction in which the person became an interested stockholder prior to
the date the person attained the status;
- upon completion of the transaction that resulted in the person's becoming
an interested stockholder, the person owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction began,
excluding shares owned by persons who are directors and also officers;
and
- at or subsequent to the date the person became an interested stockholder,
our board of directors approved the business combination and the
stockholders other than the
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<PAGE> 57
interested stockholder authorized the transaction at an annual or special
meeting of stockholders.
A business combination generally includes a merger, asset or stock sale or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an interested stockholder is a person who, together
with the person's affiliates and associates, owns, or within three years prior
to the determination of interested stockholder status did own, 15% or more of a
corporation's voting stock.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
Our Certificate of Incorporation and Bylaws divides our board into three
classes as nearly equal in size as possible, with each class serving a
three-year term. The terms are staggered, so that one-third of our board of
directors is to be elected each year. The classification of the board of
directors could have the effect of making it more difficult for a third party to
acquire control of us, because it would typically take more than a year for a
majority of the stockholders to elect a majority of our board of directors. In
addition, our Certificate of Incorporation and Bylaws provide that any action
required or permitted to be taken by our stockholders at an annual or special
meeting may be taken only if it is properly brought before the meeting, and may
not be taken by written action in lieu of a meeting. The Bylaws also provide
that special meetings of the stockholders may be called only by the board of
directors, the Chairman of the Board, the Chief Executive Officer or the holders
of the majority of shares of our common stock. Under our Bylaws, stockholders
wishing to propose business to be brought before a meeting of stockholders will
be required to comply with various advance notice requirements.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is . The
transfer agent's address is .
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<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock,
and we cannot predict the effect, if any, that sales of common stock or the
availability of common stock for sale will have on the market price of our
common stock prevailing from time to time. Nonetheless, substantial sales of
common stock in the public market following this offering, or the perception
that such sales could occur, could lower the market price of our common stock or
make it difficult for us to raise additional equity capital in the future.
Following this offering, there will be approximately shares of our
common stock outstanding. Of these shares, the shares which are being
sold in this offering generally will be freely transferable without restriction
or further registration under the Securities Act of 1933, except that any shares
held by our affiliates as defined in Rule 144 under the Securities Act may be
sold only in compliance with the limitations described below. The remaining
shares of common stock which will be outstanding after the offering, plus
up to shares that may be issued upon exercise of outstanding vested
options and warrants, will be restricted securities as defined in Rule 144, and
may be sold in the future without registration under the Securities Act subject
to compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act.
In connection with this offering, our existing officers and directors and
persons who will own an aggregate of shares of common stock after this
offering, assuming exercise of all vested options and warrants to purchase our
common stock, have agreed with the underwriters that, subject to exceptions,
they will not sell or dispose of any of their shares for 180 days after the date
of this prospectus. Deutsche Bank Securities Inc. may, in its sole discretion
and at any time without notice, release all or any portion of the shares subject
to such restrictions. The shares of common stock outstanding upon the closing of
this offering or issuable upon exercise of vested options or warrants as of the
closing of this offering will be available for sale in the public market as
follows:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES DESCRIPTION
---------------- -----------
<S> <C>
.............. After the date of this prospectus, freely
tradeable shares sold in the offering.
.............. After 90 days from the from the date of this
prospectus, these shares will be saleable if the
sales meet the conditions of Rule 701.
.............. After 180 days from the date of this prospectus,
the lock-up period will expire and these shares
will be saleable under Rule 144, subject, in some
cases, to volume limitations.
.............. After one year from the date of this prospectus,
these additional shares will be saleable under
Rule 144, subject, in some cases, to volume
limitations.
.............. After two years from the date of this prospectus,
these additional shares will be saleable under
Rule 144 without limitations as to volume, except
that shares held by our affiliates will continue
to be subject to limitations as described below.
</TABLE>
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<PAGE> 59
In general, under Rule 144, as currently in effect, a person or persons
whose shares are required to be aggregated, including an affiliate of ours, and
who has beneficially owned shares for at least one year is entitled to sell,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of 1% of the
then outstanding shares of common stock, which is expected to be approximately
shares upon the completion of this offering, or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
date on which notice of such sale is filed, subject to certain restrictions. In
addition, a person who is not deemed to have been an affiliate of ours at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell such
shares under Rule 144(k) without regard to the public information, volume
limitations and notice filing requirements of Rule 144. To the extent that a
person acquires shares from an affiliate of ours, that person's holding period
for the purpose of effecting a sale under Rule 144 commences on the date of
transfer from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under our stock
option plans and under other outstanding warrants and options.
In general, under Rule 701 under the Securities Act, any of our employees,
directors, officers, consultants or advisors who purchased shares of common
stock from us in connection with a compensatory stock or option plan or other
written agreement before the effective date of this offering is entitled to sell
those shares beginning 90 days after the date of this prospectus in reliance on
Rule 144, without having to comply with the holding period and notice filing
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice filing
provisions of Rule 144. The SEC has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, along with the
shares acquired upon exercise of such options, including exercises after the
date of this prospectus.
We intend to file one or more registration statements on Form S-8 under the
Securities Act following this offering to register all shares of common stock
which are issuable upon exercise of outstanding stock options issued under our
stock option plans and all shares of common stock issuable under our stock
option plans. These registration statements become effective upon filing. Shares
covered by these registration statements will thereupon be eligible for sale in
the public markets, upon the expiration or release from the terms of the lock-up
agreements, to the extent applicable.
In addition, after the expiration of the 180-day lock-up period, some of
the holders of our Series D preferred stock, which will convert automatically
into common stock immediately prior to the closing of this offering, will have
the registration rights described in "Description of Capital
Stock -- Registration Rights."
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<PAGE> 60
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, the underwriters named below, for whom Deutsche
Bank Securities Inc., FleetBoston Robertson Stephens Inc. and Bear, Stearns &
Co. Inc. are acting as representatives, have severally but not jointly agreed to
purchase the following respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
Deutsche Bank Securities Inc. ..............................
FleetBoston Robertson Stephens Inc. ........................
Bear, Stearns & Co. Inc. ...................................
Total.............................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to approval of conditions precedent and that the
underwriters will be obligated to purchase all of the shares of the common stock
offered if any are purchased. The underwriting agreement provides that, in the
event of a default by an underwriter, in some circumstances the purchase
commitments of non-defaulting underwriters may be increased or the underwriting
agreement may be terminated.
The underwriting discount will be an amount equal to the public offering
price per share, less the amount paid per share by the underwriters. The
following table shows the underwriting discount we will pay to the underwriters
in this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of our common
stock to cover over-allotments.
<TABLE>
<CAPTION>
% OF INITIAL
PUBLIC OFFERING
NO EXERCISE FULL EXERCISE PRICE
----------- ------------- ---------------
<S> <C> <C> <C>
Per Share................... $ $ %
Total....................... $ $ %
</TABLE>
We will pay the offering expenses, estimated to be approximately $
million, which consist of registration and filing fees, legal and accounting
fees and expenses, printing expenses, blue sky qualification fees and expenses,
transfer agent fees and other miscellaneous expenses.
We have granted to the underwriters an option expiring on the 30th day
after the date of this prospectus to purchase up to additional shares of
common stock at the initial public offering price, less the underwriting
discounts and commissions. This option may be exercised only to cover
over-allotments in the sale of shares of common stock. To the extent this option
is exercised, each underwriter will become obligated to purchase approximately
the same percentage of these additional shares of common stock as it was
obligated to purchase pursuant to the underwriting agreement.
We have been advised by the representatives that the underwriters propose
to offer the shares of common stock to the public initially at the public
offering price set forth on the cover page of this prospectus and, through the
representatives, to selling group members at this price less a concession of
$ per share, and the underwriters and selling group members may allow a
discount of $ per share on sales to other broker-dealers. After the
offering, the public offering price and concession and discount to dealers may
be changed by the representatives.
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<PAGE> 61
The representatives have informed us that they do not expect discretionary
sales by the underwriters to exceed 5% of the shares being offered hereby.
Digital Commerce, its officers and directors, and some of our other
existing stockholders and optionholders have agreed that they will not offer,
sell, contract to sell, pledge or otherwise dispose of or transfer, directly or
indirectly, or, in our case, file with the Securities and Exchange Commission a
registration statement relating to, any shares of common stock or securities
exchangeable or exercisable for or convertible into shares of common stock, or
publicly disclose the intention to do any of the foregoing, without the prior
written consent of Deutsche Bank Securities Inc. for a period of 180 days after
the date of this prospectus, except under certain circumstances. Deutsche Bank
Securities may remove these restrictions prior to 180 days after the offering
without prior notice.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for persons we designate. The
number of shares available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby. We intend, through Deutsche Bank
Securities Inc., to seek indications of interest from designated persons who may
include employees, customers and others with whom we have or may seek to develop
business relationships.
Individuals associated with Deutsche Bank Securities Inc. own a total of
13,711 shares of our Series D preferred stock.
We have agreed to indemnify the underwriters against liabilities, including
civil liabilities under the Securities Act, or to contribute to payments which
the underwriters may be required to make in respect thereof.
We anticipate our common stock will be approved for quotation on the Nasdaq
National Market under the symbol "DCCN."
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors considered in
determining the initial public offering price will include:
- the information set forth in this prospectus and otherwise available to
the representatives;
- our history and prospects within our industry;
- an assessment of our management;
- the prospects for, and the timing of, our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of the
offering;
- the recent market prices of, and the demand for, publicly-traded common
stock of companies in businesses similar to ours;
- market conditions for initial public offerings; and
- other relevant factors.
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<PAGE> 62
There can be no assurance that an active trading market will develop for
the common stock or that the common stock will trade in the market after this
offering at or above the initial public offering price.
The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
shares of the common stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
representatives to reclaim a selling concession from a syndicate member when
shares of the common stock originally sold by a syndicate member are purchased
in a syndicate covering transaction to cover syndicate short positions.
Stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the common stock to be higher than it would otherwise be in
the absence of these transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
VALIDITY OF COMMON STOCK
The validity of the issuance of the common stock offered by us in this
offering will be passed upon for us by Winstead Sechrest & Minick P.C. Dallas,
Texas. Some members of Winstead Sechrest & Minick P.C. are holders of 20,850
shares of our Series D preferred stock. In addition, Mr. Crawford, who remains
affiliated with Winstead Sechrest & Minick P.C. in a non-compensatory capacity,
is the holder of 8,569 shares of our Series D preferred stock and 10,000 shares
of our common stock. Some legal matters concerning this offering will be passed
upon for the underwriters by Fulbright & Jaworski L.L.P., New York, New York.
CHANGES IN ACCOUNTANTS
Previous independent accountants
On January 10, 2000, PricewaterhouseCoopers LLP was dismissed as our
independent accountants.
The report of PricewaterhouseCoopers LLP on our financial statements as of
December 31, 1998 and for each of the two years in the period ended December 31,
1998 contained no adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principle, except for
an explanatory paragraph regarding the fact that we had experienced losses and
required additional capital to achieve our business plan after December 31,
1999.
In connection with the audit of our consolidated financial statements as of
December 31, 1998 and for the years ended December 31, 1998 and 1997 and through
January 10, 2000, there have been no disagreements with PricewaterhouseCoopers
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on such consolidated financial statements for
such years.
In connection with the audit of our consolidated financial statements as of
December 31, 1998 and for the years ended December 31, 1998 and 1997, on January
31, 2000 PricewaterhouseCoopers LLP reported to our president, as a
representative of our board of directors, that certain matters relating to our
internal control structure constituted
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<PAGE> 63
a material weakness as contemplated by generally accepted auditing standards.
PricewaterhouseCoopers LLP advised us that inadequate financial systems and our
inability to maintain appropriate accounting records inhibited us from
appropriately analyzing and accounting for equity and pending transactions.
Further, due to the size of our accounting department at that time, we did not
have appropriate personnel to ensure sufficient segregation of duties. Our board
of directors did not formally discuss these matters with PricewaterhouseCoopers
LLP. We authorized PricewaterhouseCoopers LLP to respond fully to any inquiries
from Ernst & Young LLP regarding this matter.
We have requested that PricewaterhouseCoopers LLP furnish a letter
addressed to the SEC stating whether or not it agrees with the above statements.
A copy of this letter dated May 2, 2000, is filed as Exhibit 16.1 to this Form
S-1.
Other
During the past six months, we have implemented a new accounting system,
recruited a more experienced financial and legal team, including a new Chief
Financial Officer and a General Counsel, instituted new internal financial
policies and control procedures and hired additional qualified accounting
personnel. We believe that the actions taken to strengthen our management and
financial controls are adequate to address the recurrence of any past
deficiencies.
New independent accountants
Ernst & Young LLP was engaged on February 15, 2000, to audit our financial
statements for the fiscal year ended December 31, 1999. Our board of directors
unanimously resolved to appoint Ernst & Young LLP as our independent accountants
for the fiscal year ended December 31, 1999.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999, and for the year then ended, as set
forth in their report. We have included our 1999 financial statements in this
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report given on their authority as experts in accounting and
auditing.
The consolidated financial statements as of December 31, 1998 and for the
years ended December 31, 1997 and 1998 included in this Prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Datamatix, Inc. for the year ended December 31, 1998, as set forth
in their report. We have included the financial statements of Datamatix, Inc. in
this prospectus and elsewhere in the registration statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the common stock we are offering. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules to the registration statement. For further information with
respect to us and our common stock, reference is made to the registration
statement and the exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or any other document filed as an exhibit to the registration
statement are summaries of the material provisions of these contracts and
documents. Because a complete description of each of these contracts and
documents in this prospectus is not practicable, reference is made in each
instance to the copy of the contract or document filed as an exhibit to the
registration statement. Each of the statements made in this prospectus about
those contracts and documents is qualified in all respects by reference to that
exhibit. The registration statement, including exhibits and copies of all or any
part thereof may be obtained from such office after payment of fees prescribed
by the Commission. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://www.sec.gov.
62
<PAGE> 65
INDEX TO FINANCIAL STATEMENTS
DIGITAL COMMERCE CORPORATION
<TABLE>
<S> <C>
AS OF MARCH 31, 2000 AND FOR THE THREE MONTHS ENDED MARCH
31, 1999 AND 2000
Unaudited Consolidated Balance Sheet...................... F-2
Unaudited Consolidated Statements of Operations........... F-3
Unaudited Consolidated Statements of Cash Flows........... F-4
Notes to Unaudited Consolidated Financial Statements...... F-5
AS OF DECEMBER 31, 1998 AND 1999 AND FOR EACH OF THE YEARS
IN THE
THREE-YEAR PERIOD ENDED DECEMBER 31, 1999
Report of Ernst & Young LLP, Independent Auditors......... F-8
Report of Independent Accountants......................... F-9
Consolidated Balance Sheets............................... F-10
Consolidated Statements of Operations..................... F-11
Consolidated Statements of Changes in Stockholders'
Deficit................................................ F-12
Consolidated Statements of Cash Flows..................... F-13
Notes to Consolidated Financial Statements................ F-14
</TABLE>
DATAMATIX, INC.
<TABLE>
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
Report of Ernst & Young LLP, Independent Auditors......... F-29
Statement of Operations................................... F-30
Statement of Cash Flows................................... F-31
Notes to Financial Statements............................. F-32
PRO FORMA FINANCIAL INFORMATION
Introduction.............................................. F-35
Unaudited Pro Forma Consolidated Statement of
Operations............................................. F-36
</TABLE>
F-1
<PAGE> 66
DIGITAL COMMERCE CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
ASSETS
<TABLE>
<S> <C>
(In thousands, except share data)
Current assets:
Cash and cash equivalents................................. $ 41,455
Accounts receivable....................................... 1,691
Other current assets...................................... 749
--------
Total current assets.............................. 43,895
Property and equipment, net................................. 2,458
Goodwill and other intangibles, net......................... 1,056
Deposits.................................................... 695
--------
Total assets...................................... $ 48,104
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses..................... $ 9,145
Line of credit............................................ 200
Notes payable -- related party, current................... 932
Restructured notes, current............................... 533
Deferred revenue.......................................... 284
--------
Total liabilities................................. 11,094
Commitments and contingencies
Series D redeemable convertible preferred stock, $0.01 par
value, 8,709,902 shares designated, issued and
outstanding; liquidation preference of $50,820............ 47,762
Stockholders' deficit:
Series A convertible preferred stock: $0.01 par value,
300,000 shares designated; no shares issued or
outstanding............................................ --
Series B convertible preferred stock: $0.01 par value,
6,000,000 shares designated; 5,463,764 shares issued
and outstanding; liquidation preference of $5,464...... 55
Series C convertible preferred stock: $0.01 par value,
3,500,000 shares designated; 2,550,465 shares issued
and outstanding; liquidation preference of $7,294...... 25
Common stock: $0.01 par value, 200,000,000 shares
authorized; 7,749,598 shares issued and outstanding.... 78
Additional capital........................................ 36,436
Accumulated deficit....................................... (47,346)
--------
Total stockholders' deficit....................... (10,752)
--------
Total liabilities and stockholders' deficit....... $ 48,104
========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-2
<PAGE> 67
DIGITAL COMMERCE CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 2000
(In thousands, except share and per share data) --------- ---------
<S> <C> <C>
Revenues.................................................... $ 241 $ 1,599
Costs of revenues........................................... 223 630
--------- ---------
Gross profit...................................... 18 969
Operating expenses:
Sales and marketing....................................... 1,093 5,867
Product development....................................... 126 792
General and administrative................................ 927 3,142
Depreciation and amortization............................. 337 332
Non-cash employee stock compensation...................... 25 25
--------- ---------
Total operating expenses.......................... 2,508 10,158
--------- ---------
Loss from operations.............................. (2,490) (9,189)
Interest expense, net....................................... (186) (301)
--------- ---------
Net loss.......................................... $ (2,676) $ (9,490)
========= =========
Net loss per share -- basic and diluted..................... $ (0.61) $ (1.23)
========= =========
Weighted average shares outstanding -- basic and diluted.... 4,380,737 7,720,303
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-3
<PAGE> 68
DIGITAL COMMERCE CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 2000
(In thousands) -------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,676) $(9,490)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash employee stock compensation................... 25 25
Depreciation expense................................... 47 212
Amortization expense................................... 290 110
Non-cash interest expense.............................. -- 406
Changes in assets and liabilities:
Accounts receivable.................................. 107 (1,125)
Other assets......................................... 86 (391)
Accounts payable and accrued expenses................ 143 4,650
------- -------
Net cash used in operating activities....................... (1,978) (5,603)
------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (220) (1,453)
------- -------
Net cash used in investing activities....................... (220) (1,453)
------- -------
Cash flows from financing activities:
Proceeds from issuance of Series D redeemable convertible
preferred stock........................................ -- 47,732
Distribution of PowerTrust................................ (211) (2,102)
Payments for deposits..................................... -- (695)
Payments on notes payable................................. -- (137)
------- -------
Net cash provided by (used for) financing activities........ (211) 44,798
------- -------
Net increase (decrease) in cash and cash equivalents........ (2,409) 37,742
Cash and cash equivalents, beginning of period.............. 2,824 3,713
------- -------
Cash and cash equivalents, end of period.................... $ 415 41,455
======= =======
Cash paid for interest...................................... $ 9 $ 17
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-4
<PAGE> 69
DIGITAL COMMERCE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(1) BASIS OF PRESENTATION
The unaudited interim financial information as of March 31, 2000, and for
the three months ended March 31, 1999 and 2000, has been prepared in accordance
with generally accepted accounting principles for interim financial information.
In the opinion of management, such information contains all adjustments,
consisting only of normal recurring adjustments, considered necessary for a fair
presentation of such information. The operating results for the three months
ended March 31, 2000 may not be indicative of the results of operations for the
year ending December 31, 2000 or any future period. This financial information
should be read in conjunction with the Company's audited consolidated financial
statements and footnotes thereto.
PowerTrust.com, Inc. ("PowerTrust"), a separate line of business that
utilizes e-commerce to offer and sell natural gas to consumers, commenced
operations during 1999. In late 1999, the board of directors of the Company
elected to spin-off this division through the distribution of PowerTrust's
common stock to the Company's existing security holders in 2000. PowerTrust will
be operated independently from the Company. The unaudited consolidated financial
statements of the Company for the three months ended March 31, 1999 and 2000
exclude the accounts of PowerTrust. PowerTrust financial information as of and
for the three months ended March 31, 2000 was as follows: revenues of
approximately $904,000; net loss of approximately ($1,572,000); total assets of
approximately $1,517,000; and a net deficit of approximately ($3,680,000).
(2) PREFERRED STOCK
The Company's board of directors is authorized to issue up to 50,000,000
shares of preferred stock in one or more series and to determine the relative
rights and preferences of each series of shares.
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
The board of directors designated 300,000 shares of the authorized shares
of preferred stock as Series A Non-Voting Convertible Preferred Stock. No shares
of Series A Convertible Preferred Stock have been issued to date. The Series A
Convertible Preferred Stock is convertible into shares of common stock of the
Company at a conversion rate of two shares of common stock per one share of
Series A Convertible Preferred Stock. Holders of Series A Convertible Preferred
Stock are entitled to receive dividends, when, as, and if, declared by the board
of directors at a cumulative, annual rate of 11.25 percent of the liquidation
preference per share. The holders receive a liquidation preference of $10 per
share, plus an amount equal to any accrued but unpaid dividends to the payment
date. No such dividends have been declared to date.
SERIES B CONVERTIBLE PREFERRED STOCK
The board of directors designated 6,000,000 shares of the authorized
preferred stock as Series B Convertible Preferred Stock. In March 2000,
5,463,764 shares of Series B Convertible Preferred Stock were issued upon the
conversion of related party notes payable with principal and accrued interest of
$5,464,000. The Series B Convertible Preferred Stock is convertible into shares
of common stock of the Company at a conversion price of $1 per share. Further,
all shares of Series B Convertible Preferred Stock automatically convert into
shares of common stock should the Company consummate a qualified initial public
offering of its common stock.
F-5
<PAGE> 70
DIGITAL COMMERCE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Holders of Series B Convertible Preferred Stock are entitled to receive a
liquidation preference of $1 per share and vote as a single class and on the
same basis with the holders of common stock. There are no dividend rights
associated with this series of convertible preferred stock.
SERIES C CONVERTIBLE PREFERRED STOCK
The board of directors designated 3,500,000 shares of the authorized
preferred stock as Series C Convertible Preferred Stock. In March 2000,
2,550,465 shares of Series C Convertible Preferred Stock were issued upon the
conversion of related party notes payable with principal and accrued interest of
$7,294,000. The Series C Convertible Preferred Stock is convertible into shares
of common stock of the Company at a conversion price of $2.86 per share.
Further, all shares of Series C Convertible Preferred Stock automatically
convert into shares of common stock should the Company consummate a qualified
initial public offering of its common stock. Holders of Series C Convertible
Preferred Stock are entitled to receive a liquidation preference of $2.86 per
share and vote as a single class and on the same basis with the holders of
common stock. There are no dividend rights associated with this series of
convertible preferred stock.
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
The board of directors designated 8,709,902 shares of the authorized shares
of preferred stock as Series D Redeemable Convertible Preferred Stock. In March
2000, 8,709,902 shares of Series D Redeemable Convertible Preferred Stock were
issued for approximately $50,820,000, net of issuance costs of approximately
$3,088,000. The issuance costs are being amortized to additional capital within
stockholders' equity over the redemption period of the preferred stock.
The Series D Redeemable Convertible Preferred Stock is convertible at any
time into shares of common stock based on the initial purchase price of $5.8347
or the effective conversion price, subject to adjustment, based on certain
events. The Series D Redeemable Convertible Preferred Stock converts
automatically upon consummation of a qualified initial public offering of the
Company's common stock.
The Series D Redeemable Convertible Preferred Stockholders are entitled to
a liquidation preference of $5.8347 per share and vote as a single class and on
the same basis with the holders of common stock. Holders of Series D Redeemable
Convertible Preferred Stock have a right of first refusal to purchase shares of
common stock, including convertible securities to maintain their respective
percentage ownership interests subject to certain limitations.
At the option of the holders of Series D Redeemable Convertible Preferred
Stock, the Company is required to redeem all outstanding unconverted shares of
Series D Redeemable Convertible Preferred Stock should the Company not
consummate a qualified initial public offering of its common stock by March
2005. The redemption price will be the greater of the fair market value of such
shares at the time of redemption or the initial purchase price of the shares
with ten percent increases compounding annually. The Company records periodic
accretion under the effective interest method on the Series D Redeemable
Preferred Stock to recognize the excess of the redemption price over the
carrying value. The accretion was nominal for the period ended March 31, 2000.
F-6
<PAGE> 71
DIGITAL COMMERCE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) NET LOSS PER SHARE
The computation of net loss per share is as follows (in thousands, except
share and per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 2000
------------- -------------
<S> <C> <C>
Net loss................................................ $ (2,676) $ (9,490)
========== ==========
Weighted average shares of common stock outstanding..... 4,380,737 7,720,303
========== ==========
Net loss per share -- basic and diluted................. $ (0.61) $ (1.23)
========== ==========
</TABLE>
(4) ACQUISITION OF DATAMATIX
In August 1999, the Company acquired the assets of Datamatix, Inc. in
exchange for 329,632 shares of the Company's common stock with a value of
approximately $900,000. Datamatix provides e-commerce services and solutions
related to the federal, state and local government procurement process. At the
date of combination, the assets acquired had a fair value of approximately
$300,000 and the Company assumed certain liabilities of approximately $700,000.
The acquisition was accounted for as a purchase business combination and
goodwill of approximately $1,300,000 was recorded as a result of this
combination. The goodwill associated with the acquisition is being amortized
over a period of three years.
The following unaudited pro forma summary presents consolidated information
as if the acquisition of Datamatix had occurred on January 1, 1999. The pro
forma summary is provided for informational purposes only and is based on
historical information that does not necessarily reflect actual results that
would have occurred nor is it necessarily indicative of future results of
operations of the combined entity (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
1999
---------
<S> <C>
Total revenues.............................................. $ 809
Total expenses.............................................. (3,531)
-------
Net loss.................................................... (2,722)
Net loss per share -- basic and diluted..................... $ (0.58)
=======
</TABLE>
F-7
<PAGE> 72
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Digital Commerce Corporation
We have audited the accompanying consolidated balance sheet of Digital
Commerce Corporation as of December 31, 1999 and the related consolidated
statements of operations, changes in stockholders' deficit, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Digital
Commerce Corporation at December 31, 1999, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States.
McLean, Virginia
March 31, 2000, except Note xx, as to which the date is
, 2000
---------------------
The foregoing report is in the form that will be signed upon the completion
of the distribution of PowerTrust, Inc. as described in Note 1 to the financial
statements.
/s/ ERNST & YOUNG LLP
April 26, 2000
F-8
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Digital Commerce Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' deficit and
of cash flows present fairly, in all material respects, the consolidated
financial position of Digital Commerce Corporation at December 31, 1998, and the
results of their operations and their cash flows for the years ended December
31, 1997 and 1998, in conformity with accounting principles generally accepted
in the United States of America. 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 of these statements in accordance with auditing standards generally
accepted in the United States of America which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Company has experienced net losses and will require additional capital
to achieve its business plan for periods after December 31, 1999.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Washington, D.C.
September 21, 1999
F-9
<PAGE> 74
DIGITAL COMMERCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
(In thousands, except share data) -------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,824 $ 3,713
Accounts receivable....................................... 313 566
Other current assets...................................... 150 357
-------- --------
Total current assets.............................. 3,287 4,636
Property and equipment, net................................. 412 1,218
Goodwill and other intangibles, net......................... 290 1,166
-------- --------
Total assets...................................... $ 3,989 $ 7,020
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses..................... $ 1,077 $ 4,130
Accrued compensation...................................... 661 497
Deferred revenue.......................................... 115 53
Accrued interest payable.................................. 246 656
Line of credit............................................ -- 200
Convertible and other notes payable, related
party -- current portion............................... -- 5,537
Notes payable -- current portion.......................... 1,050 783
-------- --------
Total current liabilities......................... 3,149 11,856
Convertible and other notes payable, related party -- long
term portion.............................................. 4,117 5,970
Notes payable -- long term portion.......................... 661 --
-------- --------
Total liabilities................................. 7,927 17,826
-------- --------
Commitments and contingencies
Stockholders' deficit:
Preferred stock: $0.01 par value, 15,000,000 shares
authorized; no shares issued or outstanding at December
31, 1998 or 1999....................................... -- --
Common stock: $0.01 par value, 25,000,000 shares
authorized; 4,359,084 and 7,715,353 shares issued and
outstanding at December 31, 1998 and 1999,
respectively........................................... 44 77
Additional capital........................................ 17,781 26,973
Accumulated deficit....................................... (21,763) (37,856)
-------- --------
Total stockholders' deficit....................... (3,938) (10,806)
-------- --------
Total liabilities and stockholders' deficit....... $ 3,989 $ 7,020
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 75
DIGITAL COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
(In thousands, except share and per share data) ---------- ---------- ----------
<S> <C> <C> <C>
Revenues.......................................... $ 518 $ 1,375 $ 1,437
Costs of revenues................................. 980 1,242 970
---------- ---------- ----------
Gross profit (loss)..................... (462) 133 467
Operating expenses:
Sales and marketing............................. 27 328 6,194
Product development............................. 258 704 721
General and administrative...................... 3,258 5,322 7,518
Depreciation and amortization................... 1,200 1,361 747
Non-cash employee stock compensation............ 512 3,804 25
---------- ---------- ----------
Total operating expenses................ 5,255 11,519 15,205
---------- ---------- ----------
Loss from operations.................... (5,717) (11,386) (14,738)
Interest income................................... 6 16 34
Interest expense.................................. (481) (1,417) (1,560)
---------- ---------- ----------
Loss before extraordinary item.......... (6,192) (12,787) (16,264)
Extraordinary item -- gain on debt
restructuring................................... -- 4,190 171
---------- ---------- ----------
Net loss................................ $ (6,192) $ (8,597) $ (16,093)
========== ========== ==========
Net loss per share -- basic and diluted:
Loss before extraordinary item.................. $ (11.86) $ (8.73) $ (3.34)
Extraordinary item.............................. -- 2.86 0.03
---------- ---------- ----------
Net loss........................................ $ (11.86) $ (5.87) $ (3.31)
========== ========== ==========
Weighted average shares outstanding --
basic and diluted............................... 522,247 1,464,255 4,867,685
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE> 76
DIGITAL COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
<TABLE>
<CAPTION>
COMMON STOCK DEFERRED
------------------ ADDITIONAL COMPENSATION ACCUMULATED
SHARES AMOUNT CAPITAL EXPENSE DEFICIT TOTAL
(In thousands, except share data) --------- ------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997....................... 517,996 $ 5 $ 3,870 $ (164) $ (6,974) $ (3,263)
Issuance of common stock in exchange for
services....................................... 400 -- 10 -- -- 10
Issuance of common stock in connection with
conversion of notes payable.................... 5,000 -- 145 -- -- 145
Issuance of common stock and warrants for cash... 20,427 -- 1,083 -- -- 1,083
Issuance of options to related party in
connection with note payable................... -- -- 324 -- -- 324
Issuance of warrants in exchange for services.... -- -- 389 -- -- 389
Deferred compensation expense related to issuance
of employee stock options...................... -- -- 1,102 (1,102) -- --
Non-cash compensation expense related to employee
stock options.................................. -- -- -- 512 -- 512
Net loss......................................... -- -- -- -- (6,192) (6,192)
--------- --- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1997..................... 543,823 5 6,923 (754) (13,166) (6,992)
Issuance of common stock and warrants for cash... 57,453 1 2,264 -- -- 2,265
Issuance of warrants in exchange for services.... -- -- 1,805 -- -- 1,805
Issuance of common stock in exchange for
services....................................... 1,000 -- 49 -- -- 49
Issuance of common stock in connection with
conversion of notes payable -- related party... 2,980,833 30 1,331 -- -- 1,361
Issuance of common stock in connection with
conversion of notes payable and accrued
interest as part of Restructuring.............. 775,975 8 767 -- -- 775
Issuance of options to former employees as part
of Restructuring............................... -- -- 48 -- -- 48
Issuance of note payable to related party with
below market interest rate..................... -- -- 1,062 -- -- 1,062
Issuance of options to purchase common stock to
related party in connection with induced
conversion of note payable..................... -- -- 324 -- -- 324
Issuance of options to purchase common stock to
settle potential litigation.................... -- -- 158 -- -- 158
Deferred compensation expense related to employee
stock options.................................. -- -- 3,050 (3,050) -- --
Non-cash compensation expense related to
accelerated vesting of employee stock
options........................................ -- -- -- 3,804 -- 3,804
Net loss......................................... -- -- -- -- (8,597) (8,597)
--------- --- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1998..................... 4,359,084 44 17,781 -- (21,763) (3,938)
Issuance of common stock for cash................ 2,916,455 29 8,311 -- -- 8,340
Issuance of common stock pursuant to employment
agreement...................................... 25,000 -- 25 -- -- 25
Issuance of common stock in connection with
purchase of Datamatix.......................... 329,632 3 939 -- -- 942
Issuance of common stock in connection with
conversion of notes payable and accrued
interest as part of Restructuring.............. 85,182 1 243 -- -- 244
Issuance of options in exchange for services..... -- -- 12 -- -- 12
Issuance of note payable to related party with
below market interest rate..................... -- -- 1,599 -- -- 1,599
Distribution of PowerTrust....................... -- -- (1,937) -- -- (1,937)
Net loss......................................... -- -- -- -- (16,093) (16,093)
--------- --- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1999..................... 7,715,353 $77 $26,973 $ -- $(37,856) $(10,806)
========= === ======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE> 77
DIGITAL COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
(In thousands) -------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $(6,192) $(8,597) $(16,093)
Adjustments to reconcile net loss to net cash used in
operating activities:
Extraordinary gain on debt restructuring............ -- (4,190) (171)
Non-cash employee stock compensation................ 512 3,804 25
Issuance of common stock in exchange
for services...................................... 10 49 --
Issuance of options and warrants in exchange for
services.......................................... 389 1,805 12
Issuance of options to settle litigation............ -- 158 --
Depreciation expense................................ 39 199 312
Amortization expense................................ 1,161 1,162 435
Non-cash interest expense........................... 522 1,078 1,522
Changes in operating assets and liabilities:
Accounts receivable............................... (106) (184) (131)
Other current assets.............................. 200 (109) (172)
Accounts payable and accrued expenses............. 378 92 2,407
Accrued compensation.............................. (33) (206) (164)
Deferred revenue.................................. (19) 14 (62)
Other current liabilities......................... (95) -- --
------- ------- --------
Net cash used in operating activities.................... (3,234) (4,925) (12,080)
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment.................... (16) (448) (931)
------- ------- --------
Net cash used in investing activities.................... (16) (448) (931)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants.... 1,083 2,265 8,340
Distribution of PowerTrust............................. -- -- (1,937)
Proceeds from borrowings on line of credit............. -- -- 200
Proceeds from notes payable............................ 2,100 -- --
Proceeds from notes payable with related party......... 500 5,860 8,000
Payments on notes payable.............................. (35) (330) (703)
------- ------- --------
Net cash provided by financing activities................ 3,648 7,795 13,900
------- ------- --------
Net increase in cash and cash equivalents................ 398 2,422 889
Cash and cash equivalents, beginning of year............. 4 402 2,824
------- ------- --------
Cash and cash equivalents, end of year................... $ 402 $ 2,824 $ 3,713
======= ======= ========
Cash paid for interest................................... $ 6 $ 150 $ 38
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE> 78
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) ORGANIZATION AND BASIS OF PRESENTATION
Digital Commerce Corporation (the "Company") was incorporated in Delaware
in 1995 and provides business-to-government e-commerce solutions for the
procurement of goods and services. The Company operates in, and reports, one
business segment, which is e-commerce solutions over the Internet.
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiary, FedCenter, Inc., and a limited liability company in
which the Company owns a 50.1 percent voting interest. All significant
intercompany accounts and transactions have been eliminated.
PowerTrust.com, Inc. ("PowerTrust"), a separate line of business that
utilizes e-commerce to offer and sell natural gas to consumers, commenced
operations during 1999. In late 1999, the board of directors of the Company
elected to spin-off this division through the distribution of PowerTrust's
common stock to the Company's existing security holders in 2000. PowerTrust will
be operated independently from the Company. The consolidated financial
statements of the Company for the year ended December 31, 1999 exclude the
accounts of PowerTrust. PowerTrust 1999 financial information was as follows:
revenues of approximately $616,000; net loss of approximately ($2,118,000);
total assets of approximately $712,000; and a net deficit of approximately
($2,108,000).
The Company's operations are subject to certain risks and uncertainties,
including among others, uncertainties relating to product development, rapidly
changing technology, current and potential competitors with greater financial,
technological, production, and marketing resources, dependence on key management
personnel, limited protection of intellectual property and proprietary rights,
uncertainty of future profitability and possible fluctuations in financial
results. During 1998, the Company completed a financial restructuring (see note
4) and has incurred net losses since inception. As of December 31, 1998, the
Company's majority stockholder committed to fund the Company's operations
through August 2000. As discussed in note 6, in March 2000 the Company raised
approximately $50,820,000, net of issuance costs of approximately $3,088,000,
and management believes that these proceeds, together with anticipated equity
financings during 2000, will be sufficient to meet the Company's anticipated
cash requirements for at least the next twelve months. Accordingly, the Company
has released the majority stockholder from this commitment.
(2) SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.
F-14
<PAGE> 79
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives ranging from
three to five years.
GOODWILL
Goodwill includes the costs in excess of fair value of the net assets
acquired in connection with the acquisitions of the InterFed Group in 1996 and
Datamatix, Inc. in 1999 (see note 9). Goodwill associated with these
acquisitions is amortized on a straight-line basis over three years. Goodwill
associated with the InterFed Group acquisition became fully amortized during the
year ended December 31, 1999. Accumulated amortization as of December 31, 1998
and 1999 was approximately $3,194,000 and $146,000, respectively.
The Company periodically evaluates the recoverability of goodwill and other
long-lived assets based on expectations of non-discounted cash flows and
operating income for each asset or company acquired. Impairments, if any, are
measured based upon the difference between an asset's carrying value and fair
value and are recorded when identified.
REVENUE RECOGNITION
Site construction fees for the development and activation of dedicated
vendor web sites linked to our e-marketplaces are recognized upon completion and
delivery of the site. Amounts received in advance of delivery of the site are
deferred and recognized upon delivery. Monthly subscription fees to keep vendor
sites active are recognized monthly as earned. Fees earned for transactions
processed electronically through the vendor sites are recognized as revenue when
the transaction occurs.
The Company also earned revenue in 1999 from software sales and
professional consulting fees, which are expected to decline in future periods.
Software sales are recognized as revenue upon product delivery, provided a
signed agreement is in place, fees are fixed and determinable, and collection of
the resulting receivable is deemed probable. Maintenance fees under annual
maintenance agreements are recognized as revenue over the maintenance period,
generally one year. The Company's consulting contracts are settled on a time and
materials basis and revenue is recognized when services are rendered, provided
the terms of the consulting arrangement are fixed and collection of the
resulting receivable is probable.
PRODUCT DEVELOPMENT
Costs related to development of the Company's Internet products are
expensed as incurred until technological feasibility has been established, after
which such costs are capitalized. To date, all development costs have been
expensed as the time period between technological feasibility and general
release of a product has not been significant and the costs incurred during that
time period have not been material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, accounts payable and accrued
expenses approximate their fair market values as of December 31, 1998 and 1999
due to the relatively short duration of these financial instruments. The
carrying amounts of the Company's indebtedness approximate their fair values as
of December 31, 1998 and 1999 as they either bear interest rates that
approximate market or have been discounted to approximate a market interest
rate.
F-15
<PAGE> 80
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, include cash and cash equivalents and accounts
receivable. The Company maintains its cash and cash equivalents as deposits with
major commercial banks. The Company has not experienced any losses on these
deposits. The Company performs ongoing credit evaluations of its customers'
financial condition and maintains allowances for potential credit losses. Actual
losses have been insignificant to date.
No customer comprised more than ten percent of the Company's consolidated
revenues in 1999. Sales to the Company's largest customer comprised
approximately 74 percent and 52 percent of the Company's consolidated revenues
in 1997 and 1998, respectively. One additional customer comprised approximately
32 percent of consolidated revenues for the year ended December 31, 1998. At
December 31, 1998, three customers represented 35 percent, 31 percent and 21
percent, respectively, of the Company's net accounts receivable balance.
ADVERTISING
Costs related to print advertisements are expensed the first time an
advertisement appears. All other advertising and promotion costs are expensed as
incurred. Advertising expense totaled approximately $13,000, $313,000, and
$3,622,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
EMPLOYEE STOCK OPTIONS
The Company accounts for stock-based employee compensation arrangements
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. Compensation expense
is based on the difference, if any, between the fair value of the Company's
stock on the date of grant and the exercise price. The Company has adopted the
disclosure-only alternative of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123").
INCOME TAXES
The Company calculates its income tax provision using the asset and
liability method. Under the asset and liability method, deferred income taxes
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.
NET LOSS PER SHARE
Basic and diluted net loss per share information for all periods is
presented under the requirements of SFAS No. 128, Earnings Per Share. Basic loss
per share has been computed using the weighted-average number of shares of
common stock outstanding during the period and excludes any dilutive effects of
options, warrants and convertible securities. Potentially dilutive securities
have also been excluded from the computation of diluted net loss per share as
their inclusion would be antidilutive.
F-16
<PAGE> 81
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998 and
1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
----- ------
<S> <C> <C>
Computer and office equipment............................... $ 582 $1,675
Furniture and fixtures...................................... 29 54
----- ------
611 1,729
Less accumulated depreciation............................... (199) (511)
----- ------
$ 412 $1,218
===== ======
</TABLE>
(4) INDEBTEDNESS
The Company's indebtedness consists of the following at December 31, 1998
and 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ -------
<S> <C> <C>
Line of credit.............................................. $ -- $ 200
Convertible and other notes payable -- related party........ 5,060 13,060
Unamortized discount on convertible notes payable -- related
party..................................................... (943) (1,553)
Restructured subordinated notes payable..................... 661 533
Convertible subordinated notes payable...................... 1,050 250
------ -------
5,828 12,490
Less current portion........................................ 1,050 6,520
------ -------
$4,778 $ 5,970
====== =======
</TABLE>
CONVERTIBLE AND OTHER NOTES PAYABLE -- RELATED PARTY
The Company entered into convertible notes payable with a stockholder in
October 1998 with principal amounts of $5,060,000 bearing interest at 6 percent
per year and maturing in October 2000. The notes were convertible into the
Company's Series B Preferred Stock. The interest rate was deemed to be below a
fair market interest rate, and accordingly, the Company discounted the note and
recorded a contribution to additional capital of approximately $1,062,000.
In April 1999, the Company entered into additional notes payable with the
stockholder: a convertible note payable with a principal amount of $7,000,000,
bearing interest at 6 percent per year and maturing in April 2001; and, a note
payable of $1,000,000, bearing interest at 6 percent and maturing in November
2000. The interest rates were deemed to be below a fair market interest rate,
and accordingly, the Company discounted the notes and recorded contributions to
additional capital of approximately $1,599,000.
The discounts on these notes are being amortized to interest expense over
the term of the notes using the effective interest method. Interest expense
relating to amortization of the discounts totaled approximately $119,000 and
$989,000 during the years ended December 31, 1998 and 1999, respectively.
In March 2000, notes with principal amounts of $5,060,000, along with
accrued interest of approximately $404,000, were converted into 5,463,764 shares
of Series B Preferred Stock at a conversion price of $1.00 per share and notes
with aggregate principal amounts of
F-17
<PAGE> 82
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$7,000,000, along with accrued interest of approximately $294,000, were
converted into 2,550,465 shares of Series C Preferred Stock at a conversion
price of $2.86 per share.
The Company entered into a convertible note with the stockholder in July
1998 with a principal amount of $800,000 bearing interest at 18 percent per
year. In September 1998, upon default of the Company and in accordance with the
conversion terms of the note, the note was converted into 2,971,470 shares of
the Company's common stock.
The Company entered into a convertible note with the stockholder in
December 1997 with a principal amount of $500,000 bearing interest at 18 percent
per year and payable 121 days from the date of the agreement. The note was
convertible at a conversion rate of $53.40 per unit consisting of (1) one share
of common stock, and (2) a warrant to purchase one share of common stock for $60
per share. In January 1998, the stockholder purchased 37,453 shares of common
stock and 37,453 warrants to purchase shares of common stock for $2 million, or
$53.40 per unit. Simultaneously with the purchase of these shares of common
stock, the stockholder converted the $500,000 note along with accrued interest
of approximately $30,000 into 9,363 shares of the Company's common stock and
9,363 warrants to purchase shares of common stock at an exercise price of $60.00
per share.
In connection with the Restructuring described in Note 4, the exercise
prices of the 927,112 outstanding warrants were reduced from $60.00 to $12.00.
No other terms of the warrants were affected. For accounting purposes relating
to warrants to purchase common stock, the adjustment of the exercise price of
the warrants is treated as the cancellation of existing warrants and the
reissuance of new warrants with an exercise price of $12.00. Using an
established option pricing model, a nominal value was ascribed to the warrants.
In conjunction with the $500,000 convertible note payable, the Company granted
the stockholder options to purchase 10,000 shares of the Company's common stock
at $25 per share. The fair value of the options granted, using an established
pricing model, was recorded as a discount on the note totaling approximately
$176,000. The stockholder could receive additional options to purchase 10,000
shares of common stock at $25 per share in the event the note was not repaid on
or before the maturity date.
As a result of the purchase of the shares of common stock by the
stockholder in January 1998, the Company accelerated the issuance of the
additional options. The accelerated issuance of the options was accounted for as
an induced conversion of the note and resulted in approximately $324,000 of
interest expense based on the fair value of the options at grant date.
CONVERTIBLE SUBORDINATED NOTES AND RESTRUCTURED NOTES
During 1996 and 1997, the Company entered into convertible subordinated
notes payable to various third parties with total principal amounts of
approximately $5,110,000 along with detachable warrants. These notes bore
interest at 11.25 percent per year and were initially convertible into shares of
the Company's Series A Preferred Stock at a conversion price of $50 per share.
In addition, holders of the convertible subordinated notes received a detachable
warrant for each $5 paid to the Company, which warrant entitled the holder to
purchase one share of common stock of the Company for $12 per share. The
estimated fair value of the warrants at the time of issuance was determined to
be nominal.
During 1998 and 1999, the Company restructured certain of its liabilities,
including the convertible subordinated notes and other amounts due to trade
creditors and current and former employees (the "Restructuring").
F-18
<PAGE> 83
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1998, under the terms of the Restructuring, convertible subordinated
notes with principal amounts of $4,060,000, plus accrued interest of
approximately $859,000, were restructured as follows:
- Cash payments to the holders of $481,000;
- Conversion of the subordinated notes into 775,975 shares of common stock;
and,
- Restructured subordinated notes ("Restructured Notes") with total
principal amounts of $590,000.
The Company recorded an extraordinary gain resulting from the Restructuring
of approximately $3,072,000 in the consolidated statement of operations for the
year ended December 31, 1998.
Of the notes restructured during 1998, notes with principal and accrued
interest balances of approximately $160,000 were converted into 53,082 shares of
the Company's common stock during 1999.
Additional convertible subordinated notes with principal amounts of
$800,000 were restructured during 1999 as follows:
- Cash payments to the holders of approximately $700,000;
- Conversion of the subordinated notes into 32,100 shares of common stock;
and,
- Restructured subordinated notes with total principal amounts of $31,000.
The Company recorded an extraordinary gain from this portion of the
Restructuring of approximately $171,000 in the consolidated statement of
operations for the year ended December 31, 1999.
The remaining subordinated convertible notes with principal amounts of
$250,000 outstanding as of December 31, 1999 were restructured in March 2000
through cash payments of $137,500 and the issuance of 28,174 shares of common
stock. There were no extraordinary gains or losses recognized as a result of
this Restructuring.
The Restructured Notes bear interest at six percent, are payable in full on
October 30, 2000 and are unsecured.
Also in connection with the Restructuring, during 1998, creditors exchanged
accounts payable and accrued liabilities with carrying values of approximately
$1,127,000 for cash payments of approximately $440,000. The Company has no
further obligations with these creditors for these amounts and as a result,
recognized an extraordinary gain of approximately $687,000 in the consolidated
statement of operations for the year ended December 31, 1998.
The Company also settled liabilities to five employees with a carrying
amount of approximately $664,000 with cash payments of $185,000 and the issuance
of 115,892 options to purchase common stock at an exercise price of $1.00 per
share. The Company recognized an extraordinary gain of $431,000 in the
consolidated statement of operations for the year ended December 31, 1998.
LINE OF CREDIT
The Company has a line of credit with a financial institution for
borrowings up to $200,000, all of which was outstanding as of December 31, 1999.
Borrowings bear interest at the prime
F-19
<PAGE> 84
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rate plus two percent (10.5 percent at December 31, 1999). The line of credit is
secured by all of the assets of a division of the Company.
(5) COMMON STOCK
The Company declared a 1-for-5 reverse stock split effective November 12,
1998. All share and per share amounts reported herein have been adjusted to
retroactively reflect the reverse stock split.
During 1997 and 1998, the Company issued 400 and 1,000 shares of its common
stock, respectively, in exchange for services rendered by vendors. Operating
expenses of approximately $10,000 and $49,000 were recorded based on the
estimated fair value of the stock at the time of issuance for the years ended
December 31, 1997 and 1998, respectively.
The current president of the Company has an employment agreement in place
providing him with shares of the Company's common stock worth $25,000 for each
year of employment with the Company. The number of shares of common stock issued
to the president is based on the fair value of the Company's stock as of the
date of issuance. In connection with this agreement, the president of the
Company was granted 25,000 shares of common stock in January 1999.
(6) PREFERRED STOCK
The Company's board of directors is authorized to issue up to 15,000,000
shares of preferred stock in one or more series and to determine the relative
rights and preferences of each series of shares.
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
The board of directors designated 300,000 shares of the authorized shares
of preferred stock as Series A Non-Voting Convertible Preferred Stock. No shares
of Series A Convertible Preferred Stock have been issued to date. The Series A
Convertible Preferred Stock is convertible into shares of common stock of the
Company at a conversion rate of two shares of common stock per one share of
Series A Convertible Preferred Stock. Holders of Series A Convertible Preferred
Stock are entitled to receive dividends, when, as, and if, declared by the board
of directors at a cumulative, annual rate of 11.25 percent of the liquidation
preference per share. The holders receive a liquidation preference of $10 per
share, plus an amount equal to any accrued but unpaid dividends to the payment
date. No such dividends have been declared to date.
SERIES B CONVERTIBLE PREFERRED STOCK
The board of directors designated 6,000,000 shares of the authorized
preferred stock as Series B Convertible Preferred Stock. There were no shares of
Series B Convertible Preferred Stock outstanding as of December 31, 1999 or
1998; however, 5,463,764 shares of Series B Convertible Preferred Stock were
issued in March 2000 upon the conversion of the related party notes payable with
principal amounts of $5,060,000 and accrued interest of approximately $404,000,
as discussed in Note 4. The Series B Convertible Preferred Stock is convertible
into shares of common stock of the Company at a conversion price of $1 per
share. Further, all shares of Series B Convertible Preferred Stock automatically
convert into shares of common stock should the Company consummate a qualified
initial public offering of its common stock. Holders of Series B Convertible
Preferred Stock are entitled to receive a liquidation preference of $1 per share
and vote as a single class and on the same basis with the holders of
F-20
<PAGE> 85
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock. There are no dividend rights associated with this series of
convertible preferred stock.
SERIES C CONVERTIBLE PREFERRED STOCK
The board of directors designated 3,500,000 shares of the authorized
preferred stock as Series C Convertible Preferred Stock. There were no shares of
Series C Convertible Preferred Stock outstanding as of December 31, 1999 or
1998; however, 2,550,465 shares of Series C Convertible Preferred Stock were
issued in March 2000 upon the conversion of related party notes payable with
principal amounts of $7,000,000 and accrued interest of approximately $234,000,
as discussed in Note 4. The Series C Convertible Preferred Stock is convertible
into shares of common stock of the Company at a conversion price of $2.86 per
share. Further, all shares of Series C Convertible Preferred Stock automatically
convert into shares of common stock should the Company consummate a qualified
initial public offering of its common stock. Holders of Series C Convertible
Preferred Stock are entitled to receive a liquidation preference of $2.86 per
share and vote as a single class and on the same basis with the holders of
common stock. There are no dividend rights associated with this series of
convertible preferred stock.
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
The board of directors designated 8,709,902 shares of the authorized shares
of preferred stock as Series D Redeemable Convertible Preferred Stock. There
were no shares of Series D Redeemable Convertible Preferred Stock outstanding as
of December 31, 1999 or 1998; however, 8,709,902 shares of Series D Redeemable
Convertible Preferred Stock were issued in March 2000 for approximately
$50,820,000, net of issuance costs of approximately $3,088,000 that are being
amortized to additional capital within stockholders' equity over the redemption
period of the preferred stock.
The Series D Redeemable Convertible Preferred Stock is convertible at any
time into shares of common stock based on the initial purchase price of $5.8347
or the effective conversion price, subject to adjustment, based on certain
events. The Series D Redeemable Convertible Preferred Stock converts
automatically upon consummation of a qualified initial public offering of the
Company's common stock.
The Series D Redeemable Convertible Preferred Stockholders are entitled to
a liquidation preference of $5.8347 per share and vote as a single class and on
the same basis with the holders of common stock. Holders of Series D Redeemable
Convertible Preferred Stock have a right of first refusal to purchase shares of
common stock, including convertible securities, to maintain their respective
percentage ownership interests, subject to certain limitations.
At the option of the holders of Series D Redeemable Convertible Preferred
Stock, the Company can redeem the outstanding shares of Series D Redeemable
Convertible Preferred Stock should the Company not consummate an initial public
offering of its common stock by March 2005. The redemption price will be the
greater of the fair market value of such shares at the time of redemption or the
initial purchase price of the shares with ten percent increases compounding
annually. The Company will record periodic accretion under the effective
interest method on the Series D Redeemable Preferred Stock to recognize the
excess of the redemption price over the carrying value.
F-21
<PAGE> 86
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
During 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan") and terminated its 1996 Stock Incentive Plan (the "1996 Plan;"
collectively, the "Plans"). Total options authorized to be granted under the
1998 Plan total 2,872,000. Total options authorized to be granted under the 1996
Plan were 3,000,000. Options granted under the Plans vest based on the
individual option or employment agreements, generally three to five years, and
generally expire seven to ten years from the date of grant.
In connection with the Restructuring described in Note 4, the exercise
prices of the 218,361 stock options outstanding under the 1996 Plan as of
October 31, 1998 were reduced from $25.00 per share to $5.00 per share; however,
the adjusted exercise price exceeded the deemed fair value of the common stock
of $1.00 per share as of that date, and accordingly, the Company did not record
compensation expense in connection with the repricing of these employee stock
options. Of such options, 51,545 were held by employees and 166,816 were held by
non-employees. The Company treated this repricing as a cancellation and
reissuance of options as the number of shares associated with the options did
not change in conjunction with the reverse stock split as discussed in Note 5.
The Company valued such options using an option-pricing model; however, a
nominal value was ascribed to the options.
In connection with various stock option grants during the years ended
December 31, 1997, 1998 and 1999, the Company recognized non-cash employee stock
compensation of approximately $512,000, $3,804,000 and $25,000, respectively.
The Company also recognized approximately $12,000 of professional fees for the
value of options granted to non-employees during the year ended December 31,
1999. The Company valued these options to purchase 35,000 shares of the
Company's common stock using an option pricing model with the following
assumptions: expected life of two years; risk-free interest rate of six percent;
and no dividend yield.
During 1998, in connection with change of control provisions in the 1996
Plan, all stock options outstanding became immediately vested at the time of
conversion of the $800,000 convertible related party note payable as discussed
in Note 4. As a result of this accelerated vesting, the Company recognized
approximately $3,804,000 of non-cash stock compensation expense for the year
ended December 31, 1998 that was previously being deferred and recognized over
the vesting period of the outstanding options.
In December 1998, under the terms of an employment agreement with the
Company's president, the president was granted options to purchase 1,031,739
shares of the Company's common stock at an exercise price of $1.00 per share,
which was considered to be the fair value of the Company's stock at the grant
date. These options vest as follows: 300,000 shares on March 16, 1998; 200,000
shares on each of March 16, 1999, 2000 and 2001; and, 131,739 shares on March
16, 2002. These options immediately vest upon a change of control of the Company
or upon the consummation of a qualified initial public offering of shares of the
Company's common stock.
F-22
<PAGE> 87
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's stock option activity under the Plans is set
forth below:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance, January 1, 1997............................. 380,000 $25.00
Granted............................................ 125,882 25.00
---------
Balance, December 31, 1997........................... 505,882 25.00
Cancelled.......................................... (218,361) 15.80
Reissued........................................... 218,361 3.16
Granted............................................ 1,248,218 2.98
Forfeited.......................................... (474,000) 25.00
---------
Balance, December 31, 1998........................... 1,280,100 1.47
Granted............................................ 1,121,037 2.36
Forfeited.......................................... (18,545) 5.00
---------
Balance, December 31, 1999........................... 2,382,592 1.97
=========
</TABLE>
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING
--------------------------
WEIGHTED-
AVERAGE
REMAINING
RANGE OF CONTRACTUAL SHARES
EXERCISE PRICES SHARES LIFE EXERCISABLE
- --------------- --------- ----------- -----------
<S> <C> <C> <C>
$1.00.................................... 1,364,739 8.72 500,000
2.86.................................... 818,037 7.13 --
5.00.................................... 199,816 5.04 199,816
</TABLE>
Pro forma information regarding results of operations and net loss per
share is required by SFAS No. 123, which requires that the information be
determined as if the Company had accounted for its employee stock options under
the fair value method. The fair value of stock options granted was estimated at
the date of grant using a Black-Scholes option valuation model with the
following weighted average assumptions: expected life of five years; risk-free
interest rate of six percent; minimal volatility; and no dividend yield.
The option valuation models were developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected life of the option. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value at the grant dates for awards under those plans
calculated using the fair value method prescribed under SFAS No. 123, the
Company's historical net loss before
F-23
<PAGE> 88
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
extraordinary item, net loss, and basic and diluted net loss per share would
have been increased to the pro forma amounts indicated below (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Loss before extraordinary item:
As reported.................................. $ (6,192) $(12,787) $(16,264)
Pro forma.................................... (6,414) (13,454) (16,413)
Loss before extraordinary item per share --
basic and diluted
As reported.................................. $ (11.86) $ (8.73) $ (3.34)
Pro forma.................................... (12.28) (9.19) (3.37)
Net loss:
As reported.................................. $ (6,192) $ (8,597) $(16,093)
Pro forma.................................... (6,414) (9,264) (16,242)
Net loss per share -- basic and diluted
As reported.................................. $ (11.86) $ (5.87) $ (3.31)
Pro forma.................................... (12.28) (6.33) (3.34)
</TABLE>
The weighted average fair value of options granted was $3.63, $0.63, and
$2.36 for the years ended December 31, 1997, 1998 and 1999, respectively.
WARRANTS
As of December 31, 1998 and 1999, there were warrants outstanding to
purchase 927,112 and 884,920 shares, respectively, of the Company's common stock
at an exercise price of $12 per share. The warrants contain certain
anti-dilutive provisions, generally expire five years from the date of grant and
all warrants outstanding at December 31, 1998 and 1999 were exercisable.
Of these warrants outstanding, 108,850 warrants and 23,500 warrants were
granted in exchange for services rendered by vendors during 1997 and 1998,
respectively. Operating expenses of approximately $389,000 and $1,805,000 were
recorded for the years ended December 31, 1997 and 1998, respectively, based on
the estimated fair value of the warrants at the time of issuance. No such
warrants were granted during 1999.
F-24
<PAGE> 89
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) NET LOSS PER SHARE
The computation of net loss per share is as follows (in thousands, except
share and per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- --------- ---------
<S> <C> <C> <C>
Loss before extraordinary item................. $(6,192) $ (12,787) $ (16,264)
Extraordinary item............................. -- 4,190 171
------- --------- ---------
Net loss....................................... $(6,192) $ (8,597) $ (16,093)
======= ========= =========
Net loss per share -- basic and diluted:
Loss before extraordinary item............... $(11.86) $ (8.73) $ (3.34)
Extraordinary item........................... -- 2.86 0.03
------- --------- ---------
Net loss..................................... $(11.86) $ (5.87) $ (3.31)
======= ========= =========
Weighted average shares of common stock
outstanding -- basic and diluted............. 522,247 1,464,255 4,867,685
======= ========= =========
</TABLE>
(9) ACQUISITION OF DATAMATIX
In August 1999, the Company acquired the assets of Datamatix, Inc. in
exchange for 329,632 shares of the Company's common stock with a value of
approximately $900,000. Datamatix provides e-commerce services and solutions
related to the federal, state and local government procurement process. At the
date of combination, the assets acquired had a fair value of approximately
$300,000 and the Company assumed certain liabilities of approximately $700,000.
The acquisition was accounted for as a purchase business combination and
goodwill of approximately $1,300,000 was recorded as a result of this
combination. The goodwill associated with the acquisition is being amortized
over a period of three years.
The following unaudited pro forma summary presents consolidated information
as if the acquisition of Datamatix had occurred on January 1, 1998. The pro
forma summary is provided for informational purposes only and is based on
historical information that does not necessarily reflect actual results that
would have occurred nor is it necessarily indicative of future results of
operations of the combined entity (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Total revenues............................................. $ 3,414 $ 2,731
Total expenses............................................. (17,339) (19,447)
Loss before extraordinary item............................. (13,493) (16,716)
Net loss................................................... (9,303) (16,545)
======== ========
Net loss per share -- basic and diluted.................... $ (5.19) $ (3.26)
======== ========
</TABLE>
The Company generated approximately $486,000 of revenues during 1999 from
Datamatix's operations since the date of acquisition.
F-25
<PAGE> 90
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES
There has been no provision of U.S. Federal or state income taxes for any
period as the Company has incurred operating losses during all periods.
The effective income tax rate differs from the U.S. federal statutory rate
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Income tax benefit.......................................... (34)% (34)% (34)%
State tax benefit........................................... (6) (6) (5)
Losses producing no current tax benefit..................... 40 40 39
--- --- ---
Income tax provision (benefit).............................. -- -- --
=== === ===
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- --------
<S> <C> <C>
Net operating loss carryforwards............................ $ 5,120 $ 11,858
Stock compensation.......................................... -- 2,119
Depreciation and amortization............................... -- 1,494
Other....................................................... 41 856
------- --------
5,161 16,327
Valuation allowance......................................... (5,161) (16,327)
------- --------
Net deferred tax asset...................................... $ -- $ --
======= ========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some or all of the deferred tax asset
will not be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which the net operating loss carryforwards are available. Management considers
projected future taxable income, the scheduled reversal of deferred tax
liabilities and available tax planning strategies that can be implemented by the
Company in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
net operating loss carryforwards are available to reduce income taxes payable,
management has established a valuation allowance such that the net deferred tax
asset is $0 as of December 31, 1998 and 1999, respectively. The net change in
the valuation allowance during the year ended December 31, 1999 was an increase
of $11,166,000.
As of December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of $30,706,000, which expire in the years 2010
through 2019. Of these net operating loss carryforwards, use of approximately
$13,484,000 may be limited under Section 382 of the Internal Revenue Code.
F-26
<PAGE> 91
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFIT PLANS
During 1999, the Company began sponsoring a 401(k) defined contribution
retirement plan (the "Plan") for its employees. Employees of the Company may
participate in the Plan upon date of hire. Employees may elect to make
contributions to the Plan of up to twenty percent of their salary in any
calendar year, provided that the total amounts do not exceed certain statutory
limits. The Company matches up to fifty percent of the first six percent of a
participant's contributions subject to certain limitations. The Company made
contributions to this Plan of approximately $52,000 during the year ended
December 31, 1999.
(12) COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its office facilities under noncancelable operating
leases expiring through 2003. Minimum annual operating lease commitments at
December 31, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
2000....................................................... $457
2001....................................................... 169
2002....................................................... 165
2003....................................................... 1
----
Total............................................ $792
====
</TABLE>
Rental expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $473,000, $417,000, and $770,000, respectively.
During 2000, the Company entered into additional operating leases for
office facilities. These leases extend through 2007 and the total commitments
under these operating leases is approximately $10,438,000.
LITIGATION
During 1998, a third party filed a claim for damages alleging that the
Company breached a contractual agreement. During May 1998, the Company and the
third party signed a settlement agreement that required the Company to pay
approximately $258,000 and to issue fully vested stock options to purchase a
total of 5,000 shares of the Company's common stock at an exercise price of
$25.00 per share. In connection with the Restructuring, the exercise price of
such options was reduced to $5.00. The Company calculated the value of the
options to be approximately $158,000 using an established pricing model. For
purposes of the calculation, the Company assumed a risk-free interest rate of
six percent, volatility of 35 percent, dividend yield of 0 percent and that the
options would remain outstanding for five years. During 1998, the Company
recorded an expense of approximately $158,000 in the consolidated statement of
operations for the underlying value of the options issued in connection with the
settlement.
In April 2000, the Company agreed to pay $750,000 to settle outstanding
litigation concerning a contractual dispute. The $375,000 portion of the
settlement not covered by the Company's insurance has been accrued as of
December 31, 1999 and is included in general and administrative expenses in the
consolidated statement of operations.
F-27
<PAGE> 92
DIGITAL COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is subject to certain other claims and legal proceedings that
arise in the ordinary course of its business activities. Each of these matters
is subject to various uncertainties, and it is possible that the outcome of some
of these matters may be unfavorable to the Company. Management believes that any
liability that may ultimately result from the resolution of these matters will
not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
F-28
<PAGE> 93
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Digital Commerce Corporation
We have audited the accompanying statements of operations and cash flows of
Datamatix, Inc. for the year ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the registration statement on Form S-1 of Digital
Commerce Corporation and are not intended to be a complete presentation of
financial statements in accordance with generally accepted accounting
principles.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Datamatix,
Inc. for the year ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
McLean, Virginia
March 31, 2000
F-29
<PAGE> 94
DATAMATIX, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
(In thousands)
Revenues.................................................... $2,039
Costs of revenues........................................... 1,261
------
Gross profit...................................... 778
Operating expenses:
Selling, general and administrative....................... 1,116
Depreciation and amortization............................. 291
------
Total operating expenses.......................... 1,407
------
Loss from operations.............................. (629)
Interest expense............................................ (77)
------
Net loss.................................................... $ (706)
======
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 95
DATAMATIX, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
(In thousands)
Cash flows from operating activities:
Net loss.................................................. $(706)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 132
Amortization........................................... 159
Changes in assets and liabilities:
Accounts receivable.................................. 79
Prepaid expenses..................................... 81
Other assets......................................... (5)
Accounts payable and accrued expenses................ 277
Deferred revenue..................................... (132)
-----
Net cash used in operating activities............. (115)
Cash flows from investing activities:
Purchases of property and equipment....................... (19)
-----
Net cash used in investing activities............. (19)
Cash flows from financing activities:
Issuance of warrants...................................... 13
Proceeds from line of credit.............................. 200
Loan repayments........................................... (120)
-----
Net cash provided by investing activities......... 93
-----
Net decrease in cash and cash equivalents................... (41)
Cash and cash equivalents, beginning of year................ 80
-----
Cash and cash equivalents, end of year...................... $ 39
=====
Cash paid during the year for interest...................... $ 47
=====
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE> 96
DATAMATIX, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) DESCRIPTION OF OPERATIONS
Datamatix, Inc. (the "Company") was formed in November 1992. The Company
provides electronic commerce and electronic data interchange services to
companies selling to federal, state and local governments. Services include
providing private networks or internet access for companies to receive sales
opportunities, submit bids, receive awards and submit invoices, and providing
on-line inquiry services against a proprietary database.
In August 1999, substantially all of the assets and liabilities of the
Company were acquired by Digital Commerce Corporation ("DCC") for 329,632 shares
of DCC common stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Fees for providing electronic commerce and electronic data interchange
services are recognized over the period in which the services are performed.
Software license fees related to the Company's applications are recognized
upon delivery, provided a signed agreement is in place, fees are fixed or
determinable, and collection of the resulting receivable is deemed probable.
Maintenance fees for annual maintenance agreements are recognized as revenue
over the maintenance period, generally one year.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets of five years using the straight line
method. Maintenance and repairs are expensed when incurred.
SOFTWARE DEVELOPMENT COSTS
The Company capitalized certain software development costs in accordance
with Statement of Financial Accounting Standards No. 86, Accounting for Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed. Costs incurred
internally to create a computer software product or to develop an enhancement to
an existing product are charged to expense when incurred as research and
development until technological feasibility has been established for the product
or enhancement. Thereafter, all software production costs are capitalized and
reported at the lower of unamortized costs or net realizable value.
Capitalization ceases when the product or enhancement is available for general
release to customers. Software development costs are amortized on a
product-by-product basis at the greater of the amounts computed using (a) the
ratio of current gross revenues for a product or enhancement to the total
current and anticipated future gross revenues for that product or enhancement or
(b) the straight-line method over the remaining estimated economic life of the
product or enhancement, not to exceed three years. The Company evaluates the net
realizable value of its software development costs at each period end using
undiscounted estimated future net operating cash flows
F-32
<PAGE> 97
DATAMATIX, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expected to be derived from the respective software product or enhancement. If
such evaluation indicates that the unamortized software development costs exceed
the net realizable value, the Company writes off the amount by which the
unamortized software costs exceed net realizable value. No development costs
were capitalized in 1998. Amortization of these costs were $159,000 in 1998.
Employee Stock Options
The Company accounts for stock-based employee compensation arrangements
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. Compensation expense
is based on the difference, if any, between the fair value of the Company's
stock on the date of grant and the exercise price. The Company has adopted the
disclosure-only alternative of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation("SFAS No. 123").
Income Taxes
The Company calculates its income tax provision using the liability method.
Under this method, deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. There is no provision of U.S. Federal or state income taxes for 1998 as
the Company has incurred operating losses during such period. In addition, no
benefit has been recognized as the ultimate realization of any deferred tax
asset is uncertain and management has established a valuation allowance such
that the net deferred tax asset is $0 at December 31, 1998.
(3) INDEBTEDNESS
The Company has a line of credit with a financial institution for
borrowings up to $200,000. Borrowings bear interest at the prime rate plus two
percent (9.5 percent at December 31, 1998). The financial institution was issued
12,500 warrants to purchase common stock. The warrants were valued at $12,500
and were recognized as interest expense during 1998. The line of credit was
assumed by DCC in connection with the sale of the Company.
The Company received funding of $100,000 from a local technology center
relating to internet commerce development. The loan was assumed by DCC in
connection with the sale of the Company, which requires monthly payments of
principal and interest through August 2001.
(4) STOCK OPTION PLAN
The Company granted options under a stock option plan for key employees,
which was terminated in connection with the sale to DCC. The option price was
equal to or greater than the fair value of the stock at the date of grant, and,
accordingly, no compensation expense was recorded.
Had compensation cost for the Company's stock options been determined using
the fair value at the grant dates calculated using the fair value method
prescribed by SFAS No. 123, the Company's historical net loss would not have
materially changed.
F-33
<PAGE> 98
DATAMATIX, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of stock options granted was estimated at the date of grant
using a minimum value valuation model with the following weighted average
assumptions: expected life of five years; risk-free interest rate of six percent
and no dividend yield.
The option valuation models were developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected life of the option. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
(5) COMMITMENTS AND CONTINGENCIES
The Company has operating leases for its office space, computers and office
furniture. Rent expense for the year ended December 31, 1998 was $238,000.
Future minimum lease payments under noncancelable leases are as follows (in
thousands):
<TABLE>
<S> <C>
Year ending December 31,
1999.................................................... 245
2000.................................................... 232
2001.................................................... 184
2002.................................................... 166
2003.................................................... 161
Thereafter.............................................. 159
------
$1,147
======
</TABLE>
F-34
<PAGE> 99
DIGITAL COMMERCE CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of Digital Commerce
Corporation (the "Company") gives effect to the acquisition of Datamatix, Inc.
In August 1999, the Company acquired the assets of Datamatix, Inc. in exchange
for 329,632 shares of common stock with a value of approximately $900,000. At
the date of combination, the assets acquired had a fair value of approximately
$300,000 and the Company assumed certain liabilities of approximately $700,000.
The acquisition was accounted for as a purchase business combination. Goodwill
associated with the acquisition of approximately $1,300,000 is being amortized
over a period of three years.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1999 reflects the acquisition as if it had occurred on
January 1, 1999.
The pro forma financial information should be read in conjunction with the
related notes included in this document and the audited financial statements and
notes of the Company and Datamatix, Inc. included elsewhere in this document.
The pro forma financial information is not necessarily indicative of what
the actual financial results of the combined company would have been had the
transaction described above taken place on January 1, 1999 nor do they purport
to indicate results of future operations.
F-35
<PAGE> 100
DIGITAL COMMERCE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
DIGITAL
DIGITAL PRO FORMA COMMERCE
COMMERCE ADJUSTMENTS PRO FORMA
(in thousands, except share and per share data) --------- ----------- ---------
<S> <C> <C> <C>
Revenues............................................ $ 1,437 $1,294(1) $ 2,731
Cost of revenues.................................... 970 318(1) 1,288
--------- ------ ---------
Gross profit.............................. 467 976 1,443
Operating expenses:
Sales and marketing............................... 6,194 3(1) 6,197
Product development............................... 721 --(1) 721
General and administrative........................ 7,518 969(1) 8,487
Depreciation and amortization..................... 747 430(2) 1,177
Non-cash employee stock compensation.............. 25 -- 25
--------- ------ ---------
Total operating expenses.................. 15,205 1,402 16,607
--------- ------ ---------
Loss from operations...................... (14,738) (426) (15,164)
Interest income..................................... 34 -- 34
Interest expense.................................... (1,560) (26)(1) (1,586)
--------- ------ ---------
Loss before extraordinary item............ (16,264) (452) (16,716)
Extraordinary item -- gain on debt restructuring.... 171 -- 171
--------- ------ ---------
Net loss.................................. $ (16,093) $ (452) $ (16,545)
========= ====== =========
Net loss per share -- basic and diluted:
Loss before extraordinary item.................... $ (3.34) $ (3.29)
Extraordinary item................................ 0.03 0.03
--------- ---------
Net loss.......................................... $ (3.31) $ (3.26)
========= =========
Weighted average shares outstanding -- basic and
diluted........................................... 4,867,685 5,086,253
========= =========
</TABLE>
(1) The pro forma adjustment is to record the revenues, cost of revenues,
operating expenses and interest expense of Datamatix, Inc. for the period of
January 1, 1999 to August 23, 1999, the date of acquisition.
(2) The pro forma adjustment is: (i) to record the depreciation expense of
$139,000 of Datamatix, Inc. for the period January 1, 1999 to August 23, 1999,
the date of acquisition; and (ii) to record amortization of goodwill for the
period January 1, 1999 to August 23, 1999 of $291,000.
F-36
<PAGE> 101
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL
THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS
WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CURRENT ONLY AS OF ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 1
Risk Factors............................ 5
Special Note Regarding Forward-Looking
Statements............................ 16
Use of Proceeds......................... 17
Dividend Policy......................... 17
Capitalization.......................... 18
Dilution................................ 19
Selected Consolidated Financial Data.... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 21
Business................................ 29
Management.............................. 40
Principal Stockholders.................. 48
Transactions with Related Parties....... 50
Description of Capital Stock............ 53
Shares Eligible for Future Sale......... 56
Underwriting............................ 58
Validity of Common Stock................ 60
Changes in Accountants.................. 60
Experts................................. 62
Where You Can Find More Information..... 62
Index to Financial Statements........... F-1
</TABLE>
THROUGH AND INCLUDING , 2000 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO AN UNSOLD ALLOTMENT OR
SUBSCRIPTION.
[DCC LOGO]
DIGITAL COMMERCE
CORPORATION
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
PROSPECTUS
, 2000
<PAGE> 102
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee..................................... $30,360
NASD Filing fee.......................................... $12,000
Nasdaq National Market listing fee....................... $ *
Printing and engraving expenses.......................... $ *
Legal fees and expenses.................................. $ *
Accounting fees and expenses............................. $ *
Blue sky fees and expenses............................... $ *
Transfer agent and registrar fees and expenses........... $ *
Miscellaneous fees and expenses.......................... $ *
-------
Total.......................................... $ *
</TABLE>
- ---------------
* To be filed by amendment.
Digital Commerce Corporation will bear all of the expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") grants each corporation organized thereunder, such as the Registrant,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Section 102(b)(7) of the DGCL permits a provision in the
certificate of incorporation of each corporation organized thereunder, such as
the Registrant, eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director except (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 DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Article VII of the Registrant's Amended and Restated
Certificate of Incorporation has eliminated the personal liability of directors
to the fullest extent permitted under DGCL.
Article VII of the Registrant's Amended and Restated Certificate of
Incorporation provides as follows: No director of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent exculpation from liability is
not permitted under the Delaware General Corporation Law. 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 Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of this Article VII by the stockholders of the
Corporation shall not adversely affect any right of protection of a director of
the Corporation existing at the time of such repeal or modification.
Article VIII of the Registrant's Amended and Restated Certificate of
Incorporation provides as follows: The indemnification provided by this Article
VIII shall not be deemed exclusive of any other rights which may be provided now
or in the future under any provision of the Bylaws currently in effect or
hereafter adopted, by any agreement, by vote of stockholders, by resolution of
disinterested directors, by provision of law, or otherwise. Any repeal or
modification of this
II-1
<PAGE> 103
Article VIII shall be prospective and shall not affect any rights under this
Article VIII in effect at the time of the alleged occurrence of any act or
omission giving rise to liability or indemnification.
The Corporation shall indemnify any director or officer of the Corporation
(an "Indemnified Party") who is or was 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 (a) the fact that the
Indemnified Party is or was a director, officer, employee or agent of the
Corporation, (b) the fact that the Indemnified Party is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise or (c) any
action or inaction by the Indemnified Party while acting as such a director,
officer, employee or agent, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by Indemnified Party in connection with such action, suit or proceeding to the
maximum extent permitted by the Delaware General Corporation Law. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Indemnified Party did not (i) act in good
faith and in a manner which he or she 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 or her
conduct was unlawful or (ii) in accordance with any other standard required by
the Delaware General Corporation Law.
The Corporation shall indemnify an Indemnified Party if such Indemnified
Party 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 (a) the fact that the Indemnified
Party is or was a director, officer, employee or agent of the Corporation, (b)
the fact that the Indemnified Party is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (c) any action or
inaction by the Indemnified Party while acting as such a director, officer,
employee or agent, against expenses (including attorneys' fees) actually and
reasonably incurred by the Indemnified Party in connection with the defense or
settlement of such action or suit to the maximum extent permitted by the
Delaware General Corporation Law, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnified Party shall
have been adjudged to be liable to the Corporation unless and only to the extent
permitted by Section 8.4 below or if the Court of Chancery of the State of
Delaware, or the court in which such action or suit was brought, shall determine
upon application that, despite the adjudication of liability and in view of all
the circumstances of the case, the Indemnified Party is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of Delaware or such other court shall deem proper.
The Corporation shall indemnify the Indemnified Party against and advance
to such Indemnified Party expenses (including attorneys' fees) and any costs of
settlement actually and reasonably incurred by the Indemnified Party in defense
of any action, suit or proceeding referred to in Sections 8.2 and 8.3 of this
Article VIII or in defense of any claim, issue or matter therein or any portion
thereof. Expenses (including, without limitation, attorneys' fees) incurred by
an Indemnified Party in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such Indemnified Party to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as permitted by law.
Article VIII, Section 6 of the Registrant's By-Laws provides as follows:
The Corporation shall indemnify its directors, officers, employees and agents to
the fullest extent permitted by the General Corporation Law of Delaware and the
Amended and Restated Certificate of Incorporation.
II-2
<PAGE> 104
Each of the directors of the Registrant are parties to indemnification
agreements whereby the Registrant agrees to indemnify each director to the
fullest extent authorized or permitted by law for claims relating to the fact
that the individual is or was a director of the Registrant. The agreement also
provides that if the Registrant maintains an insurance policy providing
directors liability insurance, the director shall be covered to the maximum
extent of the coverage available.
The foregoing statements and discussion are subject to the detailed
provisions of Section 102(b)(7) of the DGCL, Articles VII and VIII of the
Amended and Restated Certificate of Incorporation of the Registrant and Article
VIII, Section 6 of the By-Laws of the Registrant, as applicable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On November 12, 1998, the Registrant conducted a 1:5 reverse split of its
common stock. All amounts listed below are adjusted to reflect the reverse
split.
From April 1996 through October 1997, the Registrant issued 100.2 units of
its securities at a price of $50,000 per unit, each unit consisting of one
convertible subordinated promissory note in the amount of $50,000 and one
warrant to purchase 2,000 shares of its common stock at an exercise price of
$12.00 per share, to various accredited investors for an aggregate offering
price of $5,010,000.
In September 1997, the Registrant issued 4,682 shares of its common stock
to an individual investor for an aggregate purchase price of approximately
$250,000.
In October 1997, the Registrant issued 5,000 shares of its common stock to
three individuals upon the conversion of $250,000 principal amount of the
Registrant's convertible promissory notes.
From November 1997 to January 1998, the Registrant sold 62,961 shares of
its common stock and warrants to purchase 62,961 shares of its common stock to
various accredited investors for an aggregate purchase price of $3,362,117.
In January 1998, the Registrant issued warrants to purchase 2,000 shares of
its common stock at $12.00 to an individual in consideration for services
rendered.
In March 1998, the Registrant issued warrants to purchase 24,000 shares of
its common stock at an exercise price of $12.00 per share to the assignees of
certain convertible subordinated promissory notes of the Registrant. No
additional cash consideration was received.
In April 1998, the Registrant issued warrants to purchase an aggregate of
62,861 shares of its common stock at an exercise price of $12.00 per share to
various employees and designees of a consultant to the Registrant in
consideration for services rendered.
In June 1998, the Registrant sold a total of 5,000 shares of its common
stock to six accredited investors for an aggregate purchase price of $267,000.
In July 1998, the Registrant issued 1,000 shares of its common stock to a
service provider in exchange for services rendered.
In October 1998, the Registrant issued an aggregate of 775,975 shares of
its common stock to 58 holders of the Registrant's promissory notes upon the
conversion of an aggregate of $775,975 outstanding principal under the notes.
In October 1998, the Registrant issued convertible promissory notes
totaling $5,060,000 to Atocha, L.P. in exchange for loans in the same amount.
The notes were convertible into the Series B Preferred Stock of the Registrant.
On March 13, 2000, all outstanding principal and interest outstanding on these
notes was converted into 5,463,764 shares of the Registrant's Series B Preferred
Stock at a conversion price of $1.00 per share.
II-3
<PAGE> 105
In November 1998, the Registrant issued 15,000 shares of its common stock
to an individual investor for aggregate consideration of $15,000.
In November 1998, the Registrant issued 6,434 shares of its common stock to
a promissory note holder upon conversion of a $6,434 promissory note previously
issued by the Registrant.
In January 1999, the Registrant issued 25,000 shares of common stock to
Tony Bansal in consideration for services rendered to the Registrant and
pursuant to his employment contract with the Registrant.
In August 1999, the Registrant issued 329,632 shares of its common stock to
DMX Divestiture Corporation in exchange for substantially all of the assets of
Datamatix, Inc.
In November 1999, the Registrant issued a convertible promissory note in
the amount of $7,000,000 to Atocha, L.P. in exchange for a loan in the same
amount. This Note was convertible into shares of the Series C Preferred Stock of
the Registrant. On March 13, 2000, all outstanding principal and interest under
the Note was converted into 2,550,465 shares of Series C Preferred Stock at a
price of $2.86 per share.
In September 1999, the Registrant issued 4,518 shares of is common stock to
a promissory note holder upon conversion of $12,992 outstanding under the
promissory note.
In October 1999 and November 1999, the Registrant issued 2,916,455 shares
of its common stock to accredited investors at $2.86 per share for aggregate
consideration of approximately $8,341,061.
In October 1999, the Registrant issued 80,664 shares of its common stock to
promissory note holders upon the conversion of an aggregate of $230,768
outstanding under promissory notes previously issued by the Registrant.
In January 2000, the Registrant issued a convertible promissory note in the
amount of $3,000,000 to Adam Solomon Investments, L.L.C., in exchange for a loan
in the same amount. The Note was convertible into shares of Series D preferred
stock of the Registrant. In March 2000, the outstanding principal and interest
of the note was converted into 514,162 shares of Series D preferred stock of the
Registrant at a conversion price of $5.8347 per share.
In February 2000, the Registrant issued a convertible promissory note in
the amount of $2,500,000 to Sentinel Capital Partners II, L.P. in exchange for a
loan in the same amount. The note was convertible into shares of the
Registrant's Series D preferred stock. In March 2000, the outstanding principal
and interest of the Note was converted into 454,159 shares of Series D Preferred
Stock of the Registrant at a conversion price of $5.8347 per share.
In March 2000, the Registrant issued 4,284 shares of its common stock to
Tony Bansal in consideration for services rendered to the Registrant and
pursuant to his employment contract with the Registrant.
In March and April 2000, the Registrant sold 8,709,902 shares of its Series
D preferred stock for aggregate cash proceeds of $50.8 million to various
accredited investors pursuant to Rule 506 promulgated under the Securities Act
of 1933 based upon representations from each such investor that such investor
qualified as an "accredited investor" as that term is defined in Rule 501
promulgated under the Securities Act.
In April 2000, the Registrant issued 28,174 shares of its common stock to
three holders of promissory notes of the Registrant upon the conversion of an
aggregate of $140,880 of principal and interest outstanding under the notes.
The Registrant believes each of the transactions set forth above were
exempt from the registration requirements under the Securities Act by virtue of
Section 4(2) thereof, or Regulation D thereunder, as transactions by an issuer
not involving a public offering. All of the securities
II-4
<PAGE> 106
were acquired by the recipients for investment and with no view toward
distribution. Appropriate legends are affixed to the stock certificates issued
in such transactions. All recipients either received adequate information about
the Registrant or had access, through employment or other relationships, to such
information. No underwriter was involved in the transactions and no underwriting
discounts or commissions were paid.
In October 1998, pursuant to the terms of an $800,000 promissory note
issued by the Registrant to Atocha, L.P., Atocha, L.P. converted its promissory
note into 2,971,470 shares of the Registrant's common stock. The Registrant
believes the issuance of the shares upon the conversion of this note was exempt
from registration under the Securities Act by virtue of Section 3(a)(9) thereof,
as a security exchange by an existing security holder of the Registrant without
additional consideration paid.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
1.1** -- Form of Underwriting Agreement.
2.1* -- Asset Purchase Agreement by and among Digital Commerce
Corporation and Datamatix, Inc., dated as of August 23,
1999 (Pursuant to the rules of the Commission, the
schedules and exhibits have been omitted. Upon request of
the Commission, Digital Commerce will supplementally
supply such schedules and exhibits to the Commission.)
3.1* -- Amended and Restated Certificate of Incorporation of
Digital Commerce Corporation, dated as of March 13, 2000.
3.2* -- Bylaws of Digital Commerce Corporation, dated as of March
13, 2000.
4.1* -- Reference is made to Exhibits 3.1 through 3.2.
4.2** -- Form of certificate evidencing shares of the $.01 par
value common stock.
5.1** -- Opinion of Winstead Sechrest & Minick P.C., counsel to
Digital Commerce Corporation, with respect to the
securities being issued.
10.1* -- 1996 Stock Incentive Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.2* -- 1998 Stock Option Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.3* -- Executive Retention Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.4* -- Grant of Stock Options under Executive Retention Plan,
dated April 4, 2000, from Digital Commerce Corporation to
Tony Bansal.
10.5* -- Grant of Stock Options under Executive Retention Plan,
dated April 4, 2000, from Digital Commerce Corporation to
William H. Seippel.
10.6* -- Employment Agreement dated as of January 1, 1999, by and
between Digital Commerce Corporation and Tony Bansal.
10.7* -- Agreement dated as of October 8, 1999, by and between
Digital Commerce Corporation and William H. Seippel.
10.8* -- Retention Agreement dated as of April 4, 2000, by and
between Digital Commerce Corporation and Tony Bansal.
10.9* -- Retention Agreement dated as of April 4, 2000, by and
between Digital Commerce Corporation and William H.
Seippel.
</TABLE>
II-5
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
10.10* -- Form of Retention Agreement entered into between Digital
Commerce Corporation and certain executive officers.
10.11* -- Form of Indemnification Agreement entered into between
Digital Commerce Corporation and its directors and
certain executive officers.
10.12* -- Lease dated January 5, 2000 by and between Ocean Park
Management Company, Ltd. and Digital Commerce
Corporation.
10.13* -- Office Lease by and between First Campbell Associates
L.C., Loudoun Center L.C., Fairfax Corner Associates
L.C., Blue Ridge Associates L.C., Mirror Ridge Associates
L.C. and King Street II L.C. and Digital Commerce
Corporation dated January 24, 2000.
10.14* -- First Amendment to Office Lease Agreement by and between
First Campbell Associates L.C., Loudoun Center L.C.,
Fairfax Corner Associates L.C., Blue Ridge Associates
L.C., Mirror Ridge Associates L.C. and King Street II
L.C. and Digital Commerce Corporation dated February 22,
2000.
10.15* -- Office Lease between Churoad Associates, L.P. and
Datamatix dated October 20, 1997.
10.16* -- Sublease Agreement between Lucas Industries, Inc. and
Digital Commerce Corporation dated as of June 25, 1996.
10.17* -- Settlement and Sublease Modification Agreement dated as
of September 8, 1998 by and between Lucas Industries,
Inc. and Digital Commerce Corporation.
10.18* -- Agreement between the Connecticut Department of
Administrative Services and Digital Commerce Corporation,
as amended.
10.19* -- Fairfax County Contract number RQ700012.16A, dated
January 10, 1997 between Fairfax County Public Schools
and Datamatix, Inc., as amended.
10.20* -- Software End-User License Agreement, dated as of March
13, 2000, by and between SAP Public Sector and Education,
Inc. and Digital Commerce Corporation.
10.21* -- Software License Agreement, dated as of June 16, 1998, by
and between US WEST Communication Services, Inc. and
Datamatix, Inc.
10.22* -- Software License Agreement, dated February 4, 1998,
between InterWorld Corporation and Digital Commerce
Corporation.
10.23* -- Service Agreement and License, dated January 20, 2000, by
and between Tech Data Corporation and Digital Commerce
Corporation.
10.24* -- Master Service Agreement, dated January 29, 1999, by and
between Digital Commerce Corporation and Frontier Global
Center.
10.25* -- Securities Purchase Agreement among Digital Commerce
Corporation, Weston Presidio Capital III, L.P., Highland
Capital Partners V, L.P. and certain other investors
listed therein, dated as of March 13, 2000 (Pursuant to
the rules of the Commission, the schedules and exhibits
have been omitted. Upon request of the Commission,
Digital Commerce will supplementally supply such
schedules and exhibits to the Commission.)
10.26* -- Registration Rights Agreement, dated as of March 13,
2000, among Digital Commerce Corporation, Weston Presidio
Capital III, L.P., Highland Capital Partners V, L.P. and
certain other investors, Atocha, L.P., Tony Bansal and
William H. Seippel.
</TABLE>
II-6
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
10.27* -- Stockholders Agreement, dated as of March 13, 2000, among
Digital Commerce Corporation, Weston Presidio Capital
III, L.P., Highland Capital Partners V, L.P., certain
other investors, Atocha, L.P., Tony Bansal and William H.
Seippel.
10.28** -- 2000 Flexible Incentive Plan.
16.1* -- Letter from PricewaterhouseCoopers LLP on change in
certifying accountant.
21.1* -- Subsidiaries of Digital Commerce Corporation.
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of Ernst & Young LLP.
23.3* -- Consent of PricewaterhouseCoopers LLP.
23.4** -- Consent of Winstead Sechrest & Minick P.C. (included in
Exhibit 5.1).
24.1* -- Powers of Attorney (included as part of signature page of
this Registration Statement).
27.1* -- Financial Data Schedule.
</TABLE>
- ------------
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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) of 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 purposes of determining any liability under the Securities Act
of 1933, 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-7
<PAGE> 109
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 Herndon, State of
Virginia, on the 2nd day of May, 2000.
DIGITAL COMMERCE CORPORATION
By: /s/ TONY BANSAL
----------------------------------
Tony Bansal
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Digital Commerce Corporation,
do hereby constitute and appoint Tony Bansal and William H. Seippel our true and
lawful attorneys-in-fact and agents, to do any and all acts and things in our
names and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our name in the capacities
indicated below, which said attorneys and agents may deem necessary or advisable
to enable said Corporation to comply with the Securities Act of 1933 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this registration statement, or any registration statement
for this offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act of 1933, including specifically, but without
limitation, power and authority to sign for us or any of us in names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorneys
and agents shall do or cause to be done by virtue thereof.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board
- -----------------------------------------------------
Thomas J. Cirrito
/s/ TONY BANSAL President, Chief Executive May 2, 2000
- ----------------------------------------------------- Officer and Director
Tony Bansal (Principal Executive
Officer)
/s/ WILLIAM H. SEIPPEL Chief Financial Officer and May 2, 2000
- ----------------------------------------------------- Director (Principal
William H. Seippel Financial Officer and
Principal Accounting
Officer)
/s/ DR. JOHN M. POINDEXTER Director May 2, 2000
- -----------------------------------------------------
Dr. John M. Poindexter
</TABLE>
II-8
<PAGE> 110
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
1.1** -- Form of Underwriting Agreement.
2.1* -- Asset Purchase Agreement by and among Digital Commerce
Corporation and Datamatix, Inc., dated as of August 23,
1999 (Pursuant to the rules of the Commission, the
schedules and exhibits have been omitted. Upon request of
the Commission, Digital Commerce will supplementally
supply such schedules and exhibits to the Commission.)
3.1* -- Amended and Restated Certificate of Incorporation of
Digital Commerce Corporation, dated as of March 13, 2000.
3.2* -- Bylaws of Digital Commerce Corporation, dated as of March
13, 2000.
4.1* -- Reference is made to Exhibits 3.1 through 3.2.
4.2** -- Form of certificate evidencing shares of the $.01 par
value common stock.
5.1** -- Opinion of Winstead Sechrest & Minick P.C., counsel to
Digital Commerce Corporation, with respect to the
securities being issued.
10.1* -- 1996 Stock Incentive Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.2* -- 1998 Stock Option Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.3* -- Executive Retention Plan of Digital Commerce Corporation
and form of agreement thereunder.
10.4* -- Grant of Stock Options under Executive Retention Plan,
dated April 4, 2000, from Digital Commerce Corporation to
Tony Bansal.
10.5* -- Grant of Stock Options under Executive Retention Plan,
dated April 4, 2000, from Digital Commerce Corporation to
William H. Seippel.
10.6* -- Employment Agreement dated as of January 1, 1999, by and
between Digital Commerce Corporation and Tony Bansal.
10.7* -- Agreement dated as of October 8, 1999, by and between
Digital Commerce Corporation and William H. Seippel.
10.8* -- Retention Agreement dated as of April 4, 2000, by and
between Digital Commerce Corporation and Tony Bansal.
10.9* -- Retention Agreement dated as of April 4, 2000, by and
between Digital Commerce Corporation and William H.
Seippel.
10.10* -- Form of Retention Agreement entered into between Digital
Commerce Corporation and certain executive officers.
10.11* -- Form of Indemnification Agreement entered into between
Digital Commerce Corporation and its directors and
certain executive officers.
10.12* -- Lease dated January 5, 2000 by and between Ocean Park
Management Company, Ltd. and Digital Commerce
Corporation.
10.13* -- Office Lease by and between First Campbell Associates
L.C., Loudoun Center L.C., Fairfax Corner Associates
L.C., Blue Ridge Associates L.C., Mirror Ridge Associates
L.C. and King Street II L.C. and Digital Commerce
Corporation dated January 24, 2000.
</TABLE>
II-9
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
10.14* -- First Amendment to Office Lease Agreement by and between
First Campbell Associates L.C., Loudoun Center L.C.,
Fairfax Corner Associates L.C., Blue Ridge Associates
L.C., Mirror Ridge Associates L.C. and King Street II
L.C. and Digital Commerce Corporation dated February 22,
2000.
10.15* -- Office Lease between Churoad Associates, L.P. and
Datamatix dated October 20, 1997.
10.16* -- Sublease Agreement between Lucas Industries, Inc. and
Digital Commerce Corporation dated as of June 25, 1996.
10.17* -- Settlement and Sublease Modification Agreement dated as
of September 8, 1998 by and between Lucas Industries,
Inc. and Digital Commerce Corporation.
10.18* -- Agreement between the Connecticut Department of
Administrative Services and Digital Commerce Corporation,
as amended.
10.19* -- Fairfax County Contract number RQ700012.16A, dated
January 10, 1997 between Fairfax County Public Schools
and Datamatix, Inc., as amended.
10.20* -- Software End-User License Agreement, dated as of March
13, 2000, by and between SAP Public Sector and Education,
Inc. and Digital Commerce Corporation.
10.21* -- Software License Agreement, dated as of June 16, 1998, by
and between US WEST Communication Services, Inc. and
Datamatix, Inc.
10.22* -- Software License Agreement, dated February 4, 1998,
between InterWorld Corporation and Digital Commerce
Corporation.
10.23* -- Service Agreement and License, dated January 20, 2000, by
and between Tech Data Corporation and Digital Commerce
Corporation.
10.24* -- Master Service Agreement, dated January 29, 1999, by and
between Digital Commerce Corporation and Frontier Global
Center.
10.25* -- Securities Purchase Agreement among Digital Commerce
Corporation, Weston Presidio Capital III, L.P., Highland
Capital Partners V, L.P. and certain other investors
listed therein, dated as of March 13, 2000 (Pursuant to
the rules of the Commission, the schedules and exhibits
have been omitted. Upon request of the Commission,
Digital Commerce will supplementally supply such
schedules and exhibits to the Commission.)
10.26* -- Registration Rights Agreement, dated as of March 13,
2000, among Digital Commerce Corporation, Weston Presidio
Capital III, L.P., Highland Capital Partners V, L.P. and
certain other investors, Atocha, L.P., Tony Bansal and
William H. Seippel.
10.27* -- Stockholders Agreement, dated as of March 13, 2000, among
Digital Commerce Corporation, Weston Presidio Capital
III, L.P., Highland Capital Partners V, L.P., certain
other investors, Atocha, L.P., Tony Bansal and William H.
Seippel.
10.28** -- 2000 Flexible Incentive Plan.
16.1* -- Letter from PricewaterhouseCoopers LLP on change in
certifying accountant.
21.1* -- Subsidiaries of Digital Commerce Corporation.
23.1* -- Consent of Ernst & Young LLP.
</TABLE>
II-10
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ------------------------
<C> <S>
23.2* -- Consent of Ernst & Young LLP.
23.3* -- Consent of PricewaterhouseCoopers LLP.
23.4** -- Consent of Winstead Sechrest & Minick P.C. (included in
Exhibit 5.1).
24.1* -- Powers of Attorney (included as part of signature page of
this Registration Statement).
27.1* -- Financial Data Schedule.
</TABLE>
- ------------
* Filed herewith.
** To be filed by amendment.
II-11
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered
into this 23rd day of August, 1999 by and among Digital Commerce Corporation, a
Delaware corporation (the "Purchaser"), and Datamatix, Inc., a Delaware
corporation ("Seller") and is effective with immediately after the close of
Seller's business on August 20, 1999.
Recitals
Seller desires to sell, transfer and assign to the Purchaser, and the
Purchaser desires to purchase from Seller, substantially all of the assets,
properties and business of Seller on the terms and conditions hereinafter set
forth.
Covenants
In consideration of the mutual representations, warranties and
covenants and subject to the conditions herein contained, the parties hereto
agree as follows:
ARTICLE I
Purchase and Sale of Assets
Section 1.1. Purchase of Assets of Seller. Seller hereby sells,
conveys, transfers, assigns and delivers to the Purchaser, free and clear of all
liens, mortgages, pledges, encumbrances and charges of every kind (except as may
be set forth on Schedule 3.14), on the terms and subject to the conditions set
forth in this Agreement, the properties, business and assets of Seller as
follows (collectively the "Purchased Assets"):
(a) all computer equipment, machinery, equipment, tools, supplies,
leasehold improvements, construction in progress, furniture and fixtures, and
other fixed assets owned by Seller identified in Schedule1.1 (a) hereto (the
"Purchased Fixed Assets");
(b) all receivables of Seller, including without limitation all
receivables identified on Schedule 1.1(b) hereof, all trade accounts receivable
arising from sales of inventory in the ordinary course of business, notes
receivable, insurance proceeds receivable, tax refunds receivable (whether
currently receivable or receivable in the future as a result of the transactions
contemplated hereby), and any funds loaned or advanced to any officer, director,
employee or consultant of the Seller (the "Purchased Receivables");
(c) all of the interest of and the rights and benefits accruing to
Seller as lessee under all leases or rental agreements covering machinery,
equipment, tools, supplies, furniture and fixtures, and other fixed assets (the
"Purchased Leasehold Rights");
(d) except as may be set forth on Schedule 1.2, all of the rights and
benefits accruing to Seller under all sales orders, sales contracts, license
agreements, supply contracts, purchase orders
<PAGE> 2
and purchase commitments made by Seller in the ordinary course of business, the
uncollected portions of all settlements of rights or claims, and all choses in
action, causes of action and other rights of Seller (the "Purchased Contract and
Other Rights");
(e) all operating data and records of Seller, including without
limitation customer lists, financial records, credit records, correspondence,
budgets and other similar documents and records (the "Purchased Records");
(f) all of the proprietary rights of Seller, including without
limitation all domestic and foreign trademarks, trademark applications, service
marks, service mark applications, trade names, patents, patent rights, patent
applications, copyrights, and all applications for such which are in the process
of being prepared, owned by or registered in the name of Seller, licenses for
any of the foregoing, trade secrets, technology, know-how, other databases,
formulae, designs and drawings, computer software, slogans, copyrights,
processes, operating rights, other licenses and permits, and other similar
intangible property and rights relating to the products or business of Seller,
whether or not registered or licensed with federal, state, or international
bodies (the "Purchased Proprietary Rights");
(g) the prepaid and deferred items of Seller identified on Schedule
1.1(g) hereto (the "Purchased Prepaid Items");
(h) all of Seller's right, title and interest in and to its corporate
and trade names and all of the other goodwill of Seller (the "Purchased
Goodwill");
(i) the October 20, 1997 Agreement of Lease between ChuRoad Associates,
LP as Landlord and Datamatix as Tenant (the "Lease"); and
(j) Seller's license to certain intellectual property as set forth in
that certain Settlement Agreement dated June 15, 1999 by and between Andrew
Lupo, Martin Koller, Ronald Burkholder, Datatron, Inc. and the Seller.
Section 1.2. Excluded Assets. Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude the following assets of
Seller: (i) Seller's other rights under this Agreement; (ii) any employee
benefit plans defined in Section 3.23; (iii) all minutes and other records of
the proceedings of the Seller's Board of Directors, all records pertaining to
the ownership interests in Seller, and any other record relating to the
organization of Seller or the amendment of any of Seller's organizational
documents; (iv) all bank accounts; and (v) the items described on Schedule 1.2
hereto.
ARTICLE II
PURCHASE PRICE
Section 2.1. Purchase Price. As consideration for the Purchased Assets
of Seller and subject to the terms, conditions and limitations set forth in this
Agreement, concurrent with the
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execution of this Agreement (the "Closing"), the Purchaser has delivered to an
escrow agent, pursuant to the provisions of the Stock Pledge Agreement executed
concurrently herewith, 329,632 shares of the common stock, $0.01 par value per
share, of the Purchaser (collectively the "Shares").
Section 2.2. Assumed Liabilities. The Purchaser hereby assumes and
agrees to perform when lawfully due all obligations of Seller relating to the
period from and after the date of this Agreement pursuant to any agreements
included within the Purchased Assets (collectively, the "Assumed Liabilities").
In addition, the Purchaser assumes and agrees to pay when lawfully due, those
specific expenses of Seller which are described in Schedule 2.2 hereto.
Section 2.3. Excluded Liabilities. Except as specifically provided in
Section 2.2 hereof, the Purchaser shall not be responsible for the payment of
any liabilities of Seller, including, but not limited to, the following
liabilities, contracts, commitments and other obligations of Seller (the
"Excluded Liabilities"):
(a) Seller's obligations and any liabilities arising under this
Agreement;
(b) any obligations of Seller for federal, state, local or foreign
income tax liability, payroll, property and sales taxes (including interest and
penalties) arising from the operations of Seller up to the date hereof or
arising out of the sale by Seller of the Purchased Assets pursuant hereto;
(c) any obligations of Seller for any transfer, sales or other taxes,
fees or levies (including motor vehicle sales taxes) imposed by any state or
other governmental entity on or arising out of the sale of the Purchased Assets
pursuant hereto;
(d) any obligation of Seller for expenses incurred in connection with
the sale of the Purchased Assets pursuant hereto, including without limitation
the fees and expenses of its counsel, independent auditors and financial
advisors;
(e) any liability, contract, commitment or other obligation of Seller,
known or unknown, fixed or contingent, the existence of which constitutes or
will constitute a breach of any representation or warranty of Seller contained
in or made pursuant to Article III of this Agreement;
(f) any liability of Seller for any breach of contract, breach of
warranty, malfeasance or misfeasance, act of negligence or intentional act by
Seller or any of its employees or any violation of any statute regulation or
other administrative rule of any governmental entity;
(g) any liability of Seller for any damages arising out of any cause of
action or claim against Seller arising out of any act or failure to act of
Seller which occurs prior to the date hereof, including without limitation, any
liability of Seller arising out of Lupo, et al. v. Datamatix. Inc., et
Anticipation of Litigation., No. 97-5429, U.S. Dist. Ct., E.D. Pa. ("Lupo");
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(h) any liability of Seller arising out of the design, development, or
sale of any software or service sold by Seller prior to the date hereof,
including without limitation, any liability of Seller arising out of any
intellectual property rights of Seller which were the subject of Lupo;
(i) any liability of Seller arising under any pension, profit sharing,
401(k) plan or other employee benefit plan whether arising before or after the
date of this Agreement;
(j) any liability of Seller for any rent due for occupancy by Seller
prior to the date of this Agreement on any real estate leased by Seller;
(k) any liability associated with grants issued, supervised, or
controlled by the Commonwealth of Pennsylvania, Department of Community and
Economic Development; and
(l) any other liability of Seller not expressly assumed hereunder.
Section 2.4 . Allocation of the Purchase Price among the Purchased
Assets. The Purchase price for the Purchased Assets shall be allocated among
each item or class of the Purchased Assets as specifically set forth in or
determined pursuant to Schedule 2.4. Seller and the Purchaser agree that they
will prepare and file their federal and any state or local income tax returns
based on such allocation of the Purchase Price of the Purchased Assets, and that
they will prepare and file any notices or other filings (including but not
limited to IRS Form 8594) required pursuant to Section 1060 of the Internal
Revenue Code of 1986, and that any such notices or filings will be prepared
based on such allocation of the purchase price for the Purchased Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereunder, Seller represents and
warrants as follows:
Section 3.1. Organization.
(a) Seller is a corporation organized under the laws of the state of
Delaware. A true and correct copy of the Articles of Incorporation and Bylaws,
as amended and in full force and effect as of the date hereof (the
"Organizational Documents"), have been delivered to the Purchaser. Seller is
duly licensed and qualified to do business as a foreign corporation and is in
good standing in each of the jurisdictions listed on Schedule 3.1 hereto, such
jurisdictions being the only jurisdictions in which the nature of the business
transacted by it or the character of the properties owned or leased by it
require such licensing or qualification.
(b) Seller has all requisite power and authority and holds all material
licenses, permits and other required authorizations from governmental
authorities necessary to own its properties and assets and to conduct its
business as it is now being conducted.
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(c) Except as provided in this Agreement, Seller has not has not sold,
or agreed to sell, any of its assets to any person or entity other than in the
ordinary course of business.
Section 3.2. Authorization, Validity and Enforceability of this
Agreement.
(a) Seller has full legal power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by Seller of this Agreement and all other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
have been authorized by all necessary corporate action of Seller, and will not
violate any provision of law (except for violations that could not reasonably be
expected, individually or in the aggregate to have a material adverse effect),
any order of any court or other agency of government, the Articles of
Incorporation or Bylaws of Seller or any instrument or other restriction to
which Seller is a party or by which it is bound.
(b) This Agreement has been duly executed and delivered by Seller and
constitutes the legal, valid, and binding obligation of Seller, enforceable
against it in accordance with its terms except as enforceability may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws from time to
time in effect that affect creditors' rights generally and by legal and
equitable limitations on the availability of specific remedies.
Section 3.3. Governmental Consents, Etc. Except as may be necessary to
transfer certain contracts of Seller, no consent, approval or authorization of,
or declaration, registration or filing with any person, entity or governmental
authority on the part of Seller is required for the valid execution, delivery
and performance of this Agreement or the valid consummation of the transactions
contemplated hereby.
Section 3.4. Financial Statements. The audited financial statements of
Seller for the year ending December 31, 1996, and the unaudited financial
statements for years ending December 31, 1997, December 31, 1998 and the six and
one-half month period ended July 15, 1999, together with notes thereto (the
"Financial Statements"), copies of which are included herewith as Schedule 3.4,
are accurate, true, and complete, have been prepared in accordance with
generally accepted accounting principles consistently applied, and fairly
present, in all material respects, the financial position of the Company, the
results of operations and cash flows for the years ended December 31, 1996, 1997
and 1998 and the six and one-half month period ended July 15, 1999,
respectively.
Section 3.5. No Adverse Changes. Since July 15, 1999, (i) there have
been no changes in the condition or prospects (financial or otherwise except as
may relate to economic conditions generally) of Seller that, in the aggregate,
would materially adversely affect the organization, business, properties,
operations, financial condition, business prospects or operating results of
Seller, (ii) none of the business, prospects, financial condition, operations,
property or affairs of Seller has been materially adversely affected by an
occurrence or development, individually or in the aggregate, whether or not
insured against and (iii) there is not, to the best of Seller's knowledge, any
threatened or prospective event or condition of any character whatsoever which
could materially and adversely affect the Purchased Assets or the business,
financial condition or results of operations of Seller.
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Section 3.6 . No Defaults. Except as set forth in Schedule 3.6, Seller
is not in default in the performance or observance of any material obligations,
agreement, covenant, or condition contained in its Articles of Incorporation or
Bylaws or in any material contract, indenture, mortgage, loan agreement, lease,
note or other instrument to which it is a party or by which it may be bound. The
execution and delivery of this Agreement will not violate any provision of law
and will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, Seller's Organizational Documents, or any agreement,
instrument, or other restriction to which Seller is a party or by which it is
bound.
Section 3.7. Material Transactions. Except as disclosed on the
Financial Statements or in Schedule 3.7 hereto, Seller has not:
(a) borrowed any funds or incurred or become subject to any obligations
or liabilities (absolute or contingent), except as incurred in the ordinary
course of business;
(b) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities
reflected in or shown on the Financial Statements and obligations referred to in
(a) above;
(c) declared or made any distribution to its stockholders of or
purchased or redeemed any shares of its common stock or other securities;
(d) paid any bonus or increased the rate of compensation of any of its
employees;
(e) sold or transferred or agreed to sell or transfer any of its assets
other than in the ordinary course of business;
(f) made or obligated itself to make any capital expenditures;
(g) incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby;
(h) suffered any theft, damage, destruction or casualty loss;
(i) entered into any agreements or arrangements for the purchase of, or
granting any preferential rights to purchase, any of the equity interests in or
assets, properties, or rights of Seller (including management and control
thereof), or requiring the consent of any party to a transfer or assignment of
such assets, properties or rights (or change in the management or control
thereof), or providing for the merger or consolidation of Seller into or with
another corporation or entity or the purchase of a majority of the ownership
interests in Seller;
(j) suffered any material losses, waived any rights of substantial or
material value or canceled any debts or claims;
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(k) except in the ordinary course of business, made or permitted any
amendment or termination of any material contract, agreement, or license to
which it is a party;
(l) changed any accounting method or practice, including, without
limitation, any change in depreciation or amortization policies or rates;
(m) made any loan to any person or entity, including but not limited to
any officer, director, employee, or owner of an equity interest in Seller;
(n) entered into any transaction other than in the ordinary course of
business; or
(o) entered into an agreement to do any of the things described in
clauses (a) through (n) above.
Section 3.8. Material Agreements. Except as disclosed in Schedule 3.8
hereto, Seller is not a party to any written or oral:
(a) contract for employment that may not be terminated on not more than
30 days notice without liability to Seller;
(b) pension or profit sharing plan, retirement plan, bonus plan, stock
purchase or stock option plan, or any similar plan, formal or informal, whether
covering one or more employees or former employees;
(c) contract involving payment by or to Seller of more than $10,000 or
the performance of which may extend more than 90 days from the date hereof; or
(d) other material contract, agreement, or understanding, whether
formal or informal.
All material contracts, agreements and understandings are set forth in Schedule
3.8 and are in full force and effect, and Seller has not received any notice of
default, nor is Seller in default, nor does any condition now exist which, with
notice or the lapse of time or both, would render Seller, or, to Seller's
knowledge, any other party in default under any contract, understanding, or
agreement to which Seller may be a party. There are no disputes or proceedings
relating to any such contract, understanding or agreement or to exercise or not
exercise any option or rights under such contract, understanding, or agreement.
Section 3.9. Status of Transferred Contracts. All Transferred
Contracts (as defined in Section 6.2) are and will be at the time of the Closing
fully compliant with all the terms of such contracts. Seller is in good standing
with the customer with respect to each of the Transferred Contracts, to the
knowledge of the Company, and there are no outstanding complaints or claims by
any customer for failure to perform any service to be provided pursuant to such
Transferred Contracts.
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Section 3.10. No Litigation. Except as set forth in Schedule 3.10,
there is no action or proceeding at law or in equity pending or, to the
knowledge of Seller, threatened against or affecting Seller, at law or in
equity, before any federal, state, local or foreign court or governmental
department, commission, board, bureau, agency or instrumentality, and there is
no such proceeding pending or, to the knowledge Seller, threatened, in
arbitration or before any administrative agency and, to the knowledge of Seller,
there are no facts, events or occurrences by reason of which any such action or
proceeding may be brought. There is no judgment, consent, decree, injunction,
rule, or other judicial or administrative order outstanding against Seller.
Section 3.11. Certain Transactions. Seller is not indebted, except as
provided in Schedule 3.11, directly or indirectly, to any of its officers or
directors or to their respective spouses or children, in any amount whatsoever
and none of Seller's officers or directors or any members of their immediate
families are indebted to Seller or have any direct or indirect ownership
interest in any firm or corporation with which Seller is affiliated or with
which Seller has a business relationship, or any firm or corporation that
competes with Seller. Seller is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
Section 3.12. Liabilities. All liabilities of Seller as of the date
hereof are set forth in the July 15, 1999 Financial Statements or on Schedule
3.12.
Section 3.13. Taxes. Except as provided in Schedule 3.13:
(a) Seller has filed all federal, state, county and local tax returns
that are required to be filed by it, and such returns are true and correct, and
all taxes shown thereon to be due have been timely paid with exceptions not
material to Seller. The Federal income tax returns of Seller have not been
examined by the Internal Revenue Service or any state or local taxing
authorities, and no controversy with respect to taxes of any type is pending or,
to the knowledge of Seller, threatened.
(b) All taxes and other assessments and levies which Seller is required
by law to withhold or to collect, including any applicable sales taxes and
employee withholding, have been duly withheld and collected, and have been paid
over to the proper governmental entity or are being held by Seller for such
payment.
Section 3.14. Property and Assets.
(a) Except as set forth on Schedule 3.14, Seller has good and
marketable title to all of the Purchased Assets (other than the Purchased
Leasehold Premises and the Purchased Leasehold Rights), free and clear of all
liens, mortgages, pledges, encumbrances or charges of every kind, nature, and
description whatsoever.
(b) All of the Purchased Fixed Assets currently in use are in good
operating condition, normal wear and tear excepted.
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(c) All licenses held by Seller are current and enforceable, and, upon
assignment to the Purchaser, will convey to the Purchaser all the rights set
forth therein.
Section 3.15. Leases. Seller enjoys peaceful and undisturbed possession
under all material leases under which it is operating as lessee and all such
leases are valid and subsisting and in full force and effect. Other than as
disclosed on Schedule 3.15 hereto, no consent of any lessor is required under
any such lease in order to keep such lease in full force and effect after the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
Section 3.16. Receivables. Schedule 1.1(b) hereto contains a complete
list of all receivables of Seller as of the date hereof, including accounts
receivable, notes receivable, insurance proceeds receivable, and taxes
receivable. All of the receivables either listed on Schedule 1.1(b) or set forth
or reflected in the July 15, 1999 Financial Statements were, as of the dates as
of which the information is given valid accounts receivable. Except as set forth
on Schedule 1.1(b), the Seller is not aware of any reason or circumstance
relating to such accounts receivable which would prevent the Purchaser from
collecting the full amount of the Purchased Receivables within 90 days after the
date hereof.
Section 3.17. Compliance with Laws. Seller has complied in all material
respects with all material federal, state, and local laws and regulations
applicable to its business, and the present uses by Seller of its properties and
the conduct by Seller of its business does not in any material respect violate
any such laws or regulations.
Section 3.18. Insurance. Seller currently maintains, with respect to
its properties and business, and with financially sound and reputable insurers,
the insurance that is set forth on Schedule 3.18 hereto.
Section 3.19. Intellectual Property.
(a) The Purchased Proprietary Rights include all proprietary rights (i)
necessary to conduct the business of the Seller as it is now conducted and is
proposed to be conducted, (ii) the failure to possess which would have a
material adverse effect on the business, financial condition or results of
operations of Seller (including without limitation inventions, patents, trade
secrets, technology, know-how, copyrights, trademarks, trade names, and any
rights to any of the foregoing) and (iii) necessary to carry on Seller's
business as now being conducted without conflict with valid proprietary rights
of others. Schedule 3.19 contains a complete list of all of the Purchased
Proprietary Rights.
(b) Seller wrote all of the content contained on any world wide web
site operated by Seller and either owns or possesses licenses to use, all
copyrightable material, trademarks, service marks and other intellectual
property contained on such web sites
(c) Except as sets forth in Schedule 3.19, Seller has not received any
notice of infringement or conflict with (and knows of no infringement with or
conflict with or potential claim
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of infringement or conflict with) asserted rights of others with respect to any
Purchased Proprietary Rights. No product or process of Seller infringes or
conflicts with any rights or copyright, trademark, or patent, or any discovery,
invention, product or process that is the subject of an outstanding patent,
patent application, trademark, trademark application, service mark, service mark
application or copyright.
(d) Seller has taken all adequate steps, and has in place and enforces
appropriate policies and procedures, to protect the Purchased Proprietary Rights
and all of its proprietary information. Seller has not disclosed any of its
proprietary information to third parties without appropriate restrictions on use
or disclosure thereof. As used herein, "proprietary information" means any
information that Seller considers confidential or secret material information of
Seller, including without limitation (whether verbal, written or embodied in any
other medium): all confidential business and marketing data and information of
Seller (including but not limited to customer lists, prospective customer lists,
invoices, confidential selling and profit information, special pricing and cost
information, finances, earnings, volume of business, outlets, methods, products
or services under development, information relating to Seller's business
contracts, marketing studies conducted by or for Seller, marketing strategies,
any other secret or confidential matter relating or pertaining to the products,
services, sales, or other business of Seller); all confidential technical data
and information of Seller (including but not limited to systems, practices,
plans, processes, procedures, drawings, databases, computer hardware, firmware,
and software whether in the form of object codes, source codes or otherwise,
inventions, improvements, manufacturing techniques or systems, formulas,
development or experimental work, work in process, and research data used by
Seller); all passwords, entry codes, access sequences, and the like; and all
other items of trade secret, trade knowledge, and trade know-how of Seller.
(e) Seller has taken adequate steps, and has in place and enforces
appropriate policies and procedures to protect any confidential information
disclosed to or obtained by Seller through confidential relationships with any
third parties, including without limitation (whether verbal, written or embodied
in any other medium): any Intellectual Property of a third party possessed by
Seller pursuant to a license or other arrangement; confidential data or
information submitted to Seller from time to time by a customer or a customer's
client; any confidential data or information regarding the business of a
customer or a customer's client learned in the course of providing services
and/or products to such customer or its client; and the identity of any third
party in a confidential relationship with Seller as the source of such data or
information.
(f) To Seller's knowledge, no person employed by or affiliated with
Seller 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 Seller.
Section 3.20. Sensitive Payments. Neither Seller nor anyone acting on
behalf of Seller, has made or received any "sensitive" payments. "Sensitive"
payments means, whether legal or illegal, (a) payments to or from government
officials or employees, (b) commercial bribes or kickbacks, (c) amounts paid
with an understanding that rebates or refunds will be made in contravention of
the
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laws of any jurisdiction, either directly or through a third party, (d)
political contributions, and (e) payments or commitments (whether made in the
form of commissions, payments of fees for goods or services received, or
otherwise) made with the understanding or under circumstances that would
indicate that all or part thereof is to be paid by the recipient to government
officials or employees or as a commercial bribe, influence payment or kick-back,
provided, however, that "sensitive" payments shall not include contributions to
political campaigns or organizations that are permissible under federal and
state election laws.
Section 3.21. Books and Records. All of Seller's operating data and
records, including without limitation customer lists and financial, accounting
and credit records (the "Company Records"), are accurate and complete in all
material respects and there are no material matters as to which appropriate
entries have not been made in the Company Records.
Section 3.22. Environmental Matters.
(a) To the knowledge of Seller, neither the real property or the
buildings, improvements, fixtures or equipment, forming a part of the real
property operated by Seller (the "Facilities"), is in violation of or the
subject of any investigations or inquiry or enforcement action by any
governmental authority for the recovery of environmental response costs or for
compliance with remedial obligations under any applicable law pertaining to
"Hazardous Substances" as the term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1990, as amended, as codified at 42
U.S.C. Section 9601 et seq. ("CERCLA"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq. ("RCRA"); any applicable state or local
governmental statutes, ordinances or regulations (referred to hereafter
collectively as "Environmental Laws").
(b) Seller has not transported, stored, treated or disposed of, nor has
it allowed or arranged for any third parties to transport, store, treat or
dispose of Hazardous Substances. Seller does not use and has not used any
Underground Storage Tanks. For the purposes of this Section 3.22(b),
"Underground Storage Tanks" shall have the meaning given it in RCRA.
Section 3.23. Labor Relations.
(a) A true and correct list of all of the employees of Seller is
attached hereto as Schedule 3.23. Seller is not a party to any contract with any
labor union.
(b) Seller has not, within the past 24 months, committed any act which
is discriminatory under Title VII of the Civil Rights Act, as amended, the Age
Discrimination in Employment Act, as amended, the Americans with Disabilities
Act of 1990, or the Pennsylvania Human Rights Act, as amended, and there is not
now pending or, to the best of Seller's knowledge, threatened any charge or
complaint against Seller by or with the Equal Employment Opportunity Commission
or any state agency with respect to any alleged discriminatory act.
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(c) Seller is in compliance with all federal and state laws and
regulations governing the compensation of employees.
Section 3.24. Employee Benefits.
(a) Schedule 3.24 lists all of Seller's pension, profit sharing,
retirement, bonus, incentive, supplemental unemployment benefit, severance,
deferred compensation, health and welfare, stock purchase, and any other
employee agreements, plans, programs, policies, and arrangements, whether
written or unwritten, whether or not funded, and whether or not terminated,
including, without limitation, all employee benefit plans, as defined by Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "Employee Benefit Plans").
(b) With respect to each Employee Benefit Plan, Seller has provided to
the Purchaser a complete copy, if applicable, of the plan document, the most
current summary plan description ("SPD"), the three most recently filed IRS
Forms 5500 and any Financial Statements attached thereto, the most recent IRS
determination letter, and copies of all nondiscrimination testing for the last
three (3) years. Further, Seller has delivered a true and complete copy of all
documents pertaining to employee agreements, programs, policies and
arrangements.
(c) Except with respect to any assumed liabilities that are
specifically contemplated in Section 2.2 of this Agreement, the consummation of
the transactions contemplated by this Agreement will not result in any
obligation or liability of the Purchaser to any current or former employee of
Seller (with respect to accrued benefits under any Employee Benefit Plan or
otherwise). No amendment to, termination of, or withdrawal from, any active,
inactive, or terminated Employee Benefit Plan at any time before or after the
Closing Date by Seller has or will subject Seller, the Purchaser, or assets of
Seller to any liability to any Employee Benefit Plan; to the Pension Benefit
Guaranty Corporation ("PBGC"), the Department of Labor ("DOL"), the Internal
Revenue Service ("IRS") or any other governmental entity; to any current or
former employee of Seller; or to any other person or party.
(d) With respect to each active, inactive, or terminated Employee
Benefit Plan, all contributions (including all employer contributions and
employee salary reduction contributions) and payments due from Seller as of the
Closing Date have been made as of the Closing Date, and all benefits accrued
under any unfunded Employee Benefit Plan have been paid, accrued, or otherwise
adequately reserved on the Financial Statements. Seller does not have any
current or projected liability in respect of pre-employment or post-retirement
health or medical or life insurance benefits for retired or former employees of
Seller.
(e) No active, inactive, or terminated Employee Benefit Plan or assets
of such Plans have been subject to any liability, contingent or otherwise, or
the imposition of a lien. No action, suit, proceeding, hearing, investigation,
audit or examination with respect to the administration or the investment of the
assets of any active, inactive, or terminated Employee Benefit Plan is pending
or threatened. Seller has no knowledge of any basis for any such action, suit,
proceeding, hearing, investigation, audit or examination.
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(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Seller that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the Code as a result of this transaction.
(g) With respect to any present or former employee of Seller, Seller
has not at any time (i) contributed to (or been obligated to contribute to) any
multi-employer plan (as defined in Section 4001 of ERISA) or (ii) been a party
to any collective bargaining agreement, nor has Seller ever been a member of a
controlled group of organizations, within the meaning of Sections 414(b), (c),
(m), or (o) of the Code. Further, there have never been any leased employees,
within the meaning of Section 414(n) of the Code, who perform services for
Seller.
(h) Seller has not at any time maintained or contributed to a defined
benefit pension plan (as defined in Section 3(35) of ERISA) or to any other
Employee Benefit Plan that is subject to Section 302 of ERISA or Section 412 of
the Code or Title IV of ERISA.
(i) Seller, its active, inactive and terminated Employee Benefit Plans,
and fiduciaries of such Employee Benefit Plans have complied in all respect with
ERISA, the Code and the regulations thereunder and all other applicable federal
or state statutes or regulations. Each Employee Benefit Plan intended to qualify
under Section 401(a) of the Code so qualifies and each trust forming a part of
any such Plan is exempt from taxation under Section 501 (a) of the Code. No
"reportable event" (within the meaning of Section 4043 of ERISA), nor any
"prohibited transaction" (within the meaning of Section 406 or 407 or ERISA or
Section 4975 of the Code), has occurred with respect to any Employee Benefit
Plan, and Seller has not incurred any liability for any tax imposed under
Section 4971 through 4980B of the Code or civil liability under Sections 502(i)
or (1) of ERISA.
(j) For notices and payments related to events occurring on, before, or
after the Closing Date, Seller shall be responsible for any notices required to
be given to employees pursuant to the Worker Adjustment and Retraining
Notification Act ("WARN"), the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), the Health Insurance Portability and Accountability Act of 1996
("HIPAA"), and Section 402(f) of the Code ("Rollover Notice"), and for any
payments or benefits required pursuant to such laws or on account of violation
of any requirement of such laws.
(k) Each Employee Benefit Plan may be amended or terminated by Seller
in any manner and at any time without the consent of any person covered by such
Plan and without any further liability for benefits that may be accrued or
expenses that may be incurred after the date of such termination or amendment,
other than benefits that may be required under the terms of such Plan or
benefits required under Part 6 of Title I of ERISA or Section 4980B of the Code.
Section 3.25. Year 2000. Seller believes that its products are Year
2000 Compliant, but Seller has taken no steps to determine whether its products
are Year 2000 Complaint or whether any of its hardware or software systems are
Year 2000 Compliant. Seller has not developed any contingency plans for the
operation of its business in the event that any of its systems which are mission
critical to the operation of Seller's business are not Year 2000 Compliant. For
the purposes
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of this Section 3.25, "Year 2000 Compliant" shall mean the ability of any of
Seller's systems to record, store, process, calculate and present calendar dates
falling on or after January 1, 2000 and the ability of any of Seller's systems
to calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as such
computer systems record, store, process, calculate and present calendar dates on
or before December 31, 1999.
Section 3.26. Necessary Consents. Except as set forth on Schedule
3.26, no third party has the right, by contract or otherwise, to approve or
disapprove of any of the transactions contemplated hereby, including, without
limitation, the assignment of any contract or agreement hereunder.
Section 3.27. Brokers' Commissions. No broker, finder, investment
banker or financial advisory firm, or any other person or entity is entitled to
receive any brokerage, finder's or other fee or commission or transaction fee as
a result of the execution of this Agreement or the consummation of any of the
transactions contemplated herein.
Section 3.28. Securities.
(a) All of the members of the Board of Directors of Seller represent,
are employed by, or are otherwise affiliated with, entities which are engaged in
the business of purchasing interests in or otherwise investing in securities of
entities such as Seller and Purchaser. Accordingly, Seller, either alone or
together with its purchaser representative(s), has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the prospective ownership of the Shares.
(b) Seller acknowledges that it has had an opportunity to ask questions
of and receive answers from Purchaser regarding the business properties,
prospects, and financial condition of the Purchaser and to obtain additional
information (to the extent the Purchaser possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to Seller or to which Seller had access.
Seller acknowledges that the acquisition of the Shares represents a speculative
investment, involving a high degree of risk. Seller acknowledges that it has had
sufficient opportunity to read and understand the Purchaser's Confidential
Private Placement Memorandum, dated as of August 11, 1999, prior to executing
this Agreement and consummating the transactions set forth herein.
(c) Seller acknowledges that Shares have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933 ("1933 Act")
or under state securities laws and that the Securities are being delivered and
sold pursuant to an exemption from registration under the 1933 Act and
applicable exemptions under state securities laws and agrees that the Shares
cannot be sold or otherwise transferred unless registered under federal and
state securities laws or unless an exemption from registration is available
under the federal and state securities laws and will bear a legend to that
effect to such effect:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(d) Seller represents that it is acquiring the Shares for its own
account, for investment, and not with a view to the transfer, resale or
distribution of all or of any part thereof, and Seller has no present intention
of selling, transferring, granting any participation in, or otherwise
distributing the Shares (either directly or to its shareholders).
(e) Seller has its principal office at the address specified in Section
8.6 of this Agreement, and will be the beneficial owner of the Shares standing
in its name.
(f) Seller acknowledges that certain other persons have been issued
rights to acquire the Common Stock of the Purchaser and that the Purchaser may
issue other such rights and may sell additional shares of its Common Stock and
Preferred Stock, as a result of which the ownership interest of Seller in the
Purchaser will be diluted.
Section 3.29. Accuracy of Information. No representation, statement or
information made or furnished by Seller to the Purchaser contained in this
Agreement and the various schedules attached hereto, nor any representation,
statement or information relating to material historical factual information
concerning Seller previously furnished by Seller to the Purchaser which is not
superseded by a similar representation or statement contained in this Agreement
and the various schedules attached hereto, contains any untrue statement of a
material fact or omits or shall omit any material fact necessary to make the
information contained therein, in light of the circumstances in which they were
made, not misleading.
Section 3.30. Disclosure. Seller is not aware of any fact relating to
the business, affairs, operation, condition or prospects of Seller that
materially adversely affects the same and that has not been set forth in this
agreement or otherwise disclosed in writing to the Purchaser in connection with
this transaction.
Section 3.31. Survival of Representations and Warranties.
Notwithstanding any investigation at any time made by or on behalf of the
Purchaser, the representations and warranties of Seller contained herein shall
survive the execution and delivery of this Agreement and the purchase of the
Purchased Assets.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce Seller to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Purchaser makes the
following representations and warranties:
Section 4.1. Organization; Power and Authority of the Purchaser. The
Purchaser is a corporation duly organized and validly existing under the laws of
the State of Delaware, with full corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
Section 4.2. Due Authorization; Binding Obligation. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and is a valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or violate any
provision of the certificate of incorporation or bylaws of the Purchaser, or of
any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against the
Purchaser; or (ii) result in any breach of or default under any mortgage,
contract, agreement, indenture, will, trust or other instrument which is either
binding upon or enforceable against the Purchaser.
Section 4.3. Brokers' Commissions. No broker, finder or investment
banker is entitled to receive any brokerage, finder's or other fee or commission
from the Purchaser as a result of the execution of this Agreement or the
consummation of any of the transactions contemplated herein.
Section 4.4. Authorized Stock. The Shares being sold and purchased
hereunder have been duly and validly authorized, will be validly issued, fully
paid and nonassessable after issuance and sale to Seller pursuant to this
Agreement and will be free of any liens or encumbrances (except for those
contemplated by this Agreement) created by or as the result of action by
Purchaser.
Section 4.5. Accuracy of Information. None of the information
concerning the Purchaser set forth in that certain Confidential Private
Placement Memorandum of the Purchaser dated August 11, 1999 contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the information contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE V
CLOSING AND CONDITIONS TO CLOSING
Section 5.1. Deliveries by Seller at Closing. At the Closing Seller
shall deliver copies of each of the following documents to Purchaser:
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(a) a certified copy of the resolutions of Seller's Board of Directors
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(b) a certified copy of the resolutions of the shareholders of Seller
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(c) a duly executed bill of sale for the Purchased Assets, a copy of
which is attached hereto as Exhibit B;
(d) the Stock Pledge Agreement (the "Pledge Agreement"), executed by
Seller, and stock powers duly executed in blank, appointing the Purchaser as
agent for Seller to transfer the Shares to the Purchaser pursuant to the terms
and conditions of the Pledge Agreement and this Agreement;
(e) duly executed Assignments of Registration for the trademarks;
(f) a duly executed Assignment for the patent application;
(g) a duly executed Assignment of the copyrights;
(h) duly executed assignments of the domain names
(i) a Certificate of Good Standing from Delaware and each state in
which Seller is registered to do business as a foreign corporation;
(j) an opinion of counsel from attorneys for Seller in a form
satisfactory to counsel for Purchaser;
(k) a duly executed and acknowledged Certificate of Amendment to the
Certificate of Incorporation of Purchaser and such other documents which may be
required to change the corporate name to a new name which does not incorporate
the name "Datamatix" or words similar thereto and which will not suggest,
directly or indirectly, that Seller retains any interest in Seller's Assets;
(l) the assents of the State of Connecticut and Fairfax County to the
assignment to Purchaser of their contracts with Seller or evidence satisfactory
to Purchaser that such parties have agreed to assign such contracts to Seller;
(n) a certificate from the Department of Revenue showing that all
Pennsylvania state tax reports have been filed and all state taxes, unemployment
compensation contributions paid to the date of the proposed transfer;
(o) an assignment and assumption agreement for the ChuRoad Associates
Lease; and
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(p) a release or assent from Ben Franklin Technology Center of
Southeastern Pennsylvania as to the transfer of the Purchased Assets from Seller
to Purchaser.
Section 5.4. Deliveries by Purchaser. At Closing, the Purchaser shall
deliver copies of each of the following documents:
(m) to Seller, a certified copy of the resolutions of Purchaser's Board
of Directors approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(n) to Seller, a certificate of Good Standing from the State of
Delaware;
(o) to Seller, a duly executed Pledge Agreement; and
(p) to the escrow agent under the Pledge Agreement, a duly executed
Stock Certificate for 329,632 shares which shall be issued in the name of the
Purchaser (the "Pledged Shares").
ARTICLE VI
CERTAIN ACTIONS AFTER THE CLOSING
Section 6.1. Purchaser to Act as Agent for Seller. This Agreement shall
not constitute an agreement to assign any claim, contract, license, lease,
commitment, sales order or purchase order if any attempted assignment of the
same without the consent of the other party thereto would constitute a breach
thereof or in any way affect the rights of Seller thereunder. If such consent is
not obtained or if any attempted assignment would be ineffective or would affect
Seller's rights thereunder so that the Purchaser would not in fact receive all
such rights, then, subject to the terms and conditions of Section 6.4 hereof,
the Purchaser shall act as the agent for Seller in order to obtain for the
Purchaser the benefits thereunder. In the event that the Purchaser is unable to
secure the consent of any lessor of a Purchased Leasehold Right to the
assignment of such rights to the Purchaser, Purchaser shall return the related
equipment in the same condition as of the date of Closing and thereafter Seller
shall resume liability for all payments due and owing pursuant to such lease.
Section 6.2. Novation/Assignment of Transferred Contracts;
Subcontracting.
(a) Upon Closing, the Purchaser shall initiate with the responsible
government or corporate officials the applicable documentation to novate or
assign to the Purchaser the contracts listed on Schedule 6.2 hereto (the
"Transferred Contracts"). The Seller shall provide all necessary support to the
Purchaser to facilitate the proposed novation or assignment.
(b) Both parties agree that until a novation or assignment is approved
by the contractual clients, and subject to the provisions of subsections 6.2(d)
and (e) below, the Purchaser shall perform all work under the Transferred
Contracts as an agent of or a subcontractor to Seller. Seller shall not
"mark-up" invoices of the Purchaser or add additional costs or fees in
processing the Purchaser's
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invoices for payment by the customer, except for previously approved reasonable
out-of-pocket expenses that Seller incurs and which Purchaser agrees to
reimburse to Seller upon receipt of invoice and supporting documentation.
(c) In the event a novation or assignment is not approved by the
client, the parties shall continue to perform in accordance with paragraph (b)
above, until the Transferred Contracts expire.
(d) To the extent permitted prior to contract novation or assignment,
operational management of each Transferred Contract shall transfer to the
Purchaser concurrent with the Closing. Operational management includes, but is
not limited to: the Purchaser performing the duties of interfacing with clients;
managing the development and submission of deliverables, reports, and invoices;
preparing and negotiating task plans; and assignment of staff.
(e) Responsibility for all matters related to performance of each
Transferred Contract prior to the Closing shall permanently remain with Seller.
Section 6.3. Delivery of Property Received by Seller After Closing.
From and after the Closing the Purchaser shall have the right and authority to
collect, for the account of the Purchaser, all Purchased Receivables and other
items which shall be transferred or are intended to be transferred to Purchaser
as part of the Purchased Assets as provided in this Agreement, and to endorse
with the name of Seller any checks or drafts received on account of any such
receivables or other items of the Purchased Assets. Seller hereby agrees that it
will transfer or deliver to the Purchaser, promptly after the receipt thereof,
any cash or other property which Seller receives after the date hereof in
respect of any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items transferred or
intended to be transferred to Purchaser as part of the Purchased Assets under
this Agreement.
Section 6.4. Purchaser Appointed Attorney for Seller. Effective as of
the date hereof Seller hereby constitutes and appoints the Purchaser, its
successors and assigns, the true and lawful attorney of Seller in the name of
either the Purchaser or Seller (as the Purchaser shall determine in its sole
discretion) but for the benefit and at the expense of the Purchaser (except as
otherwise herein provided), (i) to institute and prosecute all proceedings which
the Purchaser may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in or to the Purchased Assets as provided for in this
Agreement; (ii) to defend or compromise any and all actions, suits or
proceedings in respect of any of the Purchased Assets, and to do all such acts
and things in relation thereto as the Purchaser shall deem advisable; and (iii)
to take all action which the Purchaser may reasonably deem proper in order to
provide for the Purchaser the benefits under any of the Purchased Assets where
any required consent of another party to the sale or assignment thereof to the
Purchaser pursuant to this Agreement shall not have been obtained. Seller hereby
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. The Purchaser shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
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Section 6.5. Execution of Further Documents. From and after the
Closing, upon the reasonable request of the Purchaser, Seller shall execute,
acknowledge and deliver all such further acts, deeds, bills of sale,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required to convey and transfer to and vest in the Purchaser and
protect its right, title and interest in all of the Purchased Assets, and as may
be appropriate otherwise to carry out the transactions contemplated by this
Agreement.
Section 6.6. Proprietary Information. Seller recognizes and
acknowledges that it or he has received, developed, or otherwise acquired
Proprietary Information, as defined herein. Except as authorized by the
Purchaser, Seller agrees to hold in strict confidence and not to disclose to any
third party or use for its own benefit or for the benefit of any other party,
directly or indirectly, any Proprietary Information of Seller whether verbal,
written, or in any other medium. For purposes of this agreement, Proprietary
Information shall mean any corporate, technical, business or financial
information of Seller which is of a secret or confidential nature, including,
without limitation, any inventions, ideas, technical data, devices, methods,
strategies or tactics employed on behalf of clients, improvements, products,
product specifications, services, processes, procedures, formulae, tools,
machinery, apparatus, prices, proposals, bid rates, discounts, manufacturing
costs, computer and information systems (including software, which shall
encompass, without limitation, source code, object code, documentation, diagrams
and flow charts), unpublished works of any nature (whether or not
copyrightable), future plans, policies, and all other information and knowledge
in whatever form used in management, engineering, manufacturing, marketing,
purchasing, finance, operations, or otherwise, concerning the business of
Seller. The restrictions herein shall not apply to any information that is or
later falls within the public domain, provided that Seller was not responsible
for such information entering the public domain.
Section 6.7. Covenant Not-to-Compete. In consideration of the
Purchasers consummating the transactions set forth in this Agreement, Seller
hereby agrees that for a period of two (2) years after the date hereof, it will
not (without the affirmative resolution of the Board of Directors or the
President of the Purchaser) personally or through any business (as an owner, or
as director, officer, employee or in any other capacity calling for the
rendition of acts of management or control) engage in any business in
competition with the business of Seller as of the date hereof.
Section 6.8. Injunctive Relief; Reformation.
(a) Seller recognizes that a breach by it, its agents, or employees of
the provisions of Section 6.6 or 6.7 hereof would cause the Purchaser
irreparable injury and damage which cannot be reasonably or adequately
compensated by damages at law. Seller, therefore, expressly agrees that the
Purchaser shall be entitled to injunctive and/or other equitable relief to
prevent a breach of such sections in addition to any other remedies legally
available to it. No bond or other security shall be required in obtaining such
equitable relief, and Seller hereby consents to the issuance of such injunction
and to the ordering of specific performance.
(b) In the event that any of the provisions of Sections 6.6 or 6.7
should ever be deemed to exceed the temporal, geographic or occupational
limitations permitted by applicable laws, then
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such provision(s) shall be and hereby are reformed to the maximum temporal,
geographic or occupational limitations permitted by law.
Section 6.9 . Termination of Employee Benefit Plans. Except with
respect to any Employee Benefit Plan that is expressly assumed by the Purchaser
as an Assumed Liability under Section 2.2 of this Agreement, the Seller shall
terminate all Employee Benefits Plans as soon as possible, but no later than
December 31, 1999, in accordance with all oral and written contract terms and
all laws, rules, and regulations, including, without limitation, ERISA and the
Code.
Section 6.10. Access to Records. Seller shall provide Purchaser with
unrestricted access to and/or copies of all of accounting and other business
records of Seller necessary for Seller to wind up its affairs.
Section 6.11. Process Bank Loan. Seller and Purchaser are entering into
an Assignment, Assumption and Amendment Agreement with Progress Bank
("Progress"), under which Seller is assigning to Purchaser all of its rights,
title and interests in and to the Business Loan Agreement, dated February 18,
1998, between Seller and Progress (the "Progress Loan Agreement") and its
related line of credit with Progress (the "Progress Loan"), Purchaser is
agreeing to assume all of the payment, performance and other obligations of
Seller thereunder and Progress is consenting to the transactions contemplated by
this Agreement. Purchaser agrees that (i) on or before October 31, 1999,
Purchaser shall either (a) pay the Progress Loan in full or (b) use its best
efforts to cause Seller, without any payment or posting of collateral by Seller,
to be released from any and all obligations under the Progress Loan Agreement;
and (ii) it will not agree to or enter into any agreement or amendment to the
Progress Loan Agreement which could be interpreted to impose upon or have the
effect of imposing upon Seller any additional obligation or duty (payment or
otherwise) with respect to the Progress Loan unless as part of such agreement or
amendment Seller is released in full from any and all obligations it may have
under the Progress Loan Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Survival. All representations, warranties and covenants
contained in this Agreement, including those contained in the exhibits,
schedules and other documents delivered pursuant to this Agreement, shall
survive the execution and delivery of this Agreement.
Section 7.2. Agreement by Seller to Indemnify.
(a) Seller shall indemnify, defend and hold the Purchaser harmless in
respect of the aggregate of all Indemnifiable Damages of the Purchaser. For the
purposes of this Section 7.2, "Indemnifiable Damages" means the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including
related counsel fees and expenses) incurred or suffered by the Purchaser
resulting from (i) any inaccurate representation or warranty made by Seller in
or pursuant to Article III hereof, (ii) any default in the performance of any of
the covenants or agreements made by Seller in this Agreement, (iii) the failure
of Seller to pay, discharge or perform any liability or
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obligation of Seller which is not expressly assumed by the Purchaser pursuant to
this Agreement or resulting from any dispute concerning any such liability or
obligation, (iv) any act or failure to act of Seller prior to the date hereof,
(v) any violation of the 1933 Act or applicable state securities laws as a
result of any sale or distribution by Seller in violation of the 1933 Act or any
state securities laws, (vi) any liability arising under any Employee Benefit
Plan, (vii) any inability of Purchaser to collect at least fifty percent (50%)
of the accounts receivable listed on Schedule 1.1(b) within sixty (60) days
after the date of this Agreement, or (viii) any claims that may be asserted
against Purchaser under bulk sales law provisions, including but not limited to
taxes imposed under 72 P.S. Section 1403 and 69 P.S. Section 529. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, the Purchaser shall have the right to be put in the same
financial position as it would have been in had each of the representations and
warranties of Seller been true and correct, had each of the covenants of the
Seller been performed in full, or if no claim had been filed.
(b) In the even that any software developed by Seller is not Year 2000
Compliant and such failure to be Year 2000 Compliant renders such software
incapable of performing any material function, Seller agrees to indemnify
Purchaser for such losses, costs and damages (including lost revenue) incurred
or suffered by Purchaser as a result of such failure; provided however, that the
maximum amount of losses, costs and damages to be paid by Seller pursuant to
this Section 7.2(b) shall not exceed $250,000.
Section 7.3. Agreements by the Purchaser to Indemnify. The Purchaser
agrees to indemnify and hold Seller harmless in respect of the aggregate of all
Indemnifiable Damages of Seller. For the purposes of this Section 7.3,
"Indemnifiable Damages" of Seller means the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including related counsel fees and
expenses) incurred or suffered by Seller resulting from any inaccurate
representation or warranty made by the Purchaser in Article IV hereof or
resulting from any default in the performance of any of the covenants or
agreements made by the Purchaser in this Agreement. Without limiting the
generality of the foregoing, with respect to the measurement of Indemnifiable
Damages, Seller shall have the right to be put in the same financial position as
it or he would have been in had each of the representations and warranties of
the Purchaser been true and correct and had each of the covenants of the
Purchaser been performed in full.
Section 7.4. Limitations on Indemnification. Buyer shall not be
required to make any payment for Indemnifiable Damages unless the amount of
damages suffered by Seller, together with all claims asserted therewith or
previously asserted under this Section 7 by Seller, shall exceed $20,000 (the
"Basket Amount"). Notwithstanding the preceding sentence, in the event Purchaser
is entitled to indemnification pursuant to Section 7.2 hereof and the Assumed
Liabilities plus the Basket Amount would collectively exceed $800,000, then the
Basket Amount available to Purchaser shall be reduced to an amount equal to
$800,000 minus the amount of the Assumed Liabilities. In the event that either
Purchaser or Seller is able to completely satisfy any Assumed Liability
outstanding as of the date hereof for an amount less than the stated amount of
such Assumed Liability as of the date hereof, then, solely for the purposes of
calculation of the amount of the Basket Amount pursuant to this Section 7.4, the
total amount of Assumed Liabilities shall be reduced proportionately.
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Section 7.5. Remedies.
(a) Each party agrees to use its best efforts to provide prompt written
notice to the other of each claim for Indemnifiable Damages which it believes it
has suffered; provided, however, that no delay in the giving of such notice
which does not effect the defense or amount of Indemnifiable Damages shall
affect the rights of the Indemnified Party to recover Indemnifiable Damages
hereunder.
(b) In the event of any claim or demand asserted against the
indemnified party by a third party upon which the indemnified party may claim
indemnification, the indemnifying party shall give written notice to the
indemnified party within 15 days after receipt of notice from the indemnified
party indicating whether the indemnifying party intends to assume the defense of
such claim or demand. Notwithstanding such assumption, the indemnified party
shall have the right to participate in such defense, by written notice given tot
he indemnifying party within 15 days from the date of the indemnifying party's
notice, provided that such participation shall be at the expense of the
indemnified party unless there is a conflict of interest between the indemnified
party of the indemnifying party, in which case the cost of such participation
(including attorney's fees for counsel selected by the indemnified party) shall
be reimbursed by the indemnifying party. If the indemnifying party assumes the
defense and the indemnified party elects not to participate, the indemnifying
party shall have the right fully to control and to settle the proceeding. If the
indemnified party elects to participate in such defense, the parties shall
cooperate in the defense o f the proceeding and shall not settle the same
without the consent of each, which consent shall not be unreasonably withheld or
delayed. If the indemnifying party elects not to assume the defense, the
indemnified party shall have the right to do so (at the expense of the
indemnifying party);provided, however, that the indemnified party may not settle
the same without the consent of the indemnifying party, which consent shall not
be unreasonably withheld or delayed.
(c) In the event Purchaser is entitled to any Indemnifiable Damages or
damages pursuant to, Section 7.2(b) hereof (collectively "Damages"), Purchaser
shall first look to the Pledged Shares for payment of any such Damages. For the
purposes of this Agreement, "Pledged Shares" shall mean those shares which are
subject to that certain Stock Pledge Agreement to be executed at the Closing.
The number of shares to be returned to the Purchaser as payment of such Damages
shall be determined by dividing the amount of such Damages by the value of one
share of the common stock of the Purchaser as of the date of payment of such
Damages. In the event that, at any time, there does not remain subject to the
Pledge Agreement such number of Pledged Shares having a Value equal to or
greater than the amount of any Indemnifiable Damages owed to Purchaser by Seller
then the Purchaser shall have the right to proceed against Seller for such
Indemnifiable Damages in excess of the Pledged Shares.
23
<PAGE> 24
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Amendment and Modification. The parties hereto may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
Section 8.2. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and legal representatives.
Section 8.3. Entire Agreement. This instrument and the exhibits and
schedules attached hereto contain the entire agreement of the parties hereto
with respect to the purchase of the Purchased Assets and the other transactions
contemplated herein, and supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof. Any reference herein to
this Agreement shall be deemed to include the schedules and exhibits attached
hereto.
Section 8.4. Headings. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Section 8.5. Execution in Counterpart. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original.
Section 8.6. Notices. Any notice, request, information or other
document to be given hereunder to any of the parties by any other party shall be
in writing and delivered personally or sent by prepaid overnight express
courier, addressed as follows:
If to Seller, to it at: 215 West Church Road
King of Prussia, PA 19406
Attn: William Browne
with a copy to: Obermayer Rebmann Maxwell & Hippel LLP
One Penn Center, 1617 JFK Boulevard
Philadelphia, PA 19103
Attn: John Ehlinger, Esq.
If to Purchaser, to it at: 11180 Sunrise Valley Drive
Reston, Virginia 20191
Attn: Tony Bansal
with a copy to: Koltun & King, P.C.
1615 L Street, N. W., Suite 400
Washington, D.C. 20036
Attn: Susan J. King, Esq.
24
<PAGE> 25
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the date it is so delivered, and any notice delivered by overnight
courier shall be deemed to have been given on the date it is received.
Section 8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia applicable
to contracts made and to be performed therein.
Section 8.8. Further Representations. Each party acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement and is not relying on any
representations or statements made by the other party as to such tax
consequences.
[signatures on next page]
25
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DIGITAL COMMERCE CORPORATION DATAMATIX, INC.
/s/ Tony Bansal /s/ William A. Browne
- ----------------------------- ------------------------------------
Tony Bansal, President William A. Browne, Vice President
26
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DIGITAL COMMERCE CORPORATION
Digital Commerce Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby certify
as follows:
FIRST: The name of the Corporation is Digital Commerce Corporation. The
Corporation was originally incorporated under the name International Market
Exchange Corporation.
SECOND: The date of filing of the Corporation's original Certificate of
Incorporation was June 5, 1995.
THIRD: This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law by the Board of Directors and stockholders of
the Corporation. This Amended and Restated Certificate of Incorporation was
approved by the written consent of the holders of a majority of the outstanding
stock of the Corporation entitled to vote on the matter in accordance with
Section 228 of the Delaware General Corporation Law.
FOURTH: The text of this Amended and Restated Certificate of
Incorporation is amended and restated in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is Digital Commerce Corporation (the
"Corporation").
ARTICLE II
PURPOSE
The purpose for which the Corporation is organized 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.
ARTICLE III
CAPITAL
SECTION 3.1 AUTHORIZATION. The aggregate number of shares which the
Corporation will have authority to issue is two hundred fifty million
(250,000,000) shares of which two hundred million (200,000,000) will be shares
of common stock, par value $0.01 per share ("Common Stock"), and fifty million
(50,000,000) will be shares of preferred stock, par value $0.01 per share
("Preferred Stock").
SECTION 3.2 DESIGNATIONS. Shares of Preferred Stock may be issued from
time to time in one or more series, each of which is to have a distinctive
serial designation as determined in the resolution or resolutions of the Board
of Directors providing for the issuance of such Preferred Stock from time to
time.
SECTION 3.3 RIGHTS AND PREFERENCES. Each series of Preferred Stock:
(a) may consist of such number of shares;
(b) may have such voting powers;
(c) may be subject to redemption at such time or times and at
such price;
<PAGE> 2
(d) may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates or upon such
conditions, from such date or dates, at such times and payable in
preference to, or in such relation to, the dividends payable on any
other class or series of stock of the Corporation;
(e) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation;
(f) may be made convertible into, or exchangeable for, shares
of any other class or series of stock of the Corporation at such price
or prices or at such rates of exchange, and with adjustments;
(g) may be entitled to the benefit of a sinking fund or
purchase fund to be applied to the purchase or redemption of shares of
such series in such amount or amounts;
(h) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or
any subsidiary, upon the issuance of any additional class or series of
stock of the Corporation (including additional shares of such series)
and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the
Corporation of any class or series of stock of the Corporation; and
(i) may have such other relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof;
as in such instance is stated in the resolution or resolutions of the Board of
Directors providing for the issuance of such series of Preferred Stock. Except
where otherwise set forth in such resolution or resolutions, the number of
shares comprising such series of Preferred Stock may be increased or decreased
(but not below the number of shares then outstanding) from time to time by like
action of the Board of Directors.
SECTION 3.4 STATUS OF REDEEMED, PURCHASED OR CONVERTED SHARES OF
PREFERRED STOCK. Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise) or
purchased by the Corporation, or which, if convertible or exchangeable, have
been converted into or exchanged for shares of stock of any other class or
series of stock of the Corporation will, after the filing of a proper
certificate with the Delaware Secretary of State, have the status of authorized
but unissued shares of Preferred Stock and may be reissued as a part of the
series of which they were originally a part or may be reclassified and reissued
as part of a new series of Preferred Stock created by resolution or resolutions
of the Board of Directors or as part of any other series of Preferred Stock, all
subject to (a) the conditions or restrictions on issuance set forth in any
resolution or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock and to (b) any filing required by law.
SECTION 3.5 RIGHTS OF COMMON STOCK.
(a) Except as otherwise provided by law or by the resolution
or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock, Common Stock will have the
exclusive right to vote for the election of directors and for all other
purposes. Each holder of Common Stock will be entitled to one vote for
each share of Common Stock held.
(b) Except as otherwise provided by law or by the resolution
or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock, the holders of Common Stock
will be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, dividends payable
in cash, in stock or otherwise.
<PAGE> 3
(c) Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, after payment or
provision for the payment of the obligations of Corporation, the
remaining assets of the Corporation will, subject to the rights, if
any, of the holders of Preferred Stock, be distributed pro rata to the
holders of Common Stock in accordance with their respective rights and
interests.
ARTICLE IV
DIRECTORS
SECTION 4.1 MANAGEMENT OF CORPORATION. The management of the business
and the conduct of the affairs of the Corporation shall be vested in its Board
of Directors.
SECTION 4.2 DIRECTORS. In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized:
(a) to fix, determine and vary from time to time the amount to
be maintained as surplus and the amount or amounts to be set apart as
working capital; and
(b) except as otherwise provided by law, to designate by
resolution or resolutions one or more committees, each committee to
consist of one or more of the directors of the Corporation, which, to
the extent provided in said resolution or resolutions or in the Bylaws
of the Corporation, shall have and may exercise the power of the Board
of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers on which the Corporation desires to place a seal.
Such committee or committees shall have such name or names as may be
stated in the Bylaws of the Corporation or as may be determined from
time to time by resolutions adopted by the Board of Directors.
SECTION 4.3 NUMBER, ELECTION AND TERMS OF DIRECTORS. Subject to the
rights of the holders of any class or series of capital stock of the Corporation
to elect additional directors under specified circumstances, the number of
directors which shall constitute the whole Board of Directors of the Corporation
shall be no less than three (3) directors. Subject to any contractual
restrictions agreed to by the Corporation, the number of directors which shall
constitute the whole Board of Directors may be increased or (subject to the
immediately preceding sentence) decreased by one or more resolutions adopted by
the Board of Directors. The directors, other than those who may be elected by
the holders of any class or series of capital stock of the Corporation under
specified circumstances, shall be divided into three classes, Class I, Class II
and Class III, each class to consist of an equal number of directors (or as
nearly equal as is practicable). Except as hereinafter noted, each director
shall serve for a term ending on the third annual meeting following the annual
meeting at which such director was elected; provided, however, that the
directors first elected to Class I shall serve for a term expiring at the annual
meeting next following the end of the calendar year 2000, the directors first
elected to Class II shall serve for a term expiring at the annual meeting next
following the end of the calendar year 2001, and the directors first elected to
Class III shall serve for a term expiring at the annual meeting next following
the end of the calendar year 2002. Each director shall hold office until the
annual meeting at which such director's term expires and, the foregoing
notwithstanding, shall serve until such director's successor shall have been
duly elected and qualifies, unless such director shall resign, become
disqualified, disabled or shall otherwise be removed. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
The initial Board of Directors following the filing of this Amended and
Restated Certificate of Incorporation, and the respective classes in which they
will serve, are as follows: Thomas J. Cirrito (Class I), William H. Seippel
(Class II), Tony Bansal and Dr. John M. Poindexter (Class III).
Any director chosen to fill a vacancy created by the death, resignation
or removal of a director shall be of the same class as the predecessor director,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall designate one or more director whose
term then expires as a director of another class in order more nearly to achieve
equality of number of directors among the classes.
<PAGE> 4
Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide. Cumulative voting of shares of any capital
stock having voting rights is prohibited.
SECTION 4.4 REMOVAL OF DIRECTORS. Except with respect to the rights of
the holders of any class or series of capital stock of the Corporation to remove
directors, no director of the Corporation shall be removed from office as a
director by vote or other action of stockholders except for cause. Except as may
otherwise be provided by law, cause for removal of a director shall be deemed to
exist only if: (a) the director whose removal is proposed has been convicted, or
where a director is granted immunity to testify where another has been
convicted, of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (b) such director has been found by the
affirmative vote of at least a majority of the entire Board of Directors at any
regular or special meeting of the Board of Directors called for that purpose or
by a court of competent jurisdiction to have been grossly negligent or guilty of
misconduct in the performance of his duties to the Corporation in a matter of
substantial importance to the Corporation; or (c) such director has been
adjudicated by a court of competent jurisdiction to be mentally incompetent,
which mental incompetency directly affects his ability to serve as a director of
the Corporation.
SECTION 4.5 VACANCIES. Subject to the rights of the holders of any
class or series of capital stock of the Corporation, vacancies and newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal or other cause shall, unless otherwise
provided by law, be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors and not by stockholders. Any director elected in accordance with
the preceding sentence shall hold office for (i) (in the case of a vacancy
resulting from death, resignation, retirement, disqualification, removal or
other cause) the remainder of the full term of the predecessor director and (ii)
(in the case of a newly created directorship) the class of directors in which
the new directorship was created, and (in each case) until such director's
successor shall have been elected and qualifies.
ARTICLE V
STOCKHOLDER MEETINGS
SECTION 5.1 SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights of the holders of any class or series of capital stock of
the Corporation which provide the ability to call special meetings, special
meetings of stockholders of the Corporation may be called only (a) by the Board
of Directors of the Corporation pursuant to a resolution approved by a majority
of the total number of authorized directors, or (b) by the holders of shares
entitled to cast not less than a majority of the votes at the meeting.
SECTION 5.2 NOTICE. Advance notice of nominations for the election of
directors, of business to be brought before any meeting of the stockholders of
the Corporation or of business which is to be subject of a written consent of
stockholders shall be given in the manner provided in the Bylaws of the
Corporation.
SECTION 5.3 ACTION BY WRITTEN CONSENT. From the time and so long as the
Corporation is subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), no action
required to be taken or that may be taken at any annual or special meeting of
the stockholders of the Corporation may be taken without a meeting, and the
power of stockholders to consent in writing to the taking of any action by
written consent is expressly denied, except for action by unanimous written
consent, which is expressly allowed.
<PAGE> 5
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the registered office of the Corporation is 1209
Orange Street, New Castle County, Wilmington, Delaware, 19801, and the name of
its registered agent at such address is The Corporation Trust Company.
ARTICLE VII
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent exculpation from liability is not permitted under
the Delaware General Corporation Law. 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
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this Article VII by the stockholders of the Corporation shall not adversely
affect any right of protection of a director of the Corporation existing at the
time of such repeal or modification.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 GENERAL. The indemnification provided by this Article VIII
shall not be deemed exclusive of any other rights which may be provided now or
in the future under any provision of the Bylaws currently in effect or hereafter
adopted, by any agreement, by vote of stockholders, by resolution of
disinterested directors, by provision of law, or otherwise. Any repeal or
modification of this Article VIII shall be prospective and shall not affect any
rights under this Article VIII in effect at the time of the alleged occurrence
of any act or omission giving rise to liability or indemnification.
SECTION 8.2 THIRD PARTY PROCEEDINGS. The Corporation shall indemnify
any director or officer of the Corporation (an "Indemnified Party") who is or
was 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 (a) the fact that the Indemnified Party is or was a director, officer,
employee or agent of the Corporation, (b) the fact that the Indemnified Party is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or (c) any action or inaction by the Indemnified Party while
acting as such a director, officer, employee or agent, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnified Party in connection with such
action, suit or proceeding to the maximum extent permitted by the Delaware
General Corporation Law. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Party did not (i) act in good faith and in a manner which he or she 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 or her conduct was unlawful or (ii) in accordance with any
other standard required by the Delaware General Corporation Law.
SECTION 8.3 PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify an Indemnified Party if such Indemnified Party 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 (a) the fact that the Indemnified Party is or
was a director, officer, employee or agent of the Corporation, (b) the fact that
the Indemnified Party is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or (c) any action or inaction by the
Indemnified Party while acting as such a director, officer, employee or agent,
against expenses (including attorneys' fees) actually and reasonably incurred by
the Indemnified Party in connection with the defense or settlement of such
action or suit to the maximum extent permitted by the Delaware General
Corporation Law, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnified Party shall have been adjudged to
be liable to the Corporation unless and only to the extent permitted by Section
8.4
<PAGE> 6
below or if the Court of Chancery of the State of Delaware, or the court in
which such action or suit was brought, shall determine upon application that,
despite the adjudication of liability and in view of all the circumstances of
the case, the Indemnified Party is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery of the State of Delaware or such
other court shall deem proper.
SECTION 8.4 MANDATORY PAYMENT OF EXPENSES. The Corporation shall
indemnify the Indemnified Party against and advance to such Indemnified Party
expenses (including attorneys' fees) and any costs of settlement actually and
reasonably incurred by the Indemnified Party in defense of any action, suit or
proceeding referred to in Sections 8.2 and 8.3 of this Article VIII or in
defense of any claim, issue or matter therein or any portion thereof. Expenses
(including, without limitation, attorneys' fees) incurred by an Indemnified
Party in defending any civil, criminal, administrative or investigative action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of any undertaking
by or on behalf of such Indemnified Party to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation as permitted by law.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
SECTION 9.1 AMENDMENT BY THE CORPORATION. The Corporation reserves the
right, subject to any express provisions or restrictions contained in this
Amended and Restated Certificate of Incorporation, from time to time to amend
this Amended and Restated Certificate of Incorporation or any provision thereof
in any manner now or hereafter provided by law.
SECTION 9.2 AMENDMENT BY STOCKHOLDERS. Notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation or the
Bylaws (and in addition to any other vote that may be required by law, this
Amended and Restated Certificate of Incorporation or the Bylaws), there shall be
required to amend, alter, change or repeal, directly or indirectly, the
provisions of this Article IX and/or the provisions of Articles IV, V, VII, VIII
and X of this Amended and Restated Certificate of Incorporation, the affirmative
vote of at least seventy-five percent (75%) of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled to
vote.
ARTICLE X
BYLAWS
Except as set forth in the immediately following sentence, the Bylaws
may only be altered or amended and new Bylaws may only be adopted by the
affirmative vote of at least seventy-five (75%) of the voting power of all of
the then-outstanding shares of the capital stock of the Corporation entitled to
vote. The Board of Directors shall have the power to adopt, amend, or repeal the
Bylaws.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed by its President and attested by its Secretary
as of the 13th day of March, 2000.
DIGITAL COMMERCE CORPORATION
By: /s/ Tony Bansal
------------------------------
Tony Bansal, President
Attest:
By: /s/ William H. Seippel
-----------------------------
William H. Seippel, Secretary
<PAGE> 7
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF PREFERRED STOCK
OF
DIGITAL COMMERCE CORPORATION
* * *
DIGITAL COMMERCE CORPORATION, a corporation duly organized and validly
existing under the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
FIRST: That, at a meeting of the Board of Directors of the Company,
resolutions were duly adopted providing for the designations, references and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of the Preferred Stock of the Company,
which resolution is as follows:
RESOLVED, of the 10,000,000 authorized shares of Preferred Stock of
the Company, 1,500,000 shares shall be designated Series A Preferred Stock, par
value $0.01 per share. The following is a statement of the designations and the
powers, privileges and rights, and the qualifications, limitations and
restrictions thereof in respect of the Series A Preferred Stock of the Company.
A. SERIES A PREFERRED STOCK
Certain capitalized terms used in this Section A are defined in
subdivision II, part 3 of this Section.
I. Terms Applicable to the Series A Preferred Stock.
Part 1. Dividends.
1A. General Obligation. When and as declared by the Company's board of
directors and to the extent permitted under the General Corporation
Law of Delaware, the Company will pay preferential dividends to the
holders of the Series A Preferred Stock as provided in this part 1.
Dividends on each share of Series A Preferred Stock will accrue
1
<PAGE> 8
cumulatively on a daily basis at the rate of 11.25% per annum on the
liquidation preference of $10.00 per share, which dividend will be
paid semi_annually on June 30 and December 31 of each year commencing
on the first of such dates to occur after the date of issuance. Such
dividends will accrue from the date of issuance of the Series A
Preferred Stock whether or not such dividends have been declared and
whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. The date on
which the Company initially issues any share of Series A Preferred
Stock will be deemed to be its "date of issuance" regardless of the
number of times transfer of any such share of Series A Preferred Stock
is made on the stock records maintained by or for the Company and
regardless of the number of certificates which may be issued to
evidence any such share of Series A Preferred Stock. No dividends will
be paid, declared or set apart with respect to the Common Stock unless
all accrued but unpaid dividends on Series A Preferred Stock shall
have been paid. Upon liquidation, dissolution or winding up of the
Company, the holders of Series A Preferred Stock shall be entitled to
receive, out of the assets of the Company, an amount equal to the
liquidation preference of the Series A Preferred Stock (described in
part 2 below) plus all unpaid and accumulated dividends thereon,
before any payment may be made to holders of the Common Stock.
1B. Distribution of Partial Dividend. If at any time the Company pays less
than the total amount of dividends then accrued with respect to the Series A
Preferred Stock, such payment will be distributed ratably among the holders
of the Series A Preferred Stock based upon the aggregate accrued but unpaid
dividends on the shares of Series A Preferred Stock held by each such
holder.
Part 2. Liquidation.
Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary ("Liquidation"), the holders of shaves of
Series A Preferred Stock and any class or series of stock ranking or
liquidation on a parity with the Series A Preferred Stock shall be entitled,
before any distribution or payment is made upon any stock ranking on
liquidation junior to the Series A Preferred Stock, to be paid an amount equal
to $10.00 per share, plus, in the case of each share, an amount equal to all
other dividends declared but unpaid thereon, computed to the date payment
thereof is made available, and the holders of Series A Preferred Stock shall
not be entitled to any further payment, such amount payable with respect to one
share of Series A Preferred Stock being sometimes referred to as the
"Liquidation Payment" and with respect to all shares of Series A Preferred
Stock being sometimes referred to as the "Liquidation Payments." If upon any
such liquidation, dissolution or winding up of the Company, the remaining
assets of the Company available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Preferred Stock the full amount to
which they shall be entitled, the holders of shares of Series A Preferred Stock
and any class or series of stock ranking on liquidation on a parity with the
Series A Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Company in proportion to the respective
amounts which would otherwise be payable
2
<PAGE> 9
in respect of the shares held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full. Upon any such
Liquidation, after the holders of Preferred Stock shall have been paid in full
the amounts to which they shall be entitled, the remaining net assets of the
Company may be distributed to the holders of stock ranking on liquidation
junior to the Preferred Stock. If, upon any Liquidation, the Company's assets
to be distributed among the holders of the Series A Preferred Stock are
insufficient to permit payment to such holders of the full amount to which they
are entitled hereunder, then the entire amount of assets to be distributed
among the holders of the Series A Preferred Stock will be distributed ratably
among such holders of Series A Preferred Stock. The Company will mail written
notice of any Liquidation not later than 30 days prior to the payment date
stated therein, to each record holder of Series A Preferred Stock. Neither the
consolidation or merger of the Company into or with any other corporation or
corporations, nor the sale or transfer by the Company of all or any part of its
assets, nor the reduction of the capital stock of the Company, will be deemed
to be a Liquidation for purposes of this part 2.
Part 3. Voting Rights.
The Series A Preferred Stock will have no voting rights or powers;
provided, however, that the Company will not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock without the written consent
of the holders of a majority of the then outstanding shares of Series A
Preferred Stock, consenting as a class. For this purpose, the increase in the
number of authorized shares of Series A Preferred Stock or the authorization or
issuance of any series of Preferred Stock with preference or priority over the
Series A Preferred Stock as to the right to receive either dividends or amounts
distributable upon Liquidation of the Company shall not be deemed to affect
adversely the Series A Preferred Stock.
Part 4. Conversion of Series A Preferred Stock. The holders of shares of
Series A Preferred Stock shall have the following conversion rights:
4A. Right to Convert. Subject to the terms and conditions of this part 4,
the holder of any share or shares of Series A Preferred Stock shall
have the right at its option at any time, to convert such shares of
Series A Preferred Stock (except that, upon any Liquidation of the
Company, the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount
distributable on the Series A Preferred Stock) into such number of
fully paid and nonassessable shares of Common Stock as is obtained by
(i) multiplying the number of shares of Series A Preferred Stock so to
be converted by $10.00, and (ii) dividing the result by the conversion
price of $5.00 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this part 5, then by
the conversion price as last adjusted and in effect at the date any
share or shares of Series A Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred
to as the "Series A Conversion
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<PAGE> 10
Price"). Such right of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a
seated number of shares of Series A Preferred Stock into Common Stock
and by surrender of a certificate or certificates for the shares so to
be converted to the Company at its principal office (or such other
office or agency of the Company as the Company may designate by notice
in writing to the holders of the Series A Preferred Stock) at any time
during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be
issued.
4B. Issuance of Certificates; Time Conversion Effected. Promptly after the
receipt of the written notice referred to in part 4, paragraph A and
surrender of the certificate or certificates for the share or shares
of Series A Preferred Stock to be converted, the Company shall issue
and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a
certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Series A
Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Series A Conversion Price
shall be determined as of the close of business on the date on which
such written notice shall have been received by the Company, and the
certificate or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the holder of
such share or shares of Series A Preferred Stock shall cease, and the
person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of
record of the shares presented thereby.
4C. Fractional Shares; Dividends; Partial Conversion. No fractional shares
shall be issued upon conversion of Series A Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Company
shall pay in cash out of funds legally available therefor an amount
equal to all dividends declared and unpaid on the shares of Series A
Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in part 4, paragraph B.
In case the number of shares of Series A Preferred Stock represented
by the certificate or certificates surrendered pursuant to part 4,
paragraph A exceeds the number of shares converted, the Company shall,
upon such conversion, execute and deliver to the holder, at the
expense of the Company, a new certificate or certificates for the
number of shares of Series A Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted.
If any fractional share of Common Stock would, except for the
provisions of the first sentence of this part 4, paragraph C, be
delivered upon such conversion, the Company, in lieu of delivering
such fractional share, shall pay to the holder surrendering the Series
A Preferred Stock for conversion an
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<PAGE> 11
amount in cash equal to the current market price of such fractional
share as determined in good faith by the Board of Directors of the
Company.
4D. Adjustment Price Upon Issuance of Common Stock. Except as provided in
part 4, paragraph E, if and whenever the Company shall issue or sell,
or is, in accordance with part 4, paragraphs D(1) through D(7), deemed
to have issued or sold, any shares of Common Stock for a consideration
per share less than the Series A Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith
upon such issue or sale, the Series A Conversion Price shall be
reduced to a price equal to the consideration per share received by
the Company upon such issue or sale.
For purposes of this part 4, paragraph D, the following paragraphs
5D(1) to 5D(7) shall also be applicable:
4D(1) Issuance of Rights or Options. If the Company shall in any
manner grant (whether directly or by assumption in a merger
or otherwise) any warrants or other rights to subscribe for
or to purchase, or any options for the purchase of, Common
Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or
options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to
convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration
for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company
upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof by (ii) the
total maximum number of shares of Common Stuck issuable upon
the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the
exercise
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<PAGE> 12
of such Options) shall be less than the Series A Conversion
Price in effect immediately prior to the time of the granting
of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or
the issuances of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise
provided in part 4, paragraph D(3), no adjustment of the
Series A Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
4D(2) Issuance of Convertible Securities. In case the Company shall
in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Series A
Conversion Price in effect immediately prior to the time of
such issue or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue
or sale of such Convertible Securities, and thereafter shall
be deemed to be outstanding; provided that (a) except as
otherwise provided in paragraph D(3), no adjustment of the
Series A Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of such
Convertible Securities, and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any
Options to purchase any such Convertible Securities for which
adjustments of the Series A Conversion Price have been or are
to be made pursuant to other provisions of this paragraph D,
no further adjustment of the Series A Conversion Price shall
be made by reason of such issue or sale.
4D(3) Change in Option Price or Conversion Rate. If (i) the
purchase price provided for in any Option referred to in part
4, paragraph D(1), (ii) the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in part 4, paragraph D(1) or D(2), or
(iii) the rate at which Convertible Securities referred to in
part 4, paragraph D(1) or D(2) are convertible into or
exchangeable for Common Stock, shall change at any time
(including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), then the
Series A Conversion Price in effect at the time of such event
shall forthwith be readjusted to the Series A Conversion
Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided
for such changed purchase price, additional
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<PAGE> 13
consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if, as a
result of such adjustment, the Series A Conversion Price then
in effect hereunder is thereby reduced; and on the expiration
of any such Option or the termination of any such right to
convert or exchange such Convertible Securities, the Series A
Conversion Price then in effect hereunder shall forthwith be
increased to the Series A Conversion Price which would have
been in effect at the time of such expiration or termination
had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or
termination, never been issued.
4D(4) Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any stock of the Company
payable in Common Stock, Options or Convertible Securities
(except for dividends or distributions upon the Common Stock
or the Series A Preferred Stock), any such Common Stock,
Options of Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
4D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to
be the amount received by the Company therefor, without
deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of
Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid
or allowed by the Company in connection therewith. In case
any Options shall be issued in connection with the issue and
sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued for such
consideration as is determined in good faith by the Board of
Directors of the Company.
4D(6) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in
Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or
purchase, as the case may be.
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<PAGE> 14
4D(7) Treasury Shares. The disposition of any shares of Common
Stock owned or held by or for the account of the Company
shall be considered an issue or sale of Common Stock for the
purpose of this paragraph 4D.
4E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make
any adjustment of the Series A Conversion Price in the case of the
issuance of Common Stock, Options or Convertible Securities: (i) upon
conversion of any of the Series A Preferred Stack; (ii) as a dividend
or distribution on any of the Company's Series A Preferred Stock or
Common Stock; (iii) upon the issuance of 6,000,000 shares of Common
Stock or Options to purchase such shares (appropriately adjusted to
reflect the occurrence of any event or transaction described in part
4, paragraph (F) to Directors, employees or consultants of the Company
in connection with their performance of services for or on behalf of
the Company; (iv) in connection with the acquisition of another
company by the Company by merger, purchase of all or substantially all
of the assets of such company or other reorganization; or (v) by
reason of a dividend, stock split, split-up or other distribution on
shares of Common Stock, Options or Convertible Securities excluded by
the foregoing clauses (i), (ii), (iii) and (iv).
4F. Subdivision or Combination of Common Stock. In case the Company shall
at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater
number of shares, the Series A Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and,
conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Series A Conversion
Price in effect immediately prior to such combination shall be
proportionately increased.
4G. Reorganization or Reclassification. If any reorganization or
reclassification of the capital stock of the Company shall be effected
in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby
each holder of a share or shares of Series A Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore receivable upon the conversion of such
share or shares of Series A Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore
receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the Series A Conversion
Price) shall
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<PAGE> 15
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
4H. Notice of Adjustment. Upon any adjustment of the Series A Conversion
Price, then and in each such case the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to
cash holder of shares of Series A Preferred Stock at the address of
such holder as shown on the books and records of the Company, which
notice shall state the Series A Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which
such calculation is based
4I. Mandatory Conversion.
4I(1) Immediately prior to the closing of the sale of
shares of Common Stock at a price of at least $10.00
per share (subject to appropriate adjustment for
stock splits, stock dividends, combinations and
other similar recapitalizations affecting such
shares), in a bona fide, firm commitment,
underwritten public offering pursuant to an
effective registration statement under the
Securities Act of 1933, as amended, resulting in at
least $7,500,000 of gross proceeds to the Company,
each share of Series A Preferred Stock then
outstanding shall automatically be converted into
Common Stock at the then effective Series A
Conversion Price.
4I(2) All holders of record of shares of Series A
Preferred Stock will be given at least 20 days'
prior written notice of the date fixed and the place
designated for mandatory conversion of all such
shares of Series A Preferred Stock pursuant to this
part 4, paragraph I. Such notice will be sent by
first class or registered mail, postage prepaid, to
each record holder of Series A Preferred Stock at
such holder's address last shown on the records of
the transfer agent for the Series A Preferred Stock
(or the records of the Company, if it serves as its
own transfer agent). On or before the date fixed for
such mandatory conversion, each holder of shares of
Series A Preferred Stock shall surrender his or its
certificate or certificates for all such shares to
the Company at the place designated in such notice,
and shall thereafter receive certificates for the
number of shares of Common Stock to which such
holder is entitled pursuant to this part 4,
paragraph I. On the date fixed for such mandatory
conversion, all rights with respect to the Series A
Preferred Stock so converted, including the rights,
if any, to receive notices and vote, shall
terminate, except for only the rights of the holders
thereof, upon surrender of their certificate or
certificates therefor, to receive certificates for
the number of shares of Common Stock into which such
Series A Preferred Stock has been converted, and
payment of any accrued but unpaid dividends thereon.
If so acquired by the Company, certificates
surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of
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<PAGE> 16
transfer, in form satisfactory to the Company, duly
executed by the registered holder or by his or its
attorney duly authorized in writing. As soon as
practicable after the date of such mandatory
conversion and the surrender of the certificate or
certificates for Series A Preferred Stock, the
Company shall cause to be issued and delivered to
such holder, or on his or its written order, a
certificate or certificates for the number of full
shares of Common Stock issuable on such conversion
in accordance with the provisions hereof and cash as
provided in part 4, paragraph C in respect of any
fractions of a share of Common Stock otherwise
issuable upon such conversion.
4I(3) All certificates evidencing shares of Series A
Preferred Stock which are required to be surrendered
for conversion in accordance with the provisions
hereof, from and after the date such certificates
are so required to be surrendered, shall be deemed
to have been retired and canceled and shall not be
reissued, and the shares of Series A Preferred Stock
represented thereby shall be deemed to have been
converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior
to such date. The Company may thereafter take such
appropriate action as may be necessary to reduce the
amount of designated Series A Preferred Stock
accordingly.
4J. Other Notices. In case at any time:
4J(1) the Company shall declare any dividend upon its
Common Stock in cash or stock or make any other
distribution to the holders of its Common Stock;
4J(2) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional
shares of stock of any class or other rights;
4J(3) there shall be any reorganization or
reclassification of the capital stock of the
Company, or a consolidation or merger of the Company
with or into, or a sale of all or substantially all
of its assets to, another entity or entities; or
4J(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the
Company;
then, in any one or more of said cases, the Company shall
give, by first class mail, postage prepaid, addressed to each holder of any
shares of Series A Preferred Stock at the address of such holder as shown on
the books and records of the Company: (a) at least 20 days' prior
10
<PAGE> 17
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up; and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
20 days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
4K. Stock to be Reserved. The Company will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose
of issuance upon the conversion of Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series A
Preferred Stock. The Company covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and, without limiting the generality of
the foregoing, the Company covenants that it will from time to time
take all such action as may be required to assure that the par value
per share of the Common Stock is at all times equal to or less than
the Series A Conversion Price in effect at the time. The Company will
take all such action as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national
securities exchange upon which the Common Stock may be listed. The
Company will not take any action which results in any adjustment of
the Series A Conversion Price if the total number of shares of Common
Stock issued and issuable after such action upon conversion of the
Series A Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation.
4L. No Reissuance of Series A Preferred Stock. Shares of Series A
Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
4M. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series A Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof,
provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of
the Series A Preferred Stock which is being converted.
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<PAGE> 18
4N. Closing of Books. The Company will at no time close its transfer books
against the transfer of any Series A Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares
of Series A Preferred Stock in any manner which interferes with the
timely conversion or such Series A Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
4O. Definition of Common Stock. As used in this part 4, the term "Common
Stock" shall mean and include the Company's authorized common stock,
par value $.01 per share, as constituted on the date of filing of this
Certificate of Designations, Preferences and Rights, and also shall
include any capital stock of any class of the Company thereafter
authorized which shall not be limited to a fixed sum or percentage of
par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Company; provided that the shares of Common Stock receivable upon
conversion of shares of Series A Preferred Stock shall include only
shares designated as Common Stock of the Company on the date of filing
of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in part 4, paragraph G.
II. Miscellaneous.
Part 1. Registration of Transfer.
The Company will keep at its principal office (or such other place as
the Company reasonably designates) a register for the registration of shares of
Series A Preferred Stock. Upon the surrender of any certificate representing
shares of any class of Series A Preferred Stock at such place, the Company
will, at the request of the registered holder of such certificate, execute and
deliver a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares of such class represented by the surrendered
certificate, and the Company forthwith will cancel such surrendered
certificate. Each such new certificate will be registered in such name and will
represent such number of shares of such Series A Preferred Stock as is
requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate. The issuance of
new certificates will be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Company in connection with such issuance, unless such issuance is made in
connection with a transfer of Series A Preferred Stock, in which case the
transferring holder will pay all taxes arising from such transfer.
12
<PAGE> 19
Part 2. Replacement.
Upon receipt of evidence reasonably satisfactory to the Company (an
affidavit of the registered holder will be deemed to be satisfactory for this
purpose) of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of any Series A Preferred Stock, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that, if the holder is an
institutional investor, its own agreement will be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Company
will (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Part 3. Amendment and Waiver.
No amendment, modification or waiver will be binding or effective with
respect to any provision of subdivision I above or this subdivision II without
the prior written consent of the holders of at least a majority of the Series A
Preferred Stock outstanding at the time such action is taken.
Part 4. Notices.
Except as otherwise expressly provided, all notices referred to herein
will be in writing and will be delivered by personal delivery, overnight
delivery service or registered or certified mail, return receipt requested,
postage prepaid and will be deemed to have been given when so delivered or
mailed (i) to the Company, at its principal executive offices and (ii) to any
stockholder, at such holder's address as it appears in the stock records of the
Company (unless otherwise indicated by any such holder).
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by John T. Royall, its Chief Executive Officer, and attested by Richard
Graveley, its Secretary, this 30th day of October, 1995.
ATTEST: DIGITAL COMMERCE CORPORATION
By: /s/ Richard Graveley By: /s/ John T. Royall
----------------------------- ----------------------------------
Richard Graveley, Secretary John T. Royall, Chairman and CEO
13
<PAGE> 20
AMENDED CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PREFERRED STOCK OF
DIGITAL COMMERCE CORPORATION
DIGITAL COMMERCE CORPORATION, a corporation duly organized and validly
existing under the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY that pursuant to the provisions of Section 151
of the Delaware General Corporation Law, its Board of Directors duly adopted the
following resolutions amending the rights, preferences, privileges and
restrictions of the Company's Series B Preferred Stock:
WHEREAS, on March 26, 1999, the Company filed the Certificate of
Designations, Preferences and Rights of the Series B Preferred Stock of the
Company pursuant to Section 151 of the Delaware General Corporation Law setting
forth the designations and the powers, privileges and rights, and the
qualifications, limitations and restrictions of the Series B Preferred Stock;
and
WHEREAS, as of the date hereof, no shares of the Series B Preferred
Stock have been issued by the Company; and
WHEREAS, immediately prior to the filing of this Amended Certificate of
Designations, the Company filed its Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware; and
WHEREAS, three hundred thousand (300,000) shares of preferred stock
have been designated as Series A Preferred Stock, par value $0.01 per share
pursuant to the Certificate of Designations, Preferences and Rights of Preferred
Stock filed with the Secretary of State of the State of Delaware on November 3,
1995; and
WHEREAS, three million five hundred thousand (3,500,000) shares of
preferred stock have been designated as Series C Convertible Preferred Stock
pursuant to the Amended Certificate of Designations, Preferences and Rights of
the Series C Convertible Preferred Stock filed with the Secretary of State of
the State of Delaware on the date hereof; and
WHEREAS, eight million seven hundred nine thousand nine hundred two
(8,709,902) shares of preferred stock have been designated as Series D
Redeemable Convertible Preferred Stock, par value $0.01 per share pursuant to
the Certificate of Designations, Preferences and Rights of the Series D
Redeemable Convertible Preferred Stock filed with the Secretary of State of the
State of Delaware on the date hereof; and
WHEREAS, the Board of Directors has determined that the designations
and the powers, privileges and rights, and the qualifications, limitations and
restrictions of the Series B Preferred Stock should be amended and re-designated
as Series B Convertible Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that six million (6,000,000) shares
shall be designated as Series B Convertible Preferred Stock, par value $0.01 per
share. The remaining shares of the preferred stock of the Company may be issued
in one or more series. The following is a statement of the designations and the
powers, privileges and rights, and the qualifications, limitations and
restrictions thereof in respect of the Series B Convertible Preferred Stock:
<PAGE> 21
1. Dividends. No dividends of cash or other property shall be paid on
the common stock of the Company (the "Common Stock") (other than additional
shares of Common Stock) unless the shares of Series B Convertible Preferred
Stock receive the same dividends, pari passu with shares of any other series of
Preferred Stock, that such shares would have received had they been converted
into Common Stock immediately prior to the record date for such dividend.
2. Liquidation Preference. In the event of (a) any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, (b)
unless agreed otherwise in writing by a majority of the holders of the Series B
Convertible Preferred Stock, a merger, recapitalization or consolidation of the
Company in which the holders of capital stock of the Company do not retain a
majority of the voting power of the surviving entity or (c) the sale of all or
substantially all of the assets of the Company, distributions to the
stockholders of the Company shall be made in the following manner: The holders
of Series B Convertible Preferred Stock shall first be entitled to receive, pari
passu with any distribution of any of the assets of the Company to the holders
of any other series of Preferred Stock and prior and in preference to any
distribution of any of the assets of the Company to the holders of any Common
Stock or other capital stock of the Company, an amount equal to the aggregate
initial purchase price applicable to such Series B Convertible Preferred Stock
and each other series of Preferred Stock. The initial purchase price per share
for Series B Convertible Preferred Stock is $1.00. After payment of the
aggregate initial purchase price to the holders of Series B Convertible
Preferred Stock and each other series of Preferred Stock, the holders of Series
B Convertible Preferred Stock shall then be entitled to receive, pari passu with
any distribution of any of the assets of the Company to the holders of any other
series of Preferred Stock and prior and in preference to any distribution of any
of the assets of the Company to the holders of any Common Stock or other capital
stock of the Company, at their option, either:
(i) an amount which would equal a 10% rate of return
compounded annually on the initial purchase price applicable to the Preferred
Stock held by such holders from the Original Issue Date to the date of
distribution; or
(ii) the amount that would be payable pursuant to such
transaction to the holders of Preferred Stock if they converted their shares of
Preferred Stock into Common Stock immediately prior to such transaction.
The aggregate amount to be paid to the holders of Preferred Stock
pursuant to the foregoing provisions of this Section 2 is referred to as the
"Preferential Amount". If the assets and funds of the Company shall be
insufficient to permit the payment of the full Preferential Amount to the
holders of Preferred Stock, then the entire assets of the Company legally
available for distribution shall be distributed ratably among the holders of
Preferred Stock in accordance with the aggregate liquidation preference of the
shares of Preferred Stock held by each of them. After payment has been made to
the holders of Preferred Stock of the full amount to which they are entitled
above, the holders of Common Stock shall be entitled to share ratably in the
remaining assets without participation by the holders of Preferred Stock.
3. Voting. Except as otherwise required by law, or as specifically
provided herein, the holders of shares of the Series B Convertible Preferred
Stock shall vote as a single class with the
<PAGE> 22
holders of Common Stock and shall have such votes in respect of each share of
Series B Convertible Preferred Stock on any matter submitted to the holders of
Common Stock as the number of shares of Common Stock into which shares of Series
B Convertible Preferred Stock may then be converted. Record holders of Series B
Convertible Preferred Stock shall be entitled to notice of any stockholders'
meeting or solicitation of stockholders' consents in the manner provided in the
Bylaws of the Company for general notices.
4. Conversion.
4.1 Right of Conversion. Each share of Series B Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time or
from time to time, at the office of the Company or any transfer agent for the
Series B Convertible Preferred Stock into the number of shares of the Common
Stock of the Company obtained by dividing the initial purchase price by the then
effective conversion price of the Series B Convertible Preferred Stock (as from
time to time adjusted by this Section 4, the "Conversion Price"). The initial
Conversion Price shall be equal to the Purchase Price. All calculations under
this Section 4 shall be made to the nearest one hundredth of a cent.
4.2 Automatic Conversion. Each share of Series B Convertible Preferred
Stock shall automatically be converted into shares of Common Stock at the then
effective Conversion Price upon the closing of the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, covering the offer and sale of Common Stock for the account of the
Company to the public generally and providing net proceeds to the Company (after
underwriter commissions and discounts and other offering expenses) of not less
than $30,000,000 and at a price per share of Common Stock not less than 200% of
the initial Conversion Price, adjusted for stock splits and stock dividends
after the Original Issue Date (as hereinafter defined) (a "Qualified Public
Offering").
4.3 Mechanics of Conversion. Before any holder of Series B Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock and to receive certificates therefor, such holder shall surrender the
Series B Convertible Preferred Stock certificates, duly endorsed, at the office
of the Company or of any transfer agent for the Series B Convertible Preferred
Stock, and shall give written notice to the Company at such office that such
holder elects to convert the same; provided, however, that in the event of an
automatic conversion pursuant to Section 4.2, the outstanding shares of Series B
Convertible Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, further, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless and until the certificates evidencing such shares of Series B Convertible
Preferred Stock are either delivered to the Company or its transfer agent as
provided above, or the holder provides evidence reasonably satisfactory to the
Company or its transfer agent that such certificates have been lost, stolen,
destroyed or mutilated and delivers an indemnity bond in such reasonable amount
as the Company may determine. The Company shall, as soon as practicable after
such delivery, or execution of such agreement in the case of a lost, stolen or
destroyed certificate, issue and deliver at such office to such holder of Series
B Convertible Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid and a
check payable to the holder in the amount of any cash
<PAGE> 23
amounts payable as the result of a conversion into fractional shares of Common
Stock plus all accrued and unpaid dividends on such holder's Series B
Convertible Preferred Stock so converted. 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,
or in the case of automatic conversion immediately upon closing of the Qualified
Public Offering, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
4.4 Adjustment of Conversion Price due to Issuance of Additional
Shares. The Conversion Price shall be subject to adjustment as follows:
4.4.1 Special Definitions
(a) "Options" 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 the
Series D Convertible Preferred Stock is first issued by the Company.
(c) "Convertible Securities" shall mean any indebtedness,
shares or other securities 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 4.4.6, deemed to be issued) by
the Company after the Original Issue Date, other than shares of Common Stock
issued or issuable (or, pursuant to Section 4.4.6, deemed to be issued) at any
time:
(i) upon conversion of the Series B Convertible Preferred
Stock authorized herein, convertible notes or any other series of
Preferred Stock or upon exercise of the other options and warrants
outstanding on the Original Issue Date;
(ii) as a stock dividend, stock split or similar
distribution on the Series B Convertible Preferred Stock or any
other capital stock of the Company or any other event for which
adjustment is made pursuant to Section 4.4.3;
(iii) Options or shares of Common Stock issuable upon
exercise of Options to the extent such Options have been reserved
for such purpose as of the date hereof pursuant to the Company's
stock option plan and do not exceed 6,477,847 shares;
(iv) in connection with sales of Common Stock or other
Future Shares to the holders of the Series B Convertible Preferred
Stock pursuant to the exercise by such holders of their rights
under Section 6.1;
(v) by way of dividend or other distribution on
securities excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses of this Section 4.4.1(d); or
<PAGE> 24
(vi) by conversion or exchange of the Series A Notes in
accordance with section 6.8 of the Purchase Agreement.
4.4.2 No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional Shares
of Common Stock (a) unless the consideration per share (determined pursuant to
Section 4.4.7) for an Additional Share of Common Stock issued or deemed to be
issued by the Company is less than the applicable Conversion Price in effect on
the date of, and immediately prior to, such issue, or (b) if prior to such
issuance a majority of the holders of Series B Convertible Preferred Stock give
a written waiver of such adjustment.
4.4.3 Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.4.6 but excluding Additional Shares of Common Stock
described in Section 4.4.4) for a consideration per share less than the
applicable Conversion Price of the Series B Convertible Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, the applicable Conversion Price shall be reduced, concurrently with such
issue, to a new Conversion Price obtained by dividing (a) an amount equal to the
sum of (i) the number of shares of Common Stock outstanding immediately prior to
such issue multiplied by the then applicable Conversion Price and (ii) the
consideration, if any, deemed received by the Company upon such issue by (b) the
total number of shares of Common Stock deemed to be outstanding immediately
after such issue; provided, however, that, for purposes of any calculation under
this Section 4.4.3, all shares of Common Stock outstanding or issuable upon
conversion of outstanding Options, Convertible Securities (including the Series
B Convertible Preferred Stock) immediately prior to giving effect to such
calculation shall be deemed to be outstanding. In no event will the Conversion
Price be adjusted as the result of any issuance of any Additional Shares of
Common Stock for any amount equal to or higher than the Conversion Price in
effect immediately prior to such issuance.
4.4.4 Adjustment of Conversion Price for Certain Option Grants. In
the event the Company grants options pursuant to a stock option plan deemed to
be the issuance of Additional Shares of Common Stock pursuant to Section 4.4.6
at any time within twelve months of the Original Issue Date, then and in such
event, the applicable Conversion Price shall be reduced, concurrently with such
grant, to a new Conversion Price equal to the Conversion Price in effect
immediately prior to the issuance of such Additional Shares of Common Stock
multiplied by a fraction the numerator of which is the number of shares of
Common Stock deemed outstanding immediately prior to such issuance and the
denominator of which is the number of shares of Common Stock deemed outstanding
immediately after such issuance, after taking into account the adjustment of the
Conversion Price pursuant to this Section 4.4.4 (assuming for purposes of this
calculation that all shares of Common Stock outstanding or issuable upon
conversion or exercise of Options and Convertible Securities (including the
Series B Convertible Preferred Stock) shall be deemed to be outstanding). Any
grant of options pursuant to a stock option plan deemed to be the issuance of
Additional Shares of Common Stock pursuant to Section 4.4.6 at any time after
twelve months of the Original Issue Date shall be subject to Section 4.4.3.
<PAGE> 25
4.4.5 Adjustments for Subdivisions, Stock Dividends, Combinations
or Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be increased by way of stock issued as a dividend for no
consideration or subdivided (by stock split or otherwise) into a greater number
of shares of Common Stock, the respective Conversion Prices then in effect
shall, concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. 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 respective Conversion Prices then
in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
4.4.6 Deemed Issue of Additional Shares of Common Stock Options and
Convertible Securities. Except as provided in Sections 4.4.1, 4.4.3, 4.4.4 or
4.4.5, in the event the Company at any 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, however, that for
purposes of this Section 4.4.6 Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 4.4.7) of such Additional Shares of Common Stock would be
less than the applicable Conversion Price in effect on the date of, and
immediately prior to, such issue, or such record date, as the case may be
(except as provided below in this Section 4.4.6); and provided, further, that in
any such case in which Additional Shares of Common Stock are deemed to be
issued:
(a) no further adjustment in the applicable Conversion Price shall be
made upon the subsequent issue of shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities or upon
the subsequent issue of such Convertible Securities or Options;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Company, or any increase in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the applicable
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 becoming effective, be
recomputed to reflect such increase insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(c) 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 applicable 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 be readjusted to the Conversion Price
that would have been in effect if no adjustment had been made with respect to
such Options or Convertible Securities;
<PAGE> 26
(d) in the event of any changes in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of such Options or
Convertible Securities, including a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in effect shall be readjusted to
the Conversion Price that would have been in effect if the adjustment which was
made upon the issuance of such Options or Convertible Securities had been made
upon the basis of such change;
(e) no readjustment pursuant to clauses (b) or (d) above shall have the
effect of increasing the applicable Conversion Price to an amount which exceeds
the lower of (i) the applicable Conversion Price on the original adjustment
date, or (ii) the applicable Conversion Price that resulted from the issuance or
deemed issuance of other Additional Shares of Common Stock between the original
adjustment date and such readjustment date; and
(f) in the event the Company amends the terms of any Options or
Convertible Securities (whether such Options or Convertible Securities were
outstanding on the Original Issue Date or were issued after the Original Issue
Date), then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the provisions of
this Section 4.4.6 shall apply.
4.4.7 Determination of Consideration. For purposes of this Section
4.4, the consideration received by the Company 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 amount of cash proceeds received by the Company 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 value thereof at the time of such issue, as
determined in good faith by the Board of Directors of the Company;
and
(iii) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of
the Company for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses
(i) and (ii) above, which is allocated to the Additional Shares of
Common Stock as determined in good faith by the Board of Directors.
(b) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 4.4.6, relating to Options and Convertible
Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by
the Company as consideration for the issue of such Options or
Convertible Securities, plus, subject to Section 4.4.6(b), the
minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained
<PAGE> 27
therein for a subsequent adjustment of such consideration) payable
to the Company upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities by
(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.
4.4.8 Other Dilutive Events. In case any event shall occur as to which
the other provisions of this Section 4.4 are not strictly applicable, but the
failure to make any adjustment in the Conversion Price would not fairly protect
the conversion rights represented by the Series B Convertible Preferred Stock in
accordance with the intention of this Section 4, then, upon request of a
majority of the holders of Series B Convertible Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent public accountants
of recognized national standing (which may be the regular auditors of the
Company) to give their opinion as to the adjustment, if any, on a basis
consistent with the intention of this Section 4, necessary to preserve without
dilution the conversion rights represented by the Series B Convertible Preferred
Stock. Upon receipt of such opinion, the Company will promptly furnish a copy
thereof to the holders of the Series B Convertible Preferred Stock and the
Conversion Price shall be adjusted in accordance therewith to the extent
recommended by such accountants. The fees and expenses of such accountants shall
be paid by the Company; provided, however, that if such accountants opine that
no adjustment is necessary, such fees and expenses will be paid by the holders
of the Series B Convertible Preferred Stock.
4.5 Other Distributions. In the event the Company shall declare a
distribution payable in securities of the Company (other than shares of Common
Stock), securities of other entities, securities evidencing indebtedness issued
by the Company or other entities, assets (including cash dividends) or options
or rights, then, in each such case, the holders of the Series B Convertible
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock into which their shares of Series B Convertible Preferred Stock were
convertible as of the record date fixed for the determination of the holders of
Common Stock entitled to receive such distribution.
4.6 Subsequent Events. In the event of any recapitalization,
consolidation or merger of the Company or its successor which does not entitle
the holders of the Series B Convertible Preferred Stock to the distribution
provided for in Section 2, the shares of Series B Convertible Preferred Stock
shall be convertible into such shares or other interests as the Series B
Convertible Preferred Stock would have been entitled if the Series B Convertible
Preferred Stock had been converted into Common Stock immediately prior to such
event.
4.7 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 4, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each 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 is
based. The Company
<PAGE> 28
shall, upon the written request at any time of any holder of Series B
Convertible Preferred Stock, furnish or cause to be furnished to such holder a
certificate setting forth (a) all such adjustments and readjustments previously
made, (b) the Conversion Price at the time in effect, and (c) the number of
shares of Common Stock and the amount, if any, of other property which at such
time would be received upon the conversion of Series B Convertible Preferred
Stock.
4.8 Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series B Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the name of the holder of the Series B Convertible Preferred Stock
which is being converted.
5. Certain Covenants.
5.1 Special Restrictions. At any time when shares of Series B Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Company is required by law or by
the Certificate of Incorporation, and in addition to any other vote required by
law or the Certificate of Incorporation, without the consent of the majority of
the holders of the Series B Convertible Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as a
class, the Company will not:
(a) create or authorize the creation of any additional class or
series of shares of stock, or issue any shares thereof, unless the same
ranks junior to the Series B Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Company or increase the authorized amount of the Series B Convertible
Preferred Stock or increase the authorized amount of any additional class
or series of shares of stock unless the same ranks junior to the Series B
Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, or create or
authorize any instrument or security convertible into shares of Series B
Convertible Preferred Stock or into shares of any other class or series
of stock unless the same ranks junior to the Series B Convertible
Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Company, whether any such creation,
authorization or increase shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
(b) amend, alter or repeal its Certificate of Incorporation or
By-laws in a manner that is adverse to the holders of Series B
Convertible Preferred Stock in any respect or for which the holders of
Series B Convertible Preferred Stock did not receive prior written
notice;
(c) purchase or set aside any sums for the purchase of any shares of
stock or other securities other than (i) the Series B Convertible
Preferred Stock as provided in this Amended Certificate of Designation,
(ii) the repurchase of the Series A Notes in accordance with section 6.8
of that certain Securities Purchase Agreement, dated as of March 13,
2000, among the Company and the Investors party thereto, and (iii) the
purchase of shares of Common Stock or other securities from former
employees of the Company who acquired
<PAGE> 29
such shares directly from the Company or the Stock Option Plan (as
defined in the Purchase Agreement), if each such purchase is made
pursuant to contractual rights held by the Company relating to the
termination of employment of any such former employee and the total
purchase price does not exceed $100,000 plus any applicable life
insurance payments for all such purchases from each such former employee;
(d) redeem or otherwise acquire any shares of Series B Convertible
Preferred Stock except pursuant to a purchase offer made pro rata to all
holders of the shares of Series C Convertible Preferred Stock on the
basis of the aggregate number of outstanding shares of Series C
Convertible Preferred Stock then held by each such holder;
(e) consent to any liquidation, dissolution or winding up of the
Company; or
(f) consolidate or merge into or with any other entity or entities or
sell or transfer all or substantially all its assets.
5.2 No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, recapitalization, transfer of
all or a substantial portion of its assets, consolidation, merger, dissolution,
issue or sale of securities, closing or transfer books or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed under this Certificate of Designation by the
Company, but will at all times in good faith assist in carrying out all the
provisions of this Certificate of Designation and in taking all such action as
may be necessary or appropriate in order to protect the conversion and other
rights of the holders of Series B Convertible Preferred Stock against
impairment.
5.3 Reservation of Shares. So long as any share of Series B Convertible
Preferred Stock shall remain outstanding, the Company shall at all times reserve
and keep available, free from preemptive rights, out of its authorized capital
stock, for the purpose of issuance upon conversion of the Series B Convertible
Preferred Stock, the full number of shares of Common Stock then issuable upon
exercise of all outstanding shares of Series B Convertible Preferred Stock. If
the Company's Common Stock shall be listed on any national stock exchange, the
Company at its expense shall include in its listing application all of the
shares of Common Stock reserved for issuance upon conversion of the Series B
Convertible Preferred Stock (subject to issuance or notice of issuance to the
exchange) and will similarly procure the listing of any further Common Stock
reserved for issuance upon conversion of the Series B Convertible Preferred
Stock at any subsequent time as a result of adjustments in the outstanding
Common Stock or otherwise.
5.4 Validity of Shares. The Company will from time to time take all such
action as may be required to assure that all shares of Common Stock which may be
issued upon conversion of any share of the Series B Convertible Preferred Stock
will, upon issuance, be legally and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof. Without limiting the generality of the foregoing, the Company
will from time to time take all such action as may be required to assure that
the par value per share, if any, of the Common Stock is at all times equal to or
less than the lowest quotient obtained by dividing the then current par value of
the Series B Convertible Preferred Stock by the number of shares of Common Stock
into which each share of Series B Convertible Preferred Stock can, from time to
time, be converted.
<PAGE> 30
5.5 Notice of Certain Events. If at any time:
(a) the Company shall declare any dividend or distribution payable to
the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of any class or any other
rights;
(c) any recapitalization of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets
to, another corporation or business organization shall occur; or
(d) a voluntary or involuntary dissolution, liquidation or winding up
of the Company shall occur;
then, in any one or more of such cases, the Company shall give the registered
holders of the Series B Convertible Preferred Stock written notice, by
registered mail, of the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining stockholders entitled to
vote upon such recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding up and of the date when any such transaction shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least 20
days prior to the record date with respect thereto.
5.6 No Reissuance of Preferred Stock. No shares of Series B Convertible
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of Preferred Stock accordingly.
6. Preemptive Rights.
6.1 Right of First Offer. Until the closing under a Qualified Public
Offering, the Company shall not issue or sell any Common Stock (including
securities convertible into, or options, warrants or other rights to purchase
Common Stock, but excluding the shares described in Section 6.7) (collectively,
the "Future Shares") to any Person (an "Offeree") without first providing each
holder of Series B Convertible Preferred Stock the right to subscribe for its
Proportionate Percentage of the Future Shares at the same price and on the same
terms which shall have been offered or are proposed to be offered by the Company
to such Offeree and which shall have been specified by the Company in a notice
delivered to each holder of Series B Convertible Preferred Stock (the
"Proposal"). The Proposal by its terms shall remain open and irrevocable for a
period of 30 days from the date it is delivered by the Company to each holder of
Series B Convertible Preferred Stock (the "Future Shares Exercise Period"). The
Proposal shall also certify that the Company has either (a) received a bona fide
offer from a prospective purchaser, who shall be identified in such
certification, and that the
<PAGE> 31
Company in good faith believes a binding agreement of sale is obtainable for
consideration having a fair market, cash equivalent or present value set forth
in such certification; or (b) intends in good faith to make an offering of its
securities to prospective purchasers, who shall be identified to the extent
possible in such certification at the price and on the terms set forth in such
certification.
"Proportionate Percentage" means, for any holder of Series B Convertible
Preferred Stock, the percentage of Future Shares covered by the Proposal equal
to (i) the number of shares of Common Stock into which the shares of Series B
Convertible Preferred Stock held by such holder would then be convertible
divided by (ii) the total number of shares of Common Stock outstanding at the
time of delivery of the Proposal (assuming the conversion or exercise of all
issued and outstanding Convertible Securities and Options).
6.2 Notice. Notice of each holder of Series B Convertible Preferred
Stock's intention to accept the Proposal made pursuant to Section 6.1 shall be
evidenced by a writing signed by such holder and delivered to the Company prior
to the end of the Future Shares Exercise Period (the "Notice of Purchase")
setting forth that portion of the Future Shares such holder elects to purchase
(the "Accepted Shares").
6.3 Full Acceptance. In the event that each holder of Series B
Convertible Preferred Stock elects to purchase all of the shares offered to such
holder in the Proposal, the Company shall sell to each such holder, pursuant to
Section 6.6, the number of Accepted Shares set forth in such holder's Notice of
Purchase.
6.4 Partial Acceptance. In the event that one or more holders of Series B
Convertible Preferred Stock do not elect to purchase all of the shares offered
to such holders in the Proposal, the Company shall sell to each holder electing
to purchase, pursuant to Section 6.6, the number of Accepted Shares, if any, set
forth in such holder's Notice of Purchase. Holders of Series B Convertible
Preferred Stock may purchase pursuant to Section 6.6 any remaining shares
offered in the Proposal not purchased by the other holders of Series B
Convertible Preferred Stock pro rata based on the respective Proportionate
Percentages of such holders wishing to purchase additional shares, or as they
may otherwise agree.
6.5 No Fractional Shares. For the purpose of avoiding fractions as to
Future Shares, the Company may adjust upward or downward by not more than one
full share the number of Future Shares which any holder of Series B Convertible
Preferred Stock would otherwise be entitled to purchase.
6.6 Sale of Shares. No later than 30 days after the expiration of the
Future Shares Exercise Period, the Company shall deliver to each holder of
Series B Convertible Preferred Stock who has submitted a Notice of Purchase to
the Company a notice indicating the number of Future Shares which the Company
shall sell to such holder pursuant to this Section 6 and the terms and
conditions of such sale, which shall be in all respects (including unit price
and interest rates) the same as specified in the proposal. The sale to such
holders of such Future Shares shall take place not later than 10 days after
receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for
purchase by the holders of Series B Convertible Preferred Stock as provided
above shall take place not later than 90 days
<PAGE> 32
after the expiration of the Future Shares Exercise Period. Such sale shall be
upon terms and conditions in all respects (including unit price and interest
rates) which are no more favorable to such Offeree or less favorable to the
Company than those set forth in the Proposal. Any refused Future Shares not
purchased by the Offeree as contemplated by the Proposal within the 90-day
period specified above shall remain subject to this Section 6.
6.7 Exclusion of Certain Shares. Notwithstanding any contrary provision
of this Section 6, Future Shares shall not include shares of Common Stock or
other securities (i) issued pursuant to a public offering by the Company, (ii)
issued pursuant to any merger or other consolidation of the Company with another
Person, (iii) issued for services or in a transaction the purpose of which is
not to raise capital, (iv) excluded from the definition of "Additional Shares of
Common Stock" under Section 4.4.1(d), or (v) constituting Series D Preferred
Stock authorized by the Certificate of Designation designating the Series D
Preferred Stock filed on March 13, 2000 but issued after the date thereof for
consideration not less than the initial purchase price of the Series D Preferred
Stock.
7. Amendments. The provisions of these terms of the Series B Convertible
Preferred Stock may not be amended, modified or waived without the written
consent or affirmative vote of a majority of the holders of the Series B
Convertible Preferred Stock. Except to the extent required by law, the vote of
the holders of any other class of capital stock of the Company is not required
for the amendment, modification or waiver of the terms of this Certificate of
Designation.
Digital Commerce Corporation has caused this certificate to be signed by
Tony Bansal, its President, and attested by William H. Seippel, its Secretary,
this 13th day of March, 2000.
/s/ Tony Bansal
---------------------------
President
ATTEST:
/s/ William H. Seippel
- ---------------------------------------
Secretary
<PAGE> 33
AMENDED CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PREFERRED STOCK OF
DIGITAL COMMERCE CORPORATION
DIGITAL COMMERCE CORPORATION, a corporation duly organized and validly
existing under the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY that pursuant to the provisions of Section 151
of the Delaware General Corporation Law, its Board of Directors duly adopted the
following resolutions amending the rights, preferences, privileges and
restrictions of the Company's Series C Preferred Stock:
WHEREAS, on September 2, 1999, the Company filed the Certificate of
Designations, Preferences and Rights of the Series C Preferred Stock of the
Company pursuant to Section 151 of the Delaware General Corporation Law setting
forth the designations and the powers, privileges and rights, and the
qualifications, limitations and restrictions of the Series C Preferred Stock;
and
WHEREAS, as of the date hereof, no shares of the Series C Preferred Stock
have been issued by the Company; and
WHEREAS, immediately prior to the filing of this Amended Certificate of
Designations, the Company filed its Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware; and
WHEREAS, three hundred thousand (300,000) shares of preferred stock have
been designated as Series A Preferred Stock, par value $0.01 per share pursuant
to the Certificate of Designations, Preferences and Rights of Preferred Stock
filed with the Secretary of State of the State of Delaware on November 3, 1995;
and
WHEREAS, six million (6,000,000) shares of preferred stock have been
designated as Series B Preferred Stock pursuant to the Certificate of
Designations, Preferences and Rights of the Series B Preferred Stock filed with
the Secretary of State of the State of Delaware on March 26, 1999; and
WHEREAS, eight million seven hundred nine thousand nine hundred two
(8,709,902) shares of preferred stock have been designated as Series D
Redeemable Convertible Preferred Stock, par value $0.01 per share pursuant to
the Certificate of Designations, Preferences and Rights of the Series D
Redeemable Convertible Preferred Stock filed with the Secretary of State of the
State of Delaware on the date hereof; and
WHEREAS, the Board of Directors has determined that the designations and
the powers, privileges and rights, and the qualifications, limitations and
restrictions of the Series C Preferred Stock should be amended and re-designated
as Series C Convertible Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that three million five hundred thousand
(3,500,000) shares shall be designated as Series C Convertible Preferred Stock,
par value $0.01 per share. The remaining shares of the preferred stock of the
Company may be issued in one or more series. The following is a statement of the
designations and the powers, privileges and rights, and
<PAGE> 34
the qualifications, limitations and restrictions thereof in respect of the
Series C Convertible Preferred Stock:
1. Dividends. No dividends of cash or other property shall be paid on the
common stock of the Company (the "Common Stock") (other than additional shares
of Common Stock) unless the shares of Series C Convertible Preferred Stock
receive the same dividends, pari passu with shares of any other series of
Preferred Stock, that such shares would have received had they been converted
into Common Stock immediately prior to the record date for such dividend.
2. Liquidation Preference. In the event of (a) any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, (b)
unless agreed otherwise in writing by a majority of the holders of the Series C
Convertible Preferred Stock, a merger, recapitalization or consolidation of the
Company in which the holders of capital stock of the Company do not retain a
majority of the voting power of the surviving entity or (c) the sale of all or
substantially all of the assets of the Company, distributions to the
stockholders of the Company shall be made in the following manner: The holders
of Series C Convertible Preferred Stock shall first be entitled to receive, pari
passu with any distribution of any of the assets of the Company to the holders
of any other series of Preferred Stock and prior and in preference to any
distribution of any of the assets of the Company to the holders of any Common
Stock or other capital stock of the Company, an amount equal to the aggregate
initial purchase price applicable to such Series C Convertible Preferred Stock
and each other series of Preferred Stock. The initial purchase price per share
for Series C Convertible Preferred Stock is $2.86. After payment of the
aggregate initial purchase price to the holders of Series C Convertible
Preferred Stock and each other series of Preferred Stock, the holders of Series
C Convertible Preferred Stock shall then be entitled to receive, pari passu with
any distribution of any of the assets of the Company to the holders of any other
series of Preferred Stock and prior and in preference to any distribution of any
of the assets of the Company to the holders of any Common Stock or other capital
stock of the Company, at their option, either:
(i) an amount which would equal a 10% rate of return compounded
annually on the initial purchase price applicable to the Preferred Stock held by
such holders from the Original Issue Date to the date of distribution; or
(ii) the amount that would be payable pursuant to such transaction to
the holders of Preferred Stock if they converted their shares of Preferred Stock
into Common Stock immediately prior to such transaction.
The aggregate amount to be paid to the holders of Preferred Stock pursuant to
the foregoing provisions of this Section 2 is referred to as the "Preferential
Amount". If the assets and funds of the Company shall be insufficient to permit
the payment of the full Preferential Amount to the holders of Preferred Stock,
then the entire assets of the Company legally available for distribution shall
be distributed ratably among the holders of Preferred Stock in accordance with
the aggregate liquidation preference of the shares of Preferred Stock held by
each of them. After payment has been made to the holders of Preferred Stock of
the full amount to which they are entitled above, the holders of Common Stock
shall be entitled to share ratably in the remaining assets without participation
by the holders of Preferred Stock.
<PAGE> 35
3. Voting. Except as otherwise required by law, or as specifically
provided herein, the holders of shares of the Series C Convertible Preferred
Stock shall vote as a single class with the holders of Common Stock and shall
have such votes in respect of each share of Series C Convertible Preferred Stock
on any matter submitted to the holders of Common Stock as the number of shares
of Common Stock into which shares of Series C Convertible Preferred Stock may
then be converted. Record holders of Series C Convertible Preferred Stock shall
be entitled to notice of any stockholders' meeting or solicitation of
stockholders' consents in the manner provided in the Bylaws of the Company for
general notices.
4. Conversion.
4.1 Right of Conversion. Each share of Series C Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time or
from time to time, at the office of the Company or any transfer agent for the
Series C Convertible Preferred Stock into the number of shares of the Common
Stock of the Company obtained by dividing the initial purchase price by the then
effective conversion price of the Series C Convertible Preferred Stock (as from
time to time adjusted by this Section 4, the "Conversion Price"). The initial
Conversion Price shall be equal to the Purchase Price. All calculations under
this Section 4 shall be made to the nearest one hundredth of a cent.
4.2 Automatic Conversion. Each share of Series C Convertible Preferred
Stock shall automatically be converted into shares of Common Stock at the then
effective Conversion Price upon the closing of the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, covering the offer and sale of Common Stock for the account of the
Company to the public generally and providing net proceeds to the Company (after
underwriter commissions and discounts and other offering expenses) of not less
than $30,000,000 and at a price per share of Common Stock not less than 200% of
the initial Conversion Price, adjusted for stock splits and stock dividends
after the Original Issue Date (as hereinafter defined) (a "Qualified Public
Offering").
4.3 Mechanics of Conversion. Before any holder of Series C Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock and to receive certificates therefor, such holder shall surrender the
Series C Convertible Preferred Stock certificates, duly endorsed, at the office
of the Company or of any transfer agent for the Series C Convertible Preferred
Stock, and shall give written notice to the Company at such office that such
holder elects to convert the same; provided, however, that in the event of an
automatic conversion pursuant to Section 4.2, the outstanding shares of Series C
Convertible Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, further, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless and until the certificates evidencing such shares of Series C Convertible
Preferred Stock are either delivered to the Company or its transfer agent as
provided above, or the holder provides evidence reasonably satisfactory to the
Company or its transfer agent that such certificates have been lost, stolen,
destroyed or mutilated and delivers an indemnity bond in such reasonable amount
as the Company may determine. The Company shall, as soon as practicable after
such delivery, or execution of such agreement in the case of a lost, stolen or
destroyed certificate, issue and deliver at such office to such holder of Series
C Convertible
<PAGE> 36
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Series C Convertible Preferred Stock so converted.
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, or in the case of automatic conversion
immediately upon closing of the Qualified Public Offering, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
4.4 Adjustment of Conversion Price due to Issuance of Additional Shares.
The Conversion Price shall be subject to adjustment as follows:
4.4.1 Special Definitions
(a) "Options" 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 the
Series D Convertible Preferred Stock is first issued by the Company.
(c) "Convertible Securities" shall mean any indebtedness, shares
or other securities 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 4.4.6, deemed to be issued) by the
Company after the Original Issue Date, other than shares of Common Stock issued
or issuable (or, pursuant to Section 4.4.6, deemed to be issued) at any time:
(i) upon conversion of the Series C Convertible Preferred
Stock authorized herein, convertible notes or any other series of
Preferred Stock or upon exercise of the other options and warrants
outstanding on the Original Issue Date;
(ii) as a stock dividend, stock split or similar
distribution on the Series C Convertible Preferred Stock or any other
capital stock of the Company or any other event for which adjustment
is made pursuant to Section 4.4.3;
(iii) Options or shares of Common Stock issuable upon
exercise of Options to the extent such Options have been reserved for
such purpose as of the date hereof pursuant to the Company's stock
option plan and do not exceed 6,477,847 shares;
(iv) in connection with sales of Common Stock or other
Future Shares to the holders of the Series C Convertible Preferred
Stock pursuant to the exercise by such holders of their rights under
Section 6.1;
<PAGE> 37
(v) by way of dividend or other distribution on securities
excluded from the definition of Additional Shares of Common Stock by
the foregoing clauses of this Section 4.4.1(d); or
(vi) by conversion or exchange of the Series A Notes in
accordance with section 6.8 of the Purchase Agreement.
4.4.2 No Adjustment of Conversion Price. No adjustment in the Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
Stock (a) unless the consideration per share (determined pursuant to Section
4.4.7) for an Additional Share of Common Stock issued or deemed to be issued by
the Company is less than the applicable Conversion Price in effect on the date
of, and immediately prior to, such issue, or (b) if prior to such issuance a
majority of the holders of Series C Convertible Preferred Stock give a written
waiver of such adjustment.
4.4.3 Adjustment of Conversion Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to Section 4.4.6 but excluding Additional Shares of Common Stock described in
Section 4.4.4) for a consideration per share less than the applicable Conversion
Price of the Series C Convertible Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event, the applicable
Conversion Price shall be reduced, concurrently with such issue, to a new
Conversion Price obtained by dividing (a) an amount equal to the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issue
multiplied by the then applicable Conversion Price and (ii) the consideration,
if any, deemed received by the Company upon such issue by (b) the total number
of shares of Common Stock deemed to be outstanding immediately after such issue;
provided, however, that, for purposes of any calculation under this Section
4.4.3, all shares of Common Stock outstanding or issuable upon conversion of
outstanding Options, Convertible Securities (including the Series C Convertible
Preferred Stock) immediately prior to giving effect to such calculation shall be
deemed to be outstanding. In no event will the Conversion Price be adjusted as
the result of any issuance of any Additional Shares of Common Stock for any
amount equal to or higher than the Conversion Price in effect immediately prior
to such issuance.
4.4.4 Adjustment of Conversion Price for Certain Option Grants. In the
event the Company grants options pursuant to a stock option plan deemed to be
the issuance of Additional Shares of Common Stock pursuant to Section 4.4.6 at
any time within twelve months of the Original Issue Date, then and in such
event, the applicable Conversion Price shall be reduced, concurrently with such
grant, to a new Conversion Price equal to the Conversion Price in effect
immediately prior to the issuance of such Additional Shares of Common Stock
multiplied by a fraction the numerator of which is the number of shares of
Common Stock deemed outstanding immediately prior to such issuance and the
denominator of which is the number of shares of Common Stock deemed outstanding
immediately after such issuance, after taking into account the adjustment of the
Conversion Price pursuant to this Section 4.4.4 (assuming for purposes of this
calculation that all shares of Common Stock outstanding or issuable upon
conversion or exercise of Options and Convertible Securities (including the
Series C Convertible Preferred Stock) shall be deemed to be outstanding). Any
grant of options pursuant to a stock option plan deemed to be the issuance of
Additional Shares of Common Stock pursuant to Section 4.4.6 at any time after
twelve months of the Original Issue Date shall be subject to Section 4.4.3.
<PAGE> 38
4.4.5 Adjustments for Subdivisions, Stock Dividends, Combinations or
Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be increased by way of stock issued as a dividend for no
consideration or subdivided (by stock split or otherwise) into a greater number
of shares of Common Stock, the respective Conversion Prices then in effect
shall, concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. 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 respective Conversion Prices then
in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
4.4.6 Deemed Issue of Additional Shares of Common Stock Options and
Convertible Securities. Except as provided in Sections 4.4.1, 4.4.3, 4.4.4 or
4.4.5, in the event the Company at any 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, however, that for
purposes of this Section 4.4.6 Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 4.4.7) of such Additional Shares of Common Stock would be
less than the applicable Conversion Price in effect on the date of, and
immediately prior to, such issue, or such record date, as the case may be
(except as provided below in this Section 4.4.6); and provided, further, that in
any such case in which Additional Shares of Common Stock are deemed to be
issued:
(a) no further adjustment in the applicable Conversion Price shall be made
upon the subsequent issue of shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities or upon the
subsequent issue of such Convertible Securities or Options;
(b) if such Options or Convertible Securities by their terms provide, with
the passage of time or otherwise, for any increase in the consideration payable
to the Company, or any increase in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the applicable
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 becoming effective, be
recomputed to reflect such increase insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(c) 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 applicable 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 be readjusted to the Conversion Price
<PAGE> 39
that would have been in effect if no adjustment had been made with respect to
such Options or Convertible Securities;
(d) in the event of any changes in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of such Options or
Convertible Securities, including a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in effect shall be readjusted to
the Conversion Price that would have been in effect if the adjustment which was
made upon the issuance of such Options or Convertible Securities had been made
upon the basis of such change;
(e) no readjustment pursuant to clauses (b) or (d) above shall have the
effect of increasing the applicable Conversion Price to an amount which exceeds
the lower of (i) the applicable Conversion Price on the original adjustment
date, or (ii) the applicable Conversion Price that resulted from the issuance or
deemed issuance of other Additional Shares of Common Stock between the original
adjustment date and such readjustment date; and
(f) in the event the Company amends the terms of any Options or
Convertible Securities (whether such Options or Convertible Securities were
outstanding on the Original Issue Date or were issued after the Original Issue
Date), then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the provisions of
this Section 4.4.6 shall apply.
4.4.7 Determination of Consideration. For purposes of this Section 4.4, the
consideration received by the Company 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
amount of cash proceeds received by the Company 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 value thereof at the time of such issue, as
determined in good faith by the Board of Directors of the Company; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the
Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, which is allocated to the Additional Shares of Common
Stock as determined in good faith by the Board of Directors.
(b) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 4.4.6, relating to Options and Convertible
Securities, shall be determined by dividing
<PAGE> 40
(i) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or Convertible
Securities, plus, subject to Section 4.4.6(b), the minimum aggregate
amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities by
(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.
4.4.8 Other Dilutive Events. In case any event shall occur as to which the
other provisions of this Section 4.4 are not strictly applicable, but the
failure to make any adjustment in the Conversion Price would not fairly protect
the conversion rights represented by the Series C Convertible Preferred Stock in
accordance with the intention of this Section 4, then, upon request of a
majority of the holders of Series C Convertible Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent public accountants
of recognized national standing (which may be the regular auditors of the
Company) to give their opinion as to the adjustment, if any, on a basis
consistent with the intention of this Section 4, necessary to preserve without
dilution the conversion rights represented by the Series C Convertible Preferred
Stock. Upon receipt of such opinion, the Company will promptly furnish a copy
thereof to the holders of the Series C Convertible Preferred Stock and the
Conversion Price shall be adjusted in accordance therewith to the extent
recommended by such accountants. The fees and expenses of such accountants shall
be paid by the Company; provided, however, that if such accountants opine that
no adjustment is necessary, such fees and expenses will be paid by the holders
of the Series C Convertible Preferred Stock.
4.5 Other Distributions. In the event the Company shall declare a
distribution payable in securities of the Company (other than shares of Common
Stock), securities of other entities, securities evidencing indebtedness issued
by the Company or other entities, assets (including cash dividends) or options
or rights, then, in each such case, the holders of the Series C Convertible
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock into which their shares of Series C Convertible Preferred Stock were
convertible as of the record date fixed for the determination of the holders of
Common Stock entitled to receive such distribution.
4.6 Subsequent Events. In the event of any recapitalization, consolidation
or merger of the Company or its successor which does not entitle the holders of
the Series C Convertible Preferred Stock to the distribution provided for in
Section 2, the shares of Series C Convertible Preferred Stock shall be
convertible into such shares or other interests as the Series C Convertible
Preferred Stock would have been entitled if the Series C Convertible Preferred
Stock had been converted into Common Stock immediately prior to such event.
<PAGE> 41
4.7 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 4, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each 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 is
based. The Company shall, upon the written request at any time of any holder of
Series C Convertible Preferred Stock, furnish or cause to be furnished to such
holder a certificate setting forth (a) all such adjustments and readjustments
previously made, (b) the Conversion Price at the time in effect, and (c) the
number of shares of Common Stock and the amount, if any, of other property which
at such time would be received upon the conversion of Series C Convertible
Preferred Stock.
4.8 Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series C Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the name of the holder of the Series C Convertible Preferred Stock
which is being converted.
5. Certain Covenants.
5.1 Special Restrictions. At any time when shares of Series C Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Company is required by law or by
the Certificate of Incorporation, and in addition to any other vote required by
law or the Certificate of Incorporation, without the consent of the majority of
the holders of the Series C Convertible Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as a
class, the Company will not:
(a) create or authorize the creation of any additional class or
series of shares of stock, or issue any shares thereof, unless the same
ranks junior to the Series C Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Company or increase the authorized amount of the Series C Convertible
Preferred Stock or increase the authorized amount of any additional class
or series of shares of stock unless the same ranks junior to the Series C
Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, or create or
authorize any instrument or security convertible into shares of Series C
Convertible Preferred Stock or into shares of any other class or series of
stock unless the same ranks junior to the Series C Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Company, whether any such creation, authorization or
increase shall be by means of amendment to the Certificate of Incorporation
or by merger, consolidation or otherwise;
(b) amend, alter or repeal its Certificate of Incorporation or
By-laws in a manner that is adverse to the holders of Series C Convertible
Preferred Stock in any respect or for which the holders of Series C
Convertible Preferred Stock did not receive prior written notice;
(c) purchase or set aside any sums for the purchase of any shares of
stock or other securities other than (i) the Series C Convertible Preferred
Stock as provided in this
<PAGE> 42
Amended Certificate of Designation, (ii) the repurchase of the Series A
Notes in accordance with section 6.8 of that certain Securities Purchase
Agreement, dated as of March 13, 2000, among the Company and the Investors
party thereto and (iii) the purchase of shares of Common Stock or other
securities from former employees of the Company who acquired such shares
directly from the Company or the Stock Option Plan (as defined in the
Purchase Agreement), if each such purchase is made pursuant to contractual
rights held by the Company relating to the termination of employment of any
such former employee and the total purchase price does not exceed $100,000
plus any applicable life insurance payments for all such purchases from
each such former employee;
(d) redeem or otherwise acquire any shares of Series C Convertible
Preferred Stock except pursuant to a purchase offer made pro rata to all
holders of the shares of Series C Convertible Preferred Stock on the basis
of the aggregate number of outstanding shares of Series C Convertible
Preferred Stock then held by each such holder;
(e) consent to any liquidation, dissolution or winding up of the
Company; or
(f) consolidate or merge into or with any other entity or entities or
sell or transfer all or substantially all its assets.
5.2 No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, recapitalization, transfer of
all or a substantial portion of its assets, consolidation, merger, dissolution,
issue or sale of securities, closing or transfer books or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed under this Certificate of Designation by the
Company, but will at all times in good faith assist in carrying out all the
provisions of this Certificate of Designation and in taking all such action as
may be necessary or appropriate in order to protect the conversion and other
rights of the holders of Series C Convertible Preferred Stock against
impairment.
5.3 Reservation of Shares. So long as any share of Series C Convertible
Preferred Stock shall remain outstanding, the Company shall at all times reserve
and keep available, free from preemptive rights, out of its authorized capital
stock, for the purpose of issuance upon conversion of the Series C Convertible
Preferred Stock, the full number of shares of Common Stock then issuable upon
exercise of all outstanding shares of Series C Convertible Preferred Stock. If
the Company's Common Stock shall be listed on any national stock exchange, the
Company at its expense shall include in its listing application all of the
shares of Common Stock reserved for issuance upon conversion of the Series C
Convertible Preferred Stock (subject to issuance or notice of issuance to the
exchange) and will similarly procure the listing of any further Common Stock
reserved for issuance upon conversion of the Series C Convertible Preferred
Stock at any subsequent time as a result of adjustments in the outstanding
Common Stock or otherwise.
5.4 Validity of Shares. The Company will from time to time take all such
action as may be required to assure that all shares of Common Stock which may be
issued upon conversion of any share of the Series C Convertible Preferred Stock
will, upon issuance, be legally and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof. Without limiting the generality of the foregoing, the Company
will from time to time take all such action as may be required to assure that
the par value per share, if any, of the Common Stock
<PAGE> 43
is at all times equal to or less than the lowest quotient obtained by dividing
the then current par value of the Series C Convertible Preferred Stock by the
number of shares of Common Stock into which each share of Series C Convertible
Preferred Stock can, from time to time, be converted.
5.5 Notice of Certain Events. If at any time:
(a) the Company shall declare any dividend or distribution payable to
the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of any class or any other
rights;
(c) any recapitalization of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation or business organization shall occur; or
(d) a voluntary or involuntary dissolution, liquidation or winding up
of the Company shall occur;
then, in any one or more of such cases, the Company shall give the registered
holders of the Series C Convertible Preferred Stock written notice, by
registered mail, of the date on which a record shall be taken for such dividend,
distribution or subscription rights or for determining stockholders entitled to
vote upon such recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding up and of the date when any such transaction shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least 20
days prior to the record date with respect thereto.
5.6 No Reissuance of Preferred Stock. No shares of Series C Convertible
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of Preferred Stock accordingly.
6. Preemptive Rights.
6.1 Right of First Offer. Until the closing under a Qualified Public
Offering, the Company shall not issue or sell any Common Stock (including
securities convertible into, or options, warrants or other rights to purchase
Common Stock, but excluding the shares described in Section 6.7) (collectively,
the "Future Shares") to any Person (an "Offeree") without first providing each
holder of Series C Convertible Preferred Stock the right to subscribe for its
Proportionate Percentage of the Future Shares at the same price and on the same
terms which shall have been offered or are proposed to be offered by the Company
to such Offeree and which shall have been specified by the Company in a notice
delivered to each holder of Series C Convertible Preferred Stock (the
<PAGE> 44
"Proposal"). The Proposal by its terms shall remain open and irrevocable for a
period of 30 days from the date it is delivered by the Company to each holder of
Series C Convertible Preferred Stock (the "Future Shares Exercise Period"). The
Proposal shall also certify that the Company has either (a) received a bona fide
offer from a prospective purchaser, who shall be identified in such
certification, and that the Company in good faith believes a binding agreement
of sale is obtainable for consideration having a fair market, cash equivalent or
present value set forth in such certification; or (b) intends in good faith to
make an offering of its securities to prospective purchasers, who shall be
identified to the extent possible in such certification at the price and on the
terms set forth in such certification.
"Proportionate Percentage" means, for any holder of Series C Convertible
Preferred Stock, the percentage of Future Shares covered by the Proposal equal
to (i) the number of shares of Common Stock into which the shares of Series C
Convertible Preferred Stock held by such holder would then be convertible
divided by (ii) the total number of shares of Common Stock outstanding at the
time of delivery of the Proposal (assuming the conversion or exercise of all
issued and outstanding Convertible Securities and Options).
6.2 Notice. Notice of each holder of Series C Convertible Preferred
Stock's intention to accept the Proposal made pursuant to Section 6.1 shall be
evidenced by a writing signed by such holder and delivered to the Company prior
to the end of the Future Shares Exercise Period (the "Notice of Purchase")
setting forth that portion of the Future Shares such holder elects to purchase
(the "Accepted Shares").
6.3 Full Acceptance. In the event that each holder of Series C Convertible
Preferred Stock elects to purchase all of the shares offered to such holder in
the Proposal, the Company shall sell to each such holder, pursuant to Section
6.6, the number of Accepted Shares set forth in such holder's Notice of
Purchase.
6.4 Partial Acceptance. In the event that one or more holders of Series C
Convertible Preferred Stock do not elect to purchase all of the shares offered
to such holders in the Proposal, the Company shall sell to each holder electing
to purchase, pursuant to Section 6.6, the number of Accepted Shares, if any, set
forth in such holder's Notice of Purchase. Holders of Series C Convertible
Preferred Stock may purchase pursuant to Section 6.6 any remaining shares
offered in the Proposal not purchased by the other holders of Series C
Convertible Preferred Stock pro rata based on the respective Proportionate
Percentages of such holders wishing to purchase additional shares, or as they
may otherwise agree.
6.5 No Fractional Shares. For the purpose of avoiding fractions as to
Future Shares, the Company may adjust upward or downward by not more than one
full share the number of Future Shares which any holder of Series C Convertible
Preferred Stock would otherwise be entitled to purchase.
6.6 Sale of Shares. No later than 30 days after the expiration of the
Future Shares Exercise Period, the Company shall deliver to each holder of
Series C Convertible Preferred Stock who has submitted a Notice of Purchase to
the Company a notice indicating the number of Future Shares which the Company
shall sell to such holder pursuant to this Section 6 and the terms and
conditions of such sale, which shall be in all respects (including unit price
and interest rates) the
<PAGE> 45
same as specified in the proposal. The sale to such holders of such Future
Shares shall take place not later than 10 days after receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for purchase
by the holders of Series C Convertible Preferred Stock as provided above shall
take place not later than 90 days after the expiration of the Future Shares
Exercise Period. Such sale shall be upon terms and conditions in all respects
(including unit price and interest rates) which are no more favorable to such
Offeree or less favorable to the Company than those set forth in the Proposal.
Any refused Future Shares not purchased by the Offeree as contemplated by the
Proposal within the 90-day period specified above shall remain subject to this
Section 6.
6.7 Exclusion of Certain Shares. Notwithstanding any contrary provision of
this Section 6, Future Shares shall not include shares of Common Stock or other
securities (i) issued pursuant to a public offering by the Company, (ii) issued
pursuant to any merger or other consolidation of the Company with another
Person, (iii) issued for services or in a transaction the purpose of which is
not to raise capital, (iv) excluded from the definition of "Additional Shares of
Common Stock" under Section 4.4.1(d), or (v) constituting Series D Preferred
Stock authorized by the Certificate of Designation designating the Series D
Preferred Stock filed on March 13, 2000 but issued after the date thereof for
consideration not less than the initial purchase price of the Series D Preferred
Stock.
7. Amendments. The provisions of these terms of the Series C Convertible
Preferred Stock may not be amended, modified or waived without the written
consent or affirmative vote of a majority of the holders of the Series C
Convertible Preferred Stock. Except to the extent required by law, the vote of
the holders of any other class of capital stock of the Company is not required
for the amendment, modification or waiver of the terms of this Certificate of
Designation.
Digital Commerce Corporation has caused this certificate to be signed by
Tony Bansal, its President, and attested by William H. Seippel, its Secretary,
this 13th day of March, 2000.
/s/ Tony Bansal
------------------------------
President
ATTEST:
/s/ William H. Seippel
- --------------------------------
Secretary
<PAGE> 46
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of the
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
of
DIGITAL COMMERCE CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
Digital Commerce Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Company"), does by its President hereby
certify that pursuant to the provisions of Section 151 of the Delaware General
Corporation Law, its Board of Directors, duly adopted the following resolution
establishing the rights, preferences, privileges and restrictions of the Series
D Redeemable Convertible Preferred Stock of the Company, which resolution
remains in full force and effect as of the date hereof:
WHEREAS: The Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") authorizes the issuance of up to
50,000,000 shares of preferred stock, $0.01 par value, in one or more series,
with such voting powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as may be stated and expressed in a resolution or
resolutions providing for the creation and issuance of any such series adopted
by the Board of Directors of the Company prior to the issuance of any shares of
such series, pursuant to authority expressly vested in the Board of Directors by
the Certificate of Incorporation. Of the 50,000,000 shares of Preferred Stock of
the Company, 300,000 shares have been designated Series A Preferred Stock, par
value $0.01 per share, 6,000,000 shares have been designated Series B
Convertible Preferred Stock, par value $0.01 per share, and 3,500,000 shares
have been designated Series C Convertible Preferred Stock, par value $0.01 per
share; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority as aforesaid, to authorize and fix the terms of the
Series D Redeemable Convertible Preferred Stock and the number of shares
constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Article III, Section 3.2
of the Certificate of Incorporation, the Series D Redeemable Convertible
Preferred Stock is hereby authorized on the terms and with the provisions herein
set forth:
<PAGE> 47
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of the
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
of
DIGITAL COMMERCE CORPORATION
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<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DESIGNATION AND AMOUNT...................................................................................1
2. DEFINITIONS..............................................................................................1
3. DIVIDENDS................................................................................................4
4. LIQUIDATION PREFERENCE...................................................................................4
5. VOTING RIGHTS; REPRESENTATIVE DIRECTORS; ETC.............................................................5
5.1. Votes Per Share; Notices........................................................................5
5.2. Preferred Directors.............................................................................5
5.3. Tenure..........................................................................................5
6. REDEMPTION...............................................................................................6
6.1. Optional Redemption.............................................................................6
7. CONVERSION...............................................................................................6
7.1. Right of Conversion.............................................................................6
7.2. Automatic Conversion............................................................................7
7.3. Mechanics of Conversion.........................................................................7
7.4. Special Adjustments of Conversion Price.........................................................8
7.5. Adjustment of Conversion Price due to Issuance of Additional Shares.............................9
7.5.1. Special Definitions...................................................................10
7.5.2. No Adjustment of Conversion Price.....................................................10
7.5.3. Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock.....11
7.5.4. Adjustment of Conversion Price for Certain Option Grants..............................11
7.5.5. Adjustments for Subdivisions, Stock Dividends, Combinations or Consolidation of
Common Stock............................................................................................12
7.5.6. Deemed Issue of Additional Shares of Common Stock - Options and Convertible
Securities..............................................................................................12
7.5.7. Determination of Consideration........................................................13
7.5.8. Other Dilutive Events.................................................................14
7.6. Other Distributions............................................................................15
7.7. Subsequent Events..............................................................................15
8. CERTAIN COVENANTS.......................................................................................15
8.1. Special Restrictions...........................................................................15
8.2. No Impairment..................................................................................16
8.3. Reservation of Shares..........................................................................17
8.4. Validity of Shares.............................................................................17
8.5. Notice of Certain Events.......................................................................17
8.6. No Reissuance of Preferred Stock...............................................................18
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C> <C>
9. PREEMPTIVE RIGHTS.......................................................................................18
9.1. Right of First Offer...........................................................................18
9.2. Notice.........................................................................................19
9.3. Full Acceptance................................................................................19
9.4. Partial Acceptance.............................................................................19
9.5. No Fractional Shares...........................................................................19
9.6. Sale of Shares.................................................................................19
9.7. Exclusion of Certain Shares....................................................................20
10. AMENDMENTS..............................................................................................20
</TABLE>
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<PAGE> 50
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
1. DESIGNATION AND AMOUNT. The designation of the fourth series of the
authorized preferred stock, $0.01 par value, of the Company shall be Series D
Redeemable Convertible Preferred Stock (the "Series D Preferred Stock"). The
number of shares of Series D Preferred Stock shall initially be 8,709,902,
subject to increase (but only as to shares of Preferred Stock authorized by the
Certificate of Incorporation with respect to which the powers, designations,
preferences and rights shall not then have been previously designated) or
decrease (but not below the number of shares thereof then outstanding) from time
to time by action of the Board of Directors.
The relative powers, preferences and rights, and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, granted to or imposed on the Series D Preferred Stock are
set forth below:
2. DEFINITIONS. Certain capitalized terms are used in this Certificate of
Designation as specifically defined below in this Section 2, certain capitalized
terms used in this Certificate of Designation which are defined in the Purchase
Agreement shall have the meanings ascribed to such terms in the Purchase
Agreement and certain capitalized terms used in this Certificate of Designation
which are defined in the Certificate of Incorporation shall have the meanings
ascribed to such terms in the Certificate of Incorporation. Except as the
context otherwise explicitly requires, (a) the capitalized term "Section" refers
to sections of this Certificate of Designation, (b) references to a particular
Section include all subsections thereof, (c) the word "including" shall be
construed as "including without limitation", (d) accounting terms not otherwise
defined herein have the meaning provided under generally accepted accounting
principles, (e) references to a particular statute or regulation include all
rules and regulations thereunder and any successor statute, regulation or rules,
in each case as from time to time in effect and (f) references to a particular
Person include such Person's successors and assigns to the extent not prohibited
by this Certificate of Designation and the Purchase Agreement. References to
"the date hereof" mean the effective date of this Certificate of Designation.
2.1. "Accepted Shares" is defined in Section 9.2.
2.2. "Additional Shares of Common Stock" is defined in Section 7.5.1(d).
2.3. "By-laws" means all written rules, regulations, procedures, by-laws
and all other similar documents relating to the management, governance or
internal regulation of a Person other than an individual, or interpretive of the
Certificate of Incorporation or other charter documents of such Person, each as
from time to time amended or modified.
2.4. "Common Stock" means the common stock, $0.01 par value, of the
Company.
2.5. "Company" means Digital Commerce Corporation, a Delaware corporation.
<PAGE> 51
2.6. "Conversion Price" is defined in Section 7.1.
2.7. "Convertible Securities" is defined in Section 7.5.1(c).
2.8. "Fair Market Value" means with respect to any share of Series D
Preferred Stock (a "Relevant Share"), as of any date, (i) if such stock is
listed or admitted to trade on a national securities exchange, the averaged
closing price of such stock on such national securities exchange for the 20
trading days immediately prior to such date, (ii) if such stock is not listed on
a national securities exchange, then the average closing price of such stock
quoted on the National Market System of the National Association of Securities
Dealers, Inc. for the 20 trading days immediately prior to such date (iii) if
such stock is not listed to trade on the National Market System, the average of
the mean between the bid and asked price for such stock on any electronic
quotation system for the 20 trading days immediately prior to such date, or (iv)
if such stock is not listed or admitted to trade on a national securities
exchange, the National Market System or any electronic quotation system, the pro
rata portion represented by such Relevant Share (assuming that all shares of
Common Stock issuable upon exercise or conversion of Options or Convertible
Securities are outstanding) of the value of the whole Company as a going
concern, not giving effect to any discount which may otherwise be attributable
to the fact that such Relevant Shares constitute less than a majority of the
shares outstanding or lack liquidity. Fair Market Value shall initially be
determined in good faith by the Board; provided, however, that in each case a
Relevant Share is valued by the Board, the Required Holders may deliver to the
Company a written objection to the determination of the Board of Fair Market
Value of the Relevant Shares. If the Board and Required Holders thereafter agree
on a Fair Market Value of the Relevant Shares, such agreement shall be binding
on the Company and all of the holders of the Relevant Shares. If the parties are
unable to agree on the Fair Market Value of the Relevant Shares, they shall
mutually select an independent nationally recognized investment banking firm to
determine the Fair Market Value of the Relevant Shares and the determination of
such investment banking firm shall be binding upon the parties. In the event the
parties are unable to mutually select an investment banking firm, the Company
and the holders of the Relevant Shares shall each select their own
nationally-recognized investment banking firm and the two such firms shall
mutually select a third nationally-recognized investment banking firm to
determine the Fair Market Value of the Relevant Shares and the determination of
the third investment banking firm shall be binding upon the parties hereto. All
costs incurred in connection with determining Fair Market Value of the Relevant
Shares, including the costs of engaging each nationally-recognized investment
banking firm, shall be borne equally by the Company and the holders of the
Relevant Shares.
2.9. "Future Shares" is defined in Section 9.1.
2.10. "Future Shares Exercise Period" is defined in Section 9.1.
2.11. "Investor Agreements" means the Purchase Agreement, this Certificate
of Designation, the Stockholders Agreement, the Registration Rights Agreement,
and any other agreement or instrument entered into between the Company and the
Investors and any amendment or modification to any of the foregoing.
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<PAGE> 52
2.12. "Member of the Immediate Family", as applied to any individual, means
each parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust or family limited partnership created
for the benefit of one or more of such persons.
2.13. "Net Revenue" is defined in Section 7.4.
2.14. "Notice of Purchase" is defined in Section 9.2.
2.15. "Offeree" is defined in Section 9.1.
2.16. "Options" is defined in Section 7.5.1(a).
2.17. "Original Issue Date" is defined in Section 7.5.1(b).
2.18. "Person" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, business trust,
limited liability company and any governmental department or agency or political
subdivision.
2.19. "Powertrust Adjustment Event" means the failure of the Company to
spin off its Powertrust.com, Inc. to its stockholders, or to limit its
investments in Powertrust.com, Inc., as required by section 6.7.3 of the
Purchase Agreement.
2.20. "Preferential Amount" is defined in Section 4.
2.21. "Preferred Director" is defined in Section 5.3.
2.22. "Preferred Stock" means the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock of the Company.
2.23. "Proportionate Percentage" is defined in Section 9.1.
2.24. "Proposal" is defined in Section 9.1.
2.25. "Purchase Agreement" means the Securities Purchase Agreement, dated
as of March 13, 2000, among the Company and the Investors party thereto.
2.26. "Purchase Price" is defined in Section 7.1.
2.27. "Qualified Public Offering" is defined in Section 7.2.
-3-
<PAGE> 53
2.28. "Redemption Notice" is defined in Section 6.1.
2.29. "Redemption Notice Date" is defined in Section 6.1(a).
2.30. "Redemption Price" is defined in Section 6.1.
2.31. "Relevant Shares" is defined in Section 2.9.
2.32. "Required Holders" means the holders of a majority of the then
outstanding Series D Preferred Stock.
2.33. "Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
2.34. "Series C Preferred Stock" means the Series C Convertible Preferred
Stock, par value $0.01 per share, of the Company.
2.35. "Series D Preferred Stock" is defined in Section 1.
2.36. "Target Revenue" is defined in Section 7.4.
3. DIVIDENDS. No dividends of cash or other property shall be paid on the Common
Stock (other than additional shares of Common Stock) unless the shares of Series
D Preferred Stock receive the same dividends, pari passu with shares of any
other Series of Preferred Stock, that such shares would have received had they
been converted into Common Stock immediately prior to the record date for such
dividend.
4. LIQUIDATION PREFERENCE. In the event of (a) any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, (b) unless agreed
otherwise in writing by the Required Holders, a merger, recapitalization or
consolidation of the Company in which the holders of capital stock of the
Company do not retain a majority of the voting power of the surviving entity or
(c) the sale of all or substantially all of the assets of the Company,
distributions to the stockholders of the Company shall be made in the following
manner: The holders of Series D Preferred Stock shall first be entitled to
receive, pari passu with any distribution of any of the assets of the Company to
the holders of any other series of Preferred Stock and prior and in preference
to any distribution of any of the assets of the Company to the holders of any
Common Stock or other capital stock of the Company, an amount equal to the
aggregate initial purchase price applicable to such Series D Preferred Stock and
each other series of Preferred Stock. After payment of the aggregate initial
purchase price to the holders of Series D Preferred Stock and each other series
of Preferred Stock, the holders of Series D Preferred Stock shall then be
entitled to receive, pari passu with any distribution of any of the assets of
the Company to the holders of any other series of Preferred Stock and prior and
in preference to any distribution of any of the assets of the Company to the
holders of any Common Stock or other capital stock of the Company, at their
option, either:
-4-
<PAGE> 54
(i) an amount which would equal a 10% rate of return compounded
annually on the initial purchase price applicable to the Preferred Stock
held by such holders from the Original Issue Date to the date of
distribution; or
(ii) the amount that would be payable pursuant to such transaction to
the holders of Preferred Stock if they converted their shares of Preferred
Stock into Common Stock immediately prior to such transaction.
The aggregate amount to be paid to the holders of Preferred Stock pursuant to
the foregoing provisions of this Section 4 is referred to as the "Preferential
Amount". If the assets and funds of the Company shall be insufficient to permit
the payment of the full Preferential Amount to the holders of Preferred Stock,
then the entire assets of the Company legally available for distribution shall
be distributed ratably among the holders of Preferred Stock in accordance with
the aggregate liquidation preference of the shares of Preferred Stock held by
each of them. After payment has been made to the holders of Preferred Stock of
the full amount to which they are entitled above, the holders of Common Stock
shall be entitled to share ratably in the remaining assets without participation
by the holders of Preferred Stock.
5. VOTING RIGHTS; REPRESENTATIVE DIRECTORS; ETC.
5.1. Votes Per Share; Notices. Except as otherwise provided herein
(including the election of Preferred Directors pursuant to Section 5.2) or
provided by law, the holders of Series D Preferred Stock shall vote as a single
class with the holders of Common Stock and shall have such votes in respect of
each share of Series D Preferred Stock on any matter submitted to the holders of
Common Stock as the number of shares of Common Stock into which shares of Series
D Preferred Stock may then be converted. Record holders of Series D Preferred
Stock shall be entitled to notice of any stockholders' meeting or solicitation
of stockholders' consents in the manner provided in the Bylaws of the Company
for general notices.
5.2. Preferred Directors. Prior to the consummation of a Qualified Public
Offering, (a) so long as at least 50% of the shares of Series D Preferred Stock
issued on the Original Issue Date remain outstanding, the holders of a majority
of the shares of Series D Preferred Stock, voting separately as a single class,
shall be entitled to elect two directors and (b) so long as at least 10% (but
less than 50%) of the shares of Series D Preferred Stock issued on the Original
Issue Date remain outstanding, the holders of a majority of the shares of Series
D Preferred Stock, voting separately as a single class, shall be entitled to
elect one director. Prior to the consummation of a Qualified Public Offering,
the number of directors of the Company shall not exceed seven.
5.3. Tenure. Each Director elected by the holders of Series D Preferred
Stock pursuant to Section 5.2 (a "Preferred Director") shall serve for a term as
provided in the following sentence and until such Preferred Director's successor
is elected and qualified. One Preferred Director shall be classified as a Class
I Director (as defined in the Company's Certificate of
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<PAGE> 55
Incorporation) and one Preferred Director shall be classified as a Class II
Director (as defined in the Company's Certificate of Incorporation), each one
serving for the term applicable to such class. So long as the holders of Series
D Preferred Stock are entitled to elect Preferred Directors, any vacancy in the
position of a Preferred Director may be filled only by vote of the holders of a
majority of the shares of Series D Preferred Stock entitled to vote thereon. A
Preferred Director may, during such Preferred Director's term of office, be
removed at any time, with or without cause, only by the affirmative vote of the
holders of record of a majority of the outstanding shares of Series D Preferred
Stock.
6. REDEMPTION.
6.1. Optional Redemption. In the event that any outstanding shares of
Series D Preferred Stock have not been converted pursuant to Section 7 on or
prior to February 28, 2005, then, at any time on or after March 1, 2005, upon
notice to the Company given by the Required Holders (a "Redemption Notice"), the
Company shall redeem all, but not less than all, outstanding shares of Series D
Preferred Stock at a price (the "Redemption Price") that is equal to the greater
of:
(a) The Purchase Price plus an amount which would equal a 10% rate of
return compounded annually on the Purchase Price from the Original Issue
Date to the date on which the Company receives the Redemption Notice (the
"Redemption Notice Date"); or
(b) The Fair Market Value on the Redemption Notice Date.
The Redemption Price shall be paid in cash in twelve equal installments on the
last day of each fiscal quarter following the Redemption Notice Date. The right
created by this Section 6.1 shall terminate upon the conversion of all of the
outstanding shares of Series D Preferred Stock pursuant to Section 7.
7. CONVERSION.
7.1. Right of Conversion. Each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof, at any time or from time to
time, at the office of the Company or any transfer agent for the Series D
Preferred Stock into the number of shares of the Common Stock of the Company
obtained by dividing the initial purchase price per share of $5.8347 (the
"Purchase Price") by the then effective conversion price of the Series D
Preferred Stock (as from time to time adjusted by this Section 7, the
"Conversion Price"). The initial Conversion Price shall be equal to the Purchase
Price. All calculations under this Section 7 shall be made to the nearest one
hundredth of a cent. The corresponding initial purchase price for shares of
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock
will be $1.00 and $2.86 per share, respectively.
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7.2. Automatic Conversion. Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon the closing of the first underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, with lead underwriters approved by the Required Holders (it being
understood that the following Persons are hereby approved as lead underwriters
by the Required Holders: Deutsche Banc Alex. Brown, Banc of America Securities,
LLC, Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, Merrill Lynch Pierce Fenner & Smith Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Thomas Weisel Partners LLC,
FleetBoston Robertson Stephens Inc. and Salomon Smith Barney Inc.), covering the
offer and sale of Common Stock for the account of the Company to the public
generally and providing net proceeds to the Company (after underwriter
commissions and discounts and other offering expenses) of not less than
$30,000,000 and at a price per share of Common Stock not less than 200% of the
initial Conversion Price, adjusted for stock splits and stock dividends after
the Original Issue Date (a "Qualified Public Offering").
7.3. Mechanics of Conversion. Before any holder of Series D Preferred
Stock shall be entitled to convert the same into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the Series D
Preferred Stock certificates, duly endorsed, at the office of the Company or of
any transfer agent for the Series D Preferred Stock, and shall give written
notice to the Company at such office that such holder elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
to Section 7.2, the outstanding shares of Series D Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, further, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Series D Preferred Stock are either delivered to the
Company or its transfer agent as provided above, or the holder provides evidence
reasonably satisfactory to the Company or its transfer agent that such
certificates have been lost, stolen, destroyed or mutilated and delivers an
indemnity bond in such reasonable amount as the Company may determine (or, in
the case of a security held by any Investor or any institutional holder that
constitutes a "Qualified Institutional Buyer" under the Securities Act or by
such Investor's or such institutional holder's nominee, of any unsecured
indemnity agreement from such Investor or such other holder reasonably
satisfactory to the Company). The Company shall, as soon as practicable after
such delivery, or execution of such agreement in the case of a lost, stolen or
destroyed certificate, issue and deliver at such office to such holder of Series
D Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Series D Preferred Stock so converted. 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 D Preferred Stock
to be converted, or in the case of automatic conversion immediately upon closing
of the Qualified Public Offering, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
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7.4. Special Adjustments of Conversion Price.
7.4.1. Performance Adjustment. The Conversion Price shall be subject
to adjustment as follows. In the event that a Qualified Public Offering has
not occurred on or prior to December 31, 2000 and the net revenue ("Net
Revenue") of the Company for the fiscal year then ended, as determined in
accordance with United States generally accepted accounting principles, is
less than $18,000,000 (the "Target Revenue"), the Conversion Price shall be
appropriately adjusted as of December 31, 2000 so that the aggregate number
of shares of Common Stock into which the outstanding shares of Series D
Preferred Stock convert increases by the product of:
(a) the product of (i) 0.00000133% of the aggregate number of shares
of Common Stock outstanding (including for purposes of this calculation all
shares of Common Stock issued or issuable upon conversion, exercise or
exchange of all Options and Convertible Securities and the additional
shares of Common Stock into which the Shares of Series D Preferred Stock
are convertible after giving effect to this adjustment) multiplied by (ii)
the number of dollars by which actual Net Revenue of the Company is less
than the Target Revenue for the 2000 Fiscal Year,
multiplied by (b) a fraction, the numerator of which is the number of
shares of Series D Preferred Stock outstanding at the time such adjustment
is made and the denominator of which is the total number of shares of
Series D Preferred Stock issued on or after the Original Issuance Date;
provided, however, that such percentage increase shall in no event exceed
10% in the aggregate. Such percentage increase shall be adjusted on a
proportionate dollar for dollar basis for any shortfall in Net Revenue. The
Company shall determine Net Revenue and make the adjustment to the
Conversion Price, if any, upon receipt of the audited financial statements
of the Company for the fiscal year ended December 31, 2000; provided,
however, that:
(A) if the Company intends to file a registration statement with the
SEC for a public offering of the Company's securities on or after January
1, 2001 but prior to the date upon which such audited financial statements
become available, Net Revenue shall be determined by the Company based on
the financial information available to the Company as of January 1, 2001
(subject to the review and approval of the Required Holders which shall not
be unreasonably withheld) and the adjustment, if any, shall be made to the
Conversion Price as of such date and the registration statement for such
offering shall not be filed until such adjustment, if any, has been made;
provided, however, that in the event that the Company and the Required
Holders are unable to agree upon such adjustment, the Company may file such
registration statement and, after the
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audited financial statements for such fiscal year become available, the
Company shall make any required adjustment prior to the effectiveness of
such registration statement;
(B) if the Company intends to file a registration statement with the
SEC for a public offering of the Company's securities on or after October
31, 2000 but prior to January 1, 2001, the Company and the Required Holders
will negotiate in good faith to agree within five business days on an
appropriate adjustment, if any, to the Conversion Price based on estimates,
as of the time of such filing, of Net Revenue for the fiscal year ending
December 31, 2000 and the registration statement for such offering shall
not be filed until the Company and the Required Holders have agreed upon
such adjustment, if any; provided, however, that in the event that the
Company and the Required Holders are unable to agree upon such adjustment,
the Company may file such registration statement and, after the audited
financial statements for such fiscal year become available, the Company
shall make any required adjustment prior to the effectiveness of such
registration statement; and
(C) if the Company has filed a registration statement with the SEC for
a public offering of the Company's securities prior to October 31, 2000
that has not been declared effective by the SEC on or prior to January 1,
2001, Net Revenue shall be determined by the Company based on the financial
information available to the Company as of January 1, 2001 (subject to the
review and approval of the Required Holders which shall not be unreasonably
withheld) and the adjustment, if any, shall be made to the Conversion Price
as of such date; provided, however, that in the event that the Company and
the Required Holders are unable to agree upon such adjustment, the Company
may file such registration statement and, after the audited financial
statements for such fiscal year become available, the Company shall make
any required adjustment prior to the effectiveness of such registration
statement.
7.4.2. Powertrust.com Spin-Off Adjustment. In the event a Powertrust
Adjustment Event has occurred, the Conversion Price shall be adjusted by
multiplying the Conversion Price in effect immediately prior to this
adjustment by 0.9513. For example, if the Conversion Price in effect
immediately prior to such adjustment is $5.8347 and the aggregate number of
issued and outstanding shares of Series D Preferred Stock is 8,709,902,
then the Conversion Price after such adjustment shall be $5.5506 ($5.8347 X
0.9513) and the number of shares of Common Stock into which all issued and
outstanding shares of Series D Preferred Stock are convertible after giving
effect to such adjustment will be 9,155,767.
7.5. Adjustment of Conversion Price due to Issuance of Additional Shares.
The Conversion Price shall be subject to adjustment as follows:
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7.5.1. Special Definitions.
(a) "Options" 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 the Series D Preferred
Stock is first issued by the Company.
(c) "Convertible Securities" shall mean any indebtedness, shares or other
securities 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 7.5.6, deemed to be issued) by the Company after
the Original Issue Date, other than shares of Common Stock issued or issuable
(or, pursuant to Section 7.5.6, deemed to be issued) at any time:
(i) upon conversion of the Series D Preferred Stock authorized herein,
convertible notes or any other series of Preferred Stock or upon exercise
of the other options and warrants outstanding on the Original Issue Date;
(ii) as a stock dividend, stock split or similar distribution on the
Series D Preferred Stock or any other capital stock of the Company or any
other event for which adjustment is made pursuant to Section 7.5.3;
(iii) Options or shares of Common Stock issuable upon exercise of
Options to the extent such Options have been reserved for such purpose as
of the date hereof pursuant to the Company's stock option plans (or are
otherwise authorized by the Company's Board of Directors) and do not exceed
6,477,847 shares;
(iv) in connection with sales of Common Stock or other Future Shares
to the holders of the Series D Preferred Stock pursuant to the exercise by
such holders of their rights under Section 10.1;
(v) by way of dividend or other distribution on securities excluded
from the definition of Additional Shares of Common Stock by the foregoing
clauses of this Section 7.5.1(d); or
(vi) by conversion or exchange of the Series A Notes in accordance
with section 6.8 of the Purchase Agreement.
7.5.2. No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock (a) unless the consideration per share (determined
pursuant to Section 7.5.7) for an
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Additional Share of Common Stock issued or deemed to be issued by the
Company is less than the applicable Conversion Price in effect on the date
of, and immediately prior to, such issue or (b) if prior to such issuance
the Required Holders give a written waiver of such adjustment.
7.5.3. Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company shall issue Additional
Shares of Common Stock (including Additional Shares of Common Stock deemed
to be issued pursuant to Section 7.5.6 but excluding Additional Shares of
Common Stock described in Section 7.5.4) for a consideration per share less
than the applicable Conversion Price of the Series D Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, the applicable Conversion Price shall be reduced, concurrently with
such issue, to a new Conversion Price obtained by dividing (a) an amount
equal to the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issue multiplied by the then applicable
Conversion Price and (ii) the consideration, if any, deemed received by the
Company upon such issue by (b) the total number of shares of Common Stock
deemed to be outstanding immediately after such issue; provided, however,
that, for purposes of any calculation under this Section 7.5.3, all shares
of Common Stock outstanding or issuable upon conversion of outstanding
Options, Convertible Securities (including the Series D Preferred Stock)
immediately prior to giving effect to such calculation shall be deemed to
be outstanding. In no event will the Conversion Price be adjusted as the
result of any issuance of any Additional Shares of Common Stock for any
amount equal to or higher than the Conversion Price in effect immediately
prior to such issuance.
7.5.4. Adjustment of Conversion Price for Certain Option Grants. In
the event the Company grants options pursuant to a stock option plan deemed
to be the issuance of Additional Shares of Common Stock pursuant to Section
7.5.6 at any time within twelve months of the Original Issue Date, then and
in such event, the applicable Conversion Price shall be reduced,
concurrently with such grant, to a new Conversion Price equal to .the
Conversion Price in effect immediately prior to the issuance of such
Additional Shares of Common Stock multiplied by a fraction the numerator of
which is the number of shares of Common Stock deemed outstanding
immediately prior to such issuance and the denominator of which is the
number of shares of Common Stock deemed outstanding immediately after such
issuance, after taking into account the adjustment of the Conversion Price
pursuant to this Section 7.5.4 (assuming for purposes of this calculation
that all shares of Common Stock outstanding or issuable upon conversion or
exercise of Options and Convertible Securities (including the Series D
Preferred Stock) shall be deemed to be outstanding). Any grant of options
pursuant to a stock option plan deemed to be the issuance of Additional
Shares of Common Stock pursuant to Section 7.5.6 at any time after twelve
months of the Original Issue Date shall be subject to Section 7.5.3.
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7.5.5. Adjustments for Subdivisions, Stock Dividends, Combinations or
Consolidation of Common Stock. In the event the outstanding shares of
Common Stock shall be increased by way of stock issued as a dividend for no
consideration or subdivided (by stock split or otherwise) into a greater
number of shares of Common Stock, the respective Conversion Prices then in
effect shall, concurrently with the effectiveness of such increase or
subdivision, be proportionately decreased. 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 respective Conversion Prices then in effect shall, concurrently
with the effectiveness of such combination or consolidation, be
proportionately increased.
7.5.6. Deemed Issue of Additional Shares of Common Stock-Options and
Convertible Securities. Except as provided in Sections 7.5.1, 7.5.3, 7.5.4
or 7.5.5, in the event the Company at any 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, however, that for purposes
of this Section 7.5.6 Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant
to Section 7.5.7) of such Additional Shares of Common Stock would be less
than the applicable Conversion Price in effect on the date of, and
immediately prior to, such issue, or such record date, as the case may be
(except as provided below in this Section 7.5.6); and provided, further,
that in any such case in which Additional Shares of Common Stock are deemed
to be issued:
(a) no further adjustment in the applicable Conversion Price shall be
made upon the subsequent issue of shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities or upon
the subsequent issue of such Convertible Securities or Options;
(b) if such Options or Convertible Securities by their terms provide, with
the passage of time or otherwise, for any increase in the consideration payable
to the Company, or any increase in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the applicable
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 becoming effective, be
recomputed to reflect such increase insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
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(c) 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 applicable 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 be readjusted to the Conversion Price that would
have been in effect if no adjustment had been made with respect to such Options
or Convertible Securities;
(d) in the event of any changes in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of such Options or
Convertible Securities, including a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in effect shall be readjusted to
the Conversion Price that would have been in effect if the adjustment which was
made upon the issuance of such Options or Convertible Securities had been made
upon the basis of such change;
(e) no readjustment pursuant to clauses (b) or (d) above shall have the
effect of increasing the applicable Conversion Price to an amount which exceeds
the lower of (i) the applicable Conversion Price on the original adjustment
date, or (ii) the applicable Conversion Price that resulted from the issuance or
deemed issuance of other Additional Shares of Common Stock between the original
adjustment date and such readjustment date; and
(f) in the event the Company amends the terms of any Options or Convertible
Securities (whether such Options or Convertible Securities were outstanding on
the Original Issue Date or were issued after the Original Issue Date), then such
Options or Convertible Securities, as so amended, shall be deemed to have been
issued after the Original Issue Date and the provisions of this Section 7.5.6
shall apply.
7.5.7. Determination of Consideration. For purposes of this Section
7.5, the consideration received by the Company 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
amount of cash proceeds received by the Company 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 value thereof at the time of such issue, as
determined in good faith by the Board of Directors of the Company; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the
Company for consideration
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which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, which is
allocated to the Additional Shares of Common Stock as determined in
good faith by the Board of Directors.
(b) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 7.5.6, relating to Options and Convertible
Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or Convertible
Securities, plus, subject to Section 7.5.6(b), the minimum aggregate
amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities by
(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.
7.5.8.Other Dilutive Events. In case any event shall occur as to
which the other provisions of this Section 7.5 are not strictly applicable,
but the failure to make any adjustment in the Conversion Price would not
fairly protect the conversion rights represented by the Series D Preferred
Stock in accordance with the intention of this Section 7, then, upon
request of the Required Holders, the Board of Directors of the Company
shall appoint a firm of independent public accountants of recognized
national standing (which may be the regular auditors of the Company) to
give their opinion as to the adjustment, if any, on a basis consistent with
the intention of this Section 7, necessary to preserve without dilution the
conversion rights represented by the Series D Preferred Stock. Upon receipt
of such opinion, the Company will promptly furnish a copy thereof to the
holders of the Series D Preferred Stock and the Conversion Price shall be
adjusted in accordance therewith to the extent recommended by such
accountants. The fees and expenses of such accountants shall be paid by the
Company; provided, however, that if such accountants opine that no
adjustment is necessary, such fees and expenses will be paid by the holders
of the Series D Preferred Stock.
7.6.Other Distributions. In the event the Company shall declare a
distribution payable in securities of the Company (other than shares of Common
Stock), securities of other entities, securities evidencing indebtedness issued
by the Company or other entities, assets (including cash dividends) or options
or rights, then, in each such case, the holders of the Series D Preferred
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Stock shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common Stock into which
their shares of Series D Preferred Stock were convertible as of the record date
fixed for the determination of the holders of Common Stock entitled to receive
such distribution.
7.7. Subsequent Events. In the event of any recapitalization,
consolidation or merger of the Company or its successor which does not entitle
the holders of the Series D Preferred Stock to the distribution provided for in
Section 4, the shares of Series D Preferred Stock shall be convertible into such
shares or other interests as the Series D Preferred Stock would have been
entitled if the Series D Preferred Stock had been converted into Common Stock
immediately prior to such event.
7.8. Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 7, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of Series D
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment is based. The Company
shall, upon the written request at any time of any holder of Series D Preferred
Stock, furnish or cause to be furnished to such holder a certificate setting
forth (a) all such adjustments and readjustments previously made, (b) the
Conversion Price at the time in effect, and (c) the number of shares of Common
Stock and the amount, if any, of other property which at such time would be
received upon the conversion of Series D Preferred Stock.
7.9. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series D Preferred Stock shall be made without charge to the
holders thereof for any issuance tax; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
the name of the holder of the Series D Preferred Stock which is being converted.
8. CERTAIN COVENANTS.
8.1. Special Restrictions. At any time when shares of Series D Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Company is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the consent of the Required
Holders, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class, the Company will not:
(a) create or authorize the creation of any additional class or series of
shares of stock, or issue any shares thereof, unless the same ranks junior to
the Series D Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company or increase the authorized
amount of the Series D Preferred Stock or increase the authorized amount of any
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additional class or series of shares of stock unless the same ranks junior to
the Series D Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, or create or authorize
any instrument or security convertible into shares of Series D Preferred Stock
or into shares of any other class or series of stock unless the same ranks
junior to the Series D Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, whether any such
creation, authorization or increase shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise;
(b) amend, alter or repeal its Certificate of Incorporation or By-laws in a
manner that is adverse to the holders of Series D Preferred Stock in any respect
or for which the holders of Series D Preferred Stock did not receive prior
written notice;
(c) purchase or set aside any sums for the purchase of any shares of stock
or other securities other than (i) the Series D Preferred Stock as provided in
this Certificate of Designation, (ii) the repurchase of the Series A Notes in
accordance with section 6.8 of the Purchase Agreement and (iii) the purchase of
shares of Common Stock or other securities from former employees of the Company
who acquired such shares directly from the Company or the Stock Option Plan (as
defined in the Purchase Agreement), if each such purchase is made pursuant to
contractual rights held by the Company relating to the termination of employment
of any such former employee and the total purchase price does not exceed
$100,000 plus any applicable life insurance payments for all such purchases from
each such former employee;
(d) redeem or otherwise acquire any shares of Series D Preferred Stock
except as expressly authorized in Section 6 or pursuant to a purchase offer made
pro rata to all holders of the shares of Series D Preferred Stock on the basis
of the aggregate number of outstanding shares of Series D Preferred Stock then
held by each such holder;
(e) consent to any liquidation, dissolution or winding up of the Company;
or
(f) consolidate or merge into or with any other entity or entities or sell
or transfer all or substantially all its assets.
8.2. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, recapitalization, transfer of
all or a substantial portion of its assets, consolidation, merger, dissolution,
issue or sale of securities, closing or transfer books or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed under this Certificate of Designation by the
Company, but will at all times in good faith assist in carrying out all the
provisions of this Certificate of Designation and in taking all such action as
may be necessary or appropriate in order to protect the conversion and other
rights of the holders of Series D Preferred Stock against impairment.
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8.3. Reservation of Shares. So long as any share of Series D Preferred
Stock shall remain outstanding, the Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized capital stock, for
the purpose of issuance upon conversion of the Series D Preferred Stock, the
full number of shares of Common Stock then issuable upon exercise of all
outstanding shares of Series D Preferred Stock. If the Company's Common Stock
shall be listed on any national stock exchange, the Company at its expense shall
include in its listing application all of the shares of Common Stock reserved
for issuance upon conversion of the Series D Preferred Stock (subject to
issuance or notice of issuance to the exchange) and will similarly procure the
listing of any further Common Stock reserved for issuance upon conversion of the
Series D Preferred Stock at any subsequent time as a result of adjustments in
the outstanding Common Stock or otherwise.
8.4. Validity of Shares. The Company will from time to time take all such
action as may be required to assure that all shares of Common Stock which may be
issued upon conversion of any share of the Series D Preferred Stock will, upon
issuance, be legally and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issuance thereof. Without
limiting the generality of the foregoing, the Company will from time to time
take all such action as may be required to assure that the par value per share,
if any, of the Common Stock is at all times equal to or less than the lowest
quotient obtained by dividing the then current par value of the Series D
Preferred Stock by the number of shares of Common Stock into which each share of
Series D Preferred Stock can, from time to time, be converted.
8.5. Notice of Certain Events. If at any time:
(a) the Company shall declare any dividend or distribution payable to
the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of any class or any other
rights;
(c) any recapitalization of the Company, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to,
another corporation or business organization shall occur; or
(d) a voluntary or involuntary dissolution, liquidation or winding up
of the Company shall occur;
then, in any one or more of such cases, the Company shall give the registered
holders of the Series D Preferred Stock written notice, by registered mail, of
the date on which a record shall be taken for such dividend, distribution or
subscription rights or for determining stockholders entitled to vote upon such
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding up and of the date when any such transaction shall take place, as the
case may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall
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participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such recapitalization, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such written notice
shall be given at least 20 days prior to the record date with respect thereto.
8.6. No Reissuance of Preferred Stock. No shares of Series D Preferred
Stock acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of Preferred Stock
accordingly.
9. PREEMPTIVE RIGHTS.
9.1. Right of First Offer. Until the closing under a Qualified Public
Offering, the Company shall not issue or sell any Common Stock (including
securities convertible into, or options, warrants or other rights to purchase
Common Stock, but excluding the shares described in Section 9.7) (collectively,
the "Future Shares") to any Person (an "Offeree") without first providing each
holder of Series D Preferred Stock the right to subscribe for its Proportionate
Percentage of the Future Shares at the same price and on the same terms which
shall have been offered or are proposed to be offered by the Company to such
Offeree and which shall have been specified by the Company in a notice delivered
to each holder of Series D Preferred Stock (the "Proposal"). The Proposal by its
terms shall remain open and irrevocable for a period of 30 days from the date it
is delivered by the Company to each holder of Series D Preferred Stock (the
"Future Shares Exercise Period"). The Proposal shall also certify that the
Company has either (a) received a bona fide offer from a prospective purchaser,
who shall be identified in such certification, and that the Company in good
faith believes a binding agreement of sale is obtainable for consideration
having a fair market, cash equivalent or present value set forth in such
certification; or (b) intends in good faith to make an offering of its
securities to prospective purchasers, who shall be identified to the extent
possible in such certification at the price and on the terms set forth in such
certification.
"Proportionate Percentage" means, for any holder of Series D Preferred
Stock, the percentage of Future Shares covered by the Proposal equal to (i) the
number of shares of Common Stock into which the shares of Series D Preferred
Stock held by such holder would then be convertible divided by (ii) the total
number of shares of Common Stock outstanding at the time of delivery of the
Proposal (assuming the conversion or exercise of all issued and outstanding
Convertible Securities and Options).
9.2. Notice. Notice of each holder of Series D Preferred Stock's intention
to accept the Proposal made pursuant to Section 9.1 shall be evidenced by a
writing signed by such holder and delivered to the Company prior to the end of
the Future Shares Exercise Period (the "Notice of Purchase") setting forth that
portion of the Future Shares such holder elects to purchase (the "Accepted
Shares").
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<PAGE> 68
9.3. Full Acceptance. In the event that each holder of Series D Preferred
Stock elects to purchase all of the shares offered to such holder in the
Proposal, the Company shall sell to each such holder, pursuant to Section 9.6,
the number of Accepted Shares set forth in such holder's Notice of Purchase.
9.4. Partial Acceptance. In the event that one or more holders of Series D
Preferred Stock do not elect to purchase all of the shares offered to such
holders in the Proposal, the Company shall sell to each holder electing to
purchase, pursuant to Section 9.6, the number of Accepted Shares, if any, set
forth in such holder's Notice of Purchase. Holders of Series D Preferred Stock
may purchase pursuant to Section 9.6 any remaining shares offered in the
Proposal not purchased by the other holders of Series D Preferred Stock pro rata
based on the respective Proportionate Percentages of such holders wishing to
purchase additional shares, or as they may otherwise agree.
9.5. No Fractional Shares. For the purpose of avoiding fractions as to
Future Shares, the Company may adjust upward or downward by not more than one
full share the number of Future Shares which any holder of Series D Preferred
Stock would otherwise be entitled to purchase.
9.6. Sale of Shares. No later than 30 days after the expiration of the
Future Shares Exercise Period, the Company shall deliver to each holder of
Series D Preferred Stock who has submitted a Notice of Purchase to the Company a
notice indicating the number of Future Shares which the Company shall sell to
such holder pursuant to this Section 9 and the terms and conditions of such
sale, which shall be in all respects (including unit price and interest rates)
the same as specified in the proposal. The sale to such holders of such Future
Shares shall take place not later than 10 days after receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for purchase
by the holders of Series D Preferred Stock as provided above shall take place
not later than 90 days after the expiration of the Future Shares Exercise
Period. Such sale shall be upon terms and conditions in all respects (including
unit price and interest rates) which are no more favorable to such Offeree or
less favorable to the Company than those set forth in the Proposal. Any refused
Future Shares not purchased by the Offeree as contemplated by the Proposal
within the 90-day period specified above shall remain subject to this Section 9.
9.7. Exclusion of Certain Shares. Notwithstanding any contrary provision of
this Section 9, Future Shares shall not include shares of Common Stock or other
securities (i) issued pursuant to a public offering by the Company, (ii) issued
pursuant to any merger or other consolidation of the Company with another
Person, (iii) issued for services or in a transaction the purpose of which is
not to raise capital, (iv) excluded from the definition of "Additional Shares
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<PAGE> 69
of Common Stock" under Section 7.5.1(d) or (v) constituting Series D Preferred
Stock authorized by this Certificate of Designation as of the date hereof but
issued after the date hereof for consideration not less than the initial
Purchase Price.
10. AMENDMENTS. The provisions of these terms of the Series D Preferred
Stock may not be amended, modified or waived without the written consent or
affirmative vote of the Required Holders. Except to the extent required by law,
the vote of the holders of any other class of capital stock of the Company is
not required for the amendment, modification or waiver of the terms of this
Certificate of Designation.
Digital Commerce Corporation has caused this certificate to be signed by
Tony Bansal, its President, and attested by William H. Seippel, its Secretary
this 13th day of March, 2000.
/s/ Tony Bansal
-------------------------
President
ATTEST:
/s/ William H. Seippel
- ----------------------------------------
Secretary
-20-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
DIGITAL COMMERCE CORPORATION
<PAGE> 2
BYLAWS
OF
DIGITAL COMMERCE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. - OFFICES..............................................................................................1
Section 1. Registered Office......................................................................1
Section 2. Other Offices..........................................................................1
ARTICLE II. - MEETINGS OF STOCKHOLDERS............................................................................1
Section 1. Place of Meetings......................................................................1
Section 2. Annual Meetings........................................................................1
Section 3. Special Meetings.......................................................................3
Section 4. Notice.................................................................................4
Section 5. Voting List............................................................................4
Section 6. Quorum.................................................................................5
Section 7. Required Vote; Withdrawal Of Quorum....................................................5
Section 8. Method of Voting; Proxies..............................................................5
Section 9. Record Date............................................................................6
Section 10. Action Without Meeting.................................................................7
Section 11. Inspectors of Elections................................................................7
ARTICLE III. - DIRECTORS..........................................................................................8
Section 1. Management.............................................................................8
Section 2. Number; Election.......................................................................8
Section 3. Change in Number.......................................................................9
Section 4. Removal................................................................................9
Section 5. Vacancies and Newly Created Directorships..............................................9
Section 6. Election of Directors; Cumulative Voting Prohibited...................................10
Section 7. Place of Meetings.....................................................................10
Section 8. First Meetings........................................................................10
Section 9. Regular Meetings......................................................................10
Section 10. Special Meetings......................................................................10
Section 11. Quorum................................................................................10
Section 12. Action Without Meeting; Telephone Meetings............................................10
Section 13. Chairman of the Board.................................................................11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 14. Compensation..........................................................................11
ARTICLE IV. - COMMITTEES.........................................................................................11
Section 1. Designation...........................................................................11
Section 2. Number; Qualification; Term...........................................................11
Section 3. Authority.............................................................................11
Section 4. Committee Changes; Removal............................................................11
Section 5. Alternate Members of Committees.......................................................11
Section 6. Regular Meetings......................................................................12
Section 7. Special Meetings......................................................................12
Section 8. Quorum; Majority Vote.................................................................12
Section 9. Minutes...............................................................................12
Section 10. Compensation..........................................................................12
Section 11. Responsibility........................................................................12
ARTICLE V. - NOTICES.............................................................................................12
Section 1. Method................................................................................12
Section 2. Waiver................................................................................13
Section 3. Exception to Notice Requirement.......................................................13
ARTICLE VI. - OFFICERS...........................................................................................13
Section 1. Officers..............................................................................13
Section 2. Election..............................................................................14
Section 3. Compensation..........................................................................14
Section 4. Removal and Vacancies.................................................................14
Section 5. President.............................................................................14
Section 6. Vice Presidents.......................................................................14
Section 7. Secretary.............................................................................14
Section 8. Assistant Secretaries.................................................................15
Section 9. Treasurer.............................................................................15
Section 10. Assistant Treasurers..................................................................15
ARTICLE VII. - CERTIFICATES REPRESENTING SHARES..................................................................15
Section 1. Certificates..........................................................................15
Section 2. Legends...............................................................................15
Section 3. Lost Certificates.....................................................................15
Section 4. Transfer of Shares....................................................................16
Section 5. Registered Stockholders...............................................................16
ARTICLE VIII. - GENERAL PROVISIONS...............................................................................16
Section 1. Dividends.............................................................................16
Section 2. Reserves..............................................................................16
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 3. Checks................................................................................16
Section 4. Fiscal Year...........................................................................17
Section 5. Seal..................................................................................17
Section 6. Indemnification.......................................................................17
Section 7. Transactions with Directors and Officers..............................................17
Section 8. Amendments............................................................................17
Section 9. Table of Contents; Headings...........................................................18
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
DIGITAL COMMERCE CORPORATION
(the "Corporation")
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be at 1209 Orange Street, New Castle County, Delaware, 19801.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders for all purposes
may be held at such time and place, either within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual Meetings. (a) The annual meeting of the stockholders
of the Corporation, for the purpose of election of directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder, (i) the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation, and (ii) such business must be a
proper matter for stockholder action under the General Corporation Law of
Delaware. To be timely, a stockholder's notice must be delivered to the
Secretary at the principal executive offices of the Corporation not later than
the close of business on the sixtieth (60th) day nor earlier than the close of
business on the ninetieth (90th) day prior to the first anniversary of the
preceding year's
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<PAGE> 6
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced more than thirty (30) days prior to or delayed by more than
thirty (30) days after the anniversary of the preceding year's annual meeting,
notice by the stockholder to be timely must be so delivered not earlier than the
close of business on the ninetieth (90th) day prior to such annual meeting and
not later than the close of business on the later of the sixtieth (60th) day
prior to such annual meeting or the tenth (10th) day following the day on which
public announcement of the date of such meeting is first made. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth: (A) as to each person whom the stockholder
proposed to nominate for election or reelection as a director all information
relating to such person ("Nominee Information") that is required to be disclosed
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder in solicitations of proxies for
election of directors in an election contest, and as may otherwise be required
by law (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (B) as to any
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (ii) the class and number of
shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, and (iii) whether either such stockholder
or beneficial owner intends to deliver a proxy statement and form of proxy to
holders of, in the case of the proposal, at least the percentage of the
Corporation's voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, a sufficient number of holders
of the Corporation's voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 2(b) of
these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least
seventy (70) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 2 shall be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth
(10th) day following the day on which such public announcement is first made by
the Corporation.
(d) Excluding persons nominated by the Board of Directors and business
proposed by the Board of Directors to be conducted, only such persons who are
nominated in accordance with the procedures set forth in this Section 2 shall be
eligible to serve as directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the meeting in
2
<PAGE> 7
accordance with the procedures set forth in this Section 2. Except as otherwise
provided by law, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made, or proposed, as the case may be, in accordance with the
procedures set forth in these Bylaws and, if any proposed nomination or business
is not in compliance with these Bylaws, to declare that such defective proposal
or nomination shall not be presented for stockholder action at the meeting and
shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 2, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the Exchange
Act. Nothing in these Bylaws shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
(f) For purposes of this Section 2, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act."
Section 3. Special Meetings. (a) Special meetings of the stockholders
of the Corporation may be called, for any purpose or purposes, by (i) the Board
of Directors pursuant to a resolution approved by a majority of the total number
of authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented by the
Board of Directors for adoption), or (ii) by the holders of shares entitled to
cast not less than a majority of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors shall fix.
(b) If a special meeting of stockholders is properly called by any
person or persons other than the Board of Directors, the request shall be in
writing, specifying the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the President or the Secretary of
the Corporation. No business may be transacted at such special meeting other
than that specified in such notice. The Board of Directors shall determine the
time and place of such special meeting, which shall be held not less than
thirty-five (35) nor more than one hundred twenty (120) days after the date of
the receipt of the request. Upon determination of the time and place of the
meeting, the officer receiving the request shall cause notice to be given to the
stockholders entitled to vote, in accordance with the provisions of Section 4 of
these Bylaws. If the notice is not given within one hundred (100) days after the
receipt of the request, the person or persons properly requesting the meeting
may set the time and place of the meeting and give the notice. Nothing contained
in this paragraph (b) shall be construed as limiting, fixing or affecting the
time when a meeting of stockholders called by action of the Board of Directors
may be held.
3
<PAGE> 8
(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 3(c). In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's delivers Nominee Information with respect to each person nominated
by such stockholder to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the ninetieth (90th) day
prior to such special meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above. Business transacted at all special
meetings shall be confined to the purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date,
and hour of each meeting of the stockholders and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the Secretary, or the officer or person(s) calling the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is to be
sent by mail, it shall be directed to such stockholder at his address as it
appears on the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, in which case it shall be directed to him at such other
address. Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy and shall
not, at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
Section 5. Voting List. At least ten (10) days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the Board of
Directors, shall prepare a complete list of the 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
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or a duly executed waiver of
4
<PAGE> 9
notice of such meeting or, if not so specified, at the place where the meeting
is to be held. Such list shall also be produced and kept at the time and place
of the meeting at all times during such meeting and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or represented by proxy, shall
constitute a quorum at any meeting of stockholders, except as otherwise provided
by statute, the Amended and Restated Certificate of Incorporation or these
Bylaws. If a quorum shall not be present at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation, may adjourn the meeting from time to time until a quorum shall be
present. When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the original meeting had a quorum been present; provided that, if
the adjournment is for more than thirty (30) days or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.
Section 7. Required Vote; Withdrawal Of Quorum. When a quorum is
present at any meeting, the vote of the holders of at least a majority of the
outstanding shares entitled to vote who are present, in person or by proxy,
shall decide any question brought before the meeting, unless the question is one
on which, by express provision of statute, the Amended and Restated Certificate
of Incorporation or these Bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
The stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 8. Method of Voting; Proxies. (a) Except as otherwise provided
by law or by the resolution or resolutions adopted by the Board of Directors
providing for the issuance of any series of preferred stock of the Corporation
("Preferred Stock"), the common stock of the Corporation ("Common Stock") will
have the exclusive right to vote for the election of directors and for all other
purposes. Each holder of Common Stock will be entitled to one vote for each
share of Common Stock held.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. Each proxy shall be filed with the
Secretary of the Corporation prior to or at the time of the meeting.
(c) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to subsection (b) of
this section, the following shall constitute a valid means by which a
stockholder may grant such authority:
5
<PAGE> 10
(i) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or by an authorized officer, director,
employee or agent of the stockholder signing such writing or causing
such stockholder's signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to
act for him as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means
of electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
(d) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (c)
of this section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
(e) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
Section 9. Record Date. (a) In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting. If no record date is fixed by the Board of Directors, 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 next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. 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.
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<PAGE> 11
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by statute or these Bylaws, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in 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. Such delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by statute or
these Bylaws, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 10. Action Without Meeting. (a) From the time and so long as
the Corporation is subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, no action required to be taken or that may be taken at any
annual or special meeting of the stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing to the
taking of any action by written consent is expressly denied, except for action
by unanimous written consent, which is expressly allowed. Such written consent
or consents shall be delivered to the Corporation at its registered office in
Delaware, its principal place of business, or to an officer or agent of the
Corporation having custody of the book in which proceedings of stockholders'
meetings are recorded. Such delivery shall be by hand or by certified or
registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the written consent, and no consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered in the manner required by this section to
the Corporation, written consents signed by a sufficient number of stockholders
to take action are delivered to the Corporation in the manner required by this
section.
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Section 11. Inspectors of Elections. (a) The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist them in the performance of their duties.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Delaware Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Section 212(c)(2) of the General Corporation Law of Delaware, ballots and the
regular books and records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to subsection (b)(v) of this section shall specify the
precise information considered by them including the person or persons from whom
they obtained the information, when the information was obtained, the means by
which the information was obtained and the basis for the inspectors' belief that
such information is accurate and reliable.
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ARTICLE III.
DIRECTORS
Section 1. Management. The business and affairs of the Corporation
shall be managed by its Board of Directors who may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute,
the Amended and Restated Certificate of Incorporation or these Bylaws directed
or required to be exercised or done by the stockholders. The Board of Directors
shall keep regular minutes of its proceedings.
Section 2. Number; Election. The Board of Directors shall consist of no
less than one (3) nor more than nine (9) directors, who need not be stockholders
or residents of the State of Delaware. The directors shall be elected at the
annual meeting of the stockholders, except as hereinafter provided. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock under specified circumstances, shall be divided into three
classes, Class I, Class II and Class III, each class to consist of an equal
number of directors (or as nearly equal as is practicable). Each director shall
serve for a term ending on the third annual meeting following the annual meeting
at which such director was elected; provided, however, that the directors first
elected to Class I shall serve for a term expiring at the annual meeting next
following the end of the calendar year 2000, the directors first elected to
Class II shall serve for a term expiring at the annual meeting next following
the end of the calendar year 2001, and the directors first elected to Class III
shall serve for a term expiring at the annual meeting next following the end of
the calendar year 2002. Each director shall hold office until the annual meeting
at which such director's term expires and, the foregoing notwithstanding, shall
serve until his successor shall have been duly elected and qualifies, unless he
shall resign, become disqualified, disabled or shall otherwise be removed. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 3. Change in Number. The number of directors may be increased
or decreased from time to time by resolution adopted by the affirmative vote of
a majority of the Board of Directors, but no decrease shall have the effect of
shortening the term of any incumbent director.
Section 4. Removal. Except with respect to the rights of the holders of
any class or series of capital stock of the Corporation to remove directors that
are set forth in the Amended and Restated Amended and Restated Certificate of
Incorporation or Certificate of Designation creating such class or series of
capital stock, no director of the Corporation shall be removed from office as a
director by vote or other action of stockholders except for cause. Except as may
otherwise be provided by law, cause for removal of a director shall be deemed to
exist only if: (a) the director whose removal is proposed has been convicted, or
where a director is granted immunity to testify where another has been
convicted, of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (b) such director has been found by the
affirmative
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vote of at least a majority of the entire Board of Directors at any regular or
special meeting of the Board of Directors called for that purpose or by a court
of competent jurisdiction to have been grossly negligent or guilty of misconduct
in the performance of his duties to the Corporation in a matter of substantial
importance to the Corporation; or (c) such director has been adjudicated by a
court of competent jurisdiction to be mentally incompetent, which mental
incompetency directly affects his ability to serve as a director of the
Corporation.
Section 5. Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any class or series of capital stock of the
Corporation, vacancies and newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification, removal or
other cause shall, unless otherwise provided by law, be filled only by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors and not by stockholders. Any
director elected in accordance with the preceding sentence shall hold office for
(i) (in the case of a vacancy resulting from death, resignation, retirement,
disqualification, removal or other cause) the remainder of the full term of the
predecessor director and (ii) (in the case of a newly created directorship) the
class of directors in which the new directorship was created, and (in each case)
until such director's successor shall have been elected and qualifies.
Section 6. Election of Directors; Cumulative Voting Prohibited. At
every election of directors, each stockholder having voting rights shall have
the right to vote in person or by proxy the number of voting shares owned by
such stockholders for as many persons as there are directors to be elected and
for whose election such stockholder has a right to vote. Cumulative voting of
shares of any capital stock having voting rights is prohibited.
Section 7. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 8. First Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of stockholders, and at the same place, unless by unanimous
consent of the directors then elected and serving, such time or place shall be
changed.
Section 9. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on three (3) days' notice to each
director, either personally or by mail or by telegram. Special meetings may be
called in like manner and on like notice on the written request of any one of
the directors. Except as may be otherwise expressly provided by statute, the
Amended and Restated Certificate of Incorporation or these Bylaws, neither the
business to be transacted at, nor
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the purpose of, any special meeting need be specified in a notice or waiver of
notice.
Section 11. Quorum. At all meetings of the Board of Directors, the
presence of a majority of the directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, or the Amended and Restated Certificate of Incorporation or
these Bylaws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 12. Action Without Meeting; Telephone Meetings. Any action
required or permitted to be taken at a meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by all the members of the Board of
Directors or committee, as the case may be. Such consent shall have the same
force and effect as a unanimous vote at a meeting. Subject to applicable notice
provisions and unless otherwise restricted by the Amended and Restated
Certificate of Incorporation, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in and hold a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute presence in person at such
meeting, except where a person's participation is for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 13. Chairman of the Board. The Board of Directors may elect a
Chairman of the Board to preside at their meetings and to perform such other
duties as the Board of Directors may from time to time assign to him.
Section 14. Compensation. Directors, as such, shall not receive any
stated salary for their services, but, by resolution of the Board of Directors,
a fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors; provided, that
nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV.
COMMITTEES
Section 1. Designation. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees.
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Section 2. Number; Qualification; Term. Each committee shall consist of
one or more directors appointed by resolution adopted by a majority of the
entire Board of Directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
Board of Directors. Each committee member shall serve as such until the earliest
of (i) the expiration of such member's term as director, (ii) such member's
resignation as a committee member or as a director, or (iii) such member's
removal as a committee member or as a director.
Section 3. Authority. Each committee, to the extent expressly provided
in the resolution of the Board of Directors establishing such committee, shall
have and may exercise all of the authority of the Board of Directors in the
management of the business and affairs of the Corporation except to the extent
expressly restricted by statute, the Amended and Restated Certificate of
Incorporation or these Bylaws.
Section 4. Committee Changes; Removal. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of,
and to discharge any committee. The Board of Directors may remove any committee
member, at any time, with or without cause.
Section 5. Alternate Members of Committees. The Board of Directors may
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee.
Section 6. Regular Meetings. Regular meetings of any committee may be
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
Section 7. Special Meetings. Special meetings of any committee may be
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two (2) days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
Section 8. Quorum; Majority Vote. At meetings of any committee, a
majority of the number of members designated by the Board of Directors shall
constitute a quorum for the transaction of business. If a quorum is not present
at a meeting of any committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present. The act of a majority of the members present
at any meeting at which a quorum is in attendance shall be the act of a
committee, unless the act of a greater number is required by law, the Amended
and Restated Certificate of Incorporation or these Bylaws.
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Section 9. Minutes. Each committee shall cause minutes of its
proceedings to be prepared and shall report the same to the Board of Directors
upon the request of the Board of Directors. The minutes of the proceedings of
each committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
Section 10. Compensation. Committee members may, by resolution of the
Board of Directors, be allowed a fixed sum and expenses of attendance, if any,
for attending any committee meetings.
Section 11. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE V.
NOTICES
Section 1. Method. Whenever by statute, the Amended and Restated
Certificate of Incorporation, or these Bylaws, notice is required to be given to
any committee member, director, or stockholder and no provision is made as to
how such notice shall be given, personal notice shall not be required, and any
such notice may be given (a) in writing, by mail, postage prepaid, addressed to
such committee member, director, or stockholder at the address of such member,
director or stockholder as it appears on the books or (in the case of a
stockholder) the stock transfer records of the Corporation, or (b) by any other
method permitted by law (including but not limited to overnight courier service,
telegram, telex, or telefax). Any notice required or permitted to be given by
mail shall be deemed to be given when deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be given at the time delivered to such service with
all charges prepaid and addressed as aforesaid. Any notice required or permitted
to be given by telegram, telex, or telefax shall be deemed to be delivered and
given at the time transmitted with all charges prepaid and addressed as
aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
Amended and Restated Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be equivalent to notice.
Attendance of a stockholder, director, or committee member at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 3. Exception to Notice Requirement. The giving of any notice
required under
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any provision of the General Corporation Law of Delaware, the Amended and
Restated Certificate of Incorporation or these Bylaws shall not be required to
be given to any stockholder to whom (i) notice of two consecutive annual
meetings, and all notices of meetings or of the taking of action by written
consent without a meeting to such stockholder during the period between such two
consecutive annual meetings, or (ii) all, and at least two, payments (if sent by
first class mail) of dividends or interest on securities during a twelve-month
period, have been mailed addressed to such person at such person's address as
shown on the records of the Corporation and have been returned undeliverable. If
any such stockholder shall deliver to the Corporation a written notice setting
forth such stockholders then current address, the requirement that notice be
given to such stockholder shall be reinstated.
ARTICLE VI.
OFFICERS
Section 1. Officers. The Chairman of the Board, President, Secretary
and such other officers of the Corporation as may be designated by the Board of
Directors shall be elected by the Board of Directors. The Board of Directors
and/or the President may also elect a Treasurer and one or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, Assistant Secretaries,
Assistant Treasurers or other officers as the Board of Directors and/or the
President may deem appropriate. Any two or more offices may be held by the same
person.
Section 2. Election. None of officers of the Corporation need be a
member of the Board of Directors, a stockholder or a resident of the State of
Delaware. The Board of Directors and/or the President may appoint such other
agents as they shall deem advisable, who shall be appointed for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors and/or the President.
Section 3. Compensation. The compensation of all officers and agents of
the Corporation shall be fixed by the Board of Directors.
Section 4. Removal and Vacancies. Each officer of the Corporation shall
hold office until such officer's successor is elected and qualifies or until
such officer's earlier resignation or removal. Any officer or agent elected or
appointed by the Board of Directors and/or the President may be removed either
for or without cause by a majority of the directors represented at a meeting of
the Board of Directors at which a quorum is represented, whenever in the
judgment of the Board of Directors the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer or agent elected or
appointed by the President may be removed either for or without cause by the
President, whenever in the judgment of the President the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
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Section 5. President. The President shall be the chief executive
officer of the Corporation. The President shall preside at all meetings of the
stockholders and the Board of Directors unless the Board of Directors shall
elect a Chairman of the Board, in which event the President shall preside at
meetings of the stockholders and at Board of Directors meetings in the absence
of the Chairman of the Board. The President shall have general and active
management of the business and affairs of the Corporation, shall see that all
orders and resolutions of the Board of Directors are carried into effect, and
shall perform such other duties as the Board of Directors shall prescribe.
Section 6. Vice Presidents. Each Executive Vice President, Senior Vice
President or Vice President shall have only such powers and perform only such
duties as the Board of Directors may from time to time prescribe or as the
President may from time to time delegate to him.
Section 7. Secretary. The Secretary or an Assistant Secretary shall
attend all sessions of the Board of Directors and all meetings of the
stockholders and record all votes and the minutes of all proceedings in a book
to be kept for that purpose and shall perform like duties for any committee when
required. Except as otherwise provided herein, the Secretary shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision
the Secretary shall be. The Secretary shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix the same to
any instrument requiring it, and, when so affixed, it shall be attested by the
signature of the Secretary or by the signature of the Treasurer or an Assistant
Secretary.
Section 8. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe or as the President may from time to time delegate.
Section 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and directors, at the regular meetings of the Board of Directors,
or whenever they may require it, an account of all transactions as Treasurer and
of the financial condition of the Corporation, and shall perform such other
duties as the Board of Directors may prescribe. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such form, in such
sum, and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the Treasurer's office
and for the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money, and other property of
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whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe.
ARTICLE VII.
CERTIFICATES REPRESENTING SHARES
Section 1. Certificates. The shares of the Corporation shall be
represented by certificates in such form as shall be determined by the Board of
Directors. Such certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued. Each certificate
shall state on the face thereof the holder's name, the number and class of
shares, and the par value of such shares or a statement that such shares are
without par value. Each certificate shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and may be sealed with
the seal of the Corporation or a facsimile thereof. Any or all of the signatures
on a certificate may be facsimile.
Section 2. Legends. The Board of Directors shall have the power and
authority to provide that certificates representing shares of stock shall bear
such legends, including, without limitation, such legends as the Board of
Directors deems appropriate to assure that the Corporation does not become
liable for violations of federal or state securities laws or other applicable
law.
Section 3. Lost Certificates. The Corporation may issue a new
certificate representing shares in place of any certificate theretofore issued
by the Corporation, alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen or destroyed. The Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may require the owner of such lost,
stolen or destroyed certificate, or such holder's legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such form, in such sum, and with such surety or sureties
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by such
holder's duly authorized attorney. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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Section 5. Registered Stockholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VIII.
GENERAL PROVISIONS
Section 1. Dividends. The directors, subject to any restrictions
contained in the Amended and Restated Certificate of Incorporation, may declare
dividends upon the shares of the Corporation's capital stock. Dividends may be
paid in cash, in property, or in shares of the Corporation, subject to the
provisions of the General Corporation Law of Delaware and the Amended and
Restated Certificate of Incorporation.
Section 2. Reserves. By resolution of the Board of Directors, the
directors may set apart out of any of the funds of the Corporation such reserve
or reserves as the directors from time to time, in their discretion, think
proper to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other purposes as the
directors shall think beneficial to the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. Indemnification. The Corporation shall indemnify its
directors, officers, employees and agents to the fullest extent permitted by the
General Corporation Law of Delaware and the Amended and Restated Certificate of
Incorporation.
Section 7. Transactions with Directors and Officers. No contract or
other transaction between the Corporation and any other corporation and no other
act of the Corporation shall, in the absence of fraud, be invalidated or in any
way affected by the fact that any of the directors of the
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Corporation are pecuniarily or otherwise interested in such contract,
transaction or other act, or are directors or officers of such other
corporation. Any director of the Corporation, individually, or any firm or
corporation of which any such director may be a member, may be a party to, or
may be pecuniarily or otherwise interested in, any contract or transaction of
the Corporation; provided, however, that the fact that the director,
individually, or the firm or corporation is so interested shall be disclosed or
shall have been known to the Board of Directors or a majority of such members
thereof as shall be present at any annual meeting or at any special meeting,
called for that purpose, of the Board of Directors at which action upon any
contract or transaction shall be taken. Any director of the Corporation who is
so interested may be counted in determining the existence of a quorum at any
such annual or special meeting of the Board of Directors which authorizes such
contract or transaction. Every director of the Corporation is hereby relieved
from any disability which might otherwise prevent such director from carrying
out transactions with or contracting with the Corporation for the benefit of
such director or any firm, corporation, trust or organization in which or with
which such director may be in anywise interested or connected.
Section 8. Amendments. In addition to any requirements of law, these
Bylaws may be altered, amended, or repealed or new bylaws may be adopted by the
stockholders or by the Board of Directors at any regular meeting of the
stockholders or the Board of Directors, at any special meeting of the
stockholders or the Board of Directors if notice of such alteration, amendment,
repeal, or adoption of new bylaws be contained in the notice of such special
meeting, or by written consent of the Board of Directors or the stockholders
without a meeting. The affirmative vote of at least seventy-five (75%) of the
voting power of all of the then-outstanding shares of the voting power of the
Corporation entitled to vote shall be required for the stockholders of the
Corporation to alter, amend or repeal these Bylaws and/or adopt new bylaws.
Section 9. Table of Contents; Headings. The Table of Contents and
headings used in these Bylaws have been inserted for convenience only and do not
constitute matters to be construed in interpretation.
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CERTIFICATE BY SECRETARY
The undersigned, being the secretary of the Corporation, hereby
certifies that the foregoing Bylaws were duly adopted by the Board of Directors
of the Corporation effective on March 13, 2000.
IN WITNESS WHEREOF, I have signed this certification as of the 13th
day of March, 2000.
By: /s/ William H. Seippel
--------------------------------
William H. Seippel, Secretary
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EXHIBIT 10.1
DIGITAL COMMERCE CORPORATION
1996 STOCK INCENTIVE PLAN
1. Purpose.
Digital Commerce Corporation (the "Company"), by means of this 1996
Stock Incentive Plan (the "Plan"), desires to afford certain of its directors,
officers, employees, and consultants, and the officers and certain selected
employees of any subsidiary thereof now existing or hereafter formed or
acquired, an opportunity to acquire a proprietary interest in the Company, and
thus to create in such persons an increased interest in and a greater concern
for the welfare of the Company and any subsidiary. As used in the Plan, the term
"subsidiary" shall mean any entity in which the Company, directly or indirectly,
owns a controlling interest.
The stock options described in Sections 6 and 7 hereof (the "Options"),
and the shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") acquired pursuant to the exercise of such Options are a matter
of separate inducement and are not in lieu of any salary or other compensation
for services.
The Options granted under Section 6 hereof are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not meet the requirements for Incentive Options ("Non-Qualified Options"),
but the Company makes no warranty as to the qualification of any Option as an
Incentive Option.
2. Administration.
The Plan shall be administered by the Compensation Committee, or any
successor thereto, of the Board of Directors of the Company or by such other
committee as determined by the Board (the "Committee"). The Committee shall
consist of not less than two members of the Board of Directors of the Company,
each of whom shall qualify as a "disinterested person" to administer the Plan
within the meaning of Rule 16b-3, as amended, or other applicable rules under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall administer the Plan so as to conform at all times
with the provisions of Rule 16b-3 promulgated under the Exchange Act. A majority
of the Committee shall constitute a quorum, and subject to the provisions of
Section 5 hereof, the acts of a majority of the members present at any meeting
at which a quorum is present, or acts approved unanimously in writing by the
Committee, shall be the acts of the Committee.
The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may employ
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<PAGE> 2
attorneys, consultants, accountants, or other persons, and the Committee, the
Company and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all persons who have received grants under the Plan, the
Company and all other interested persons. No member or agent of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan and all members and agents of the
Committee shall be fully protected by the Company in respect of any such action,
determination or interpretation.
3. Shares Available.
Subject to the adjustments provided in Section 9 hereof, the maximum
aggregate number of shares of Common Stock which may be purchased pursuant to
the exercise of Options granted under the Plan shall not exceed 3,000,000. If,
for any reason, any shares as to which Options have been granted cease to be
subject to purchase thereunder, including without limitation the expiration of
such Options, the termination of such Options prior to exercise or the
forfeiture of such Options, such shares thereafter shall be available for grants
to such individual or other individuals under the Plan. Options granted under
the Plan may be fulfilled in accordance with the terns of the Plan with either
authorized and unissued shares of Common Stock or issued shares of such Common
Stock held in the Company's treasury or both, at the discretion of the Company.
4. Eligibility and Bases of Participation.
Grants under the Plan (i) may be made, pursuant to Section 6 hereof, to
certain selected employees and officers (but not to any director who is not also
an employee) of the Company or any subsidiary thereof who are regularly employed
on a salaried basis and who are so employed on the date of such grant ("Officer
and Certain Selected Employee Participants"); (ii) may be made, pursuant to
Section 6 hereof, to directors of the Company, other than Committee Participants
(as defined below), who are not employees and who are retained by the Company in
such capacity on the date of such grant (the "Director Participants"); (iii) may
be made, pursuant to Section 6 hereof, to consultants or advisors, provided that
the services rendered by such consultants or advisors shall not be in connection
with the offer or sale of securities in a capital-raising transaction (the
"Consultant Participants") (the Officer and Certain Selected Employee
Participants, Director Participants and Consultant Participants are hereinafter
collectively referred to as the "Grant Participants"); and (iv) may be made,
pursuant to Section 7 hereof, to individuals who serve on the Committee or have
been named to serve on the Committee in the future (the "Committee
Participants").
5. Authority of Committee.
Subject to and not inconsistent with the express provisions of the Plan
and the Code, the Committee shall have plenary authority, in its sole
discretion, to:
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<PAGE> 3
a. other than with respect to Committee Participants, determine the
persons to whom Options shall be granted, the time when such Options shall be
granted, the number of shares of Common Stock underlying each Option, the
purchase price or exercise price of each Option, the restrictions to be
applicable to Options and the other terms and provisions thereof (which need not
be identical);
b. provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to an optionee by the broker-dealer
for the purpose of assisting the optionee in the exercise of an Option;
c. establish procedures for an optionee to pay the exercise price of an
Option in whole or in part by delivering that number of shares of Common Stock
owned by such optionee; or for the collection of any taxes required by any
government to be withheld or otherwise deducted and paid by the Company or any
subsidiary in respect of the issuance or disposition of Common Stock acquired
pursuant to the exercise of an Option granted hereunder, which procedures may
include payment in whole or in part through the delivery of shares of Common
Stock owned by the optionee valued on the basis of the Fair Market Value (as
defined in Section 11 hereof) on the date preceding such exercise;
d. prescribe, amend, modify and rescind rules and regulations relating
to the Plan;
e. make all determinations specified in or permitted by the Plan or
deemed necessary or desirable for its administration or for the conduct of the
Committee's business; and
f. establish any procedures determined to be appropriate in discharging
its responsibilities under the Plan.
6. Stock Options for Grant Participants.
The Committee shall have the authority, in its sole discretion, to
grant Incentive Options or Non-Qualified Options or both Incentive Options and
Non-Qualified Options to Grant Participants (any such Options are hereinafter
collectively referred to as the "Participant Options") during the period
beginning on the date on which the Plan is approved by the holders of a majority
of the Company's outstanding shares of Common Stock and Preferred Stock, voting
as a class (the "Effective Date") and ending on the tenth anniversary of the
Effective Date (the "Termination Date"). Notwithstanding anything contained
herein to the contrary, Incentive Options may be granted only to Officer and
Certain Selected Employee Participants. As a condition to the granting of any
Option, the Committee shall require that the person receiving such Option agree
not to sell or otherwise dispose of any Common Stock acquired pursuant to such
Option for a period of six months following the date of the grant of such
Option. The terms and conditions of the Participant Options shall be determined
from time to time by the Committee; provided, however, that the Participant
Options granted under the Plan shall be subject to the following:
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<PAGE> 4
a. Exercise Price. The exercise price for each share of Common Stock
purchasable under any Participant Option granted hereunder shall be such amount
as the Committee, in its best judgment, shall determine to be not less than 100%
of the Fair Market Value (as defined in Section 11 hereof) per share on the date
the Participant Option is granted; provided, however, that in the case of an
Incentive Option granted to a person who, at the time such Incentive Option is
granted, owns shares of capital stock of the Company, or of any subsidiary of
the Company, having more than 10% of the total combined voting power of all
classes of shares of capital stock of the Company or of such subsidiary, the
exercise price for each share shall be not less than 110% of the Fair Market
Value (as defined in Section 11 hereof) per share on the date the Incentive
Option is granted. In determining the stock ownership of a person for purposes
of this Section 6, the rules of Section 424(d) of the Code shall be applied and
the Committee may rely on representations of fact made to it by such person and
believed by it to be true. The exercise price of the Participant Options will be
subject to adjustment in accordance with the provisions of Section 9 hereof.
b. Payment. The exercise price per share of Common Stock with respect
to each Participant Option shall be payable at the time the Participant Option
is exercised. Such price shall be payable in cash, which may be paid by wire
transfer in immediately available funds, by check, by a commitment by a
broker-dealer to pay to the Company that portion of any sale proceeds receivable
by the optionee upon exercise of a Participant Option or by any other instrument
acceptable to the Company or, in the discretion of the Committee, by delivery to
the Company of shares of Common Stock. Shares delivered to the Company in
payment of the exercise price shall be valued at the Fair Market Value (as
defined in Section 11 hereof) of the Common Stock on the business day
immediately preceding the date of the exercise of the Participant Option.
c. Exercisability of Participant Options. Subject to this Section 6 and
Section 8 hereof, each Participant Option shall vest and become exercisable on
the dates and in the amounts set forth in the particular stock option agreement
or employment agreement between the Company and the optionee; provided, however,
that a Participant Option shall expire not later than seven years from the date
such Option is granted. The right to purchase shares shall be cumulative so that
when the right to purchase any shares has accrued, such shares or any part
thereof may be purchased at any time thereafter until the expiration or
termination of the Participant Option.
d. Death. In the event of the death of an optionee, all Participant
Options held by such optionee on the date of such death shall vest in full and
become immediately exercisable. Upon such death, the legal representative of
such optionee, or such person who acquired such Participant Options by bequest
or inheritance or by reason of the death of the optionee, shall have the right
for one year after the date of death (but not after the expiration or
termination of the Participant Options), to exercise such optionee's Participant
Options with respect to all or any part of the shares of Common Stock subject
thereto.
e. Disability. If the employment of an optionee is terminated because
of Disability (as defined in Section 11 hereof), all Participant Options held by
such optionee on the date of such termination shall vest in full and become
immediately exercisable. Such optionee shall have the
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<PAGE> 5
right for one year after the date of such termination (but not after the
expiration or termination of the Participant Options), to exercise such
optionee's Participant Options with respect to all or any part of the shares of
Common Stock subject thereto.
f. Retirement. In the event the employment of an Officer and Certain
Selected Employee Participant is terminated by reason of the Retirement (as
defined in Section 11 hereof) of the optionee, all Participant Options held by
such optionee on the date of such termination shall vest in full and become
immediately exercisable. Such optionee shall have the right for three months
after the date of such termination (but not after the expiration or termination
of the Participant Options), to exercise such optionee's Participant Options
with respect to all or any part of the shares of Common Stock subject thereto.
The Committee, in its discretion, shall determine whether an optionee's
employment was terminated by reason of Retirement and whether such optionee is
entitled to the treatment afforded by this subsection f.
g. Other Termination. If the employment of an Officer and Certain
Selected Employee Participant is terminated for any reason other than those
specified in subsections d, e, and f of this Section 6, such optionee shall have
the right for 30 days after the date of such termination (but not after the
expiration or termination of the Participant Options), to exercise such
optionee's Participant options with respect to all or any part of the shares of
Common Stock which such optionee was entitled to purchase immediately prior to
the time of such termination.
h. Cessation of Directorship. In the event a Director Participant shall
cease to be a director of the Company, such optionee shall have the right for 90
days after the date of such cessation (but not after the expiration or
termination of the Participant Options), to exercise such optionee's Participant
Options with respect to all or any part of the shares of Common Stock subject
thereto.
i. Maximum Exercise. To the extent the aggregate Fair Market Value (as
defined in Section 11 hereof) of Common Stock (determined at the time of the
grant) with respect to which Incentive Options are exercisable for the first
time by an optionee during any calendar year under all plans of the Company or
any subsidiary, exceeds $100,000, or such other amount as may be prescribed
under Section 422 of the Code or any successor provision of law, the excess
thereof shall be treated as Non-Qualified Options and not as Incentive Options.
7. Stock Option Grants to Committee Participants.
During the term of the Plan, on the date that a director of the Company
commences service on the Committee (which in the case of the initial members of
the Committee shall be deemed to be the Effective Date), and on the date of any
subsequent annual meeting of the holders of the Common Stock at which a director
is elected and appointed or reappointed to serve on the Committee, such
Committee Participant automatically shall be granted a Non-Qualified Option to
purchase 2,000 shares of Common Stock, which Non-Qualified Option, except as
otherwise provided in this Section 7 or Section 8 hereof, shall become fully
exercisable immediately upon grant as to all of the
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<PAGE> 6
shares covered thereby. (A Non-Qualified Option granted to a Committee
Participant pursuant to this Section 7 is referred to as a "Committee Option".)
As a condition to the granting of any Committee Option, the person receiving
such Committee Option shall agree not to sell or otherwise dispose of any Common
Stock acquired pursuant to such Option for a period of six months following the
date of the grant of such Option. The terms and conditions of the Committee
Options shall be as follows:
a. Option Price. The exercise price of each share of Common Stock
purchasable under any Committee Options shall be such amount as the Committee,
in its best judgment, shall determine to be 100% of the Fair Market Value (as
defined in Section 11 hereof) per share at the date the Committee Option is
granted.
b. Payment. The exercise price per share of Common Stock with respect
to each Committee Option and any withholding tax due in connection with such
exercise may be paid by any of the methods described under Section 6b hereof.
c. Exercisability. Except as provided in subsection d of this Section
7, no Committee Option shall be exercisable after the earlier of (i) the
expiration of seven years from the date such Committee Option is granted and
(ii) 90 days after such Committee Participant ceases for any reason to be a
director of the Company.
d. Death. In the event of the death of any Committee Participant, the
legal representative of the Committee Participant, or such person who acquired
such Committee Options by bequest or inheritance or by reason of the death of
the Committee Participant, shall have the right for one year after the date of
death (but not after the expiration or termination of such Committee Options),
to exercise such Committee Participant's Committee Options with respect to all
or any part of the shares of Common Stock subject thereto.
e. Amendment. The provisions of this Section 7 shall not be amended
more than one time in any six-month period, other than to comport with any
amendments to the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder.
8. Change of Control.
Notwithstanding any provision herein to the contrary, upon the
occurrence of an event constituting a Change of Control (as defined in Section
11 hereof), all Options granted under the Plan immediately shall become fully
exercisable.
9. Adjustment of Shares.
In the event the outstanding shares of Common Stock shall be increased
or decreased or changed into or exchanged for a different number of kind of
shares of stock or other securities of the
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<PAGE> 7
Company or another corporation by reason of any consolidation, merger,
combination, liquidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares or other like change in capital structure of the Company, the number or
kind of shares or interests subject to an Option and the per share price or
value thereof shall be appropriately adjusted by the Committee at the time of
such event. Any fractional shares or interests resulting from such adjustment
shall be eliminated. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option shall comply with the rules of Section
424(a) of the Code and (ii) in no event shall any adjustment be made that would
result in an Incentive Option failing to be treated as an "incentive stock
option" for purposes of Section 422 of the Code. In such event, the Board of
Directors of the Company shall appropriately adjust the number of shares of
Common Stock for which Options may be granted under the Plan.
10. Miscellaneous Provisions.
a. Assignment or Transfer. No grant of any "derivative security" (as
defined by Rule 16a-1(c) under the Exchange Act) made under the Plan or any
rights or interests therein shall be assignable or transferable by an optionee
except by will or the laws of descent and distribution or, except as to
Incentive Options, pursuant to a qualified domestic relations order as defined
in the Code. During the lifetime of an optionee, Options granted hereunder shall
be exercisable only by the optionee or the optionee's guardian or legal
representative.
b. Investment Representation. If a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Common Stock issuable upon exercise of an option is not in effect at the time
such Option is exercised, the Company may require, for the sole purpose of
complying with the Securities Act, that prior to delivering such Common Stock to
the exercising optionee such optionee must deliver to the Secretary of the
Company a written statement (i) representing that such Common Stock is being
acquired for investment only and not with a view to the resale or distribution
thereof, (ii) acknowledging that such Common Stock may not be sold unless
registered for sale under the Securities Act or pursuant to an exemption from
such registration, and (iii) agreeing that the certificates evidencing such
Common Stock shall bear a legend to the foregoing effect.
c. Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by the Company and shall not be charged against any Option nor to
any person receiving an Option.
d. Funding of Plan. The Plan shall be unfunded. The Company shall not
be required to make any segregation of assets to assure the satisfaction of any
Option under the Plan.
e. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for officers,
directors or employees.
f. Effect on Employment. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall affect, or be construed as affecting,
the terms of employment of any Grant
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<PAGE> 8
Participants except to the extent specifically provided herein or therein.
Nothing contained in the Plan or any agreement related hereto or referred to
herein shall impose, or be construed as imposing, an obligation on (i) the
Company or any subsidiary to continue the employment of any Grant Participant or
(ii) any Grant Participant to remain in the employ of the Company or any
subsidiary.
g. Termination or Suspension of the Plan. The Board of Directors may at
any time suspend or terminate the Plan. The Plan, unless sooner terminated under
Section 12 of the Plan or by action of the Board of Directors, shall terminate
at the close of business on the Termination Date. Options may not be granted
while the Plan is suspended or after it is terminated. Rights and obligations
under any Option granted while the Plan is in effect shall not be altered or
impaired by suspension or termination of the Plan, except with the consent of
the person to whom the Option was granted. The power of the Committee to
construe and administer any Option granted prior to the termination or
suspension of the Plan nevertheless shall continue after such termination or
during such suspension.
h. Savings Provision. With respect to persons subject to Section 16 of
the Exchange Act, the transactions under the Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the Plan or action by the Committee fails so
to comply, it shall be deemed null and void to the extent required by law.
i. Partial Invalidity. The invalidity or illegality of any provision
herein shall not be deemed to affect the validity of any other provision.
11. Definitions.
a. "Fair Market Value", as it relates to the Common Stock, shall mean
the average of the high and low sale prices of such Common Stock on the date
such determination is required herein, or if there were no sales on such date,
the average closing bid and asked prices, as reported on the national securities
exchange on which the Company's Common Stock is listed or, in the absence of
such listing, on the NASDAQ National Market or Small Cap Market or, if such
Common Stock is not at the time listed on a national securities exchange or
traded on the NASDAQ National Market or Small Cap Market, the value of such
Common Stock on such date as determined in good faith by the Committee.
b. "Disability" shall have the meaning set forth in Section 22(e)(3) of
the Code or any successor provision of law.
c. "Change of Control" shall be deemed to have occurred if, subsequent
to the Effective Date of this Plan, any "person" (as such term is defined in
Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or
indirectly, of either (x) a majority of the Common Stock or (y) securities of
the Company representing a majority of the combined voting power of the
Company's then outstanding voting securities.
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<PAGE> 9
d. "Retirement" shall mean the date upon which a Grant Participant,
having attained an age as may be determined by the Committee in its sole
discretion, terminates his employment with the Company or any subsidiary,
provided that such Grant Participant has been employed by the Company or any
subsidiary.
12. Amendment of Pan.
The Board of Directors of the Company shall have the right to amend,
modify, suspend or terminate the Plan at any time, provided that no amendment
shall be made without shareholder approval which shall (i) increase the total
number of shares of the Common Stock of the Company which may be issued and sold
pursuant to Options granted under the Plan (except for increases due to
adjustments in accordance with Section 9 hereof), (ii) materially increase the
benefits accruing to participants under the Plan, (iii) decrease the minimum
exercise price in the case of an Incentive Option or (iv) materially modify the
provisions of the Plan relating to eligibility with respect to Options. In no
event may the Plan be amended in any way that would retroactively impair the
Committee's discretion. The Board of Directors shall be authorized to amend the
Plan and the Options granted thereunder (A) to qualify such Options as
"incentive stock options" within the meaning of Section 422 of the Code or (B)
to comply with Rule 16b-3 (or any successor rule) under the Exchange Act. No
amendment, modification, suspension or termination of the Plan, without the
consent of the holder thereof, shall adversely alter or impair any Options
previously granted under the Plan.
13. Effective Date.
The Plan shall become effective on the Effective Date. Subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Section 12 hereof, the Plan shall remain in effect until the earlier of (i) the
date that Options covering all shares of Common Stock issuable under the Plan
have been granted or (ii) the Termination Date.
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<PAGE> 10
DIGITAL COMMERCE CORPORATION
GRANT OF STOCK OPTIONS
Dated:_____________
Dear ________:
Digital Commerce Corporation (the "Company") has adopted the Digital
Commerce Corporation 1996 Stock Option Plan (the "Plan"). A copy of the Plan is
annexed to this letter. The Plan permits the Company to grant stock options to
key employees, independent agents, consultants, attorneys, officers and
directors of the Company and its subsidiaries, designated by the Compensation
Committee (the "Committee"). We are pleased to inform you that the Committee has
granted you an option to purchase up to shares of the $.01 par value Common
Stock of the Company at a price of $ per share. To the maximum extent allowable,
such option is a Qualified Incentive Stock Option for purposes of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). The date of this
grant is .
The option is subject to certain conditions, to which you must agree by
signing and returning to the Secretary of the Company a copy of this letter not
later than ___________ ( ) days from the date of this letter. These conditions
include BUT ARE NOT LIMITED TO the following:
1. Subject to the terms and conditions, contained in the Plan and in
this letter, the option may be exercised in accordance with the following
schedule:
The option shall continue whole or in part at any time from the date hereof
until , ( ) years from the date of grant (the "Termination Date"), when, in any
event, it shall expire to the extent it has not been exercised; provided,
however, that notwithstanding the above, the option may be terminated at an
earlier time as set forth in Section 6 or 7 (as may be applicable) of the Plan.
You shall not have any of the rights or privileges of a shareholder with respect
to any shares issuable upon exercise of this option until certificates
representing such shares shall have been issued and delivered.
2. The option must be exercised by written notice to the Board of
Directors of the Company, care of the Secretary of the Company. The notice must
state the number of shares you wish to purchase and must be paid in accordance
with Section 6b of the Plan.
3. You will not be permitted to exercise the option at any time when
its exercise, or the issuance of shares by the Company under the Plan would, in
the opinion of the Company, constitute a violation of any federal or state law
or of the listing requirements of any stock exchange on which the shares of the
Company are listed.
<PAGE> 11
4. You are the only person who may exercise this option during your
lifetime. You may not transfer it other than by will or under the laws of
descent and distribution. If you should die while any part of the option is
unexercised, then your legal representative may exercise the option for the
applicable period as set forth in Section 6 or 7 of the Plan.
5. A. You agree to hold the shares acquired by your exercise of the
option for investment purposes only and not with a view to resale or
distribution to the public within the meaning of the Securities Act of 1933 (the
"1933 Act") unless made pursuant to an effective registration statement under
the 1933 Act and applicable state securities laws or an exemption therefrom. You
agree, as a condition of any exercise of the option, to sign a letter, in such
form as the Company may require in order to comply with the securities laws as
they may be in effect at the time of your exercise of the option. You further
agree, as a condition of any exercise of the option, to sign a letter, in such
form as the Company may require, that will subject the transfer of the shares
that you receive upon the exercise of the option to a right of first refusal.
You understand that circumstances existing at the time of your exercise of the
option may inhibit your sale of the shares.
B. YOU ARE HEREBY PUT ON NOTICE THAT ANY TRANSFER OF THE SHARES
ACQUIRED BY YOUR EXERCISE OF THE QUALIFIED INCENTIVE STOCK OPTION PRIOR TO THE
EXPIRATION OF TWO (2) YEARS FROM THE DATE THAT YOU WERE GRANTED THE OPTION AND
ONE (1) YEAR AFTER THE EXERCISE OF THE OPTION MAY RESULT IN A DISQUALIFYING
EVENT UNDER SECTION 421 OF THE CODE, RESULTING IN SUCH OPTIONS BEING TREATED AS
NON-QUALIFIED STOCK OPTIONS AND BEING SUBJECT TO POTENTIAL TAX IMPACT UPON
EXERCISE OF THE OPTION AND SALE OF THE STOCK.
6. You understand that neither the option granted hereby nor the shares
of Common Stock that may be acquired by the exercise of the option have been
registered under the Securities Act of 1933 nor under state securities laws. The
certificates for all shares which you purchase through your exercise of the
option shall bear a legend on their face, substantially as follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act") or
under the securities laws of any state. Such shares may not be
offered for sale, sold, delivered after sale, transferred, pledged
or hypothecated in the absence of an effective registration
statement covering such shares under the 1933 Act or state
securities laws or an exemption from registration thereunder which,
in the opinion of counsel satisfactory to the Company, makes such
registration unnecessary."
7. Prior to your exercise of the option, you have the right to request
that the Company make available to you, without charge, its most recent public
filings, if any, under the 1933 Act and under the Securities Exchange Act of
1934, and such other documents that you may reasonably request in order to make
an informed decision as to whether you should exercise the option.
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<PAGE> 12
8. You agree to notify the Company in writing within thirty (30) days
of the date that you sell or otherwise dispose of the stock acquired through the
exercise of the option granted herein and within thirty (30) days of any
disposition or event that disqualifies the options from being treated as an
incentive stock option under Section 422 of the Code.
9. IN ADDITION TO THE FOREGOING CONDITIONS, the option is subject to
all the terms and conditions of the Digital Commerce Corporation 1996 Stock
Incentive Plan annexed to this letter and any rules and regulations promulgated
from time to time by the Committee with respect to the Plan. To the extent that
anything contained herein or in any such rules of or regulations are
inconsistent with the Plan, the terms of the Plan shall govern. The options are
subject to adjustment upon the happening of certain events in the Plan.
10. No provision in this option shall be construed as conferring upon
you the right to vote, consent, receive dividends or receive notice other than
as expressly provided herein or in the Plan.
11. No representation is made to you with respect to the tax effect
upon your receipt of the option, your exercise thereof, or the sale of the
shares so acquired. PLEASE CONSULT YOUR TAX OR FINANCIAL ADVISOR PRIOR TO
EXERCISING YOUR OPTION.
* * *
To make the grant of the option effective, please acknowledge receipt
of this letter and the enclosed copy of the Plan by signing and dating the
enclosed copy of this letter in the space provided below and returning the
signed copy in the enclosed, self-addressed envelope.
Yours truly,
Tony Bansal, President
Digital Commerce Corporation
ACCEPTED AND SIGNED:
Print Name:
------------------------------
Date:
------------------------------------
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<PAGE> 1
EXHIBIT 10.2
DIGITAL COMMERCE CORPORATION
1998 STOCK OPTION PLAN
1. NAME AND PURPOSE. The purpose of this Plan, which shall be known as
the Digital Commerce Corporation 1998 Stock Option Plan ("Plan"), is to advance
the interests of Digital Commerce Corporation ("Company") by providing a
material incentive for the continued services of those key employees, officers,
and directors of and consultants to the Company or its Subsidiaries, who make
significant contributions toward the Company's success and development, by
encouraging those key employees (including officers), directors, and consultants
to increase their proprietary interest in the Company and by attracting new,
able executives to employment with the Company or its Subsidiaries.
2. DEFINITIONS. For purposes of this Plan, the following terms, when
capitalized, shall have the meanings designated herein unless a different
meaning is plainly required by the context. Where applicable, the masculine
pronoun shall mean or include the feminine and the singular shall include the
plural.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean a Stock Option Committee of not less than
two directors of the Company who shall be appointed by and serve at the pleasure
of the Board. Each director on the Committee shall be a Non-Employee Director
(as such term is defined in Rule 16b-3(b)(3)(i) of the Securities and Exchange
Act of 1934). The Board may appoint an existing committee to act as the Stock
Option Committee, provided that its members satisfy the eligibility provisions
of this Paragraph 2(b). If no Stock Option Committee is appointed, then the
Board shall act as the Committee.
(c) "Consultant" shall mean any independent agent, consultant, or
attorney to or for the Company or a Subsidiary who, in the opinion of the Board,
has demonstrated a capacity for contributing in a substantial measure to the
success of the Company and its Subsidiaries, except for consultants residing in
any state in which an exemption from registration under such state's securities
laws would not be available for this Plan.
(d) "Effective Date" shall mean the date on which this Plan shall have
been approved by the directors or by the shareholders of the Company.
(e) "Fair Market Value" of the Company's common shares on a certain
date shall mean, if the Company's common shares are listed on a recognized stock
exchange or the Nasdaq system, the average of the closing bid and asked prices
as quoted by such exchange or Nasdaq on the date specified, or if the Company's
common shares are not quoted on an exchange or Nasdaq on such date, on the next
preceding date on which the common shares are traded. If the Company's common
shares are not listed on an exchange or Nasdaq, then "Fair Market Value" of the
common shares on
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<PAGE> 2
a certain date shall be that value which the Board or the Committee determines,
in good faith, to be the fair market value of the common shares on such date.
(f) "Key Employee" shall mean any employee (including officers) of the
Company or a Subsidiary who, in the opinion of the Board, has demonstrated a
capacity for contributing in a substantial measure to the success of the Company
and its Subsidiaries. A director of the Company or a Subsidiary may be a Key
Employee if he is also an employee of the Company or a Subsidiary.
(g) "Non-Qualified Stock Options" shall mean those options, granted by
the Company pursuant to this Plan, which do not qualify for favorable tax
treatment under Section 422 of the Internal Revenue Code of 1986 (the "Code").
(h) "Participant" shall mean a Key Employee, Participating Director, or
Consultant selected by the Board to receive options, whether Qualified Incentive
Stock Options or Non-Qualified Stock Options, granted under this Plan.
(i) "Participating Director" shall mean any director of the Company or
any Subsidiary who, in the opinion of the Board, has demonstrated a capacity for
contributing in a substantial measure to the success of the Company and its
Subsidiaries.
(j) "Qualified Incentive Stock Options" shall mean those options
granted by the Company pursuant to the Plan which qualify for favorable tax
treatment under Section 422 of the Code.
(k) "Subsidiary" shall mean an entity in which 50% or more of the
common stock or, in the case of a partnership, 50% or more of the capital
interest thereof, is owned directly or indirectly by the Company, or that is a
member with the Company in a controlled group of corporations, or is otherwise
under common control with the Company within the meaning of Section 414(b) and
(c) of the Code.
3. ADMINISTRATION; SELECTION OF PARTICIPANTS.
(a) The Plan shall be administered by the Board or, at its discretion,
by the Committee, which shall select the Participants and shall grant to the
Participants stock options under, and in accordance with, the provisions of the
Plan. To the extent the Committee administers the Plan, all references herein to
the "Board" shall mean the "Committee." The stock options granted under this
Plan to Participants may be either qualified Incentive Stock Options (to Key
Employees) or Non-Qualified Stock Options, within the discretion of the Board.
(b) Subject to the express provisions of this Plan, the Board shall
have authority to adopt regulations and procedures which are consistent with the
terms of this Plan; to adopt and amend stock option agreements between the
Company and a Participant as they deem advisable and to determine the terms and
provisions of such stock option agreements, including the number of shares with
respect to which options are granted to a Participant, the option price for such
shares, and the
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date or dates when the option or parts of it may be exercised, which terms shall
comply with any applicable requirements of Paragraph 5 below; to construe and
interpret such stock option agreements and to impose therein such limitations
and restrictions as are deemed necessary or advisable by counsel for the Company
so that compliance with the federal securities laws and with the securities laws
of the various states may be assured; and to make all other determinations
necessary or advisable for administering this Plan. All decisions and
interpretations made by the Board shall be binding and conclusive on all
Participants, their legal representatives and beneficiaries.
4. STOCK SUBJECT TO THE PLAN.
(a) The stock to be issued and delivered by the Company upon exercise
of options granted under this Plan (whether Qualified Incentive Stock Options or
Non-Qualified Stock Options) are shares of the Company's Common Stock, $0.01 par
value per share, which may be either authorized but unissued shares, or treasury
shares, in the discretion of the Board.
(b) The aggregate number of the Company's common shares which may be
issued under this Plan shall not exceed 2,100,000; subject, however, to the
adjustment provided in Paragraph 11 in the event of stock splits, certain stock
dividends, exchanges of shares, or the like, occurring after the Effective Date.
No stock option may be granted under this Plan which could cause such maximum
limit to be exceeded.
(c) Shares covered by an option which is no longer exercisable with
respect to such shares shall again be available for issuance in connection with
other options granted under this Plan.
5. TERMS OF OPTIONS. Options granted under the Plan shall be evidenced
by stock option agreements authorized by the Board and executed by a duly
authorized officer of the Company. Such stock option agreements shall contain
such terms as the Board shall determine, subject to the following limitations
and requirements.
(a) OPTION PRICE: The option price per common share shall be not less
than 100% of the Fair Market Value of the common shares on the date of grant of
such option; provided, however, that the option price of any qualified Incentive
Stock Options granted to any stockholder of the Company who owns at least 10% of
the Company's common shares shall not be less than 110% of such Fair Market
Value.
(b) PERIOD WITHIN WHICH OPTION MAY BE EXERCISED: In general, and
subject to the provisions of Paragraphs 5(c) and 12, options granted under the
Plan will become exercisable on the dates and in the amounts set forth in the
stock option agreement between the Company and the Participant. Each option
granted under this Plan shall terminate (become nonexercisable) after the
expiration of ten years from the date of grant of such option; provided,
however, the Qualified Incentive Stock Options granted to any stockholder of the
Company who owns, at the time of grant, at least 10% of the Company's common
shares, shall terminate after the expiration of five years from
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the date of grant of such option. Regardless of the immediately preceding
sentence, the Board shall have the discretion to set a shorter termination
period.
(c) TERMINATION OF OPTION BY REASON OF TERMINATION OF EMPLOYMENT,
DIRECTORSHIP, OR CONSULTANCY:
i. Upon termination of a Key Employee's employment with the
Company or a Subsidiary, and unless otherwise provided in the stock option
agreement, all options granted under this Plan to such Participant which are not
exercisable on the date of such termination shall immediately terminate, and any
remaining exercisable options shall terminate if not exercised before the
expiration of the applicable period specified below, or at such earlier time as
may be applicable under Subparagraph 5(b) above:
(A) No later than three (3) months following such termination of
employment if such termination was not a result of death or retirement
of the Participant.
(B) No later than six (6) months following such termination of
employment if such termination was because of death, or because of
retirement under the provisions of any retirement plan of the Company
or any Subsidiary, or with the consent of the Company.
ii. Whether time spent on leave of absence granted by the
Company or any Subsidiary shall constitute continued employment for purposes of
this Plan, shall be determined by the Board in its sole discretion.
iii. Notwithstanding the foregoing, the Board may, in its sole
discretion, impose more restrictive conditions on the exercise of an option
granted under the Plan, including, without limitation, providing for no exercise
of any option after termination of a Key Employee's employment; however, any and
all such conditions shall be specified in the stock option agreement limiting
and defining such option.
iv. The Board may, in its sole discretion, impose similar
conditions upon the exercise of any options granted to Participating Directors
(who are not Key Employees) or Consultants, but is not required to do so.
v. Notwithstanding the foregoing provisions of this
Subparagraph 5(c), the stock option agreement may provide that in the event of
the termination of a Key Employee's employment, the Company shall repurchase or
offer to repurchase some or all unexercised and vested options, or common stock
issued upon the exercise of such options, upon such terms and conditions as are
set forth in the stock option agreement.
vi. Notwithstanding the foregoing provisions of this
Subparagraph 5(c), the Board may in the stock option agreement provide, or may
unilaterally amend the stock option agreement to provide, that: (A) the time in
which an option may be exercised upon termination of employment,
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<PAGE> 5
directorship, or consultancy may exceed the time set forth in Subparagraph
5(c)(i), and (B) options not exercisable at such termination of employment,
directorship, or consultancy shall not terminate at such time but may
nevertheless may be exercised until the expiration of the earlier of the
exercise period contained in such stock option agreement or amendment
(regardless of such termination of employment, directorship, or consultancy) or
such shorter period as provided therein.
(d) NON-TRANSFERABILITY: No option under this Plan shall be assignable
or transferable except, in the event of the death of a Participant, by his will
or by the laws of descent and distribution. In the event of the death of a
Participant, the representative of his estate, or the person or persons who
acquired (by bequest or inheritance) the rights to exercise his stock options
granted under the Plan, may exercise any of the unexercised options or part
thereof prior to the expiration of the applicable exercise period, as specified
in Subparagraph 5(b) and 5(c) above, or in the stock option agreement relating
to such options. No transfer of an option by a participant by will or by laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of such option.
(e) MORE THAN ONE OPTION GRANTED TO A PARTICIPANT: More than one
option, and more than one form of option, may be granted to a Participant under
this Plan.
(f) PARTIAL EXERCISE: Unless otherwise provided in the stock option
agreement, any exercise of an option granted under this Plan may be made in
whole or in part.
(g) LIMITATION ON ACCOUNT OF QUALIFIED INCENTIVE STOCK OPTIONS: To the
extent that the aggregate Fair Market Value of stock with respect to which
Qualified Incentive Stock Options become exercisable by a Participant for the
first time during any calendar year (including all such plans of the Company and
its Subsidiaries) exceeds $100,000, those Qualified Incentive Stock Options
exercisable for the first time in a calendar year that cause the aggregate Fair
Market Value of stock issuable upon the exercise of such options to exceed
$100,000 during such calendar year shall be treated as Non-Qualified Stock
Options, and the remaining options exercisable for the first time in a calendar
year shall continue to be treated as Qualified Incentive Stock Options. For
purposes of this subsection, the Fair Market Value of stock shall be determined
at the time the option is granted.
6. PERIOD OF GRANTING OPTIONS. No option shall be granted under this
Plan subsequent to ten years after the Effective Date.
7. NO EFFECT UPON EMPLOYMENT STATUS OR STATUS AS DIRECTOR OR
CONSULTANT. The fact that an employee, director, or consultant has been selected
as a Participant shall not limit or otherwise qualify the right of the Company
to terminate his employment, directorship, or consultancy with the Company at
any time, nor shall it be deemed a promise or commitment by the Company to
continue such person's employment, directorship, or consultancy.
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<PAGE> 6
8. METHOD OF EXERCISE. Any option granted under this Plan may be
exercised by written notice to the Board, signed by the Participant, or by such
other person as is entitled to exercise such option. The notice of exercise
shall state the number of shares in respect of which the option is being
exercised, and shall be accompanied by the payment, in cash, in the form of a
written commitment by a broker-deal to pay to the Company that portion of any
sale proceeds receivable by the optionee upon exercise of an option granted
hereunder, in any other instrument acceptable to the Company, in any other form
acceptable to the Company or provided in the grant of options, and/or, as
provided below, in the common shares of the Company, of the full option price
for such shares. At the written request of the Participant and upon approval by
the Board, shares acquired pursuant to the exercise of any option may be paid
for at the time of exercise by the surrender of common shares of the Company
held by or for the account of the Participant at the time of exercise (for
Qualified Incentive Stock Options only to the extent permitted by subsection
(c)(4) of Section 422 of the Code, without liability to the Company). In such
case, the fair market value of the surrendered shares shall be determined by the
Board as of the date of exercise in the same manner as such value is determined
upon the grant of an option. A certificate or certificates for the common shares
of the Company purchased through the exercise of an option shall be issued in
the regular course after the exercise of an option and payment therefor. The
Company shall be afforded reasonable opportunity after exercise of any option to
comply with any requirements for stock exchange listing, for registration under
applicable securities or other laws and for compliance with other laws and
regulations, if any, before issuance of the shares being purchased on such
exercise. During the option period, no person entitled to exercise any option
granted under this Plan shall have any of the rights or privileges of a
shareholder with respect to any shares issuable upon exercise of such option
until certificates representing such shares shall have been issued and
delivered. The exercise of any option shall be contingent upon receipt from the
Participant of a representation that, at the time of such exercise, it is his or
her then present intention to acquire the shares being purchased for investment
and not for distribution (unless the Plan has been duly registered under the
Securities Act of 1933 ("1933 Act") and the Company has waived the requirement
that such representation be made, or unless the Company has received an opinion
of counsel acceptable to it that the resale of such shares is exempt from the
registration requirements of the 1933 Act and applicable state securities laws).
9. RESTRICTIONS ON SHARES; SECURITIES REGISTRATION.
(a) The certificates for Common Stock to be delivered upon proper
exercise of the option ("Option Stock") shall contain legends substantially as
set forth below:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("1933 Act"). Such shares
may not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated in the absence of an effective registration
statement covering such shares under the 1933 Act or an exemption under
the 1933 Act which, in the opinion of counsel satisfactory to the
Company, makes such registration unnecessary."
"The shares of stock represented by this certificate are subject to and
are not transferable on the books of the Company except in accordance
with the Company's
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<PAGE> 7
Stock Option Plan and the agreement between the Company and the
shareholder relating to the granting of options, copies of which are on
file at the office of the Company."
(b) If the Company shall nevertheless deem it necessary or desirable to
register any Option Stock to be issued pursuant to the Plan under the 1933 Act
or other applicable statutes or to qualify any such shares for exemption from
the 1933 Act under any rule or regulation of the Securities and Exchange
Commission or under the 1933 Act, then the Company shall take such action at its
own expense before delivery of such shares, but nothing contained herein shall
be deemed, in any manner, to require the Company to register the Option Stock
under the 1933 Act or to qualify the shares for any exemption under the 1933
Act.
10. IMPLIED CONSENT OF PARTICIPANTS. Every Participant, by his
acceptance of an option under this Plan, shall be deemed to have consented to be
bound, on his own behalf and on behalf of his heirs, assigns, and legal
representatives, by all of the terms and conditions of this Plan.
11. SHARE ADJUSTMENTS. In the event there is any change in the
Company's common shares resulting from stock splits, stock dividends of more
than 5% in any year, combination or exchanges of shares, or other similar
capital adjustments, equitable proportionate adjustments shall be made by the
Board in (1) the number of shares available for option under this Plan, (2) the
number of shares subject to options granted under this Plan, and (3) the option
price of optioned shares.
12. MERGER, CONSOLIDATION, OR SALE OF ASSETS; CHANGE IN CONTROL OF THE
COMPANY. In the event the Company shall consolidate with, merge into, or
transfer all or substantially all of its assets to another corporation or
corporations, all options theretofore granted shall immediately be exercisable
(subject to the limitations contained in Subparagraph 5(g)) no later than twenty
(20) days prior to the effective date of such consolidation, merger, or transfer
of assets. In the event of a change in control of the Company or a sale of a
controlling interest in the Company, all options previously granted under this
Plan shall immediately be exercisable not later than the day prior to the
effective date thereof (subject to the provisions contained in Subparagraph
5(g)).
13. COMPANY RESPONSIBILITY. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Company. The Company shall
have no responsibility or liability for any act or thing done or left undone
with respect to the price, time, quality, or other conditions and circumstances
of the purchase of shares under the terms of the Plan, so long as the Company
acts in good faith.
14. USE OF PROCEEDS. The proceeds received by the Company from the sale
of stock under the Plan shall be added to the general funds of the Company and
shall be used for such corporate purposes as the Board shall direct.
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15. TAX TREATMENT. With respect to Qualified Incentive Stock Options,
the Plan is intended to comply with the provisions of Section 422 of the Code.
Any provisions of the Plan which conflict with the provisions of Section 422
shall be deemed to be hereby amended so as to comply therewith.
16. LAW GOVERNING. This Plan and the rights of all persons hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
17. SECURITIES LAWS. The Board shall take all necessary or appropriate
actions to ensure that all option grants and all exercises thereof under this
Plan are in full compliance with all federal and state securities laws.
18. WITHHOLDING AND DEDUCTIONS. Notwithstanding anything to the
contrary contained herein, if at any time specified herein for the making of any
payment of cash or any delivery of Option Stock to any person, by reason of the
grant of an option, the exercise thereof, or otherwise, any law or regulation of
any governmental authority having jurisdiction in the premises shall require the
Company to withhold, or to make any deduction for any taxes or take any other
action in connection with the payment or delivery then to be made, such payment
or delivery, as the case may be, shall be deferred until such withholding or
deduction shall have been adequately provided for, in the opinion of the Board.
19. AMENDMENT AND TERMINATION. The Board may terminate this Plan at any
time, and may amend the Plan at any time or from time to time, without obtaining
any approval of the Company's shareholders; except that the Plan may not be
amended, without the consent of the shareholders, (1) to increase the aggregate
number of shares issuable under the Plan (excepting proportionate adjustments
made under Paragraph 11 to give effect to stock splits, etc.); (2) to change the
option price of optioned shares (excepting proportionate adjustments made under
Paragraph 11); (3) to change the requirement that the option price per common
share not be less than 100% of the Fair Market Value of the common shares on the
date the option is granted (or less than 110% in the case of 10% stockholders
being issued Qualified Incentive Stock Options); (4) to extend the time within
which options may be granted or the time within which a granted option may be
exercised; (5) to change, without the consent of the Participant, any option
previously granted to him under the Plan, except as provided herein; (6) if such
amendment would result in a material increase in the cost of the Plan to the
Company; or (7) to comply with Rule 16b-3 (or any successor rule) under the
Securities Exchange Act of 1934. If the Plan is terminated, any unexercised
option shall continue to be exercisable in accordance with its terms, except as
provided in Paragraph 12 above.
20. SAVINGS PROVISION. With respect to persons subject to Section 16 of
the Securities Exchange Act of 1934, the transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors thereunder. To the extent that any provision of this Plan or action
by the Board fails to so comply, it shall be deemed null and void to the extent
required by law. The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.
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21. VARIATIONS IN PRONOUNS. Whenever used in this Plan, unless the
context otherwise requires, words used in the singular shall also include the
plural, and words used in the masculine gender shall also include the feminine
or neuter gender.
22. CAPTIONS AND HEADINGS. The section and subsection headings and
captions are for reference purposes only and shall not in any way affect the
meaning or interpretation of any such section or subsection of this Plan.
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DIGITAL COMMERCE CORPORATION
GRANT OF STOCK OPTIONS
Dated:
---------------
Dear ________:
Digital Commerce Corporation (the "Company") has adopted the Digital
Commerce Corporation 1998 Stock Option Plan (the "Plan"). A copy of the Plan is
annexed to this letter. The Plan permits the Company to grant stock options to
key employees, officers, and directors of and consultants to the Company and its
subsidiaries, as designated by the Company's Stock Option Committee or the Board
of the Directors acting in such capacity (the "Committee"). We are pleased to
inform you that the Committee has granted you an option to purchase up to
___________ shares of the $.01 par value Common Stock of the Company at a price
of $_______ per share. To the maximum extent allowable, such option is a
Qualified Incentive Stock Option for purposes of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"); in the event that for any reason
all or a portion of this option is ineligible to be treated as a Qualified
Incentive Stock Option, such portion of this option that is ineligible for
treatment as a Qualified Incentive Stock Option shall automatically, and without
further action by the Company or you, become a non-qualified stock option, and
any remaining portion of such option that remain eligible for treatment as a
Qualified Incentive Stock Option shall continue to be a Qualified Incentive
Stock Option. The date of this grant is the date of this letter set forth above.
The option is subject to certain conditions, to which you must agree by
signing and returning to the Secretary of the Company a copy of this letter.
These conditions include BUT ARE NOT LIMITED TO the following:
1. Subject to the terms and conditions, contained in the Plan and in
this letter, the option may first be exercised as set forth below: __________
shares as of _______________; __________ shares as of ________________; and
__________ shares as of ______________________________.
The option shall continue whole or in part at any time from the date hereof
until _______________, five (5) years from the date of grant (the "Termination
Date"), when, in any event, it shall expire to the extent it has not been
exercised; provided, however, that notwithstanding the above, the option may be
terminated at an earlier time as set forth in Section 5 of the Plan. You shall
not have any of the rights or privileges of a shareholder with respect to any
shares issuable upon exercise of this option until certificates representing
such shares shall have been issued and delivered.
2. In the event that the immediate vesting of such options shall cause
such options to become ineligible to be treated as a Qualified Incentive Stock
Option for purposes of Section 422 of the Code, or in the event that for any
other reason all or a portion of this option is ineligible to be treated as a
Qualified Incentive Stock Option, such portion of this option that is ineligible
for treatment as a Qualified Incentive Stock Option shall automatically, and
without further action by the Company or you, become a non-qualified stock
option, and any remaining portion of such option
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that remain eligible for treatment as a Qualified Incentive Stock Option shall
continue to be a Qualified Incentive Stock Option.
3. The option must be exercised by written notice to the Board of
Directors of the Company, care of the Secretary of the Company. The notice must
state the number of shares you wish to purchase and must be accompanied by full
payment of the option price for those shares.
4. You will not be permitted to exercise the option at any time when
its exercise, or the issuance of shares by the Company under the Plan would, in
the opinion of the Company, constitute a violation of any federal or state law
or of the listing requirements of any stock exchange on which the shares of the
Company are listed.
5. You are the only person who may exercise this option during your
lifetime. You may not transfer it other than by will or under the laws of
descent and distribution. If you should die while any part of the option is
unexercised, then your legal representative may exercise the option for the
applicable period as set forth in Section 5 of the Plan.
6. A. You agree to hold the shares acquired by your exercise of the
option for investment purposes only and not with a view to resale or
distribution to the public within the meaning of the Securities Act of 1933 (the
"1933 Act") unless made pursuant to an effective registration statement under
the 1933 Act and applicable state securities laws or an exemption therefrom. You
agree, as a condition of any exercise of the option, to sign a letter, in such
form as the Company may require in order to comply with the securities laws as
they may be in effect at the time of your exercise of the option.
B. You further agree, as a condition of any exercise of the option, to
offer to the Company the right to purchase the shares of stock that you will
receive upon the exercise of the option. The Company shall have the right to
purchase for cash any or all of such shares of stock at the fair market value
(as determined by the Company's Board of Directors) of such stock as of the date
of exercise of the option. The Company's right to purchase shall commence upon
your written exercise of the option and extend for ten (10) days thereafter. The
Company's determination not to purchase shares upon any exercise of your option
shall not be deemed a waiver of the Company's right to purchase shares upon any
subsequent exercise of the option. You understand that circumstances existing at
the time of your exercise of the option may inhibit your sale of the shares. The
provisions of this subparagraph 6(B) shall terminate as to any options exercised
following the initial closing of the initial public offering of the Company's
common stock.
C. YOU ARE HEREBY PUT ON NOTICE THAT ANY TRANSFER OF THE SHARES
ACQUIRED BY YOUR EXERCISE OF THE QUALIFIED INCENTIVE STOCK OPTION PRIOR TO THE
EXPIRATION OF TWO (2) YEARS FROM THE DATE THAT YOU WERE GRANTED THE OPTION AND
ONE (1) YEAR AFTER THE EXERCISE OF THE OPTION MAY RESULT IN A DISQUALIFYING
EVENT UNDER SECTION 421 OF THE CODE, RESULTING IN SUCH OPTIONS BEING TREATED AS
NON-QUALIFIED STOCK OPTIONS AND BEING SUBJECT TO POTENTIAL TAX IMPACT UPON
EXERCISE OF THE OPTION AND SALE OF THE STOCK.
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7. You understand that neither the option granted hereby nor the shares
of Common Stock that may be acquired by the exercise of the option have been
registered under the Securities Act of 1933 nor under state securities laws. The
certificates for all shares which you purchase through your exercise of the
option shall bear a legend on their face, substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act") or under the securities laws of any state. Such
shares may not be offered for sale, sold, delivered after
sale, transferred, pledged or hypothecated in the absence of
an effective registration statement covering such shares under
the 1933 Act or state securities laws or an exemption from
registration thereunder which, in the opinion of counsel
satisfactory to the Company, makes such registration
unnecessary."
8. Prior to your exercise of the option, you have the right to request
that the Company make available to you, without charge, its most recent public
filings, if any, under the 1933 Act and under the Securities Exchange Act of
1934, and such other documents that you may reasonably request in order to make
an informed decision as to whether you should exercise the option.
9. You agree to notify the Company in writing within thirty (30) days
of the date that you sell or otherwise dispose of the stock acquired through the
exercise of the option granted herein and within thirty (30) days of any
disposition or event that disqualifies the options from being treated as an
incentive stock option under Section 422 of the Code.
10. As provided by Section 8 of the Plan, in addition to other forms of
exercising the option, you shall have the right to convert this option, by the
surrender of this option and a written notice of conversion duly executed at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to you), in whole, but not in part, at any time
into shares of Common Stock as provided for in this Section 10. Upon exercise of
this conversion right, you shall be entitled to receive that number of Shares of
Common Stock equal to the quotient obtained by dividing [(A - B)(X)] by (A),
where:
(A) = the Fair Market Value (as defined below)
of one share of Common Stock on the date of
conversion of this option.
(B) = the Exercise Price for one share of Common
Stock under this option (as adjusted under
Section 4 of the Plan,).
(X) = the total number of shares of Common Stock
issuable upon exercise of this option (as
adjusted under Section 4 of the Plan).
If the above calculation results in a negative number, then no shares of Common
Stock shall be issued or issuable upon conversion of this option.
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<PAGE> 13
"Fair Market Value" of a share of Common Stock shall mean the fair value as
determined in good faith by the Company's Board of Directors.
Upon conversion of this option, you shall be entitled to receive a certificate
for the number of shares of Common Stock as determined above.
11. IN ADDITION TO THE FOREGOING CONDITIONS, the option is subject to
all the terms and conditions of the Digital Commerce Corporation 1998 Stock
Option Plan annexed to this letter and any rules and regulations promulgated
from time to time by the Committee with respect to the Plan. To the extent that
anything contained herein or in any such rules of or regulations are
inconsistent with the Plan, the terms of the Plan shall govern. The options are
subject to adjustment upon the happening of certain events in the Plan.
12. No provision in this option shall be construed as conferring upon
you the right to vote, consent, receive dividends or receive notice other than
as expressly provided herein or in the Plan.
13. No representation is made to you with respect to the tax effect
upon your receipt of the option, your exercise thereof, or the sale of the
shares so acquired. PLEASE CONSULT YOUR TAX OR FINANCIAL ADVISOR PRIOR TO
EXERCISING YOUR OPTION.
* * *
To make the grant of the option effective, please acknowledge receipt
of this letter and the enclosed copy of the Plan by signing and dating the
enclosed copy of this letter in the space provided below and returning the
signed copy in the enclosed, self-addressed envelope.
Yours truly,
Tony Bansal, President
Digital Commerce Corporation
ACCEPTED AND SIGNED:
Print Name:
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Date:
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EXHIBIT 10.3
DIGITAL COMMERCE CORPORATION
EXECUTIVE RETENTION PLAN
1. NAME AND PURPOSE. The purpose of this Plan, which shall be known as
the Digital Commerce Corporation Executive Retention Plan ("Plan"), is to
advance the interests of Digital Commerce Corporation ("Company") by providing
for the continuity of the Company's executive management team during the
Company's critical growth period through providing executive management with a
material incentive for the continued services to the Company or its
Subsidiaries.
2. DEFINITIONS. For purposes of this Plan, the following terms, when
capitalized, shall have the meanings designated herein unless a different
meaning is plainly required by the context.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean a Compensation and Human Resources Committee
of not less than two directors of the Company who shall be appointed by and
serve at the pleasure of the Board. Each director on the Committee shall be a
Non-Employee Director (as such term is defined in Rule 16b-3(b)(3)(i) of the
Securities and Exchange Act of 1934). If no Compensation and Human Resources
Committee is appointed, then the Board shall act as the Committee.
(c) "Effective Date" shall mean the date on which this Plan shall have
been approved by the directors of the Company.
(d) "Fair Market Value" of the Company's common shares on a certain
date shall mean, if the Company's common shares are listed on a recognized stock
exchange or the Nasdaq system, the average of the high and low prices as quoted
by such exchange or Nasdaq on the date specified, or if the Company's common
shares are not quoted on an exchange or Nasdaq on such date, on the next
preceding date on which the common shares are traded. If the Company's common
shares are not listed on an exchange or Nasdaq, then "Fair Market Value" of the
common shares on a certain date shall be that value which the Board or the
Committee determines, in good faith, to be the fair market value of the common
shares on such date.
(e) "Key Employee" shall mean any employee (including officers) of the
Company or a Subsidiary whose services, in the opinion of the Board, are
critical to the Company's success during its period of growth.
(f) "Family Member" of the Participant shall mean child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law or the Participant, including any adoptive
relationships of any of the foregoing.
<PAGE> 2
(g) "Non-Qualified Stock Options" shall mean those options, granted by
the Company pursuant to this Plan, which do not qualify for favorable tax
treatment under Section 422 of the Internal Revenue Code of 1986 (the "Code").
(h) "Participant" shall mean a Key Employee selected by the Board to
receive Non-Qualified Stock Options granted under this Plan.
(i) "Subsidiary" shall mean an entity in which 50% or more of the
common stock or, in the case of a partnership or limited liability company, 50%
or more of the voting capital interest thereof, is owned directly or indirectly
by the Company, or that is a member with the Company in a controlled group of
corporations, or is otherwise under common control with the Company within the
meaning of Section 414(b) and (c) of the Code.
3. ADMINISTRATION; SELECTION OF PARTICIPANTS.
(a) The Plan shall be administered by the Board or, at its discretion,
by the Committee, which shall select the Participants and shall grant to the
Participants stock options under, and in accordance with, the provisions of the
Plan. To the extent the Committee administers the Plan, all references herein to
the "Board" shall mean the "Committee." The stock options granted under this
Plan to Participants shall be Non-Qualified Stock Options.
(b) Subject to the express provisions of this Plan, the Board shall
have authority to adopt regulations and procedures which are consistent with the
terms of this Plan; to adopt and amend stock option agreements between the
Company and a Participant as they deem advisable and to determine the terms and
provisions of such stock option agreements, including the number of shares with
respect to which options are granted to a Participant, the option price for such
shares in accordance with Paragraph 5(a), below, and the date or dates when the
option or parts of it may be exercised, which terms shall comply with any
applicable requirements of Paragraph 5 below; to construe and interpret such
stock option agreements and to impose therein such limitations and restrictions
as are deemed necessary or advisable by counsel for the Company so that
compliance with the federal securities laws and with the securities laws of the
various states may be assured; and to make all other determinations necessary or
advisable for administering this Plan. All decisions and interpretations made by
the Board shall be binding and conclusive on all Participants, their legal
representatives and beneficiaries.
4. STOCK SUBJECT TO THE PLAN.
(a) The stock to be issued and delivered by the Company upon exercise
of options granted under this Plan are shares of the Company's common stock,
$0.01 par value per share ("Common Stock"), which may be either authorized but
unissued shares, or treasury shares, in the discretion of the Board.
(b) The aggregate number of shares of the Company's Common Stock which
may be issued under this Plan shall not exceed 3,600,000; subject, however, to
the adjustment provided in Paragraph 11 in the event of stock splits, stock
dividends, exchanges of shares, or the like,
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occurring after the Effective Date. No stock option may be granted under this
Plan which could cause such maximum limit to be exceeded.
(c) Shares covered by an option which is no longer exercisable with
respect to such shares shall again be available for issuance in connection with
other options granted under this Plan.
5. TERMS OF OPTIONS. Options granted under the Plan shall be evidenced
by stock option agreements authorized by the Board and executed by a duly
authorized officer of the Company. Such stock option agreements shall contain
such terms as the Board shall determine, subject to the following limitations
and requirements.
(a) OPTION PRICE: The option price per common share shall be not less
than 100% of the Fair Market Value of the common shares on the date of grant of
such option.
(b) PERIOD WITHIN WHICH OPTION MAY BE EXERCISED: In general, and
subject to the provisions of Paragraphs 5(c) and 12, options granted under the
Plan will become exercisable on the dates and in the amounts set forth in the
stock option agreement between the Company and the Participant. Each option
granted under this Plan shall terminate (become non-exercisable) after the
expiration of ten years from the date of grant of such option. Regardless of the
immediately preceding sentence, the Board shall have the discretion to set a
shorter termination period.
(c) TERMINATION OF OPTION BY REASON OF TERMINATION OF EMPLOYMENT:
i. Upon termination of a Participant's employment with the
Company or a Subsidiary, and unless otherwise provided in the stock option
agreement, all options granted under this Plan to such Participant which are not
exercisable on the date of such termination shall immediately terminate, and any
remaining exercisable options shall terminate if not exercised before the
expiration of one (1) year following such termination of employment for any
reason, or at such earlier time as may be applicable under Subparagraph 5(b)
above.
A Participant's termination because of long-term disability, as determined in
accordance with the Company's policies in effect as of the time of such
termination, shall not be deemed termination of employment for purposes of this
Subparagraph 5(c).
ii. Whether time spent on leave of absence granted by the
Company or any Subsidiary shall constitute continued employment for purposes of
this Plan shall be determined by the Board in its sole discretion, except that
one or more leaves of absence aggregating no more than six (6) months in a three
(3) year period shall not be deemed to be termination of employment for purposes
of this Subparagraph 5(c).
iii. Notwithstanding the foregoing, the Board may, in its sole
discretion, impose more restrictive conditions on the exercise of an option
granted under the Plan, including, without limitation, providing for no exercise
of any option after termination of a Participant's
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employment; however, any and all such conditions shall be specified in the stock
option agreement limiting and defining such option.
iv. Notwithstanding the foregoing provisions of this
Subparagraph 5(c), the stock option agreement may provide that in the event of
the termination of a Participant's employment, the Company shall have the first
right of refusal to repurchase or offer to repurchase some or all unexercised
and vested options, or Common Stock issued upon the exercise of such options,
upon such terms and conditions as are set forth in the stock option agreement.
v. The Board may, from time to time, be required to address
circumstances relating to termination of employment not set forth in this
Subparagraph 5(c). Accordingly, notwithstanding the foregoing provisions of this
Subparagraph 5(c), the Board may provide in the stock option agreement, or it
may unilaterally amend an outstanding stock option agreement to provide, that:
(A) the time in which an option may be exercised upon termination of employment
may exceed the time set forth in Subparagraph 5(c)(i), and (B) options not
exercisable at such termination of employment shall not terminate at such time
but may nevertheless may be exercised until the expiration of the earlier of the
exercise period contained in such stock option agreement or amendment
(regardless of such termination of employment, directorship, or consultancy) or
such shorter period as provided therein.
(d) TRANSFERABILITY: No vested or unvested option under this Plan shall
be assignable or transferable except (i) in the event of the death of a
Participant, by his will or by the laws of descent and distribution, or (ii)
upon transfer to (A) Family Members, (B) a trust in which the Participant or
Family Members own more than fifty percent (50%) of the beneficial interest of
the trust, (C) a foundation in which the Participant or Family Members control
the management of assets, or (D) an entity in which the Participant or family
members own fifty percent (50%) or more of the voting interest (each such
transferee in Subparagraphs (i) and (ii) a "Permitted Transferee"). In the event
of the death of a Participant, the representative of his estate, or the person
or persons who acquired (by bequest or inheritance) the rights to exercise his
stock options granted under the Plan, may exercise any of the unexercised
options or part thereof prior to the expiration of the applicable exercise
period, as specified in Subparagraph 5(b) and 5(c) above, or in the stock option
agreement relating to such options. No transfer of an option by a participant by
will or by laws of descent and distribution shall be effective to bind the
Company unless the Company shall have been furnished with written notice thereof
and a copy of the will and such other evidence as the Company may deem necessary
to establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions of such option. No transfer of an
option by a Participant to a Permitted Transferee shall be effective to bind the
Company unless (i) the Company has approved in writing such a Permitted
Transfer, and (ii) the Permitted Transferee has agreed in writing to be bound by
all of the terms and conditions of this Plan and of any stock option agreement
with the Participant seeking to transfer his or her options to a Permitted
Transferee. The Company has the right to request and obtain a written opinion of
counsel to the Company that the transfer is permitted under this Subparagraph
5(d) and under Federal and State securities laws.
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<PAGE> 5
(e) MORE THAN ONE OPTION GRANTED TO A PARTICIPANT: More than one
option, and more than one form of option, may be granted to a Participant under
this Plan. In addition, a Participant may be granted one or more options under
this Plan as well as under any other stock option plan adopted by or stock
option grant issued by the Company.
(f) PARTIAL EXERCISE: Unless otherwise provided in the stock option
agreement, any exercise of an option granted under this Plan may be made in
whole or in part.
6. PERIOD OF GRANTING OPTIONS. No option shall be granted under this
Plan subsequent to ten years after the Effective Date.
7. NO EFFECT UPON EMPLOYMENT STATUS. The fact that an employee has been
selected as a Participant shall not limit or otherwise qualify the right of the
Company to terminate his employment with the Company at any time, nor shall it
be deemed a promise or commitment by the Company to continue such person's
employment.
8. METHOD OF EXERCISE. Any option granted under this Plan may be
exercised by written notice to the Board, care of the Secretary, signed by the
Participant, or by such other person as is entitled to exercise such option. The
notice of exercise shall state the number of shares in respect of which the
option is being exercised, and shall be accompanied by the payment, in cash, in
the form of a written commitment by a broker-deal to pay to the Company that
portion of any sale proceeds receivable by the optionee upon exercise of an
option granted hereunder, in any other instrument acceptable to the Company, in
any other form acceptable to the Company or provided in the grant of options,
and/or, as provided below, in the common shares of the Company, of the full
option price for such shares. At the written request of the Participant and upon
approval by the Board, shares acquired pursuant to the exercise of any option
may be paid for at the time of exercise by the surrender to an agent designated
by the Company of shares of Common Stock held by or for the account of the
Participant at the time of exercise. In such case, the fair market value of the
surrendered shares shall be determined by the Board as of the date of exercise
in the same manner as such value is determined upon the grant of an option. A
certificate or certificates for the shares of Common Stock purchased through the
exercise of an option shall be issued in the regular course after the exercise
of an option and payment therefor. The Company shall be afforded reasonable
opportunity after exercise of any option to comply with any requirements for
stock exchange listing, for registration under applicable securities or other
laws and for compliance with other laws and regulations, if any, before issuance
of the shares being purchased on such exercise; provided, however, that the
Company shall not be obligated to register the issuance of shares of Common
Stock upon the exercise of the option or the resale of the shares of Common
Stock issued upon such exercise. During the option period, no person entitled to
exercise any option granted under this Plan shall have any of the rights or
privileges of a shareholder with respect to any shares issuable upon exercise of
such option until certificates representing such shares shall have been issued
and delivered. The exercise of any option shall be contingent upon receipt from
the Participant of a representation that, at the time of such exercise, it is
his or her then present intention to acquire the shares being purchased for
investment and not for distribution (unless issuance of the stock upon the
exercise of the options has been duly registered under the Securities Act of
1933 ("1933 Act") and the Company has
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<PAGE> 6
waived the requirement that such representation be made, or unless the Company
has received an opinion of counsel acceptable to it that the resale of such
shares is exempt from the registration requirements of the 1933 Act and
applicable state securities laws).
9. RESTRICTIONS ON SHARES; SECURITIES REGISTRATION.
(a) The certificates for Common Stock to be delivered upon proper
exercise of the option ("Option Stock") shall contain legends substantially as
set forth below, unless the resale of such stock has been registered under the
1933 Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("1933 Act"). Such shares
may not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated in the absence of an effective registration
statement covering such shares under the 1933 Act or an exemption under
the 1933 Act which, in the opinion of counsel satisfactory to the
Company, makes such registration unnecessary."
(b) If the Company shall nevertheless deem it necessary or desirable to
register any Option Stock to be issued pursuant to the Plan under the 1933 Act
or other applicable statutes (including state securities laws) or to qualify any
such issuance for exemption from the 1933 Act under any rule or regulation of
the Securities and Exchange Commission or under the 1933 Act, then the Company
shall take such action at its own expense before delivery of such shares, but
nothing contained herein shall be deemed, in any manner, to require the Company
to register the Option Stock under the 1933 Act or applicable state securities
laws or to qualify the shares for any exemption under the 1933 Act or applicable
state securities laws.
10. IMPLIED CONSENT OF PARTICIPANTS. Every Participant, by his
acceptance of an option under this Plan, shall be deemed to have consented to be
bound, on his own behalf and on behalf of his heirs, assigns, and legal
representatives, by all of the terms and conditions of this Plan, by all terms
and conditions of the agreement granting such option, and by all agreements
annexed to or referenced in such agreement granting such option.
11. SHARE ADJUSTMENTS. In the event there is any change in the
Company's common shares resulting from stock splits, stock dividends of more
than 5% in any year, combination or exchanges of shares, or other similar
capital adjustments, equitable proportionate adjustments shall be made by the
Board in (1) the number of shares available for option under this Plan, (2) the
number of shares subject to options granted under this Plan, and (3) the option
price of optioned shares.
12. MERGER, CONSOLIDATION, OR SALE OF ASSETS; CHANGE IN CONTROL OF THE
COMPANY. In the event (i) the Company shall consolidate with, merge into, or
transfer all or substantially all of its assets to another person(s) or
entity(ies) or a "change in control" (as hereinafter defined) shall occur, and
(ii) within six (6) months prior to or twelve (12) months after such event the
Participant involuntarily either no longer serves in the position or has the
duties that he had prior to such action and does not receive an equivalent or
greater position or duties with the Company
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or an Subsidiary, all options theretofore granted shall immediately be
exercisable. For purposes of this Paragraph 12, a change in control shall be
deemed to occur if twenty percent (20%) or more of the outstanding shares of the
Company's common stock are sold or otherwise transferred, except that the
following shall not be deemed to be a change in control: (A) a sale or transfer
to a Family Member or a person to whom a transfer of an option could be made
pursuant to Subparagraph 5(d) of the Plan or (B) the sale of common stock by the
Company in an initial public offering registered under the 1933 Act or in any
offering by the Company thereafter for cash registered under the 1933 Act.
13. COMPANY RESPONSIBILITY. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Company. The Company shall
have no responsibility or liability for any act or thing done or left undone
with respect to the price, time, quality, or other conditions and circumstances
of the purchase of shares under the terms of the Plan, so long as the Company
acts in good faith.
14. USE OF PROCEEDS. The proceeds received by the Company from the sale
of stock under the Plan shall be added to the general funds of the Company and
shall be used for such corporate purposes as the Board shall direct.
15. LAW GOVERNING. This Plan and the rights of all persons hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
16. SECURITIES LAWS. The Board shall take all necessary or appropriate
actions to ensure that all option grants and all exercises thereof under this
Plan are in full compliance with all federal and state securities laws.
17. WITHHOLDING AND DEDUCTIONS. Notwithstanding anything to the
contrary contained herein, if at any time specified herein for the making of any
payment of cash or any delivery of Option Stock to any person, by reason of the
grant of an option, the exercise thereof, or otherwise, any law or regulation of
any governmental authority having jurisdiction in the premises shall require the
Company to withhold, or to make any deduction for any taxes or take any other
action in connection with the payment or delivery then to be made, the Company
shall make sure such withholding or deduction shall have been adequately
provided for, in the opinion of the Board.
18. AMENDMENT AND TERMINATION. The Board may terminate this Plan at any
time, and may amend the Plan at any time or from time to time, without obtaining
any approval of the Company's shareholders; except that the Plan may not be
amended, without the consent of the shareholders, (1) to increase the aggregate
number of shares issuable under the Plan (excepting proportionate adjustments
made under Paragraph 11 to give effect to stock splits, etc.); (2) to change the
requirement that the option price per common share not be less than 100% of the
Fair Market Value of the common shares on the date the option is granted; or (3)
if such amendment would result in a material increase in the cost of the Plan to
the Company. If the Plan is terminated, any unexercised option shall continue to
be exercisable in accordance with its terms, except as provided in Paragraph 12
above.
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19. SAVINGS PROVISION. With respect to persons subject to Section 16 of
the Securities Exchange Act of 1934, the transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors thereunder. To the extent that any provision of this Plan or action
by the Board fails to so comply, it shall be deemed null and void to the extent
required by law. The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.
20. VARIATIONS IN PRONOUNS. Whenever used in this Plan, unless the
context otherwise requires, words used in the singular shall also include the
plural, and words used in the masculine gender shall also include the feminine
or neuter gender.
21. CAPTIONS AND HEADINGS. The section and subsection headings and
captions are for reference purposes only and shall not in any way affect the
meaning or interpretation of any such section or subsection of this Plan.
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DIGITAL COMMERCE CORPORATION
EXECUTIVE RETENTION PLAN
GRANT OF STOCK OPTIONS
Dated:<<GrantDate>>
<<FirstName>> <<LastName>>
<<Address1>>
<<CityStateZip>>
Dear <<FirstName>>:
Digital Commerce Corporation (the "Company") has adopted the Digital
Commerce Corporation Executive Retention Plan (the "Plan"). A copy of the Plan
is annexed to this letter. The Plan permits the Company to grant stock options
to key employees of the Company and its subsidiaries, as designated by the
Company's Compensation and Human Resources Committee or the Board of the
Directors acting in such capacity (the "Committee"). We are pleased to inform
you that the Committee has granted you an option to purchase up to
<<TotalGrant>> shares of the $.01 par value Common Stock of the Company at a
price of <<OptionPrice>> per share. This option is NOT qualified as a Qualified
Incentive Stock Option for purposes of Section 422 of the Internal Revenue Code
of 1986, as amended. The date of this grant is the date of this letter set forth
above.
The option is subject to certain conditions, to which you must agree by
signing and returning to the Secretary of the Company a copy of this letter.
These conditions include BUT ARE NOT LIMITED TO the following:
1. Subject to the terms and conditions contained in the Plan and in
this letter, the option may first be exercised as set forth below:
A. Options to purchase <<HalfGrant>> shares may be exercised as
follows: <<EighthGrant>> shares may first be exercised on the
first anniversary date of this grant, <<EighthGrant>> shares may
first be exercised on the second anniversary date of this grant,
<<EighthGrant>> shares may first be exercised on the third
anniversary date of this grant, and <<EighthGrant>> shares may
first be exercised on the fourth anniversary date of this grant.
B. Options to purchase <<HalfGrant>> shares shall be divided into
four (4) tranches of<<EighthGrant>> shares each. The options
contained in each tranche may first be exercised upon the earlier
(i) of the Company's average reported closing stock price being
maintained or exceeded for at least twenty (20) consecutive
trading days at a level specified for such tranche by the
Committee or (ii) <<NineYearDate>>. The Committee shall specify
the trading price of each of the four tranches for purposes of
Subparagraph 1(B)(i) hereof within ten (10) days
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following the date on which the Company closes its initial public
offering of its Common Stock registered under the Securities Act
of ("1933 Act"), or, in the event of no initial public offering
prior to June 1, 2001, the Board must establish the fair market
value targets applicable to the four tranches no later than July
1, 2001.
The option shall continue in whole or in part at any time from the date hereof
until <<TenYearDate>>, (the "Termination Date"), when, in any event, it shall
expire to the extent it has not been exercised; provided, however, that
notwithstanding the above, the option may be terminated at an earlier time as
set forth in Section 5 of the Plan. You shall not have any of the rights or
privileges of a shareholder with respect to any shares issuable upon exercise of
this option until certificates representing such shares shall have been issued
and delivered. Pursuant to the provisions of Section 5(c)(v) of the Plan, in the
event that your employment is terminated for any reason (including those set
forth in Section 5(c)(i)(A) and (B) of the Plan), then you (or your
representative) may, until the "Termination Date", exercise all options that you
are eligible to exercise as of the time of your termination of employment, and
all other options shall terminate on the first yearly anniversary following the
effective date of such termination, unless the Board otherwise determines that a
longer exercise period should apply.
2. The option must be exercised by written notice to the Board of
Directors of the Company, care of the Secretary of the Company. The notice must
state the number of shares you wish to purchase and must be accompanied by full
payment of the option price for those shares.
3. You will not be permitted to exercise the option at any time when
its exercise, or the issuance of shares by the Company under the Plan would, in
the opinion of the Company, constitute a violation of any federal or state law
or of the listing requirements of any stock exchange on which the shares of the
Company are listed. The Company is under no obligation to register the issuance
of the shares of Common Stock upon the exercise of this option.
4. You, or a Permitted Transferee, may exercise the options according
to Section 5 of the Executive Retention Plan. If you should die while any part
of the option is unexercised, then your legal representative may exercise the
option for the applicable period as set forth in Section 5 of the Plan.
5. You agree to comply with the securities laws as they may be in
effect at the time of your exercise of the option, to hold the shares acquired
by your exercise of the option for investment purposes only and not with a view
to resale or distribution to the public within the meaning of the 1933 Act
unless such acquisition was made pursuant to an effective registration statement
under the 1933 Act and applicable state securities laws, and to comply with any
insider trading policy generally applicable to the executive officers and
directors of the Company. You agree, as a condition of any exercise of the
option, to sign a letter, in such form as the Company may require in order to
comply with the securities laws as they may be in effect at the time of your
exercise of the option.
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6. You understand that if the shares of Common Stock that may be
acquired by the exercise of the option have not been registered under the
Securities Act of 1933 or under state securities laws, the certificates for all
shares which you purchase through your exercise of the option shall bear a
legend on their face, substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act") or under the securities laws of any state. Such
shares may not be offered for sale, sold, delivered after
sale, transferred, pledged or hypothecated in the absence of
an effective registration statement covering such shares under
the 1933 Act or state securities laws or an exemption from
registration thereunder which, in the opinion of counsel
satisfactory to the Company, makes such registration
unnecessary."
7. Prior to your exercise of the option, you have the right to request
that the Company make available to you, without charge, its most recent public
filings, if any, under the 1933 Act and under the Securities Exchange Act of
1934, as amended, and such other documents that you may reasonably request in
order to make an informed decision as to whether you should exercise the option.
8. You agree to notify the Company in writing within thirty (30) days
of the date that you sell or otherwise dispose of the stock acquired through the
exercise of the option granted herein.
9. In accordance with Section 8 of the Plan, in addition to other forms
of exercising the option, with the written consent of the Company, which it may
grant or withhold in its sole discretion, you may convert this option, by the
surrender of this option and a written notice of conversion duly executed at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to you), in whole or in part, at any time into
shares of Common Stock as provided for in this paragraph 9. Upon exercise of
this conversion right, you shall be entitled to receive that number of Shares of
Common Stock equal to the quotient obtained by dividing [(A - B)(X)] by (A),
where:
(A) = the Fair Market Value (as defined in the
Plan) of one share of Common Stock on the
date of conversion of this option.
(B) = the Exercise Price for one share of Common
Stock under this option (as adjusted under
Section 11 of the Plan).
(X) = the total number of shares of Common Stock
issuable upon exercise of this option (as
adjusted under Section 11 of the Plan).
The Company may require, as a condition of approving such exercise under this
paragraph 9, that you pay to the Company at the time of the exercise and
conversion all applicable tax withholdings generated by such exercise, as
determined by the Company. If the above
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calculation results in a negative number, then no shares of Common Stock shall
be issued or issuable upon conversion of this option.
Upon conversion of this option, you shall be entitled to receive a certificate
for the number of shares of Common Stock as determined above.
10. You agree, as a condition of receiving the options granted herein,
to execute the Retention Agreement, Confidentiality/Intellectual Property
Agreement, and Noncompetition Agreement annexed to this letter.
11. IN ADDITION TO THE FOREGOING CONDITIONS, the option is subject to
all the terms and conditions of the Plan and the Retention Agreement,
Confidentiality/Intellectual Property Agreement, and Noncompetition Agreement
(collectively, the "Agreements") annexed to this letter and any rules and
regulations promulgated from time to time by the Committee with respect to the
Plan. To the extent that anything contained herein or in any such rules of or
regulations are inconsistent with the Plan, the terms of the Plan shall govern.
In the event of inconsistencies or required clarifications the Board of
Directors or the Compensation and Human Resources Committee of the Board shall
determine such interpretations. Additionally, the options are subject to
adjustment upon the happening of certain events specified in the Plan.
12. No provision in this option shall be construed as conferring upon
you the right to vote, consent, receive dividends or receive notice other than
as expressly provided herein or in the Plan.
13. No representation is made to you with respect to the tax effect
upon your receipt of the option, your exercise thereof, or the sale of the
shares so acquired. PLEASE CONSULT YOUR TAX OR FINANCIAL ADVISOR PRIOR TO
EXERCISING YOUR OPTION.
* * *
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To make the grant of the option effective, please acknowledge receipt
of this agreement and the enclosed copy of the Plan by signing and dating the
enclosed copy of this agreement and the enclosed Agreements in the space
provided and returning the signed copies in the enclosed, self-addressed
envelope.
Yours truly,
Digital Commerce Corporation
By:
Tony Bansal, President
ACCEPTED AND SIGNED:
By:
---------------------------------
<<FirstName>><<LastName>>
Date:
-------------------------------
13
<PAGE> 1
EXHIBIT 10.4
DIGITAL COMMERCE CORPORATION
EXECUTIVE RETENTION PLAN
GRANT OF STOCK OPTIONS
Dated: April 4, 2000
Tony Bansal
12661 Braddock Farms Court
Clifton, VA 20124
Dear Tony:
Digital Commerce Corporation (the "Company") has adopted the Digital
Commerce Corporation Executive Retention Plan (the "Plan"). A copy of the Plan
is annexed to this letter. The Plan permits the Company to grant stock options
to key employees of the Company and its subsidiaries, as designated by the
Company's Compensation and Human Resources Committee or the Board of the
Directors acting in such capacity (the "Committee"). We are pleased to inform
you that the Committee has granted you an option to purchase up to 725,000
shares of the $.01 par value per share common stock of the Company ("Common
Stock") at a price of $5.8347 per share. This option is NOT qualified as a
Qualified Incentive Stock Option for purposes of Section 422 of the Internal
Revenue Code of 1986, as amended. The date of this grant is the date of this
letter set forth above.
The option is subject to certain conditions, to which you must agree by
signing and returning to the Secretary of the Company a copy of this letter.
These conditions include BUT ARE NOT LIMITED TO the following:
1. Subject to the terms and conditions contained in the Plan and in
this letter, the option may first be exercised as set forth below:
A. Options to purchase 362,500 shares may be exercised as follows:
90,625 shares may first be exercised on the first yearly
anniversary date of this grant, 90,625 shares may first be
exercised on the second yearly anniversary date of this grant,
90,625 shares may first be exercised on the third yearly
anniversary date of this grant, and 90,625 shares may first be
exercised on the fourth yearly anniversary date of this grant.
B. Options to purchase 362,500 shares shall be divided into four (4)
tranches of 90,625 shares each. The options contained in each
tranche may be first be exercised upon the earlier (i) of the
Company's average reported closing stock price being maintained
or exceeded for at least twenty (20) consecutive trading days at
a level specified for such tranche by the Committee or (ii) April
4, 2009. The Committee shall specify the trading price of each of
the four tranches for purposes of Subparagraph 1(B)(i) hereof
within ten (10) days following the date on which the Company
closes its initial public offering of its Common Stock
1
<PAGE> 2
registered under the Securities Act of ("1933 Act"), or, in the
event of no initial public offering prior to June 1, 2001, the
Board must establish the fair market value targets applicable to
the four tranches no later than July 1, 2001.
The option shall continue whole or in part at any time from the date hereof
until April 4, 2010 (the "Termination Date"), when, in any event, it shall
expire to the extent it has not been exercised; provided, however, that
notwithstanding the above, the option may be terminated at an earlier time as
set forth in Section 5 of the Plan. You shall not have any of the rights or
privileges of a shareholder with respect to any shares issuable upon exercise of
this option until certificates representing such shares shall have been issued
and delivered.
Pursuant to the provisions of Section 5(c)(v) of the Plan, in the event
that: (x) your employment is terminated other than for "Cause" or in the event
that you terminate your employment for "Good Reason," then you (or your
representative) may, from such date of termination until the "Termination Date,"
exercise all of the options granted hereunder (whether or not you would
otherwise be eligible to exercise such options pursuant to subparagraphs 1.A. or
B. hereof), and (y) in the event that your employment is terminated for any
other reason, then you (or your representative) may, until the "Termination
Date," exercise all options that you are eligible to exercise as of the time of
your termination of employment, and all other options shall terminate on the
first yearly anniversary following the effective date of such termination,
unless amended by the Board. For purposes of this option grant, "Cause" shall be
as defined in the Retention Agreement between the Company and you as of the date
herewith, and "Good Reason" shall mean (I) the Company's assigning you any
duties inconsistent with your status as President and Chief Executive Officer of
the Company or any substantial adverse alteration in the nature or status of
your responsibilities; (II) any change in your reporting responsibility such
that you are required to report other than exclusively to the Company's Board of
Directors; or (III) any other failure by the Company to comply with any material
provision of the Retention Agreement or any other employment agreement that you
may have in effect with the Company at the time of such termination, which
failure continues for more that ten (10) days after you provide the Company with
written notice of such noncompliance.
2. The option must be exercised by written notice to the Board of
Directors of the Company, care of the Secretary of the Company. The notice must
state the number of shares you wish to purchase and must be accompanied by full
payment of the option price for those shares.
3. You will not be permitted to exercise the option at any time when
its exercise, or the issuance of shares by the Company under the Plan would, in
the opinion of the Company, constitute a violation of any federal or state law
or of the listing requirements of any stock exchange on which the shares of the
Company are listed. The Company is under no obligation to register the issuance
of the shares of Common Stock upon the exercise of this option.
4. You, or a Permitted Transferee, may exercise the options according
to Section 5 of the Plan. If you should die while any part of the option is
unexercised, then your legal representative may exercise the option for the
applicable period as set forth in Section 5 of the Plan.
2
<PAGE> 3
5. You agree to comply with the securities laws as they may be in
effect at the time of your exercise of the option, to hold the shares acquired
by your exercise of the option for investment purposes only and not with a view
to resale or distribution to the public within the meaning of the 1933 Act
unless such acquisition was made pursuant to an effective registration statement
under the 1933 Act and applicable state securities laws, and to comply with any
insider trading policy generally applicable to the executive officers and
directors of the Company. You agree, as a condition of any exercise of the
option, to sign a letter, in such form as the Company may require in order to
comply with the securities laws as they may be in effect at the time of your
exercise of the option.
6. You understand that if the shares of Common Stock that may be
acquired by the exercise of the option have not been registered under the
Securities Act of 1933 or under state securities laws, the certificates for all
shares which you purchase through your exercise of the option shall bear a
legend on their face, substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act") or under the securities laws of any state. Such
shares may not be offered for sale, sold, delivered after
sale, transferred, pledged or hypothecated in the absence of
an effective registration statement covering such shares under
the 1933 Act or state securities laws or an exemption from
registration thereunder which, in the opinion of counsel
satisfactory to the Company, makes such registration
unnecessary."
7. Prior to your exercise of the option, you have the right to request
that the Company make available to you, without charge, its most recent public
filings, if any, under the 1933 Act and under the Securities Exchange Act of
1934, as amended, and such other documents that you may reasonably request in
order to make an informed decision as to whether you should exercise the option.
8. You agree to notify the Company in writing within thirty (30) days
of the date that you sell or otherwise dispose of the stock acquired through the
exercise of the option granted herein.
9. As provided by Section 8 of the Plan, in addition to other forms of
exercising the option, with the written consent of the Company, which it may
grant or withhold in its sole discretion, you may convert this option, by the
surrender of this option and a written notice of conversion duly executed at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to you), in whole or in part, at any time into
shares of Common Stock as provided for in this paragraph 9. Upon exercise of
this conversion right, you shall be entitled to receive that number of Shares of
Common Stock equal to the quotient obtained by dividing [(A - B)(X)] by (A),
where:
(A) = the Fair Market Value (as defined in the
Plan) of one share of Common Stock on the
date of conversion of this option.
3
<PAGE> 4
(B) = the Exercise Price for one share of Common
Stock under this option (as adjusted under
Section 11 of the Plan).
(X) = the total number of shares of Common Stock
issuable upon exercise of this option (as
adjusted under Section 11 of the Plan).
The Company may require, as a condition of approving such exercise under this
paragraph 9, that you pay to the Company at the time of the exercise and
conversion all applicable tax withholdings generated by such exercise, as
determined by the Company. If the above calculation results in a negative
number, then no shares of Common Stock shall be issued or issuable upon
conversion of this option.
Upon conversion of this option, you shall be entitled to receive a certificate
for the number of shares of Common Stock as determined above.
10. You agree, as a condition of receiving the options granted herein,
to execute the Employment Agreement, Confidentiality/Intellectual Property
Agreement, and Noncompetition Agreement annexed to this letter.
11. IN ADDITION TO THE FOREGOING CONDITIONS, the option is subject to
all the terms and conditions of the Plan and the Retention Agreement,
Confidentiality/Intellectual Property Agreement, and Noncompetition Agreement
(collectively, the "Agreements") annexed to this letter and any rules and
regulations promulgated from time to time by the Committee with respect to the
Plan. To the extent that anything contained herein or in any such rules of or
regulations are inconsistent with the Plan, the terms of the Plan shall govern.
In the event of inconsistencies or required clarifications, the Board of
Directors or the Compensation and Human Resources Committee of the Board shall
determine such interpretations. Additionally, the options are subject to
adjustment upon the happening of certain events specified in the Plan.
12. No provision in this option shall be construed as conferring upon
you the right to vote, consent, receive dividends or receive notice other than
as expressly provided herein or in the Plan.
13. No representation is made to you with respect to the tax effect
upon your receipt of the option, your exercise thereof, or the sale of the
shares so acquired. PLEASE CONSULT YOUR TAX OR FINANCIAL ADVISOR PRIOR TO
EXERCISING YOUR OPTION.
* * *
To make the grant of the option effective, please acknowledge receipt
of this option agreement and the enclosed copy of the Plan by signing and dating
the enclosed copy of this option agreement and the enclosed Agreements in the
space provided and returning the signed copies in the enclosed, self-addressed
envelope.
Yours truly,
Digital Commerce Corporation
By: /s/ John Poindexter
--------------------------------
Director
ACCEPTED AND SIGNED:
/s/ Tony Bansal
- --------------------------
Tony Bansal
Date: April 4, 2000
--------------
4
<PAGE> 1
EXHIBIT 10.5
DIGITAL COMMERCE CORPORATION
EXECUTIVE RETENTION PLAN
GRANT OF STOCK OPTIONS
Dated: April 4, 2000
William H. Seippel
11388 Seneca Knoll Drive
Great Falls, VA 22066
Dear Will:
Digital Commerce Corporation (the "Company") has adopted the Digital
Commerce Corporation Executive Retention Plan (the "Plan"). A copy of the Plan
is annexed to this letter. The Plan permits the Company to grant stock options
to key employees of the Company and its subsidiaries, as designated by the
Company's Compensation and Human Resources Committee or the Board of the
Directors acting in such capacity (the "Committee"). We are pleased to inform
you that the Committee has granted you an option to purchase up to 625,000
shares of the $.01 par value per share common stock of the Company ("Common
Stock") at a price of $5.8347 per share. This option is NOT qualified as a
Qualified Incentive Stock Option for purposes of Section 422 of the Internal
Revenue Code of 1986, as amended. The date of this grant is the date of this
letter set forth above.
The option is subject to certain conditions, to which you must agree by
signing and returning to the Secretary of the Company a copy of this letter.
These conditions include BUT ARE NOT LIMITED TO the following:
1. Subject to the terms and conditions contained in the Plan and in
this letter, the option may first be exercised as set forth below:
A. Options to purchase 312,500 shares may be exercised as follows:
78,125 shares may first be exercised on the first yearly
anniversary date of this grant, 78,125 shares may first be
exercised on the second yearly anniversary date of this grant,
78,125 shares may first be exercised on the third yearly
anniversary date of this grant, and 78,125 shares may first be
exercised on the fourth yearly anniversary date of this grant.
B. Options to purchase 312,500 shares shall be divided into four (4)
tranches of 78,125 shares each. The options contained in each
tranche may be first be exercised upon the earlier (i) of the
Company's average reported closing stock price being maintained
or exceeded for at least twenty (20) consecutive trading days at
a level specified for such tranche by the Committee or (ii) April
4, 2009. The Committee shall specify the trading price of each of
the four tranches for purposes of Subparagraph 1(B)(i) hereof
within ten (10) days following the date
1
<PAGE> 2
on which the Company closes its initial public offering of its
Common Stock registered under the Securities Act of ("1933 Act"),
or, in the event of no initial public offering prior to June 1,
2001, the Board must establish the fair market value targets
applicable to the four tranches no later than July 1, 2001.
The option shall continue whole or in part at any time from the date hereof
until April 4, 2010 (the "Termination Date"), when, in any event, it shall
expire to the extent it has not been exercised; provided, however, that
notwithstanding the above, the option may be terminated at an earlier time as
set forth in Section 5 of the Plan. You shall not have any of the rights or
privileges of a shareholder with respect to any shares issuable upon exercise of
this option until certificates representing such shares shall have been issued
and delivered.
Pursuant to the provisions of Section 5(c)(v) of the Plan, in the event
that: (x) your employment is terminated other than for "Cause" or in the event
that you terminate your employment for "Good Reason," then you (or your
representative) may, from such date of termination until the "Termination Date,"
exercise all of the options granted hereunder (whether or not you would
otherwise be eligible to exercise such options pursuant to subparagraphs 1.A. or
B. hereof), and (y) in the event that your employment is terminated for any
other reason, then you (or your representative) may, until the "Termination
Date," exercise all options that you are eligible to exercise as of the time of
your termination of employment, and all other options shall terminate on the
first yearly anniversary following the effective date of such termination,
unless amended by the Board. For purposes of this option grant, "Cause" shall be
as defined in the Retention Agreement between the Company and you as of the date
herewith, and "Good Reason" shall mean (I) the Company's assigning you any
duties inconsistent with your status as Chief Financial Officer and, more than
thirty (30) days following the Company's initial public offering, Chief
Operating Officer of the Company or any substantial adverse alteration in the
nature or status of your responsibilities; (II) any change in your reporting
responsibility such that you are required to report other than exclusively to
the Company's Board of Directors; or (III) any other failure by the Company to
comply with any material provision of the Retention Agreement or any other
employment agreement that you may have in effect with the Company at the time of
such termination, which failure continues for more that ten (10) days after you
provide the Company with written notice of such noncompliance.
2. The option must be exercised by written notice to the Board of
Directors of the Company, care of the Secretary of the Company. The notice must
state the number of shares you wish to purchase and must be accompanied by full
payment of the option price for those shares.
3. You will not be permitted to exercise the option at any time when
its exercise, or the issuance of shares by the Company under the Plan would, in
the opinion of the Company, constitute a violation of any federal or state law
or of the listing requirements of any stock exchange on which the shares of the
Company are listed. The Company is under no obligation to register the issuance
of the shares of Common Stock upon the exercise of this option.
4. You, or a Permitted Transferee, may exercise the options according
to Section 5 of the Plan. If you should die while any part of the option is
unexercised, then your legal
2
<PAGE> 3
representative may exercise the option for the applicable period as set forth in
Section 5 of the Plan.
5. You agree to comply with the securities laws as they may be in
effect at the time of your exercise of the option, to hold the shares acquired
by your exercise of the option for investment purposes only and not with a view
to resale or distribution to the public within the meaning of the 1933 Act
unless such acquisition was made pursuant to an effective registration statement
under the 1933 Act and applicable state securities laws, and to comply with any
insider trading policy generally applicable to the executive officers and
directors of the Company. You agree, as a condition of any exercise of the
option, to sign a letter, in such form as the Company may require in order to
comply with the securities laws as they may be in effect at the time of your
exercise of the option.
6. You understand that if the shares of Common Stock that may be
acquired by the exercise of the option have not been registered under the
Securities Act of 1933 or under state securities laws, the certificates for all
shares which you purchase through your exercise of the option shall bear a
legend on their face, substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act") or under the securities laws of any state. Such
shares may not be offered for sale, sold, delivered after
sale, transferred, pledged or hypothecated in the absence of
an effective registration statement covering such shares under
the 1933 Act or state securities laws or an exemption from
registration thereunder which, in the opinion of counsel
satisfactory to the Company, makes such registration
unnecessary."
7. Prior to your exercise of the option, you have the right to request
that the Company make available to you, without charge, its most recent public
filings, if any, under the 1933 Act and under the Securities Exchange Act of
1934, as amended, and such other documents that you may reasonably request in
order to make an informed decision as to whether you should exercise the option.
8. You agree to notify the Company in writing within thirty (30) days
of the date that you sell or otherwise dispose of the stock acquired through the
exercise of the option granted herein.
9. As provided by Section 8 of the Plan, in addition to other forms of
exercising the option, with the written consent of the Company, which it may
grant or withhold in its sole discretion, you may convert this option, by the
surrender of this option and a written notice of conversion duly executed at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to you), in whole or in part, at any time into
shares of Common Stock as provided for in this paragraph 9. Upon exercise of
this conversion right, you shall be entitled to receive that number of Shares of
Common Stock equal to the quotient obtained by dividing [(A - B)(X)] by (A),
where:
3
<PAGE> 4
(A) = the Fair Market Value (as defined in the
Plan) of one share of Common Stock on the
date of conversion of this option.
(B) = the Exercise Price for one share of Common
Stock under this option (as adjusted under
Section 11 of the Plan).
(X) = the total number of shares of Common Stock
issuable upon exercise of this option (as
adjusted under Section 11 of the Plan).
The Company may require, as a condition of approving such exercise under this
paragraph 9, that you pay to the Company at the time of the exercise and
conversion all applicable tax withholdings generated by such exercise, as
determined by the Company. If the above calculation results in a negative
number, then no shares of Common Stock shall be issued or issuable upon
conversion of this option.
Upon conversion of this option, you shall be entitled to receive a certificate
for the number of shares of Common Stock as determined above.
10. You agree, as a condition of receiving the options granted herein,
to execute the Employment Agreement, Confidentiality/Intellectual Property
Agreement, and Noncompetition Agreement annexed to this letter.
11. IN ADDITION TO THE FOREGOING CONDITIONS, the option is subject to
all the terms and conditions of the Plan and the Retention Agreement,
Confidentiality/Intellectual Property Agreement, and Noncompetition Agreement
(collectively, the "Agreements") annexed to this letter and any rules and
regulations promulgated from time to time by the Committee with respect to the
Plan. To the extent that anything contained herein or in any such rules of or
regulations are inconsistent with the Plan, the terms of the Plan shall govern.
In the event of inconsistencies or required clarifications, the Board of
Directors or the Compensation and Human Resources Committee of the Board shall
determine such interpretations. Additionally, the options are subject to
adjustment upon the happening of certain events specified in the Plan.
12. No provision in this option shall be construed as conferring upon
you the right to vote, consent, receive dividends or receive notice other than
as expressly provided herein or in the Plan.
13. No representation is made to you with respect to the tax effect
upon your receipt of the option, your exercise thereof, or the sale of the
shares so acquired. PLEASE CONSULT YOUR TAX OR FINANCIAL ADVISOR PRIOR TO
EXERCISING YOUR OPTION.
* * *
4
<PAGE> 5
To make the grant of the option effective, please acknowledge receipt
of this option agreement and the enclosed copy of the Plan by signing and dating
the enclosed copy of this option agreement and the enclosed Agreements in the
space provided and returning the signed copies in the enclosed, self-addressed
envelope.
Yours truly,
Digital Commerce Corporation
By: /s/ John Poindexter
--------------------------------
Director
ACCEPTED AND SIGNED:
/s/ William H. Seippel
- -------------------------
William H. Seippel
Date: April 4, 2000
--------------
5
<PAGE> 1
EXHIBIT 10.6
DIGITAL COMMERCE CORPORATION
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of January 1, 1999, by and between
DIGITAL COMMERCE CORPORATION, a Delaware corporation (the "Company"), and Tony
Bansal (the "Employee"), a resident of the Commonwealth of Virginia.
WHEREAS, the Employee is currently serving as President and Chief Executive
Officer of the Company;
WHEREAS, the parties desire to enter into this Agreement setting forth the terms
and conditions for the employment relationship of the Employee with the Company;
and
WHEREAS, the Board of Directors of the Company (the "Board") has approved and
authorized the Company to enter into this Agreement with the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. From the date hereof through the term of this
Agreement, the Employee is employed as President and Chief Executive Officer of
the Company reporting directly to the Board. The Employee shall devote
substantially all of his working time and his best efforts to the Company and
his position(s), which shall include acting as the Chief Executive Officer and
such other duties as the Board may from time to time reasonably direct that are
reasonably consistent with the Employee's education, experience and background.
During the term of this Agreement, there shall be no material increase or
decrease in the duties and responsibilities of the Employee otherwise than as
provided therein. During the term of this Agreement, the Employee shall not be
required to relocate more than 25 miles from Reston, Virginia, in order to
perform the services hereunder. The Board will nominate Employee for election to
the Board during such time as Employee serves as President and CEO.
2. Compensation.
(a) Salary. The Company agrees to pay the Employee during the term of
this Agreement a salary, from the date of commencement of Employee's employment
with the Company (March 16, 1998) through December 31, 2001, at an annual rate
equal to $200,000, with the salary to be increased on March 16 of each
subsequent year during the term of this Agreement as determined by the Board in
its sole discretion. In determining salary increases, the Board may compensate
the Employee for increases in the cost of living and may also provide for
performance or merit increases. The salary of the Employee shall not be
decreased at any time during the term of this Agreement from the amount then in
effect. Participation in deferred compensation, discretionary bonus retirement
and other employee benefit and fringe benefits plans shall not reduce the salary
payable to the Employee under this Section 2(a). The salary under this Section
2(a) shall be payable to the Employee not less frequently than monthly. The
Employee shall not be entitled to receive fees for serving as a director of the
Company or of any subsidiary or affiliate of the Company or for serving as a
member of any committee of any such Board of Directors; provided,
<PAGE> 2
however, the Company may allocate the Employee's salary and other compensation
payable hereunder to, and such salary and other compensation may be payable by,
any other subsidiary or affiliate of the Company for which the Employee renders
services hereunder. In addition to the salary, the Employee shall receive, as
payment for previous services, shares of the Common Stock of the Company at the
beginning of each year of the contract in an amount having a fair market value
to the Employee, as determined by the Board of $25,000.
(b) Stock Options. In addition to the salary, other compensation and
annual bonus payable to the Employee under this Agreement, the Company shall
grant the Employee an option to purchase 1,031,739 shares of the Company's
Common Stock (subject to adjustments for stock splits and other
recapitalizations) at an exercise price of $1.00 per share. The options shall
vest as to (1) 300,000 shares on March 16, 1998, (2) 200,000 shares on each of
March 16, 1999, March 16, 2000, and March 16, 2001, and (3) 131,739 shares on
March 16, 2002. Employee may exercise such options, pursuant to the terms of the
letter granting such stock options to Employee. Such letter shall provide that
all options shall vest upon the change in control of the Company or if the
Company has an initial closing of an initial public offering of shares of its
capital stock.
3. Discretionary and Performance Incentive Bonuses. During the term
of this Agreement, the Employee shall be entitled to participate in an equitable
manner with all other executive officers of the Company in such discretionary
bonuses as may be authorized, declared, and paid by the Board to its executive
officers. The Company will adopt an incentive bonus plan, as the Board in its
sole discretion may determine, providing for the payment of annual performance
incentive bonuses to the Employee and other executive officers based upon on the
increase in the Company's operating profit, stock share price or other
appropriate performance objectives. No other compensation provided for in this
Agreement shall be deemed a substitute for the Employee's right to participate
in such bonuses.
4. Insurance, Retirement and Employee Benefit Plans; Fringe
Benefits; Business Expenses.
(a) Life Insurance. The Company will pay the premiums on a whole-life
insurance policy on the life of the Employee providing a death benefit of not
less than $1,000,000 (the "Policy"). The Employee and the Company will enter
into a split-dollar agreement with respect to the Policy whereby the Employee
will own the Policy but the Company will have an interest in the cash-surrender
value, to the extent available, and death benefit under the Policy to the extent
of the premiums paid by the Company.
(b) Other Benefits and Perquisites. To the extent not otherwise
provided herein, the Employee shall be entitled to participate in any plan of
the Company relating to stock options, restricted stock, employee stock purchase
or ownership, pension, thrift, profit sharing, group life insurance, medical
coverage, education, or other retirement or employee benefit plans. The Employee
shall also be entitled to participate in, or enjoy the benefit of, any other
fringe benefits or perquisites that are now or may be or become applicable to
the Company's executive officers.
2
<PAGE> 3
The Employee shall also be provided with the full use of an automobile of the
Employee's choosing at the Company expense. The Employee shall account to the
Company for the business use of such automobile in accordance with Company
policy, as determined by the Board. Employee will only qualify for automobile
expenses when the Company is profitable.
(c) Business Expenses. During the term of the Employee's employment
hereunder, the Company will reimburse the Employee for all out of pocket
expenses reasonably incurred in connection with the performance of his service
as specified herein upon presentation of an itemized accounting for such
expenses in accordance with Company policy, as determined by the Board.
5. Term. The term of employment under this Agreement shall be for
three (3) years from the date hereof. The contract shall automatically be
renewed for an additional term of three (3) years, unless the Employee or the
Company give written notice to the contrary at least 30 days prior to December
31, 2002.
6. Voluntary Absences; Vacations. The Employee shall be entitled,
without loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this Agreement.
All such voluntary absences shall count as paid vacation time, unless the Board
otherwise approves. The Employee shall be entitled to an annual paid vacation of
at least six (6) weeks per year or such longer period as the Board may approve.
The timing of paid vacations shall be scheduled in a reasonable manner by the
Employee.
7. Termination of Employment. The Employee's employment may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Employee's employment shall terminate upon his death.
(b) Disability. The Company may terminate the Employee's employment
because of Disability. For this purpose, "Disability" shall mean the inability
of the Employee to perform his duties under this Agreement because of physical
or mental illness or incapability for a continuous period of three (3) months
during which the Employee shall have been absent from, or substantially unable
to perform, his duties under the Agreement on a substantially full-time basis.
The determination of the Employee's Disability shall be made by an independent
physician mutually agreed upon by the Company and the Employee. If the parties
are unable to agree upon an independent physician for this purpose, each party
shall select a physician and such physicians shall select a third, independent
physician who shall make a determination regarding whether the Employee is under
a Disability within the meaning of this Agreement.
(c) Cause. The Company may terminate the Employee's employment for
Cause. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Employee's employment only in the event of: (1) the willful and
continued failure by the Employee to substantially perform his duties hereunder
(other than any such failure resulting from the Employee's inability to perform
such duties as a result of physical or mental illness or incapacity or any such
3
<PAGE> 4
actual or anticipated failure after the delivery of a Notice of Termination, as
defined in Section 7(e) hereof, by the Employee for Good Reason, as defined in
Section 7(d)(2) hereof, after delivery to the Employee of a written demand for
substantial performance that specifically identifies the manner in which the
Company believes that the Employee has not substantially performed his duties
and the Employee has been given a reasonable opportunity to cure; (2) willful
misconduct by the Employee that causes substantial and material injury to the
business and operations of the Company, the continuation of which, in the
reasonable judgment of the Board, will continue to substantially and materially
injure the business and operations of the Company in the future; or (3)
conviction of the Employee of a felony. No act or failure to act shall be
considered "willful" for this purpose unless done, or omitted to be done by the
Employee other than in good faith and other than with a reasonable belief that
his action or omission was in the best interests of the Company. The Employee
shall not be deemed to have been terminated for Cause unless the Employee shall
have been provided with: (i) a reasonable notice setting forth the reasons that
the Company believes constitute Cause for the termination of his employment;
(ii) a reasonable opportunity to be heard by the Board, with his counsel; and
(iii) a Notice of Termination, as defined in Section 7(e), from the Board
finding that, in the reasonable good faith opinion of the Board, Cause for
termination exists and specifying the particulars thereof in reasonable detail.
(d) Termination by the Employee.
(1) The Employee may terminate his employment, by giving sixty (60)
days prior written notice to the Company: (A) for Good Reason, or (B) at any
time.
(2) For this purpose, "Good Reason" shall mean (A) the assignment to
the Employee of any duties inconsistent with the Employee's status as President
and Chief Executive Officer of the Company or any substantial adverse alteration
in the nature or status of the Employee's responsibilities; (B) any change in
the Employee's reporting responsibility such that the Employee is required to
report other than exclusively to the Board; (C) any purported termination of the
Employee's employment by the Company that is not effected pursuant to a Notice
of Termination satisfying the requirements of Section 7(e) hereof; (D) any other
failure by the Company to comply with any material provision of this Agreement
which failure continues for more than ten (10) days after written notice of such
noncompliance from the Employee; or (E) any change in control of the Company (as
defined in the Stock Option letter referred to in Section 2(b) hereof), other
than upon the sale by the Company of its capital stock in an initial public
offering (a "Change in Control").
(e) Notice of Termination. Any termination of the Employee's
employment by the Company or by the Employee (other than termination pursuant to
Section 7(a) hereof) shall be communicated to the other party by a written
Notice of Termination. Any Notice of Termination given by party shall specify
the particular termination provision of this Agreement relied upon by such party
and shall set forth in reasonable detail the facts and circumstances relied upon
as providing a basis for the termination under the provision so specified.
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<PAGE> 5
(f) Termination Date. The Termination Date shall mean: (1) if the
Employee's employment is terminated by his death, the date of his death; (2) if
the Employee's employment is terminated by his Disability pursuant to Section
7(b) hereof, the date specified in the Notice of Termination, which shall be
after the expiration of the three-month period specified in Section 7(b); (3) if
the Employee's employment is terminated by the Company for Cause, the date
specified in the Notice of Termination; or (4) if the Employee's employment is
terminated for any other reason, sixty (60) days following the date on which the
Notice of Termination is given.
8. Compensation Upon Termination of Employment.
(a) Termination because of Death, for Cause or Without Good Reason.
If the Employee's employment is terminated because of his death, by the Company
for Cause, or by the Employee other than for Good Reason, the Company shall pay
the Employee his base salary, his accrued and unpaid benefits, and a pro rata
portion of the bonus specified in Section 2(b) through the Termination Date, and
the Company shall have no further obligation to the Employee hereunder except as
provided in Section 8(d) hereof.
(b) Termination Because of Disability. If the Employee's employment
is terminated by the Company because of Disability under Section 7(b) hereof,
the Company shall pay the Employee an annual disability benefit equal to the
excess of (1) sixty percent (60%) of his annual salary at the rate in effect
under Section 2(a) hereof on the Termination Date, less (2) the amount of any
long-term disability benefit that is payable to the Employee under any policy of
disability insurance provided for the Employee by the Company at its expense.
The disability benefit payable hereunder shall be paid for as long as the
Employee continues to be disabled until the later of (i) the date the Employee
attains age 65 or (ii) three (3) years after the Termination Date.
(c) Termination Without Cause or with Good Reason. If (i) in breach
of this Agreement, the Company shall terminate the Employee's employment other
than (A) for Cause or (B) because of Disability or (ii) the Employee terminated
his employment for Good Reason:
(1) The Company shall pay the Employee his salary hereof through the
Termination Date and all other unpaid and pro rata amounts to which the Employee
is entitled as of the Termination Date under compensation plan or program of the
Company, including, without limitation, and incentive performance bonus, and
accrued vacation time, such payments to be made in a mutually agreed upon terms;
(2) The Company shall pay 50% of Employee's base salary (without
considering any bonuses or other benefits) for the remaining duration of the
Employment contract;
(3) In addition to the liquidated damages amounts that are payable to
the Employee under Section 8(c) hereof, the following shall apply: (A) the
Employee shall continue to participate in, and accrue benefits under, all
retirement, pension, profit-sharing, employee stock ownership, thrift, and other
deferred compensation plans of the Company for the remaining term of this
Agreement as if
5
<PAGE> 6
the termination of employment of the Employee had not occurred (with the
Employee being deemed to receive annually for the purpose of such plans the
Employee's then current salary and bonus (at the time of his termination) under
Section 2(a) and (b) of this Agreement), except to the extent such continued
participation and accrual is expressly prohibited by law, or to the extent that
such plan constitutes a "qualified plan" under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code'"), by the terms of the plan, in
which case the Company shall provide the Employee a substantially equivalent,
unfunded, nonqualified benefit; (B) the Employee shall be entitled to continue
to receive all other employee benefits and then existing fringe benefits
referred to in Section 4(a) and (b) proportionate to the 50% of salary referred
to in Section 8(c)(2), hereof for the remaining term of this Agreement as if the
termination of employment had not occurred; (C) the Company shall, on the
Termination Date, establish an irrevocable trust that meets the guidelines set
forth in Rev. Proc. 92-64 published by the Internal Revenue Service (as the same
may be modified or supplemented from time to time) (the "Trust") the assets of
which will be held, subject to the claims of creditors of the Company solely to
provide the benefits that the Employee is entitled to under this Section
8(c)(3), and the Company shall transfer to the Trust an amount sufficient to
provide for such benefits; and (D) all insurance or other provisions for
indemnification, defense or hold-harmless of officers or directors of the
Company that are in effect on the date the Notice of Termination is sent to or
by the Employee shall continue for the benefit of the Employee with respect to
all of his acts and omissions while an officer or director as fully and
completely as if such termination had not occurred, and until the final
expiration or running of all period of limitation against action which, may be
applicable to such acts or omission.
(d) Life Insurance. Notwithstanding any provision herein to the
contrary, Employee shall have full ownership of the life insurance policy
specified in Section 4(a) upon the Termination Date, and the Company shall not
have any interest thereunder (or upon the proceeds thereof) upon the Termination
Date. The Company shall not have any obligations under such policy after
termination, nor shall it have any responsibility for paying any premiums after
termination.
(e) Parachute Payment Limitation. If any payment or benefit payable
to the Employee under this Agreement would be considered a "parachute payment,"
as determined by the Board, within the meaning of Section 280G(b)(2) of a Code
and if, after reduction for any applicable federal excise tax imposed by Section
4999 of the Code (the "Excise Tax") and federal income tax imposed by the Code,
the Employee's net proceeds of the amounts payable and the benefits provided
under this Agreement would be less than the amount of the Employee's net
proceeds resulting from the payment of the Reduced Amount described below, after
reduction for federal income taxes, then the amount payable and the benefits
provided under this Agreement shall be limited to the Reduced Amount. The
"Reduced Amount" shall be the largest amount that could be received by the
Employee under this Agreement such that no amount paid to the Employee under
this Agreement and any other agreement, contract, or understanding heretofore or
hereafter entered into between the Employee and the Company (the "Other
Agreements") and any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company for the direct or indirect provision of
compensation to the Employee (including groups or classes or participants or
beneficiaries of which the Employee is a member), whether or not such
compensation is deferred; is in cash, or is in the
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<PAGE> 7
form of a benefit to or for the Employee (a "Benefit Plan") would be subject to
the Excise Tax. In the event that it is necessary to limit payments or benefits
under this Agreement to the Reduced Amount, the Employee shall have the right,
in the Employee's sole discretion, to designate those payments or benefits under
this Agreement, and other agreements, and/or any Benefit Plans that should be
reduced or eliminated so as to avoid having the payment to the Employee under
this Agreement be subject to his Excise Tax.
9. Covenant Not-to-Compete.
(a) The provisions of this paragraph 9 shall become effective only in
the event that the Board of Directors of the Company, within 15 days after the
date of termination of the Employee's employment, gives written notice to the
employee that it has elected to make this paragraph effective and the Company
makes the first payment required under subsection 9(c) hereof.
(b) In the event that the Board of Directors elects to make this
paragraph effective, for a period of one year following the termination of his
employment (for any reason whatsoever) with the Company, the Employee shall not
(without the affirmative resolution of the Board of Directors of the Company):
(i) engage in any business which is engaged in any business or
activity in competition with the services or products provided by the
Company or in active development by the Company as of the date of
termination of the Employee's employment with the Company; or
(ii) solicit or attempt to solicit for any business endeavor any
employee of the Company.
Notwithstanding the foregoing, nothing in this paragraph shall be construed to
prevent the Employee from owning up to two percent (2%) of the voting securities
of any publicly-traded corporation.
(c) In the event that the Board of Directors elects to make this
paragraph effective, the Company shall pay to the employee, in twelve equal
monthly installments, the aggregate sum of $100,000 as consideration for this
covenant not-to-compete.
(d) The provisions of this paragraph 9 shall automatically terminate
in the event that the Company files a voluntary petition in bankruptcy or a
petition or an answer seeking or consenting to reorganization under the
bankruptcy laws or upon any Change in Control. In the event that the provisions
of this paragraph 9 terminate pursuant to the preceding sentence the Employee
may retain any payments made to him pursuant to this paragraph 9.
10. Confidentiality. In consideration of the willingness of the
Company to employ the Employee and the compensation to be paid and benefits to
be received therefor, any for other good
7
<PAGE> 8
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Employee agrees as follows:
(a) The Company Owns All of the Employee's Work. All improvements,
discoveries, inventions, designs, documents, licenses and patents, or other data
devised, conceived, made, developed, obtained, filed, perfected, acquired, or
first reduced to practice, in whole or in part, or in the regular course of
employment by the Employee during the term of this Agreement, and related in any
way to the business, including development and research, of the Company or any
subsidiary or affiliate engaged in business substantially similar to that of the
Company shall be promptly disclosed to the Company. The Employee hereby assigns
and transfers to the Company all his right, interest and title thereto, and such
improvements, discoveries, inventions, designs, documents, licenses and patents,
or other data shall become the property of the Company. During the term of this
Agreement and at any time thereafter, upon request of the Company, the Employee
will join and render assistance in any proceedings and execute any papers
necessary to file and prosecute applications for, and to acquire, maintain and
enforce, letters patent, trademarks, registrations and/or copyrights, both
domestic and foreign, with respect to such improvements, discoveries,
inventions, designs, documents, licenses and patents, or other data as required
for vesting and maintaining title to same in the Company
(b) Non-Disclosure of Confidential Information. The Employee agrees
and acknowledges that the term "Confidential and Proprietary Information" shall
mean any and all processes, systems, methods of operation and procedures,
formulae, test data, know-how, improvements, price lists, financial data, code
books, invoices and other financial statements, computer programs, discs and
print outs, sketches, and plans (engineering, architectural or otherwise),
customer lists, telephone numbers, names, addresses, information about equipment
and processes (including specifications and operating manuals), or any other
written or unwritten that is used in the business of the Company or any
subsidiary or affiliate any opportunity to gain advantage over competitors of
the Company who do not know or use such information. The Employee agrees and
acknowledges that all Confidential and Proprietary Information, in any form, and
all copies and extracts thereof, is and are and shall remain the sole and
exclusive property of the Company and, upon termination of his employment with
the Company, the Employee hereby agrees to return to the Company the originals
and all copies of any Confidential and Proprietary Information provided to or
acquired by the Employee during the term of his employment hereunder. Except as
ordered by a court of competent jurisdiction, the Employee expressly agrees
never to disclose to any person (except to other Company employees, and then
only on a "need to know" basis) or entity any Confidential and Proprietary
Information either during the term of this Agreement or at any time after
termination of his employment, except with the express written authorization and
consent of the Company.
(c) Customer's Information. The Employee understands and acknowledges
that each customer of the Company or its subsidiaries or affiliates will
disclose information that be within the Company's control in conviction with the
Company's furnishing of services to its customer. The
8
<PAGE> 9
Employee covenants and agrees to hold such information in the strictest
confidence and shall treat such information in the same manner and be obligated
by the provisions.
11. Other Contracts. The Employee shall not, during the term of this
Agreement, have any other paid employment other than with a subsidiary or
affiliate of the Company, except with the prior written approval of the Board.
12. Amendments or Additions; Action by Board. No amendments or
additions to this Agreement shall be binding unless in writing and signed by all
parties hereto. The prior approval by the Board shall be required in order for
the Company to authorize any amendments or additions to this Agreement, to give
any consents or waivers of provisions of this Agreement, or to take any other
action under this Agreement including any Notice of Termination.
13. Miscellaneous.
(a) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be personally delivered or mailed by first class
registered or certified mail, postage paid, return receipt requested, or
transmitted by facsimile, telegram or telex, addressed to the Company or the
Employee at the addresses set forth on the signature page of this Agreement, or
at such other address as such party may designate by ten (10) days advance
written notice to the other party. Each notice or communication that shall have
been transmitted in the manner described receipt, delivery receipt or (with
respect to a telex) the answer back being deemed conclusive, but not exclusive,
evidence of such sending) or at such time as delivery is refused by the
addressee upon presentation.
(b) Severability. Nothing in this Agreement shall be construed so as
to require the commission of any act contrary to law and wherever there is any
conflict between any provision of this Agreement and any law, statute,
ordinance, order or regulation, the latter shall prevail, but in such event any
provision of this Agreement shall be curtailed and limited only to the extent
necessary to bring it within applicable legal requirement. If any provision of
this Agreement should be held invalid or unenforceable, the remaining provisions
shall be unaffected by such a holding.
(c) Complete Agreement. This Agreement contains the entire agreement
and understanding between the parties relating to the subject matter hereof, and
superseded any prior understandings, agreements or representations by or between
the parties, written or oral, relating the subject matter hereof.
(d) Successors and Assigns. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of any
successor or successors of the Company by way of reorganization, merger or
consolidation and any assignee of all or substantially all of its business and
assets, but except as to any such successor or assignee of the Company, neither
this Agreement nor any rights or benefits hereunder may be assigned by the
Company or the Employee. However, in the event of the death of the Employee all
rights to receive payments shall become rights of the Employee's estate.
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<PAGE> 10
(e) Section Headings. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
DIGITAL COMMERCE CORPORATION: EMPLOYEE:
By: /s/ Thomas J. Cirrito /s/ Tony Bansal
---------------------------------------- --------------------------------
Chairman Tony Bansal
Address:
11180 Sunrise Valley Drive
Reston, Virginia 20191
10
<PAGE> 1
EXHIBIT 10.7
October 8, 1999
Mr. William H. Seippel
11388 Seneca Knoll Drive
Great Falls, Virginia 22066
Dear Will:
Digital Commerce Corporation, a Delaware corporation ("DCC"), is
pleased to offer you the full-time position of Chief Financial Officer of DCC
and its subsidiaries, reporting directly to Tony Bansal, DCC's President and
CEO. After the closing of the anticipated IPO, you will be considered for the
position of DCC's Chief Operating Officer, subject to approval of the DCC Board
of Directors. You will also be offered a seat on DCC's Board of Directors,
subject to the approval of the DCC Board. You warrant and represent that, except
during the period ending March 1, 2000 (during which period you are obligated to
provide reasonable assistance to your successor at your prior employer for the
purpose of facilitating a smooth transition), you are not restricted by contract
or otherwise from carrying out fully any of the duties and responsibilities of
Chief Financial Officer, Chief Operating Officer, and/or a member of the Board
of Directors of DCC, given its current business activities, and that your
current non-competition restriction is limited to telecommunications in Europe.
You further warrant and represent that you will not disclose or use in
connection with your employment by DCC any confidential information or trade
secrets of any other person or entity.
Compensation and Duties
Your annual base salary will be $175,000, and you will be eligible for
a discretionary bonus based on meeting performance targets as determined and
agreed to by the President and CEO of DCC. You will also receive, on or before
October 31, 1999, options (hereinafter collectively referred to as the
"Options") to purchase 300,000 shares of the common stock, $0.01 par value per
share, of DCC (the "Common Stock"). The Options will be exercisable at a price
of $2.86 per share. The Options will vest in two (2) tranches, as follows:
(A) Except as hereinafter noted, with respect to the first tranche
(consisting of Options to purchase 150,000 shares of Common
Stock), one-third of the Options will vest on September 29, 2000,
one-third of the Options will vest on September 29, 2001, and
one-third of the Options will vest on September 29, 2002,
provided that you are employed by DCC as of the respective
vesting date, except as hereinafter noted. Subject to the
provisions of this letter and DCC's 1998 Stock Option Plan (the
"Plan"), the Options in the first tranche will terminate if not
exercised on or before September 29, 2004.
(B) Except as hereinafter noted, with respect to the second tranche
(consisting of Options to purchase 150,000 shares of Common
Stock), one-third of the Options will vest on the first
anniversary of the date on which DCC first issues shares of its
common stock in an initial public offering ("IPO") registered
with the Securities and Exchange Commission (the "IPO Date"),
one-third of the Options will vest on the second
<PAGE> 2
Mr. Will Seippel
October 8, 1999
Page 2
anniversary of the IPO Date, and one-third of the Options will
vest on the third anniversary of the IPO Date, provided that you
are employed by DCC as of the respective vesting date, except as
hereinafter noted. Subject to the provisions of this letter and
the Plan, the Options in the second tranche will terminate if not
exercised on or before the fifth anniversary of the IPO Date.
If not previously exercised, all Options will terminate upon the expiration of
the applicable term. Except as noted herein, the Options will be granted under,
and be subject to, the terms of the Plan and the stock option grant letter
evidencing the grant of such Options.
Notwithstanding the foregoing, in the event that:
(i) you are not appointed to the Board of Directors of DCC on or
before October 31, 1999,
(ii) you are not appointed/elected to act as DCC's Chief Operating
Officer within thirty (30) days following the IPO Date,
(iii) a Change in Control (as hereinafter defined) occurs,
(iv) DCC terminates your employment for any reason other than "Cause"
(as hereinafter defined),
(v) you are removed from DCC's Board of Directors prior to
January 1, 2001, except if such removal occurs: (A) at the
request of an underwriter in connection with DCC's IPO, (B) in
response to a request, demand or inquiry made by the Securities
and Exchange Commission, Nasdaq, Inc., or any exchange in which
DCC lists, or intends to list, its common stock for trading (an
"Exchange"), or (C) in DCC's reasonable belief that such removal
is required in order for DCC to comply with the Securities Act
of 1933 or the Securities Exchange Act of 1934 (or the rules
under such acts) or the listing standards or rules and
regulations of Nasdaq, Inc. or any Exchange, or
(vi) DCC is successful in raising an aggregate of $100,000.00 in debt
and/or equity financing during the period commencing as of the
date hereof,
then each Option which is then outstanding but which have not previously vested
will immediately vest in full and will remain exercisable thereafter for the
shorter of the remainder of its term or for a period of five (5) years from the
happening of the event referenced in subparagraphs (i) through (vi).
<PAGE> 3
Mr. Will Seippel
October 8, 1999
Page 3
For purposes of this Agreement, a "Change in Control" will be deemed to have
occurred if any of the following events shall occur:
(I) DCC is merged, consolidated, converted or reorganized into or with
another corporation or other legal entity, and, as a result of such
merger, consolidation, conversion or reorganization, less than a
majority of the combined voting power of the then outstanding
securities of DCC or such corporation or other legal entity immediately
after such transaction are held in the aggregate by the holders of
Voting Stock (as hereinafter defined) of DCC immediately prior to such
transaction;
(II) DCC sells (directly or indirectly) all or substantially all of its
assets to any other corporation or other legal entity, of which less
than a majority of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors or election of persons performing similar functions ("Voting
Stock") on behalf of such other corporation or legal entity is held in
the aggregate by the holders of Voting Stock of DCC immediately prior
to such sale;
(III) Prior to the IPO Date, any person (as the term "person" is used
in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") becomes (subsequent to October
7, 1999) the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing fifty
percent (50%) or more of DCC's Voting Stock, except that nothing
contained in this paragraph shall apply to the ownership, directly or
indirectly, of DCC securities by Tom Cirrito, Atocha Partners, LP,
their affiliates, or members of Mr. Cirrito's family (collectively,
"Cirrito");
(IV) After the IPO Date, any person (as defined in subparagraph (III),
above), other than Cirrito, becomes the beneficial owner (as defined in
subparagraph (III), above) of securities representing thirty percent
(30%) or more of DCC's Voting Stock, provided that such person is
largest holder of DCC's outstanding Common Stock at the time of
becoming such beneficial owner;
(V) DCC files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K, Schedule 14A or Schedule 14C (or any successor schedule,
form or report or item therein) that a change in control of DCC has
occurred; or
(VI) The shareholders of DCC approve a plan contemplating the
liquidation or dissolution of DCC.
<PAGE> 4
Mr. Will Seippel
October 8, 1999
Page 4
Your duties as Chief Financial Officer may vary from time to time at the
discretion of DCC in line with its business needs and in light of DCC's growth
oriented business plan.
Term and Termination
This offer letter does not constitute, and may not be construed as, a
commitment to employ you for any specific term, but rather DCC and you will be
in an employment at will relationship, in which DCC or you may terminate your
employment at any time and for any reason. If you terminate your employment
voluntarily or due to your death, or if your employment is terminated due to
your being disabled (that is, your being materially unable to perform your
duties and obligations hereunder because of physical or mental illness or
incapacity for a continuous period of sixty (60) days), or for other Cause, you
(or your estate) shall not be entitled to any unvested Options or to any other
compensation or benefits. Notwithstanding the foregoing, it is understood and
agreed that you may terminate your employment under this Agreement at any time
upon not less than thirty (30) days written notice to effect a transition of
your responsibilities and to be entitled to payment for accrued unused vacation
time.
As used herein, the term "Cause" will mean:
(i) Your failure substantially to perform, or to perform adequately,
one or more material duties of your position;
(ii) Your misconduct that causes or will likely cause material injury
to the business or operations of DCC;
(iii) Your acts of theft or misappropriation of company assets, sexual
harassment, or use of illegal drugs in connection with
employment, or your conviction of a felony involving moral
turpitude or which would reflect adversely on DCC;
(iv) Your violation or failure to comply with generally applicable
DCC policies and procedures contained in its employee policies
and procedures manual and any revisions thereto, or otherwise
communicated to you by DCC's President and CEO, Board of
Directors, or such other person appointed by either of them for
such purposes;
(v) Your being disabled, as described above; and
(vi) Your being subject to a non-competition restriction that is
contrary to your representations and warranties contained herein
and that limits you in carrying out your duties and obligations
to DCC.
<PAGE> 5
Mr. Will Seippel
October 8, 1999
Page 5
With regard to grounds for Cause (i), (ii), and (iv) termination
thereunder is subject to prior written notice by DCC of the failure, misconduct,
and/or violation at issue and a failure by you after a reasonable period of
time, not to exceed thirty (30) days following your receipt of the notice, to
cure to the reasonable satisfaction of DCC, unless providing such notice and
cure period could reasonably be detrimental to DCC's interest wherein such
notice and cure period will not be required. With regard to termination based on
a disability, DCC may, at its option, obtain the opinion of a physician with
regard to the disability at issue, and you agree to an examination by such a
physician based upon the reasonable request of DCC and at DCC's expense. You
further agree to release to DCC all relevant medical records and reports
concerning the disability at issue to be used by DCC in connection with making a
determination as to your employment status.
Purchase of DCC Stock
DCC understands that you may be interested in purchasing shares of
Common Stock. DCC will allow you to purchase as many shares of Common Stock as
you desire at $2.86 per share through November ____, 1999.
Benefits
As a full-time employee, you can elect to participate in DCC's benefit
programs (health, dental, life, and vision) that it makes available generally to
its employees, and you will be entitled to four weeks paid vacation. You will
also be entitled to participate in DCC's 401 (k) plan, subject to the terms of
the plan. DCC will reimburse you for all authorized out-of-pocket expenses. All
benefits are subject to the terms of the DCC employee policies and procedures
manual and any revisions thereto which DCC may make at its discretion from time
to time.
Conditions of Employment
This offer is subject to your signing agreements on confidentiality,
non-competition, conflict of interest, and assignment of all rights in
inventions and improvements in the form to be provided to you by DCC; provided
that the restrictions of such non-competition agreement will be limited to a
time period of eighteen (18) months following your separation from DCC for any
reason and a prohibition against your participation in or employment by any
entity whose business activity includes one or more of the following on anything
other than an insignificant basis: "e-commerce" sales to federal, state or local
governmental agencies; the marketing of natural gas and electricity; e-commerce
services to the entertainment industry; or the marketing or provision of
consumer services by targeting specifically government employees or their
families, or any other business activity engaged in or actively considered by
DCC during your employment (collectively "Prohibited Activities"). In addition,
the restrictions on such non-competition will extend to your direct or indirect
participation in any Prohibited Activities in any manner that will compete with
DCC. You also agree to execute an agreement in the form to be provided to you
that acknowledges that DCC
<PAGE> 6
Mr. Will Seippel
October 8, 1999
Page 6
will own all rights to any works that you create related to its business while
you are a DCC employee. Please note that, in compliance with federal law, you
will be required to submit proof of U.S. citizenship or other appropriate
authorization for employment upon your employment with DCC.
If the terms of this offer meet with your approval, please sign where
indicated below and return it to DCC, to the attention of Ms. Tracy Cigarski.
Will, we are very excited about your decision to join DCC, and we look
forward to a successful business relationship.
Sincerely,
/s/ Tony Bansal
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Tony Bansal, President and CEO
Accepted: /s/ William H. Seippel Date: October 14, 1999
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William H. Seippel
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EXHIBIT 10.8
RETENTION AGREEMENT
This Retention Agreement (this "Agreement") is entered into as of
April 4, 2000, by and between Tony Bansal ("Employee") and Digital Commerce
Corporation, a Delaware corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employer wishes to employ Employee and Employee wishes to
accept such employment; and
WHEREAS, the parties each desire to establish and set forth the terms
and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees
to be employed by Employer, for the term described on Annex A attached hereto
and incorporated herein by reference.
2. DUTIES AND RESPONSIBILITIES. Upon execution of this Agreement,
Employee shall diligently render his or her services to Employer in accordance
with the directives of Employer's Board of Directors and/or superior officers,
and shall use his or her best efforts and good faith in accomplishing such
directives. Employee agrees to devote his or her best efforts and substantially
all of his or her business time, abilities and attention to the business of
Employer. In addition, Employee shall perform the duties described on Annex B
attached hereto and incorporated herein by reference.
3. COMPENSATION. During the Employment Period (as defined in Annex A),
Employer will pay to Employee compensation in the amounts and form specified in
Annex C attached hereto and incorporated herein by reference, payable in
semi-weekly installments or otherwise as is the policy of Employer from time to
time with respect to its employees on a general basis. In addition to such
compensation, Employee will be entitled to the benefits, if any, described in
Annex C during the Employment Period.
4. REIMBURSEMENT FOR EXPENSES. Employer shall reimburse Employee, in
accordance with Employer's normal reimbursement policy, for all reasonable
expenses incurred by Employee in the performance of Employee's duties pursuant
to this Agreement, but only after Employee submits a written, itemized and
signed list of such expenses on a form supplied by Employer for such purpose.
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5. TERMINATION.
(a) Employer may terminate Employee's employment if he or she is
unable to perform the essential functions of his or her
position with a reasonable accommodation for ninety (90)
consecutive days or for a total of one hundred twenty (120)
days during any twelve (12) month period.
(b) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee for Cause (defined below) by delivery of written
notice of termination to Employee. "Cause" is defined to
include:
(1) fraud, misappropriation or embezzlement involving
Employer;
(2) felony conviction or conviction of a crime involving
moral turpitude or which, in the opinion of the Board
of Directors (in their sole discretion), brings
Employee or Employer into disrepute or causes
material harm to Employer's business, customer or
supplier relations or financial condition or
prospects;
(3) Employee's failure to obey or carry out (A)
reasonable directives from Employer senior management
or (B) Employer's company policies;
(4) inability or material failure by Employee to
substantially perform his or her duties hereunder;
(5) any material breach of this Agreement by Employee; or
(6) any material breach or threatened material breach of
(i) the Confidentiality Agreement and/or (ii) the
Noncompetition Agreement entered into by and between
Employer and Employee as of the date hereof pursuant
to the provisions of Paragraphs 6 and 7 of this
Agreement;
provided, however, in the case of subparagraphs (3), (4) and
(5) of this Section 5(b), the Employee shall have been
informed in writing of the act, or failure to act,
constituting Cause for termination, and shall have failed to
cure such act or failure to act within thirty (30) days
following receipt of written notice thereof.
(c) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee without Cause upon payment of the severance benefit
set forth in Annex D attached hereto.
(d) Employee's employment under this Agreement shall automatically
terminate upon Employee's death.
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(e) Employee may terminate his or her employment hereunder upon
giving at least ninety (90) days' prior written notice. In the
event that Employee gives notice of termination of this
Agreement pursuant to this subsection, Employer shall have the
right to terminate Employee prior to the end of such ninety
(90) day period upon payment of Employee's compensation for
such ninety (90) day period.
6. CONFIDENTIAL INFORMATION. Employee and Employer shall enter into a
Confidentiality/Intellectual Property Agreement in the form of Annex E attached
hereto, the terms of which are incorporated herein by this reference.
7. COVENANT NOT TO COMPETE. Employee and Employer shall enter into a
Noncompetition Agreement in the form of Annex F attached hereto, the terms of
which are incorporated herein by this reference.
8. INDEPENDENT COVENANTS. It is understood by and between the parties
hereto that the restrictive covenants set forth in the Confidentiality Agreement
and the Noncompetition Agreement are essential elements of this Agreement, and
that, but for the agreement of the Employee to comply with such covenants, the
Employer would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed as agreements independent of any other provision
in this Agreement. The existence of any claim or cause of action of the Employee
against the Employer, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Employer of such covenants.
9. RIGHT TO ENTER AGREEMENT. Employee represents and covenants to
Employer that he or she has full power and authority to enter into this
Agreement, the Confidentiality Agreement and the Non-Competition Agreement
(hereinafter collectively referred to as the "Agreements") and that the
execution, delivery and/or performance of the Agreements will not breach or
constitute a default of any other agreement or contract to which he or she is a
party or by which he or she is bound.
10. ASSIGNMENT. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. Employer may
assign and/or delegate its rights and/or obligations hereunder to a subsidiary
or affiliate of Employer or to a successor corporation in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets of
Employer or of Employer's business.
11. NOTICES. All notices, demands, requests or other communications
that may be or are required to be given, served or sent by either party to the
other party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
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(a) If to Employer: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.: (703) 391-9589
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.: (214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to Employee: Tony Bansal
12661 Braddock Farms Court
Clifton, Virginia 20124
Facsimile Transmission No.:
---------------
with a copy (which will
not constitute notice) to:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Facsimile Transmission No.:
---------------
Attn:
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Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
12. GENDER. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
13. WAIVER. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
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14. SEVERABILITY. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
15. ENTIRE AGREEMENT. Except for that certain Employment Agreement,
dated as of January 1, 1999, between Employer and Employee, that certain
Indemnification Agreement dated March 13, 2000 and prior options, bonuses or
similar awards made prior to the date hereof (the "Prior Agreements"), the terms
and provisions contained in the Agreements shall constitute the entire agreement
between the parties with respect to Employee's employment by Employer during the
Employment Period. Except for the Prior Agreements, the Agreements replace and
supersede any and all existing agreements entered into between Employee and
Employer relating generally to the same subject matter, if any, and shall be
binding upon Employee's heirs, executors, administrators or other legal
representatives or assigns. In no event will this Agreement be deemed to modify
or alter any benefits provided to Employee pursuant to the Prior Agreements.
Notwithstanding any provision herein to the contrary, in the event of any
conflict between any provision of this Agreement (and the agreements annexed
thereto) and any provision of any Prior Agreement, as such may be amended from
time to time, all such agreements shall be interpreted so that the provisions
providing the more favorable treatment to the Employee shall govern. In no event
will Employer be obligated to duplicate benefits provided under any such
agreements.
16. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated in whole
or in part, except by an instrument in writing signed by Employee and an officer
or other authorized representative of Employer.
17. UNDERSTANDING OF AGREEMENT. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
18. SURVIVAL. The terms of this Agreement shall remain in full force
and effect during the continuation of Employee's employment. The Confidentiality
Agreement, the Noncompetition Agreement and paragraphs 10 through 21 of this
Agreement will survive the termination of Employee's employment for any reason.
19. APPLICABLE LAW. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF
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VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES) AND WILL, TO THE MAXIMUM
EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN ALEXANDRIA, VIRGINIA.
COURTS WITHIN THE STATE OF VIRGINIA WILL HAVE JURISDICTION OVER ANY AND ALL
DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR
STATE COURT, WILL BE LAID IN ALEXANDRIA, VIRGINIA. EACH OF THE PARTIES HEREBY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH PARTY'S
PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY
LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
20. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
21. THIRD PARTIES. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
22. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYEE: EMPLOYER:
DIGITAL COMMERCE CORPORATION
By: /s/ John Poindexter
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Name: /s/ Tony Bansal Name: John Poindexter
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Tony Bansal Title: Director
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Dated: April 4, 2000 Dated: April 4, 2000
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ANNEX A
TERM OF EMPLOYMENT
Employer agrees to employ Employee and Employee agrees to be employed
by Employer, for a term as described in that certain Employment Agreement
between Employer and Employee dated as of January 1, 1999.
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ANNEX B
DUTIES OF EMPLOYEE
The duties of Employee will be as described in that certain Employment
Agreement between Employer and Employee dated as of January 1, 1999.
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ANNEX C
COMPENSATION AND BENEFITS
Employee shall be entitled to such compensation and benefits as are
described in that certain Employment Agreement between Employer and Employee
dated as of January 1, 1999.
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ANNEX D
SEVERANCE BENEFIT
Employee shall be entitled to such severance benefits as are set forth
in that certain Employment Agreement between Employer and Employee dated as of
January 1, 1999.
ANNEX E
CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT
This Confidentiality Agreement (this "Agreement"), is entered into as
of April 4, 2000, by and between Tony Bansal ("Employee") and Digital Commerce
Corporation, a Delaware corporation (the "Company").
RECITALS
WHEREAS, Employee is employed by the Company;
WHEREAS, in the course of Employee's employment with the Company,
Employee may have access to or have disclosed to him or her Confidential
Information (as hereinafter defined); and
WHEREAS, the parties each desire to establish and set forth Employee's
obligations with respect to Confidential Information and certain other matters.
NOW THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Definitions. For the purposes of this Agreement, the following words shall
have the following meanings:
"Affiliated Entity" means any entity which controls, is controlled by or is
under common control with the Company.
"Copyright Registrations" means any domestic or foreign copyright registrations
and applications for such registrations, including all or any portion of a
Copyright Work or other subject matter identified by any such registration or
application.
"Copyright Works" means materials for which copyright protection may be obtained
including, but not limited to: literary works (including all written material),
computer programs, artistic and graphic works (including designs, graphs,
drawings, blueprints and other works), recordings, models, photographs, slides,
motion pictures and audio-visual works, regardless of the form or manner in
which documented or recorded;
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"Inventions" means inventions (whether patentable or not), discoveries,
improvements, designs and ideas (whether or not shown or described in writing or
reduced to practice) and may include Confidential Information or Copyright
Works;
"Patent Applications" means any application to obtain a
Patent, including any Inventions or other subject matter described or
protected by such application.
"Patents" means any domestic or foreign patents, including any
Inventions or other subject matter described or protected by such
patents.
Confidential Information.
Employee acknowledges that during his or her employment with
the Company, he or she will be provided with and become acquainted with
various trade secrets and other proprietary/confidential information
which are owned by the Company or any Affiliated Entity and/or their
respective customers and vendors and which are used in the operation of
the business of the Company or an Affiliated Entity, including, without
limitation, one or more of the following types of information: customer
lists; the nature and type of services rendered to customers; fees paid
by customers; methodologies; computer code and programs; formulas;
processes; compilations of information; drawings; results of research
proposals; job notes; reports; records; trade secrets; and
specifications. Employee agrees that he or she will not disclose any
trade secrets or other proprietary/confidential information owned by
the Company or any Affiliated Entity and/or their respective customers
and vendors whether or not listed by way of example above
(collectively, the "Confidential Information"), directly or indirectly,
or use such Confidential Information in any way, either during the term
of this Agreement or at any time thereafter, except as may be required
in the course of his or her employment with the Company or by law.
Employee shall not, without the prior written approval of the
Company, publish or authorize or purport to authorize anyone to
publish, either during Employee's employment with the Company or
subsequent thereto, any Confidential Information acquired in the course
of his or her employment.
The prohibitions of this paragraph shall not apply to any
Confidential Information which (i) becomes generally available to the
public other than as a result of disclosure by Employee, (ii) was
available to Employee on a non-confidential basis prior to its
disclosure to Employee by the Company, or (iii) becomes available to
Employee on a non-confidential basis from a source other than the
Company when such source is entitled, to the best of Employee's
knowledge, to make the disclosure to Employee.
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Inventions, Patents, and Copyright Works.
Notification of the Company. Upon conception by Employee
during the period of his or her employment by the Company, all
Inventions, Confidential Information, and Copyright Works (1) which
relate to the actual or anticipated business, research or activities of
the Company or any Affiliated Entity at the time of conception; or (2)
which, directly or indirectly, result from or are suggested by any work
which Employee has done or may do for or on behalf of the Company or
any Affiliated Entity and/or their respective customers and vendors; or
(3) which are developed, tested, improved or investigated either in
part or entirely on time for which Employee was paid by the Company, or
using any resources of the Company (such Inventions, Confidential
Information and Copyright Works, together with the Inventions,
Confidential Information, Copyright Works, Copyright Registrations
and/or Patents referenced in subsection (j) below, are hereinafter
collectively referred to as the "Employee Developed Intellectual
Property") shall become the property of the Company whether or not
patent or copyright registration applications are filed for such
subject matter. Employee agrees to communicate to the Company promptly
and fully all Employee Developed Intellectual Property made, designed,
created, or conceived by Employee (whether made, designed, created, or
conceived solely by Employee or jointly with others).
Transfer of Rights. Employee agrees, during his or her
employment by the Company, to assign and transfer to the Company all of
Employee's right, title and interest in all Employee Developed
Intellectual Property prepared, made or conceived by or on behalf of
Employee (whether solely or jointly with others) during the period of
his or her employment by the Company. Employee also agrees to do all
things necessary to transfer to the Company all of Employee's right,
title and interest in and to all such Employee Developed Intellectual
Property as the Company may request, on such forms as the Company may
provide, at any time during or after Employee's employment by the
Company. This subsection shall continue in full force and effect after
termination of Employee's employment by the Company and after the
termination of this Agreement. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly and
fully assist the Company during and subsequent to his or her employment
in every lawful way to obtain, protect and enforce Employee's patent,
copyright, trade secret or other proprietary rights with respect to
Employee Developed Intellectual Property in any and all countries or
other jurisdictions. The Company will reimburse Employee for reasonable
expenses incurred by Employee in connection with such post-employment
assistance. Employee waives, to the fullest extent permitted by law,
all "moral rights" of Employee with respect to Employee Developed
Intellectual Property assigned and/or transferred to the Company.
Exclusions. No provision in this Agreement is intended to
require assignment of any of Employee's rights in an Invention, Patent
or Copyright Work, for which no equipment, supplies, facilities,
Confidential Information, Copyright Works, Inventions or Patents of the
Company was used, and which was (1) developed entirely on Employee's
own time; (2) does not relate to the business of the Company or any
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Affiliated Entity or to the actual or demonstrably anticipated research
or development of the Company or any Affiliated Entity; and (3) does
not result from any work performed by Employee for the Company or
assigned to Employee by the Company.
Rights in Copyrights. Unless otherwise agreed in writing by
the Company, all Copyright Works prepared wholly or partially by
Employee (alone or jointly with others) within the scope of his or her
employment by the Company, shall be deemed a "work made for hire" under
the copyright laws and shall be owned by the Company. Employee
understands that any assignment or release of such works can only be
made by the Company. During the period of his or her employment by the
Company, Employee shall not assist or work with any third party that is
not an employee of the Company to create or prepare any Copyright Works
without the prior written consent of the Company.
Assistance in Preparation of Applications. Without limiting
Employee's obligations under any other provision of this Agreement,
Employee will promptly and fully assist, if requested by the Company,
in the preparation and filing of Patent Applications and Copyright
Registrations in any and all countries or other jurisdictions selected
by the Company and will assign to the Company all of Employee's right,
title, and interest in and to such Patent Applications and Copyright
Registrations, as well as all Inventions or Copyright Works to which
such Patent Applications and Copyright Registrations pertain, to enable
any such properties to be prosecuted under the direction of the Company
and to ensure that any Patent or Copyright Registration obtained will
validly issue to the Company. This subsection shall continue in full
force and effect after termination of Employee's employment by the
Company and after the termination of this Agreement.
Execute Documents. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly
sign any and all lawful papers, take all lawful oaths, and do all
lawful acts, including testifying, at the request of the Company, in
connection with the procurement, grant, enforcement, maintenance,
exploitation or defense against assertion of any patent, trademark,
copyright, trade secret or related rights, including applications for
protection or registration thereof. Such lawful papers include, but are
not limited to, any and all powers, assignments, affidavits,
declarations and other papers deemed by the Company to be necessary or
advisable. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after the
termination of this Agreement.
Keep Records. Without limiting Employee's obligations under
any other provision of this Agreement, Employee will keep and regularly
maintain adequate and current written records of all Inventions,
Confidential Information, and Copyright Works he or she participates in
creating, conceiving, developing or manufacturing. Such records shall
be kept and maintained in the form of notes, sketches, drawings,
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reports or other documents relating thereto, bearing at least the date
of preparation and the signature or name of each person contributing to
the subject matter reflected in the record. Such records, to the extent
they pertain to Employee Developed Intellectual Property, shall be and
shall remain the exclusive property of the Company and shall be made
available to the Company at all times. All of such records pertaining
to work produced pursuant to subsection (c) hereof will at all times
remain the property of Employee. This subsection shall continue in full
force and effect after termination of Employee's employment by the
Company and after the termination of this Agreement.
Return of Documents, Equipment, Etc. Without limiting
Employee's obligations under any other provision of this Agreement, all
writings, records, and other documents and things comprising,
containing, describing, discussing, explaining or evidencing any
Employee Developed Intellectual Property and all equipment, components,
parts, tools and the like in Employee's custody or possession that have
been obtained or prepared in the course of Employee's employment by the
Company shall be the exclusive property of the Company, shall not be
copied and/or removed from the premises of the Company, except in
pursuit of the business of the Company, and shall be delivered to the
Company, without Employee retaining any copies, upon notification of
the termination of Employee's employment by the Company or at any other
time requested by the Company. The Company shall have the right to
retain, access, and inspect all property of Employee of any kind in the
office, work area, and on the premises of the Company upon termination
of Employee's employment by the Company and at any time during
employment by the Company, to ensure compliance with the terms of this
Agreement. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after the
termination of this Agreement.
Other Contracts. Employee represents and warrants that he or
she is not a party to any existing contract relating to the granting or
assignment to others of any interest in Inventions, Confidential
Information, Copyright Works or Patents hereafter made by Employee
except insofar as copies of such contracts, if any, are attached to
Annex A of this Agreement.
Assignment After Termination. Employee recognizes that ideas,
Inventions, Confidential Information, Copyright Works, Copyright
Registrations, Patent Applications or Patents relating to his or her
activities while working for the Company that are conceived or made by
Employee, alone or with others, within one (1) year after termination
of his or her employment may have been conceived in significant part
while Employee was employed by the Company. Accordingly, Employee
agrees that such ideas, Inventions, Confidential Information, Copyright
Works, Copyright Registrations, Patent Applications or Patents shall be
presumed to have been conceived and made during his or her employment
with the Company and are to be assigned to the Company pursuant to this
Agreement unless
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Employee can prove otherwise. This subsection shall continue in full
force and effect after termination of Employee's employment by the
Company and after the termination of this Agreement.
Prior Conceptions. Employee has set forth on Annex B attached
hereto what he or she represents and warrants to be a complete list of
all Inventions, if any, or Copyright Works, including a brief
description thereof (without revealing any confidential or proprietary
information of any other party) which Employee conceived, created,
developed or made, or participated in the conception, creation,
development or making of prior to his or her employment by the Company
and for which Employee claims full or partial ownership or other
interest, or which are in the physical possession of a former employer
and which in either case are therefore excluded from the scope of this
Agreement.
Conflicts of Interest. Employee agrees that for the duration
of this Agreement, he or she will not engage, either directly or
indirectly, in any activity which might adversely affect the Company or
any Affiliated Entity (a "Conflict of Interest"), including ownership
of a material interest in any supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company does
business or accepting any payment, service, loan, gift, trip,
entertainment or other favor from a supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company or any
Affiliated Entity does business and that Employee will promptly inform
an officer of the Company as to each offer received by Employee to
engage in any such activity. Employee further agrees to disclose to the
Company any other facts of which Employee becomes aware which might
involve or give rise to a Conflict of Interest or potential Conflict of
Interest. The Company agrees that Employee is otherwise free on his or
her own time and at his or her own expense to engage in other
activities that do not create an actual or potential Conflict of
Interest.
Confidential Information of Prior Companies. Employee will not disclose or use
during the period of his or her employment by the Company any proprietary or
confidential information or Copyright Works of a third party in fulfilling his
or her duties under this Agreement.
Right to Enter Agreement. Employee represents and warrants to the Company that
he or she has full power and authority to enter into this Agreement and that the
execution, delivery and performance of this Agreement will not breach or
constitute a default of any other agreement or contract to which he or she is a
party or by which he or she is bound.
Injunctive Relief. Employee acknowledges and agrees that any breach or violation
by Employee of this Agreement will result in immediate and irreparable injury
and harm to the Company and will cause damage to the Company in amounts
difficult to ascertain. Accordingly, in the event of a breach or threatened
breach by Employee of any of the provisions of this Agreement, Employee agrees
that the Company, in addition to and not in limitation of any other rights,
remedies or damages available to the Company at law or
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in equity, shall be entitled to a preliminary and permanent injunction in order
to prevent or restrain any such further breach by Employee or Employee's
partners, agents, representatives, servants, companies, employees and/or any and
all persons directly or indirectly acting for or with Employee. Employee
acknowledges and agrees that the remedies contained in this Paragraph 6 are
reasonably related to the injuries the Company may sustain as a result of
Employee's breach of his or her obligations under this Agreement, and are not a
penalty. It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES) AND
WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN
ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL HAVE JURISDICTION
OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY,
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR
STATE COURT, WILL BE LAID IN ALEXANDRIA, VIRGINIA. EACH OF THE PARTIES HEREBY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH PARTY'S
PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY
LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
Notices. All notices, demands, requests or other communications that may be or
are required to be given, served or sent by either party to the other party
pursuant to this Agreement will be in writing and will be mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by hand delivery, telegram or facsimile transmission addressed as
follows:
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<PAGE> 18
(a) If to Company: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.: (703) 391-9589
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.: (214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to Employee: Tony Bansal
12661 Braddock Farms Court
Clifton, VA 20124
Facsimile Transmission No.:
with a copy (which will
not constitute notice) to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Facsimile Transmission No.:
--------------
Attn:
------------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
Gender. Words of any gender used in this Agreement will be held and construed to
include any other gender, and words in the singular number will be held to
include the plural, unless the context otherwise requires.
Entire Agreement. This Agreement represents the parties' entire agreement with
respect to the subject matter of this Agreement and supersedes and replaces any
prior agreement or understanding with respect to that subject matter. This
Agreement may not be amended or supplemented except pursuant to a written
instrument signed by the party against whom such amendment or supplement is to
be enforced.
Understanding of Agreement. Employee represents and warrants that he or she has
read and understands each and every provision of this Agreement, and Employee
understands that he or she is free to obtain advice from legal counsel of
choice, if necessary and
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<PAGE> 19
desired, in order to interpret any and all provisions of this Agreement, and
that Employee has freely and voluntarily entered into this Agreement.
Counterparts. This Agreement may be executed in multiple counterparts, each of
which will be deemed to be an original and all of which will be deemed to be a
single agreement. This Agreement will be considered fully executed when all
parties have executed an identical counterpart, notwithstanding that all
signatures may not appear on the same counterpart.
Severability. If any of the provisions of this Agreement are determined to be
invalid or unenforceable, such invalidity or unenforceability will not
invalidate or render unenforceable the remainder of this Agreement, but rather
the entire Agreement will be construed as if not containing the particular
invalid or unenforceable provision or provisions, and the rights and obligations
of the parties will be construed and enforced accordingly. The parties
acknowledge that if any provision of this Agreement is determined to be invalid
or unenforceable, it is their desire and intention that such provision be
reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
Third Parties. Except as expressly set forth or referred to in this Agreement,
nothing in this Agreement is intended or will be construed to confer upon or
give to any party other than the parties to this Agreement and their successors
and permitted assigns, if any, any rights or remedies under or by reason of this
Agreement. Notwithstanding the immediately preceding sentence, Employee
acknowledges and agrees that his or her obligations under this Agreement are
intended to benefit each Affiliated Entity and may therefore be enforced by each
such Affiliated Entity.
Assignment. This Agreement and the rights and/or obligations of Employee under
this Agreement may not be assigned or delegated. The Company may assign or
delegate its rights and/or obligations hereunder to a subsidiary or affiliate of
Company or to a successor entity in the event of merger, consolidation or
transfer or sale of all or substantially all of the assets of the Company or of
the Company's business.
Waiver. No failure or delay in exercising any right hereunder will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right.
Headings. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Survival. As noted herein, this Agreement shall survive the termination of
Employee's employment with the Company and shall continue to be of full force
and effect.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
COMPANY:
DIGITAL COMMERCE CORPORATION
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
EMPLOYEE:
--------------------------------------
Tony Bansal
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<PAGE> 21
ANNEX A
OTHER CONTRACTS
<PAGE> 22
ANNEX B
PRIOR CONCEPTIONS
<PAGE> 23
ANNEX F
NONCOMPETITION AGREEMENT
Employee's potential competition with Employer shall be governed by
that certain Employment Agreement between Employer and Employee dated as of
January 1, 1999.
<PAGE> 1
EXHIBIT 10.9
RETENTION AGREEMENT
This Retention Agreement (this "Agreement") is entered into as of April
4, 2000, by and between William Seippel ("Employee") and Digital Commerce
Corporation, a Delaware corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employer wishes to employ Employee and Employee wishes to
accept such employment; and
WHEREAS, the parties each desire to establish and set forth the terms
and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees
to be employed by Employer, for the term described on Annex A attached hereto
and incorporated herein by reference.
2. DUTIES AND RESPONSIBILITIES. Upon execution of this Agreement,
Employee shall diligently render his or her services to Employer in accordance
with the directives of Employer's Board of Directors and/or superior officers,
and shall use his or her best efforts and good faith in accomplishing such
directives. Employee agrees to devote his or her best efforts and substantially
all of his or her business time, abilities and attention to the business of
Employer. In addition, Employee shall perform the duties described on Annex B
attached hereto and incorporated herein by reference.
3. COMPENSATION. During the Employment Period (as defined in Annex A),
Employer will pay to Employee compensation in the amounts and form specified in
Annex C attached hereto and incorporated herein by reference, payable in
semi-weekly installments or otherwise as is the policy of Employer from time to
time with respect to its employees on a general basis. In addition to such
compensation, Employee will be entitled to the benefits, if any, described in
Annex C during the Employment Period.
4. REIMBURSEMENT FOR EXPENSES. Employer shall reimburse Employee, in
accordance with Employer's normal reimbursement policy, for all reasonable
expenses incurred by Employee in the performance of Employee's duties pursuant
to this Agreement, but only after Employee submits a written, itemized and
signed list of such expenses on a form supplied by Employer for such purpose.
<PAGE> 2
5. TERMINATION.
(a) Employer may terminate Employee's employment if he or she is
unable to perform the essential functions of his or her
position with a reasonable accommodation for ninety (90)
consecutive days or for a total of one hundred twenty (120)
days during any twelve (12) month period.
(b) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee for Cause (defined below) by delivery of written
notice of termination to Employee. "Cause" is defined to
include:
(1) fraud, misappropriation or embezzlement involving
Employer;
(2) felony conviction or conviction of a crime involving
moral turpitude or which, in the opinion of the Board
of Directors (in their sole discretion), brings
Employee or Employer into disrepute or causes
material harm to Employer's business, customer or
supplier relations or financial condition or
prospects;
(3) Employee's failure to obey or carry out (A)
reasonable directives from Employer senior management
or (B) Employer's company policies;
(4) inability or material failure by Employee to
substantially perform his or her duties hereunder;
(5) any material breach of this Agreement by Employee; or
(6) any material breach or threatened material breach of
(i) the Confidentiality Agreement and/or (ii) the
Noncompetition Agreement entered into by and between
Employer and Employee as of the date hereof pursuant
to the provisions of Paragraphs 6 and 7 of this
Agreement;
provided, however, in the case of subparagraphs (3), (4) and
(5) of this Section 5(b), the Employee shall have been
informed in writing of the act, or failure to act,
constituting Cause for termination, and shall have failed to
cure such act or failure to act within thirty (30) days
following receipt of written notice thereof.
(c) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee without Cause upon payment of the severance benefit
set forth in Annex D attached hereto.
(d) Employee's employment under this Agreement shall automatically
terminate upon Employee's death.
-2-
<PAGE> 3
(e) Employee may terminate his or her employment hereunder upon
giving at least ninety (90) days' prior written notice. In the
event that Employee gives notice of termination of this
Agreement pursuant to this subsection, Employer shall have the
right to terminate Employee prior to the end of such ninety
(90) day period upon payment of Employee's compensation for
such ninety (90) day period.
6. CONFIDENTIAL INFORMATION. Employee and Employer shall enter into a
Confidentiality/Intellectual Property Agreement in the form of Annex E attached
hereto, the terms of which are incorporated herein by this reference.
7. COVENANT NOT TO COMPETE. Employee and Employer shall enter into a
Noncompetition Agreement in the form of Annex F attached hereto, the terms of
which are incorporated herein by this reference.
8. INDEPENDENT COVENANTS. It is understood by and between the parties
hereto that the restrictive covenants set forth in the Confidentiality Agreement
and the Noncompetition Agreement are essential elements of this Agreement, and
that, but for the agreement of the Employee to comply with such covenants, the
Employer would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed as agreements independent of any other provision
in this Agreement. The existence of any claim or cause of action of the Employee
against the Employer, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Employer of such covenants.
9. RIGHT TO ENTER AGREEMENT. Employee represents and covenants to
Employer that he or she has full power and authority to enter into this
Agreement, the Confidentiality Agreement and the Non-Competition Agreement
(hereinafter collectively referred to as the "Agreements") and that the
execution, delivery and/or performance of the Agreements will not breach or
constitute a default of any other agreement or contract to which he or she is a
party or by which he or she is bound.
10. ASSIGNMENT. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. Employer may
assign and/or delegate its rights and/or obligations hereunder to a subsidiary
or affiliate of Employer or to a successor corporation in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets of
Employer or of Employer's business.
11. NOTICES. All notices, demands, requests or other communications
that may be or are required to be given, served or sent by either party to the
other party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
-3-
<PAGE> 4
(a) If to Employer: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 391-9589
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.:
(214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to Employee: William Seippel
11388 Seneca Knoll Drive
Great Falls, Virginia 22066
Facsimile Transmission No.:
---------
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
12. GENDER. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
13. WAIVER. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
-4-
<PAGE> 5
14. SEVERABILITY. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
15. ENTIRE AGREEMENT. Except for that certain Employment Agreement,
dated as of October 8, 1999, between Employer and Employee, that certain
Indemnification Agreement dated March 13, 2000 and prior options, bonuses or
similar awards made prior to the date hereof (the "Prior Agreements"), the terms
and provisions contained in the Agreements shall constitute the entire agreement
between the parties with respect to Employee's employment by Employer during the
Employment Period. Except for the Prior Agreements, the Agreements replace and
supersede any and all existing agreements entered into between Employee and
Employer relating generally to the same subject matter, if any, and shall be
binding upon Employee's heirs, executors, administrators or other legal
representatives or assigns. In no event will this Agreement be deemed to modify
or alter any benefits provided to Employee pursuant to the Prior Agreements.
Notwithstanding any provision herein to the contrary, in the event of any
conflict between any provision of this Agreement (and the agreements annexed
thereto) and any provision of any Prior Agreement, as such may be amended from
time to time, all such agreements shall be interpreted so that the provisions
providing the more favorable treatment to the Employee shall govern. In no event
will Employer be obligated to duplicate benefits provided under any such
agreements.
16. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated in whole
or in part, except by an instrument in writing signed by Employee and an officer
or other authorized representative of Employer.
17. UNDERSTANDING OF AGREEMENT. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
18. SURVIVAL. The terms of this Agreement shall remain in full force
and effect during the continuation of Employee's employment. The Confidentiality
Agreement, the Noncompetition Agreement and paragraphs 10 through 21 of this
Agreement will survive the termination of Employee's employment for any reason.
19. APPLICABLE LAW. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF
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<PAGE> 6
VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES) AND WILL, TO THE MAXIMUM
EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN ALEXANDRIA, VIRGINIA.
COURTS WITHIN THE STATE OF VIRGINIA WILL HAVE JURISDICTION OVER ANY AND ALL
DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR
STATE COURT, WILL BE LAID IN ALEXANDRIA, VIRGINIA. EACH OF THE PARTIES HEREBY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH PARTY'S
PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY
LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
20. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
21. THIRD PARTIES. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
22. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYEE: EMPLOYER:
DIGITAL COMMERCE CORPORATION
By: /s/ John Poindexter
-----------------------------------
Name: /s/ William Seippel Name: John Poindexter
---------------------------- -----------------------------------
William Seippel Title: Director
-----------------------------------
Dated: April 4, 2000 Dated: April 4, 2000
---------------------------- -----------------------------------
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<PAGE> 8
ANNEX A
TERM OF EMPLOYMENT
Employer agrees to employ Employee and Employee agrees to be employed
by Employer, for a term of twelve (12) months commencing on the date hereof and
ending on April 4, 2001 (the "Employment Period"), unless earlier terminated as
provided herein. Unless Employee or Employer gives written notice of intention
not to renew this Agreement no later than sixty (60) days prior to its
expiration, this Agreement shall automatically continue in effect for, and the
Employment Period will automatically be extended by, successive additional
twelve (12) month terms subject to all other terms and conditions contained
herein.
<PAGE> 9
ANNEX B
DUTIES OF EMPLOYEE
The duties of Employee will be as described in that certain Employment
Agreement between Employer and Employee dated as of October 8, 1999.
<PAGE> 10
ANNEX C
COMPENSATION AND BENEFITS
Employee shall be entitled to such compensation and benefits as are
described in that certain Employment Agreement between Employer and Employee
dated as of October 8, 1999.
ANNEX D
SEVERANCE BENEFIT
I. If the Company terminates the Employee's employment for reasons
other than for Cause (as defined in the Retention Agreement of which this is an
Annex) or because of disability (as defined in Section 5(a) of the Retention
Agreement):
(1) The Company shall pay to the Employee: (a) his or her salary,
as in effect on the date of termination, through the effective
date of the termination of his or her employment (the
"Termination Date"), (b) all unpaid and pro rata amounts to
which the Employee is entitled as of the Termination Date
under any compensation plan or program of the company,
including, without limitation, accrued but unused vacation
time, and (c) all unpaid and pro rata amounts to which the
Employee is entitled under any incentive performance bonus as
of the end of the Company's fiscal quarter in which the
Termination Date occurs. The Company will make the payments
set forth in subparagraphs (b) and (c) at times mutually
agreed upon with the Employee.
(2) The Company shall pay to the Employee fifty percent (50%) of
the Employee's salary for the lesser of (a) the remaining
duration of the Employment Period subsequent to the
Termination Date, or (b) one year from the Termination Date.
(3) Employee may continue to participate in, and accrue benefits
under, all insurance, retirement, pension, 401(k) plans,
thrift and other deferred compensation plans of the Company
for the lesser of (a) the remaining term of the Employment
Period following the Termination Date or (b) six (6) months
following the Termination Date, except to the extent such
continued participation and/or accrual is prohibited by law,
or to the extent that such plan constitutes a "qualified plan"
under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"), or by the terms of the plan, in which
case the Company shall provide the Employee a substantially
equivalent, unfunded, nonqualified benefit.
II. If the Company terminates the Employee's employment for Cause, or
if the Employee terminates his or her Employment for any reason, the Employee
will only be entitled to receive the amounts set forth in subparagraphs I.1(a)
and I.1(b) above.
<PAGE> 11
ANNEX E
CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT
This Confidentiality Agreement (this "Agreement"), is entered into as
of April 4, 2000, by and between William Seippel ("Employee") and Digital
Commerce Corporation, a Delaware corporation (the "Company").
RECITALS
WHEREAS, Employee is employed by the Company;
WHEREAS, in the course of Employee's employment with the Company,
Employee may have access to or have disclosed to him or her
Confidential Information (as hereinafter defined); and
WHEREAS, the parties each desire to establish and set forth Employee's
obligations with respect to Confidential Information and certain other matters.
NOW THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For the purposes of this Agreement, the following words
shall have the following meanings:
(a) "Affiliated Entity" means any entity which controls, is
controlled by or is under common control with the Company.
(b) "Copyright Registrations" means any domestic or foreign
copyright registrations and applications for such registrations,
including all or any portion of a Copyright Work or other subject
matter identified by any such registration or application.
(c) "Copyright Works" means materials for which copyright
protection may be obtained including, but not limited to: literary
works (including all written material), computer programs, artistic and
graphic works (including designs, graphs, drawings, blueprints and
other works), recordings, models, photographs, slides, motion pictures
and audio-visual works, regardless of the form or manner in which
documented or recorded;
-11-
<PAGE> 12
(d) "Inventions" means inventions (whether patentable or not),
discoveries, improvements, designs and ideas (whether or not shown or
described in writing or reduced to practice) and may include
Confidential Information or Copyright Works;
(e) "Patent Applications" means any application to obtain a
Patent, including any Inventions or other subject matter described or
protected by such application.
(f) "Patents" means any domestic or foreign patents, including
any Inventions or other subject matter described or protected by such
patents.
2. Confidential Information.
(a) Employee acknowledges that during his or her employment
with the Company, he or she will be provided with and become acquainted
with various trade secrets and other proprietary/confidential
information which are owned by the Company or any Affiliated Entity
and/or their respective customers and vendors and which are used in the
operation of the business of the Company or an Affiliated Entity,
including, without limitation, one or more of the following types of
information: customer lists; the nature and type of services rendered
to customers; fees paid by customers; methodologies; computer code and
programs; formulas; processes; compilations of information; drawings;
results of research proposals; job notes; reports; records; trade
secrets; and specifications. Employee agrees that he or she will not
disclose any trade secrets or other proprietary/confidential
information owned by the Company or any Affiliated Entity and/or their
respective customers and vendors whether or not listed by way of
example above (collectively, the "Confidential Information"), directly
or indirectly, or use such Confidential Information in any way, either
during the term of this Agreement or at any time thereafter, except as
may be required in the course of his or her employment with the Company
or by law.
(b) Employee shall not, without the prior written approval of
the Company, publish or authorize or purport to authorize anyone to
publish, either during Employee's employment with the Company or
subsequent thereto, any Confidential Information acquired in the course
of his or her employment.
(c) The prohibitions of this paragraph shall not apply to any
Confidential Information which (i) becomes generally available to the
public other than as a result of disclosure by Employee, (ii) was
available to Employee on a non-confidential basis prior to its
disclosure to Employee by the Company, or (iii) becomes available to
Employee on a non-confidential basis from a source other than the
Company when such source is entitled, to the best of Employee's
knowledge, to make the disclosure to Employee.
-12-
<PAGE> 13
3. Inventions, Patents, and Copyright Works.
(a) Notification of the Company. Upon conception by Employee
during the period of his or her employment by the Company, all
Inventions, Confidential Information, and Copyright Works (1) which
relate to the actual or anticipated business, research or activities of
the Company or any Affiliated Entity at the time of conception; or (2)
which, directly or indirectly, result from or are suggested by any work
which Employee has done or may do for or on behalf of the Company or
any Affiliated Entity and/or their respective customers and vendors; or
(3) which are developed, tested, improved or investigated either in
part or entirely on time for which Employee was paid by the Company, or
using any resources of the Company (such Inventions, Confidential
Information and Copyright Works, together with the Inventions,
Confidential Information, Copyright Works, Copyright Registrations
and/or Patents referenced in subsection (j) below, are hereinafter
collectively referred to as the "Employee Developed Intellectual
Property") shall become the property of the Company whether or not
patent or copyright registration applications are filed for such
subject matter. Employee agrees to communicate to the Company promptly
and fully all Employee Developed Intellectual Property made, designed,
created, or conceived by Employee (whether made, designed, created, or
conceived solely by Employee or jointly with others).
(b) Transfer of Rights. Employee agrees, during his or her
employment by the Company, to assign and transfer to the Company all of
Employee's right, title and interest in all Employee Developed
Intellectual Property prepared, made or conceived by or on behalf of
Employee (whether solely or jointly with others) during the period of
his or her employment by the Company. Employee also agrees to do all
things necessary to transfer to the Company all of Employee's right,
title and interest in and to all such Employee Developed Intellectual
Property as the Company may request, on such forms as the Company may
provide, at any time during or after Employee's employment by the
Company. This subsection shall continue in full force and effect after
termination of Employee's employment by the Company and after the
termination of this Agreement. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly and
fully assist the Company during and subsequent to his or her employment
in every lawful way to obtain, protect and enforce Employee's patent,
copyright, trade secret or other proprietary rights with respect to
Employee Developed Intellectual Property in any and all countries or
other jurisdictions. The Company will reimburse Employee for reasonable
expenses incurred by Employee in connection with such post-employment
assistance. Employee waives, to the fullest extent permitted by law,
all "moral rights" of Employee with respect to Employee Developed
Intellectual Property assigned and/or transferred to the Company.
-13-
<PAGE> 14
(c) Exclusions. No provision in this Agreement is intended to
require assignment of any of Employee's rights in an Invention, Patent
or Copyright Work, for which no equipment, supplies, facilities,
Confidential Information, Copyright Works, Inventions or Patents of the
Company was used, and which was (1) developed entirely on Employee's
own time; (2) does not relate to the business of the Company or any
Affiliated Entity or to the actual or demonstrably anticipated research
or development of the Company or any Affiliated Entity; and (3) does
not result from any work performed by Employee for the Company or
assigned to Employee by the Company.
(d) Rights in Copyrights. Unless otherwise agreed in writing
by the Company, all Copyright Works prepared wholly or partially by
Employee (alone or jointly with others) within the scope of his or her
employment by the Company, shall be deemed a "work made for hire" under
the copyright laws and shall be owned by the Company. Employee
understands that any assignment or release of such works can only be
made by the Company. During the period of his or her employment by the
Company, Employee shall not assist or work with any third party that is
not an employee of the Company to create or prepare any Copyright Works
without the prior written consent of the Company.
(e) Assistance in Preparation of Applications. Without
limiting Employee's obligations under any other provision of this
Agreement, Employee will promptly and fully assist, if requested by the
Company, in the preparation and filing of Patent Applications and
Copyright Registrations in any and all countries or other jurisdictions
selected by the Company and will assign to the Company all of
Employee's right, title, and interest in and to such Patent
Applications and Copyright Registrations, as well as all Inventions or
Copyright Works to which such Patent Applications and Copyright
Registrations pertain, to enable any such properties to be prosecuted
under the direction of the Company and to ensure that any Patent or
Copyright Registration obtained will validly issue to the Company. This
subsection shall continue in full force and effect after termination of
Employee's employment by the Company and after the termination of this
Agreement.
(f) Execute Documents. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly
sign any and all lawful papers, take all lawful oaths, and do all
lawful acts, including testifying, at the request of the Company, in
connection with the procurement, grant, enforcement, maintenance,
exploitation or defense against assertion of any patent, trademark,
copyright, trade secret or related rights, including applications for
protection or registration thereof. Such lawful papers include, but are
not limited to, any and all powers, assignments, affidavits,
declarations and other papers deemed by the Company to be necessary or
-14-
<PAGE> 15
advisable. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after
the termination of this Agreement.
(g) Keep Records. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will keep and
regularly maintain adequate and current written records of all
Inventions, Confidential Information, and Copyright Works he or she
participates in creating, conceiving, developing or manufacturing. Such
records shall be kept and maintained in the form of notes, sketches,
drawings, reports or other documents relating thereto, bearing at least
the date of preparation and the signature or name of each person
contributing to the subject matter reflected in the record. Such
records, to the extent they pertain to Employee Developed Intellectual
Property, shall be and shall remain the exclusive property of the
Company and shall be made available to the Company at all times. All of
such records pertaining to work produced pursuant to subsection (c)
hereof will at all times remain the property of Employee. This
subsection shall continue in full force and effect after termination of
Employee's employment by the Company and after the termination of this
Agreement.
(h) Return of Documents, Equipment, Etc. Without limiting
Employee's obligations under any other provision of this Agreement, all
writings, records, and other documents and things comprising,
containing, describing, discussing, explaining or evidencing any
Employee Developed Intellectual Property and all equipment, components,
parts, tools and the like in Employee's custody or possession that have
been obtained or prepared in the course of Employee's employment by the
Company shall be the exclusive property of the Company, shall not be
copied and/or removed from the premises of the Company, except in
pursuit of the business of the Company, and shall be delivered to the
Company, without Employee retaining any copies, upon notification of
the termination of Employee's employment by the Company or at any other
time requested by the Company. The Company shall have the right to
retain, access, and inspect all property of Employee of any kind in the
office, work area, and on the premises of the Company upon termination
of Employee's employment by the Company and at any time during
employment by the Company, to ensure compliance with the terms of this
Agreement. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after the
termination of this Agreement.
(i) Other Contracts. Employee represents and warrants that he
or she is not a party to any existing contract relating to the granting
or assignment to others of any interest in Inventions, Confidential
Information, Copyright Works or
-15-
<PAGE> 16
Patents hereafter made by Employee except insofar as copies of such
contracts, if any, are attached to Annex A of this Agreement.
(j) Assignment After Termination. Employee recognizes that
ideas, Inventions, Confidential Information, Copyright Works, Copyright
Registrations, Patent Applications or Patents relating to his or her
activities while working for the Company that are conceived or made by
Employee, alone or with others, within one (1) year after termination
of his or her employment may have been conceived in significant part
while Employee was employed by the Company. Accordingly, Employee
agrees that such ideas, Inventions, Confidential Information, Copyright
Works, Copyright Registrations, Patent Applications or Patents shall be
presumed to have been conceived and made during his or her employment
with the Company and are to be assigned to the Company pursuant to this
Agreement unless Employee can prove otherwise. This subsection shall
continue in full force and effect after termination of Employee's
employment by the Company and after the termination of this Agreement.
(k) Prior Conceptions. Employee has set forth on Annex B
attached hereto what he or she represents and warrants to be a complete
list of all Inventions, if any, or Copyright Works, including a brief
description thereof (without revealing any confidential or proprietary
information of any other party) which Employee conceived, created,
developed or made, or participated in the conception, creation,
development or making of prior to his or her employment by the Company
and for which Employee claims full or partial ownership or other
interest, or which are in the physical possession of a former employer
and which in either case are therefore excluded from the scope of this
Agreement.
(l) Conflicts of Interest. Employee agrees that for the
duration of this Agreement, he or she will not engage, either directly
or indirectly, in any activity which might adversely affect the Company
or any Affiliated Entity (a "Conflict of Interest"), including
ownership of a material interest in any supplier, contractor,
distributor, subcontractor, customer or other entity with which the
Company does business or accepting any payment, service, loan, gift,
trip, entertainment or other favor from a supplier, contractor,
distributor, subcontractor, customer or other entity with which the
Company or any Affiliated Entity does business and that Employee will
promptly inform an officer of the Company as to each offer received by
Employee to engage in any such activity. Employee further agrees to
disclose to the Company any other facts of which Employee becomes aware
which might involve or give rise to a Conflict of Interest or potential
Conflict of Interest. The Company agrees that Employee is otherwise
free on his or her own time and at his or her own expense to engage in
other activities that do not create an actual or potential Conflict of
Interest.
-16-
<PAGE> 17
4. Confidential Information of Prior Companies. Employee will not
disclose or use during the period of his or her employment by the Company any
proprietary or confidential information or Copyright Works of a third party in
fulfilling his or her duties under this Agreement.
5. Right to Enter Agreement. Employee represents and warrants to the
Company that he or she has full power and authority to enter into this Agreement
and that the execution, delivery and performance of this Agreement will not
breach or constitute a default of any other agreement or contract to which he or
she is a party or by which he or she is bound.
6. Injunctive Relief. Employee acknowledges and agrees that any breach
or violation by Employee of this Agreement will result in immediate and
irreparable injury and harm to the Company and will cause damage to the Company
in amounts difficult to ascertain. Accordingly, in the event of a breach or
threatened breach by Employee of any of the provisions of this Agreement,
Employee agrees that the Company, in addition to and not in limitation of any
other rights, remedies or damages available to the Company at law or in equity,
shall be entitled to a preliminary and permanent injunction in order to prevent
or restrain any such further breach by Employee or Employee's partners, agents,
representatives, servants, companies, employees and/or any and all persons
directly or indirectly acting for or with Employee. Employee acknowledges and
agrees that the remedies contained in this Paragraph 6 are reasonably related to
the injuries the Company may sustain as a result of Employee's breach of his or
her obligations under this Agreement, and are not a penalty. It is further
understood and agreed that no failure or delay by the Company in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
7. Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE
-17-
<PAGE> 18
COURT, WILL BE LAID IN ALEXANDRIA, VIRGINIA. EACH OF THE PARTIES HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE
FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED
IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
8. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to Company: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 391-9589
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.:
(214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to Employee: William Seippel
11388 Seneca Knoll Drive
Great Falls, VA 22066
Facsimile Transmission No.:
---------
-18-
<PAGE> 19
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
9. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
10. Entire Agreement. This Agreement represents the parties' entire
agreement with respect to the subject matter of this Agreement and supersedes
and replaces any prior agreement or understanding with respect to that subject
matter. This Agreement may not be amended or supplemented except pursuant to a
written instrument signed by the party against whom such amendment or supplement
is to be enforced.
11. Understanding of Agreement. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
13. Severability. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate
-19-
<PAGE> 20
or render unenforceable the remainder of this Agreement, but rather the entire
Agreement will be construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and obligations of the
parties will be construed and enforced accordingly. The parties acknowledge that
if any provision of this Agreement is determined to be invalid or unenforceable,
it is their desire and intention that such provision be reformed and construed
in such manner that it will, to the maximum extent practicable, be deemed to be
valid and enforceable.
14. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement. Notwithstanding the immediately preceding sentence,
Employee acknowledges and agrees that his or her obligations under this
Agreement are intended to benefit each Affiliated Entity and may therefore be
enforced by each such Affiliated Entity.
15. Assignment. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. The Company may
assign or delegate its rights and/or obligations hereunder to a subsidiary or
affiliate of Company or to a successor entity in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets of
the Company or of the Company's business.
16. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
17. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18. Survival. As noted herein, this Agreement shall survive the
termination of Employee's employment with the Company and shall continue to be
of full force and effect.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-20-
<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
COMPANY:
DIGITAL COMMERCE CORPORATION
By:
--------------------------------------
Name:
------------------------------
Title:
-----------------------------
EMPLOYEE:
-----------------------------------------
William Seippel
-21-
<PAGE> 22
ANNEX A
OTHER CONTRACTS
ANNEX B
PRIOR CONCEPTIONS
<PAGE> 23
ANNEX F
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement"), is entered into as of
April 4, 2000, by and between William Seippel ("Employee") and Digital Commerce
Corporation, a Delaware corporation (the "Company"), and is entered into in
connection with that certain Retention Agreement, dated as of the date hereof
(the "Retention Agreement") by and between the parties hereto. Employee
recognizes and agrees that a portion of the compensation he or she is to receive
pursuant to the Retention Agreement is provided in consideration for the
agreements contained in this Agreement. Employee further acknowledges and agrees
that while employed pursuant to the Retention Agreement, Employee will be
provided with access to certain confidential information of the Company, will be
provided with specialized training on how to perform his or her duties, and will
be provided with contact with the Company's customers and potential customers.
In consideration of all of the foregoing, Employee agrees as follows:
1. Noncompetition. During the term of the Retention Agreement and for a
period of one (1) year from the date of termination of his or her employment
with the Company for any reason, Employee shall not directly or indirectly enter
into or attempt to enter into any employment, consulting or other business
relationship, anywhere in the world where the Company does business, with a
Major Competitor (as defined below) of the Company with respect to a Competing
Line of Business (as defined below) operated by such Major Competitor
(collectively, "Compete"). For the purposes of this Agreement, the following
terms shall have the meanings indicated below:
(a) Definitions. The words "directly or indirectly" as they
modify the word Compete shall mean: (i) acting as an agent,
representative, consultant, employee, director, independent contractor
or employee of Major Competitors (defined in (b) below) in a Competing
Line of Business (defined in (c) below), or (ii) participating in any
such competing entity as an owner, partner, limited partner, joint
venturer, creditor or stockholder (except as a stockholder holding less
than a five percent (5%) interest in a corporation or a limited partner
holding no more than a one percent (1%) interest in a limited
partnership).
(b) Major Competitors. The term "Major Competitor" shall
include the following organizations: Microsoft Corporation, America
Online and its Netscape subsidiary, Yahoo!, PurchasePro, Ariba,
Commerce One, VerticalNet, TRADE'ex, Chemdex, National Information
Consortium, GSA*Advantage, PeopleSoft, Oracle, SAP, American Management
Systems, CACI, IBM, and EDS and all affiliates and subsidiaries
thereof. This list of Major Competitors may be amended from time to
time by the Company upon ninety (90) days written notice to Employee.
(c) Competing Line of Business. Competing Line of Business
shall mean any person or entity engaged in (i) the development,
operation, maintenance or sales of e-commerce marketplace solutions for
the "business-to-government,"
<PAGE> 24
"business-to-business" or "business-to-consumer" segments of the
e-commerce industry anywhere in the world, or (ii) any other
significant line of business in which the Company may engage from time
to time.
2. Nonsolicitation. For a period of one (1) year from the termination
of his or her employment with the Company for any reason, Employee shall not, on
his or her behalf or on behalf of any other person or entity, directly or
indirectly, solicit, attempt to solicit, or accept any business from any person
or entity which purchased any products or services from the Company or any
Affiliated Entity (as hereinafter defined) during the one (1) year period
immediately preceding the termination of Employee's employment with the Company.
As used herein, the term "Affiliated Entity" will be deemed to mean any entity
which controls, is controlled by or which is under common control with the
Company.
3. No Raiding. For a period of one (1) year from the termination of his
or her employment with the Company for any reason, Employee shall not directly
or indirectly, on his or her behalf or on behalf of any other person or entity:
(i) induce or attempt to induce any employee of the Company or any Affiliated
Entity to terminate his or her employment with the Company or any Affiliated
Entity; (ii) induce or attempt to induce any consultant or independent
contractor to the Company or any Affiliated Entity to terminate his or her
consultancy or contractual relationship with the Company or any Affiliated
Entity; and/or (iii) employ or retain, or attempt to employ or retain, any
employee of the Company or any Affiliated Entity.
4. Conflicts of Interest. Employee agrees that for the duration of the
Retention Agreement, he or she will not engage, either directly or indirectly,
in any activity which might adversely affect the Company or any Affiliated
Entity, (a "Conflict of Interest") including ownership of a material interest in
any supplier, contractor, distributor, subcontractor, customer or other entity
with which the Company does business or accepting any payment, service, loan,
gift, trip, entertainment, or other favor from a supplier, contractor,
distributor, subcontractor, customer or other entity with which the Company or
any Affiliated Entity does business, and that Employee will promptly inform an
officer of the Company as to each offer received by Employee to engage in any
such activity. Employee further agrees to disclose to the Company any other
facts of which Employee becomes aware which might involve or give rise to a
Conflict of Interest or potential Conflict of Interest.
5. Reaffirm Obligations. Upon termination of his or her employment with
the Company, Employee, if requested by the Company, shall reaffirm in writing
any of Employee's obligations set forth in this Agreement.
6. Representation. Employee represents and warrants to the Company that
his or her execution and delivery of this Agreement, together with his or her
performance in accordance with the terms of this Agreement, does not conflict
with, or result in any breach by Employee or any violation by Employee of, any
other agreement to which Employee is a party or by which Employee is bound.
7. Injunctive Relief. Employee acknowledges and agrees that any breach
or violation by Employee of this Agreement will result in immediate and
irreparable injury and
-23-
<PAGE> 25
harm to the Company and will cause damage to the Company in amounts difficult to
ascertain. Accordingly, in the event of a breach or threatened breach by
Employee of any of the provisions of this Agreement, Employee agrees that the
Company, in addition to and not in limitation of any other rights, remedies or
damages available to the Company at law or in equity, shall be entitled to a
preliminary and permanent injunction in order to prevent or restrain any such
further breach by Employee or Employee's partners, agents, representatives,
servants, employers, employees and/or any and all persons directly or indirectly
acting for or with Employee. Employee acknowledges and agrees that the remedies
contained in this Paragraph 7 are reasonably related to the injuries the Company
may sustain as a result of Employee's breach of his or her obligations under
this Agreement, and are not a penalty. It is further understood and agreed that
no failure or delay by the Company in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
8. Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN ALEXANDRIA,
VIRGINIA. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
(ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS
ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS
BROUGHT IN AN INCONVENIENT FORUM.
9. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to the Company: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 391-9589
Attn: Tony Bansal, President
<PAGE> 26
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.:
(214) 745-5390
Attn: Robert E. Crawford, Jr., Esq.
(b) If to Employee: William Seippel
11388 Seneca Knoll Drive
Great Falls, VA 22066
Facsimile Transmission No.:
---------
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
10. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
11. Entire Agreement. This Agreement represents the parties' entire
agreement with respect to the subject matter of this Agreement and supersedes
and replaces any prior agreement or understanding with respect to that subject
matter. This Agreement may not be amended or supplemented except pursuant to a
written instrument signed by the party against whom such amendment or supplement
is to be enforced.
<PAGE> 27
12. Understanding of Agreement. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
13. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
14. Severability. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
15. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement. Notwithstanding the immediately preceding sentence,
Employee acknowledges and agrees that his or her obligations under this
Agreement are intended to benefit each Affiliated Entity and may therefore be
enforced by such Affiliated Entity.
16. Assignment. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. The Company may
assign and/or delegate its rights hereunder to a subsidiary or affiliate of the
Company or to a successor corporation in the event of merger, consolidation or
transfer or sale of all or substantially all of the assets of the Company or of
the Company's business.
17. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
18. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
<PAGE> 28
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
COMPANY:
DIGITAL COMMERCE CORPORATION
By:
--------------------------------------
Name:
------------------------------
Title:
-----------------------------
EMPLOYEE:
-----------------------------------------
William Seippel
<PAGE> 1
EXHIBIT 10.10
RETENTION AGREEMENT
This Retention Agreement (this "Agreement") is entered into as of
<<GrantDate>>, by and between <<FirstName>> <<LastName>> ("Employee") and
Digital Commerce Corporation, a Delaware corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employer wishes to employ Employee and Employee wishes to
accept such employment; and
WHEREAS, the parties each desire to establish and set forth the terms
and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees
to be employed by Employer, for the term described on Annex A attached hereto
and incorporated herein by reference.
2. DUTIES AND RESPONSIBILITIES. Upon execution of this Agreement,
Employee shall diligently render his or her services to Employer in accordance
with the directives of Employer's Board of Directors and/or superior officers,
and shall use his or her best efforts and good faith in accomplishing such
directives. Employee agrees to devote his or her best efforts and substantially
all of his or her business time, abilities and attention to the business of
Employer. In addition, Employee shall perform the duties described on Annex B
attached hereto and incorporated herein by reference.
3. COMPENSATION. During the Employment Period (as defined in Annex A),
Employer will pay to Employee compensation in the amounts and form specified in
Annex C attached hereto and incorporated herein by reference, payable in twice
monthly installments or otherwise as is the policy of Employer from time to time
with respect to its employees on a general basis. In addition to such
compensation, Employee will be entitled to the benefits, if any, described in
Annex C during the Employment Period.
4. REIMBURSEMENT FOR EXPENSES. Employer shall reimburse Employee, in
accordance with Employer's normal reimbursement policy, for all reasonable
expenses incurred by Employee in the performance of Employee's duties pursuant
to this Agreement, but only after Employee submits a written, itemized and
signed list of such expenses on a form supplied by Employer for such purpose.
<PAGE> 2
5. TERMINATION.
(a) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee for Cause (defined below) by delivery of written
notice of termination to Employee. "Cause" is defined to
include:
(1) fraud, misappropriation or embezzlement involving
Employer;
(2) felony conviction or conviction of a crime involving
moral turpitude or which, in the good faith opinion
of the Board of Directors (in their sole discretion),
brings Employee or Employer into disrepute or causes
material harm to Employer's business, customer or
supplier relations or financial condition or
prospects;
(3) Employee's failure to obey or carry out (A)
reasonable directives from Employer senior management
or (B) Employer's company policies;
(4) any material breach of this Agreement by Employee; or
(5) any material breach or threatened material breach of
(i) the Confidentiality Agreement and/or (ii) the
Noncompetition Agreement entered into by and between
Employer and Employee as of the date hereof pursuant
to the provisions of Paragraphs 6 and 7 of this
Agreement;
provided, however, in the case of subparagraphs (3) and (4) of
this Section 5(a), the Employee shall have been informed in
writing of the act, or failure to act, constituting Cause for
termination, and shall have failed to cure such act or failure
to act within thirty (30) days following receipt of written
notice thereof.
(b) Employer may terminate Employee's employment under this
Agreement at any time and without prior written notice to
Employee without Cause upon payment of the severance benefit
set forth in Annex D attached hereto.
(c) Employee's employment under this Agreement shall automatically
terminate upon Employee's death.
(d) Employee may terminate his or her employment hereunder upon
giving at least ninety (90) days' prior written notice. In the
event that Employee gives notice of termination of this
Agreement pursuant to this subsection, Employer shall have the
right to terminate Employee prior to the end of such ninety
(90) day period upon payment of Employee's compensation for
such ninety (90) day period.
6. CONFIDENTIAL INFORMATION. Employee and Employer shall enter into a
Confidentiality/Intellectual Property Agreement in the form of Annex E attached
hereto, the terms of which are incorporated herein by this reference.
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<PAGE> 3
7. COVENANT NOT TO COMPETE. Employee and Employer shall enter into a
Noncompetition Agreement in the form of Annex F attached hereto, the terms of
which are incorporated herein by this reference.
8. INDEPENDENT COVENANTS. It is understood by and between the parties
hereto that the restrictive covenants set forth in the Confidentiality Agreement
and the Noncompetition Agreement are essential elements of this Agreement, and
that, but for the agreement of the Employee to comply with such covenants, the
Employer would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed as agreements independent of any other provision
in this Agreement. The existence of any claim or cause of action of the Employee
against the Employer, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Employer of such covenants.
9. RIGHT TO ENTER AGREEMENT. Employee represents and covenants to
Employer that he or she has full power and authority to enter into this
Agreement, the Confidentiality Agreement and the Non-Competition Agreement
(hereinafter collectively referred to as the "Agreements") and that the
execution, delivery and/or performance of the Agreements will not breach or
constitute a default of any other agreement or contract to which he or she is a
party or by which he or she is bound.
10. ASSIGNMENT. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. Employer may
assign and/or delegate its rights and/or obligations hereunder to a subsidiary
or affiliate of Employer or to a successor corporation in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets of
Employer or of Employer's business.
11. NOTICES. All notices, demands, requests or other communications
that may be or are required to be given, served or sent by either party to the
other party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to Employer: Digital Commerce Corporation
575 Herndon Parkway
Second Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Digital Commerce Corporation
575 Herndon Parkway
Second Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Robert E. Crawford, Jr.,
General Counsel
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<PAGE> 4
(b) If to Employee: <<FirstName>><<LastName>>
<<Address1>>
<<CityStateZip>>
Facsimile Transmission No.:
---------
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
12. GENDER. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
13. WAIVER. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
14. SEVERABILITY. If any provision of this Agreement is determined to
be invalid or unenforceable, it will be deemed to be modified to the minimum
extent necessary to be valid and enforceable. If it cannot be so modified, it
will be deleted and the deletion will not affect the validity or enforceability
of any other provisions unless, as a result, the rights of either party are
materially diminished or the obligations and burdens of either party are
materially increased so as to be unjust or inequitable.
15. ENTIRE AGREEMENT. The terms and provisions contained in the
Agreements shall constitute the entire agreement between the parties with
respect to Employee's employment by Employer during the Employment Period.
Except as expressly set forth herein, nothing contained herein will be deemed to
alter any bonus, option or similar award previously granted to Employee.
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<PAGE> 5
16. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated in whole
or in part, except by an instrument in writing signed by Employee and an officer
or other authorized representative of Employer.
17. UNDERSTANDING OF AGREEMENT. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
18. SURVIVAL. The terms of this Agreement shall remain in full force
and effect during the continuation of Employee's employment. The Confidentiality
Agreement, the Noncompetition Agreement (for the period described therein) and
paragraphs 10 through 21 of this Agreement will survive the termination of
Employee's employment for any reason.
19. APPLICABLE LAW. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN ALEXANDRIA,
VIRGINIA. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
(ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS
ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS
BROUGHT IN AN INCONVENIENT FORUM.
20. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
21. THIRD PARTIES. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any
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<PAGE> 6
party other than the parties to this Agreement and their successors and
permitted assigns, if any, any rights or remedies under or by reason of this
Agreement.
22. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYEE: EMPLOYER:
DIGITAL COMMERCE CORPORATION
By:
- ---------------------------------- --------------------------------------
<<FirstName>><<LastName>> Name:
------------------------------------
Title:
-----------------------------------
Dated: Dated:
---------------------------- -----------------------------------
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<PAGE> 8
ANNEX A
TERM OF EMPLOYMENT
Employer agrees to employ Employee and Employee agrees to be employed
by Employer, for a term of twelve (12) months commencing on the date of the
Retention Agreement of which this Annex A is a part and ending on
<<OneYearDate>> (the "Employment Period"), unless earlier terminated as provided
herein. Unless Employee or Employer gives written notice of intention not to
renew this Agreement no later than sixty (60) days prior to its expiration, this
Agreement shall automatically continue in effect for, and the Employment Period
will automatically be extended by, successive additional twelve (12) month terms
subject to all other terms and conditions contained herein.
<PAGE> 9
ANNEX B
DUTIES OF EMPLOYEE
<PAGE> 10
ANNEX C
COMPENSATION AND BENEFITS
Employee's compensation shall be as set forth in that certain offer
letter, dated as of _____________________ between Employer and Employee.
<PAGE> 11
ANNEX D
SEVERANCE BENEFIT
I. If the Employer terminates the Employee's employment for reasons
other than for Cause (as defined in the Retention Agreement of which this Annex
is a part) or because of disability (as described in Section 5(a) of the
Retention Agreement):
(1) The Employer shall pay to the Employee: (a) his or her salary,
as in effect on the date of termination, through the effective
date of the termination of his or her employment (the
"Termination Date"), (b) all unpaid and pro rata amounts to
which the Employee is entitled as of the Termination Date
under any compensation plan or program of the Employer,
including, without limitation, accrued but unused vacation
time, and (c) all unpaid and pro rata amounts to which the
Employee is entitled under any incentive performance bonus as
of the end of the Employer's fiscal quarter in which the
Termination Date occurs. The Employer will make the payments
set forth in subparagraphs (b) and (c) at times mutually
agreed upon with the Employee.
(2) The Employer shall pay to the Employee fifty percent (50%) of
the Employee's salary for the lesser of (a) the remaining
duration of the Employment Period subsequent to the
Termination Date, or (b) one year from the Termination Date.
(3) Employee may continue to participate in, and accrue benefits
under, all insurance, retirement, pension, 401(k) plans,
thrift and other deferred compensation plans of the Employer
for the lesser of (a) the remaining term of the Employment
Period following the Termination Date or (b) six (6) months
following the Termination Date, except to the extent such
continued participation and/or accrual is prohibited by law,
or to the extent that such plan constitutes a "qualified plan"
under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"), or by the terms of the plan, in which
case the Employer shall provide the Employee a substantially
equivalent, unfunded, nonqualified benefit.
II. If the Employer terminates the Employee's employment for Cause, or if the
Employee terminates his or her Employment for any reason, the Employee will only
be entitled to receive the amounts set forth in subparagraphs I.1(a) and I.1(b)
above.
ANNEX E
CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT
This Confidentiality Agreement (this "Agreement"), is entered into as
of <<GrantDate>>, by and between <<FirstName>> <<LastName>> ("Employee") and
Digital Commerce Corporation, a Delaware corporation (the "Company").
<PAGE> 12
RECITALS
WHEREAS, Employee is employed by the Company;
WHEREAS, in the course of Employee's employment with the Company,
Employee may have access to or have disclosed to him or her Confidential
Information (as hereinafter defined); and
WHEREAS, the parties each desire to establish and set forth Employee's
obligations with respect to Confidential Information and certain other matters.
NOW THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. For the purposes of this Agreement, the following words
shall have the following meanings:
(a) "Affiliated Entity" means any entity which controls, is
controlled by or is under common control with the Company.
(b) "Copyright Registrations" means any domestic or foreign
copyright registrations and applications for such registrations,
including all or any portion of a Copyright Work or other subject
matter identified by any such registration or application.
(c) "Copyright Works" means materials for which copyright
protection may be obtained including, but not limited to: literary
works (including all written material), computer programs, artistic and
graphic works (including designs, graphs, drawings, blueprints and
other works), recordings, models, photographs, slides, motion pictures
and audio-visual works, regardless of the form or manner in which
documented or recorded;
(d) "Inventions" means inventions (whether patentable or not),
discoveries, improvements, designs and ideas (whether or not shown or
described in writing or reduced to practice) and may include
Confidential Information or Copyright Works;
(e) "Patent Applications" means any application to obtain a
Patent, including any Inventions or other subject matter described or
protected by such application.
(f) "Patents" means any domestic or foreign patents, including
any Inventions or other subject matter described or protected by such
patents.
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<PAGE> 13
2. Confidential Information.
(a) Employee acknowledges that during his or her employment
with the Company, he or she will be provided with and become acquainted
with various trade secrets and other proprietary/confidential
information which are owned by the Company or any Affiliated Entity
and/or their respective customers and vendors and which are used in the
operation of the business of the Company or an Affiliated Entity,
including, without limitation, one or more of the following types of
information: customer lists; the nature and type of services rendered
to customers; fees paid by customers; methodologies; computer code and
programs; formulas; processes; compilations of information; drawings;
results of research proposals; job notes; reports; records; trade
secrets; and specifications. Employee agrees that he or she will not
disclose any trade secrets or other proprietary/confidential
information owned by the Company or any Affiliated Entity and/or their
respective customers and vendors whether or not listed by way of
example above (collectively, the "Confidential Information"), directly
or indirectly, or use such Confidential Information in any way, either
during the term of this Agreement or at any time thereafter, except as
may be required in the course of his or her employment with the Company
or by law.
(b) Employee shall not, without the prior written approval of
the Company, publish or authorize or purport to authorize anyone to
publish, either during Employee's employment with the Company or
subsequent thereto, any Confidential Information acquired in the course
of his or her employment.
(c) The prohibitions of this paragraph shall not apply to any
Confidential Information which (i) becomes generally available to the
public other than as a result of disclosure by Employee, (ii) was
available to Employee on a non-confidential basis prior to its
disclosure to Employee by the Company, or (iii) becomes available to
Employee on a non-confidential basis from a source other than the
Company when such source is entitled, to the best of Employee's
knowledge, to make the disclosure to Employee.
3. Inventions, Patents, and Copyright Works.
(a) Notification of the Company. Upon conception by Employee
during the period of his or her employment by the Company, all
Inventions, Confidential Information, and Copyright Works (1) which
relate to the actual or anticipated business, research or activities of
the Company or any Affiliated Entity at the time of conception; or (2)
which, directly or indirectly, result from or are suggested by any work
which Employee has done or may do for or on behalf of the Company or
any Affiliated Entity and/or their respective customers and vendors; or
(3) which are developed, tested, improved or investigated either in
part or entirely on time for which Employee was paid by the Company, or
using any resources of the Company (such Inventions, Confidential
Information and Copyright Works, together with the
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<PAGE> 14
Inventions, Confidential Information, Copyright Works, Copyright
Registrations and/or Patents referenced in subsection (j) below, are
hereinafter collectively referred to as the "Employee Developed
Intellectual Property") shall become the property of the Company
whether or not patent or copyright registration applications are filed
for such subject matter. Employee agrees to communicate to the Company
promptly and fully all Employee Developed Intellectual Property made,
designed, created, or conceived by Employee (whether made, designed,
created, or conceived solely by Employee or jointly with others).
(b) Transfer of Rights. Employee agrees, during his or her
employment by the Company, to assign and transfer to the Company all of
Employee's right, title and interest in all Employee Developed
Intellectual Property prepared, made or conceived by or on behalf of
Employee (whether solely or jointly with others) during the period of
his or her employment by the Company. Employee also agrees to do all
things necessary to transfer to the Company all of Employee's right,
title and interest in and to all such Employee Developed Intellectual
Property as the Company may request, on such forms as the Company may
provide, at any time during or after Employee's employment by the
Company. This subsection shall continue in full force and effect after
termination of Employee's employment by the Company and after the
termination of this Agreement. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly and
fully assist the Company during and subsequent to his or her employment
in every lawful way to obtain, protect and enforce Employee's patent,
copyright, trade secret or other proprietary rights with respect to
Employee Developed Intellectual Property in any and all countries or
other jurisdictions. The Company will reimburse Employee for reasonable
expenses incurred by Employee in connection with such post-employment
assistance. Employee waives, to the fullest extent permitted by law,
all "moral rights" of Employee with respect to Employee Developed
Intellectual Property assigned and/or transferred to the Company.
(c) Exclusions. No provision in this Agreement is intended to
require assignment of any of Employee's rights in an Invention, Patent
or Copyright Work, for which no equipment, supplies, facilities,
Confidential Information, Copyright Works, Inventions or Patents of the
Company was used, and which was (1) developed entirely on Employee's
own time; (2) does not relate to the business of the Company or any
Affiliated Entity or to the actual or demonstrably anticipated research
or development of the Company or any Affiliated Entity; and (3) does
not result from any work performed by Employee for the Company or
assigned to Employee by the Company.
(d) Rights in Copyrights. Unless otherwise agreed in writing
by the Company, all Copyright Works prepared wholly or partially by
Employee (alone or jointly with others) within the scope of his or her
employment by the Company, shall be deemed a "work made for hire" under
the copyright laws and shall be owned by the Company. Employee
understands that any assignment or release of such works
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<PAGE> 15
can only be made by the Company. During the period of his or her
employment by the Company, Employee shall not assist or work with any
third party that is not an employee of the Company to create or prepare
any Copyright Works without the prior written consent of the Company.
(e) Assistance in Preparation of Applications. Without
limiting Employee's obligations under any other provision of this
Agreement, Employee will promptly and fully assist, if requested by the
Company, in the preparation and filing of Patent Applications and
Copyright Registrations in any and all countries or other jurisdictions
selected by the Company and will assign to the Company all of
Employee's right, title, and interest in and to such Patent
Applications and Copyright Registrations, as well as all Inventions or
Copyright Works to which such Patent Applications and Copyright
Registrations pertain, to enable any such properties to be prosecuted
under the direction of the Company and to ensure that any Patent or
Copyright Registration obtained will validly issue to the Company. This
subsection shall continue in full force and effect after termination of
Employee's employment by the Company and after the termination of this
Agreement.
(f) Execute Documents. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will promptly
sign any and all lawful papers, take all lawful oaths, and do all
lawful acts, including testifying, at the request of the Company, in
connection with the procurement, grant, enforcement, maintenance,
exploitation or defense against assertion of any patent, trademark,
copyright, trade secret or related rights, including applications for
protection or registration thereof. Such lawful papers include, but are
not limited to, any and all powers, assignments, affidavits,
declarations and other papers deemed by the Company to be necessary or
advisable. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after the
termination of this Agreement.
(g) Keep Records. Without limiting Employee's obligations
under any other provision of this Agreement, Employee will keep and
regularly maintain adequate and current written records of all
Inventions, Confidential Information, and Copyright Works he or she
participates in creating, conceiving, developing or manufacturing. Such
records shall be kept and maintained in the form of notes, sketches,
drawings, reports or other documents relating thereto, bearing at least
the date of preparation and the signature or name of each person
contributing to the subject matter reflected in the record. Such
records, to the extent they pertain to Employee Developed Intellectual
Property, shall be and shall remain the exclusive property of the
Company and shall be made available to the Company at all times. All of
such records pertaining to work produced pursuant to subsection (c)
hereof will at all times remain the property of Employee. This
subsection shall continue in full force and effect after termination of
Employee's employment by the Company and after the termination of this
Agreement.
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<PAGE> 16
(h) Return of Documents, Equipment, Etc. Without limiting
Employee's obligations under any other provision of this Agreement, all
writings, records, and other documents and things comprising,
containing, describing, discussing, explaining or evidencing any
Employee Developed Intellectual Property and all equipment, components,
parts, tools and the like in Employee's custody or possession that have
been obtained or prepared in the course of Employee's employment by the
Company shall be the exclusive property of the Company, shall not be
copied and/or removed from the premises of the Company, except in
pursuit of the business of the Company, and shall be delivered to the
Company, without Employee retaining any copies, upon notification of
the termination of Employee's employment by the Company or at any other
time requested by the Company. The Company shall have the right to
retain, access, and inspect all property of Employee of any kind in the
office, work area, and on the premises of the Company upon termination
of Employee's employment by the Company and at any time during
employment by the Company, to ensure compliance with the terms of this
Agreement. This subsection shall continue in full force and effect
after termination of Employee's employment by the Company and after the
termination of this Agreement.
(i) Other Contracts. Employee represents and warrants that he
or she is not a party to any existing contract relating to the granting
or assignment to others of any interest in Inventions, Confidential
Information, Copyright Works or Patents hereafter made by Employee
except insofar as copies of such contracts, if any, are attached to
Annex A of this Agreement.
(j) Assignment After Termination. Employee recognizes that
ideas, Inventions, Confidential Information, Copyright Works, Copyright
Registrations, Patent Applications or Patents relating to his or her
activities while working for the Company that are conceived or made by
Employee, alone or with others, within one (1) year after termination
of his or her employment may have been conceived in significant part
while Employee was employed by the Company. Accordingly, Employee
agrees that such ideas, Inventions, Confidential Information, Copyright
Works, Copyright Registrations, Patent Applications or Patents shall be
presumed to have been conceived and made during his or her employment
with the Company and are to be assigned to the Company pursuant to this
Agreement unless Employee can prove otherwise. This subsection shall
continue in full force and effect after termination of Employee's
employment by the Company and after the termination of this Agreement.
(k) Prior Conceptions. Employee has set forth on Annex B
attached hereto what he or she represents and warrants to be a complete
list of all Inventions, if any, or Copyright Works, including a brief
description thereof (without revealing any confidential or proprietary
information of any other party) which Employee conceived, created,
developed or made, or participated in the conception, creation,
development or making of prior to his or her employment by the Company
and for
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<PAGE> 17
which Employee claims full or partial ownership or other interest, or
which are in the physical possession of a former employer and which in
either case are therefore excluded from the scope of this Agreement.
(l) Conflicts of Interest. Employee agrees that for the
duration of this Agreement, he or she will not engage, either directly
or indirectly, in any activity which might adversely affect the Company
or any Affiliated Entity (a "Conflict of Interest"), including
ownership of a material interest in any supplier, contractor,
distributor, subcontractor, customer or other entity with which the
Company does business or accepting any payment, service, loan, gift,
trip, entertainment or other favor from a supplier, contractor,
distributor, subcontractor, customer or other entity with which the
Company or any Affiliated Entity does business and that Employee will
promptly inform an officer of the Company as to each offer received by
Employee to engage in any such activity. Employee further agrees to
disclose to the Company any other facts of which Employee becomes aware
which might involve or give rise to a Conflict of Interest or potential
Conflict of Interest. The Company agrees that Employee is otherwise
free on his or her own time and at his or her own expense to engage in
other activities that do not create an actual or potential Conflict of
Interest.
4. Confidential Information of Prior Companies. Employee will not
disclose or use during the period of his or her employment by the Company any
proprietary or confidential information or Copyright Works of a third party in
fulfilling his or her duties under this Agreement.
5. Right to Enter Agreement. Employee represents and warrants to the
Company that he or she has full power and authority to enter into this Agreement
and that the execution, delivery and performance of this Agreement will not
breach or constitute a default of any other agreement or contract to which he or
she is a party or by which he or she is bound.
6. Injunctive Relief. Employee acknowledges and agrees that any breach
or violation by Employee of this Agreement will result in immediate and
irreparable injury and harm to the Company and will cause damage to the Company
in amounts difficult to ascertain. Accordingly, in the event of a breach or
threatened breach by Employee of any of the provisions of this Agreement,
Employee agrees that the Company, in addition to and not in limitation of any
other rights, remedies or damages available to the Company at law or in equity,
shall be entitled to a preliminary and permanent injunction in order to prevent
or restrain any such further breach by Employee or Employee's partners, agents,
representatives, servants, companies, employees and/or any and all persons
directly or indirectly acting for or with Employee. Employee acknowledges and
agrees that the remedies contained in this Paragraph 6 are reasonably related to
the injuries the Company may sustain as a result of Employee's breach of his or
her obligations under this Agreement, and are not a penalty. It is further
understood and agreed that no failure or delay by the Company in exercising any
right, power or privilege hereunder shall operate
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<PAGE> 18
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
7. Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN ALEXANDRIA,
VIRGINIA. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
(ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS
ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS
BROUGHT IN AN INCONVENIENT FORUM.
8. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to Company: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Tony Bansal, President
with a copy (which will
not constitute notice) to: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Robert E. Crawford, Jr.,
General Counsel
-18-
<PAGE> 19
(b) If to Employee: <<FirstName>><<LastName>>
<<Address1>>
<<CityStateZip>>
Facsimile Transmission No.:
---------
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
9. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
10. Entire Agreement. This Agreement represents the parties' entire
agreement with respect to the subject matter of this Agreement and supersedes
and replaces any prior agreement or understanding with respect to that subject
matter. This Agreement may not be amended or supplemented except pursuant to a
written instrument signed by the party against whom such amendment or supplement
is to be enforced.
11. Understanding of Agreement. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
-19-
<PAGE> 20
13. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, it will be deemed to be modified to the minimum
extent necessary to be valid and enforceable. If it cannot be so modified, it
will be deleted and the deletion will not affect the validity or enforceability
of any other provisions unless, as a result, the rights of either party are
materially diminished or the obligations and burdens of either party are
materially increased so as to be unjust or inequitable.
14. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement. Notwithstanding the immediately preceding sentence,
Employee acknowledges and agrees that his or her obligations under this
Agreement are intended to benefit each Affiliated Entity and may therefore be
enforced by each such Affiliated Entity.
15. Assignment. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. The Company may
assign or delegate its rights and/or obligations hereunder to a subsidiary or
affiliate of Company or to a successor entity in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets of
the Company or of the Company's business.
16. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
17. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18. Survival. As noted herein, this Agreement shall survive the
termination of Employee's employment with the Company and shall continue to be
of full force and effect.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-20-
<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
COMPANY:
DIGITAL COMMERCE CORPORATION
By:
--------------------------------------
Name:
------------------------------
Title:
-----------------------------
EMPLOYEE:
-----------------------------------------
<<FirstName>><<LastName>>
-21-
<PAGE> 22
ANNEX A
OTHER CONTRACTS
<PAGE> 23
ANNEX B
PRIOR CONCEPTIONS
<PAGE> 24
ANNEX F
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement"), is entered into as of
<<GrantDate>>, by and between <<FirstName>> <<LastName>> ("Employee") and
Digital Commerce Corporation, a Delaware corporation (the "Company"), and is
entered into in connection with that certain Retention Agreement, dated as of
the date hereof (the "Retention Agreement") by and between the parties hereto.
Employee recognizes and agrees that a portion of the compensation he or she is
to receive pursuant to the Retention Agreement is provided in consideration for
the agreements contained in this Agreement. Employee further acknowledges and
agrees that while employed pursuant to the Retention Agreement, Employee will be
provided with access to certain confidential information of the Company, will be
provided with specialized training on how to perform his or her duties, and will
be provided with contact with the Company's customers and potential customers.
In consideration of all of the foregoing, Employee agrees as follows:
1. Noncompetition. During the term of the Retention Agreement and for a
period of one (1) year from the date of termination of his or her employment
with the Company for any reason, Employee shall not directly or indirectly enter
into or attempt to enter into any employment, consulting or other business
relationship, anywhere in the world where the Company does business, with a
Major Competitor (as defined below) of the Company with respect to a Competing
Line of Business (as defined below) operated by such Major Competitor
(collectively, "Compete"). For the purposes of this Agreement, the following
terms shall have the meanings indicated below:
(a) Definitions. The words "directly or indirectly" as they
modify the word Compete shall mean: (i) acting as an agent,
representative, consultant, employee, director, independent contractor
or employee of Major Competitors (defined in (b) below) in a Competing
Line of Business (defined in (c) below), or (ii) participating in any
such competing entity as an owner, partner, limited partner, joint
venturer, creditor or stockholder (except as a stockholder holding less
than a five percent (5%) interest in a corporation or a limited partner
holding no more than a one percent (1%) interest in a limited
partnership).
(b) Major Competitors. The term "Major Competitor" shall
include the following organizations: Microsoft Corporation, America
Online and its Netscape subsidiary, Yahoo!, PurchasePro, Ariba,
Commerce One, VerticalNet, TRADE'ex, Chemdex, National Information
Consortium, GSA*Advantage, PeopleSoft, Oracle, SAP, American Management
Systems, CACI, IBM, and EDS and all affiliates and subsidiaries
thereof. This list of Major Competitors may be amended from time to
time by the Company upon ninety (90) days written notice to Employee.
(c) Competing Line of Business. Competing Line of Business
shall mean any person or entity engaged in (i) the development,
operation, maintenance or sales of e-commerce marketplace solutions for
the "business-to-government,"
<PAGE> 25
"business-to-business" or "business-to-consumer" segments of the
e-commerce industry anywhere in the world, or (ii) any other
significant line of business in which the Company may engage from time
to time.
2. Nonsolicitation. For a period of one (1) year from the termination
of his or her employment with the Company for any reason, Employee shall not, on
his or her behalf or on behalf of any other person or entity, directly or
indirectly, solicit, attempt to solicit, or accept any business from any person
or entity which purchased any products or services from the Company or any
Affiliated Entity (as hereinafter defined) during the one (1) year period
immediately preceding the termination of Employee's employment with the Company.
As used herein, the term "Affiliated Entity" will be deemed to mean any entity
which controls, is controlled by or which is under common control with the
Company.
3. No Raiding. For a period of one (1) year from the termination of his
or her employment with the Company for any reason, Employee shall not directly
or indirectly, on his or her behalf or on behalf of any other person or entity:
(i) induce or attempt to induce any employee of the Company or any Affiliated
Entity to terminate his or her employment with the Company or any Affiliated
Entity; (ii) induce or attempt to induce any consultant or independent
contractor to the Company or any Affiliated Entity to terminate his or her
consultancy or contractual relationship with the Company or any Affiliated
Entity; and/or (iii) employ or retain, or attempt to employ or retain, any
employee of the Company or any Affiliated Entity.
4. Conflicts of Interest. Employee agrees that for the duration of the
Retention Agreement, he or she will not engage, either directly or indirectly,
in any activity which might adversely affect the Company or any Affiliated
Entity, (a "Conflict of Interest") including ownership of a material interest in
any supplier, contractor, distributor, subcontractor, customer or other entity
with which the Company does business or accepting any payment, service, loan,
gift, trip, entertainment, or other favor from a supplier, contractor,
distributor, subcontractor, customer or other entity with which the Company or
any Affiliated Entity does business, and that Employee will promptly inform an
officer of the Company as to each offer received by Employee to engage in any
such activity. Employee further agrees to disclose to the Company any other
facts of which Employee becomes aware which might involve or give rise to a
Conflict of Interest or potential Conflict of Interest.
5. Reaffirm Obligations. Upon termination of his or her employment with
the Company, Employee, if requested by the Company, shall reaffirm in writing
any of Employee's obligations set forth in this Agreement.
6. Representation. Employee represents and warrants to the Company that
his or her execution and delivery of this Agreement, together with his or her
performance in accordance with the terms of this Agreement, does not conflict
with, or result in any breach by Employee or any violation by Employee of, any
other agreement to which Employee is a party or by which Employee is bound.
7. Injunctive Relief. Employee acknowledges and agrees that any breach
or violation by Employee of this Agreement will result in immediate and
irreparable injury and
<PAGE> 26
harm to the Company and will cause damage to the Company in amounts difficult to
ascertain. Accordingly, in the event of a breach or threatened breach by
Employee of any of the provisions of this Agreement, Employee agrees that the
Company, in addition to and not in limitation of any other rights, remedies or
damages available to the Company at law or in equity, shall be entitled to a
preliminary and permanent injunction in order to prevent or restrain any such
further breach by Employee or Employee's partners, agents, representatives,
servants, employers, employees and/or any and all persons directly or indirectly
acting for or with Employee. Employee acknowledges and agrees that the remedies
contained in this Paragraph 7 are reasonably related to the injuries the Company
may sustain as a result of Employee's breach of his or her obligations under
this Agreement, and are not a penalty. It is further understood and agreed that
no failure or delay by the Company in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
8. Applicable Law. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF VIRGINIA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN ALEXANDRIA, VIRGINIA. COURTS WITHIN THE STATE OF VIRGINIA WILL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT
TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH
DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN ALEXANDRIA,
VIRGINIA. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS,
(ii) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS
ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS
BROUGHT IN AN INCONVENIENT FORUM.
9. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to the Company: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Tony Bansal, President
<PAGE> 27
with a copy (which will
not constitute notice) to: Digital Commerce Corporation
575 Herndon Parkway, 2nd Floor
Herndon, Virginia 20170
Facsimile Transmission No.:
(703) 742-9470
Attn: Robert E. Crawford, Jr.,
General Counsel
(b) If to Employee: <<FirstName>><<LastName>>
<<Address1>>
<<CityStateZip>>
Facsimile Transmission No.:
---------
with a copy (which will
not constitute notice) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Facsimile Transmission No.:
---------
Attn:
-------------------------------
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
10. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
11. Entire Agreement. This Agreement represents the parties' entire
agreement with respect to the subject matter of this Agreement and supersedes
and replaces any prior agreement or understanding with respect to that subject
matter. This Agreement may not be amended or supplemented except pursuant to a
written instrument signed by the party against whom such amendment or supplement
is to be enforced.
12. Understanding of Agreement. Employee represents and warrants that
he or she has read and understands each and every provision of this Agreement,
and Employee understands that he or she is free to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and all
provisions of this Agreement, and that Employee has freely and voluntarily
entered into this Agreement.
<PAGE> 28
13. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
14. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, it will be deemed to be modified to the minimum
extent necessary to be valid and enforceable. If it cannot be so modified, it
will be deleted and the deletion will not affect the validity or enforceability
of any other provisions unless, as a result, the rights of either party are
materially diminished or the obligations and burdens of either party are
materially increased so as to be unjust or inequitable.
15. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement. Notwithstanding the immediately preceding sentence,
Employee acknowledges and agrees that his or her obligations under this
Agreement are intended to benefit each Affiliated Entity and may therefore be
enforced by such Affiliated Entity.
16. Assignment. This Agreement and the rights and/or obligations of
Employee under this Agreement may not be assigned or delegated. The Company may
assign and/or delegate its rights hereunder to a subsidiary or affiliate of the
Company or to a successor corporation in the event of merger, consolidation or
transfer or sale of all or substantially all of the assets of the Company or of
the Company's business.
17. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
18. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
COMPANY:
DIGITAL COMMERCE CORPORATION
By:
--------------------------------------
Name:
------------------------------
Title:
-----------------------------
EMPLOYEE:
-----------------------------------------
<<FirstName>><<LastName>>
<PAGE> 1
EXHIBIT 10.11
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this
day of , , by and between Digital Commerce Corporation, Inc., a Delaware
corporation (the "Company"), and ("Indemnitee"), a of the Company.
WHEREAS, the Company and Indemnitee recognize the substantial increase
in corporate litigation subjecting directors and executive officers to expensive
litigation risks; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as directors and
executive officers of the Company and to indemnify its directors and executive
officers so as to provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was 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 Company) by reason of
(i) the fact that Indemnitee is or was a director, officer, employee or
agent of the Company, (ii) the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise or (iii) any action or inaction by the Indemnitee while
acting as such a director, officer, employee or agent, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection
with such action, suit or proceeding if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's
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
presumption that Indemnitee did not act in good faith and in a manner
which Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee 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 Company to procure a judgment
in its favor by reason of (i) the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, (ii) the fact that
Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust
INDEMNIFICATION AGREEMENT - Page 1
<PAGE> 2
or other enterprise or (iii) any action or inaction by the Indemnitee
while acting as such a director, officer, employee or agent, against
expenses (including attorneys' fees) actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such
action or suit if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and except that no indemnification shall be
made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company unless and only to
the extent permitted by Section 1(c) below or the Court of Chancery of
the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or such
other court shall deem proper.
(c) Additional Rights. Without limiting the generality of
Section 4(a) and notwithstanding anything to the contrary which may be
contained in the provisions of subsections (a) and (b) of this Section
1, the Company further agrees, to the extent permitted by applicable
law and to the extent not prohibited by public policy, to indemnify
Indemnitee against and hold Indemnitee harmless from any judgments,
fines, losses, claims, costs (including, without limitation, court
costs and costs of settlement actually and reasonably incurred by
Indemnitee), and expenses (including, without limitation, attorneys'
fees) sustained or incurred by Indemnitee in connection with any
threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action
by or in the right of the Company and/or its stockholders, to which
Indemnitee is, was or at any time becomes a party, or is threatened to
be made a party, by reason of (i) the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, (ii) the fact that
Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) any
action or inaction by Indemnitee as such a director, officer, employee
or agent; provided indemnification shall be made pursuant to this
Section 1(c) only if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or
proceeding, did not have reasonable cause to believe that Indemnitee's
conduct was unlawful.
(d) Mandatory Payment of Expenses. To the extent that
Indemnitee, as a present or former director or officer of the Company,
has been successful on the merits or otherwise (including a settlement)
in defense of any action, suit or proceeding referred to in Subsections
(a), (b) and (c) of this Section 1 or in defense of any claim, issue or
matter therein or any portion thereof, Indemnitee shall be indemnified
against expenses (including attorneys' fees) and any costs of
settlement actually and reasonably incurred by Indemnitee in connection
therewith.
INDEMNIFICATION AGREEMENT - Page 2
<PAGE> 3
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. Expenses (including attorneys'
fees) incurred by Indemnitee, in defending any civil, criminal,
administrative or investigative action, suit or proceeding referenced
in Section 1 hereof shall be paid by the Company in advance of the
final disposition of such action, suit or proceeding at the written
request of the Indemnitee, provided the Indemnitee undertakes to repay
such amount to the extent that it is ultimately determined that
Indemnitee is not entitled to indemnification with respect to such
expenses. Prompt payment shall be made of any request for an advance
pursuant to this Section 2(a). Indemnitee may contest any refusal to
make an advance by petitioning a court of appropriate jurisdiction to
make an independent determination respecting Indemnitee's right to
receive an advance, in accordance with the terms of Section 3 hereof.
(b) Indemnification Procedure. Any indemnification under and
pursuant to Section 1(a), 1(b) or 1(c) (unless ordered by a court)
shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of Indemnitee as a present or
former director, officer, employee or agent is proper in the
circumstances because Indemnitee has met the applicable standard of
conduct set forth in Section 1(a), 1(b) or 1(c). Within 45 days
following receipt of a request for indemnification provided pursuant to
Section 1(a), 1(b) or 1(c), a determination shall be made whether the
Indemnitee has met the standard of conduct required for
indemnification. Such determination shall be made, with respect to
Indemnitee who is a director or officer at the time of determination,
(i) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, (ii) by a
committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (iii) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion or (iv) by the Company's stockholders.
Promptly upon determination that the Indemnitee has met the standard of
conduct required for indemnification, payment will be made to
Indemnitee. Indemnitee may contest a determination that Indemnitee has
not met the relevant standard of conduct for indemnification by
petitioning a court of appropriate jurisdiction to make an independent
determination respecting the right of indemnification, in accordance
with the terms of Section 3 hereof.
3. Enforcement of Rights. The right to indemnification or advances as
provided by this Agreement shall be enforceable by Indemnitee in any court of
competent jurisdiction. The burden of proving that indemnification or advances
are appropriate shall be on the Indemnitee. Neither the failure of the Company
(including its Board of Directors, independent legal counsel or stockholders) to
have made a determination prior to the commencement of such action that
indemnification or advances are proper under the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including its Board of Directors, independent
legal counsel or stockholders) that Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct. The Company
agrees to indemnify the Indemnitee against and hold the Indemnitee harmless from
any judgments, fines, losses, claims, costs
INDEMNIFICATION AGREEMENT - Page 3
<PAGE> 4
(including, without limitation, costs of settlement actually and reasonably
incurred by Indemnitee) and expenses (including, without limitation, attorney's
fees and court costs) sustained or incurred by Indemnitee in connection with a
successful action, suit or proceeding to establish Indemnitee's rights to
indemnification or advances pursuant to this Agreement.
4. Additional Rights; Non-Exclusivity.
(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the
full extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's
Bylaws or by statute. In the event of any changes after the date of
this Agreement, in any applicable law, statute, or rule which expands
the right of a Delaware corporation to indemnify a member of its Board
of Directors or its officers, such changes shall be, ipso facto, within
the purview of Indemnitee's rights, and Company's obligations, under
this Agreement. In the event of any changes in any applicable law,
statute, or rule which narrow the right of a Delaware corporation to
indemnify a member of its Board of Directors or its officers, such
changes, to the extent not otherwise required by such law, statute or
rule to be applied to this Agreement shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Agreement shall not
be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation, the
Company's Bylaws, any agreement, any vote of stockholders or
disinterested Directors, the General Corporation Law of the State of
Delaware, or otherwise, both as to action or inaction in Indemnitee's
official capacity and as to action or inaction in another capacity
while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee even though Indemnitee may
have ceased to be a director or officer of the Company.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by Indemnitee in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such expenses, judgments, fines or penalties to which Indemnitee
is entitled.
6. Officer and Director Liability Insurance. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this
INDEMNIFICATION AGREEMENT - Page 4
<PAGE> 5
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage.
7. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The provisions of this Agreement shall be severable
as provided in this Section 7. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Agreement that shall not have been invalidated,
and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms. Furthermore, to the extent any provision of this
Agreement is deemed unenforceable, it is the intent of the parties hereto that
this Agreement be deemed amended to cause, to the maximum extent permissible,
such unenforceable provision to be enforceable.
8. Choice of Law. This Agreement is made and entered into pursuant to
Section 145(f) of the General Corporation Law of the State of Delaware and this
Agreement shall be governed by and its provisions construed in accordance with
the laws of the State of Delaware.
9. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to:
Digital Commerce Corporation, Inc.
Attention: General Counsel
575 Herndon Parkway
Second Floor
Herndon, Virginia 20170
Notice shall be deemed received three days after the date postmarked if sent by
certified or registered mail, properly addressed. In addition, Indemnitee shall
give the Company such information and cooperation as it may reasonably require
and as shall be within Indemnitee's power.
10. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original.
11. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
12. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees,
INDEMNIFICATION AGREEMENT - Page 5
<PAGE> 6
incurred by Indemnitee with respect to such action, unless as a part of such
action, a court of competent jurisdiction determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including attorneys' fees, incurred by Indemnitee in defense of such
action (including with respect to Indemnitee's counterclaims and cross-claims
made in such action), unless as a part of such action the court determines that
each of Indemnitee's material defenses to such action were made in bad faith or
were frivolous.
13. Miscellaneous. For purposes of this Agreement, references to "the
Company" shall include, in addition to the Company, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Agreement with respect to the Company as
he would have with respect to such constituent corporation if its separate
existence had continued. In addition, references contained in this Agreement to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
INDEMNIFICATION AGREEMENT - Page 6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DIGITAL COMMERCE CORPORATION
By:
--------------------------------------
Tony Bansal,
President and Chief Executive Officer
AGREED TO AND ACCEPTED:
INDEMNITEE
-----------------------------------------
INDEMNIFICATION AGREEMENT - Page 7
<PAGE> 1
EXHIBIT 10.12
This Lease, dated, for reference purposes only, January 5, 2000, is made by
and between OCEAN PARK MANAGEMENT COMPANY, LTD., a California Limited
Partnership ("Landlord") and DIGITAL COMMERCE CORPORATION, a Delaware
corporation ("Tenant"). In consideration of the Rents and covenants
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby
rents from Landlord, the following described Premises, upon the following
terms and conditions:
1. FUNDAMENTAL LEASE PROVISIONS
PURPOSE:
THE PURPOSE OF THIS LEASE IS TO TRANSFER POSSESSION OF THE PREMISES TO
TENANT, FOR USE BY FILMSTUFF.COM, LLC, A DELAWARE LIMITED LIABILITY COMPANY
OF WHICH TENANT OWNS 51% OF THE VOTINAL INTERESTS, IN RETURN FOR CERTAIN
BENEFITS, INCLUDING RENT AND OTHER CHARGES, TO BE PAID TO LANDLORD. THE
ESSENCE OF THIS LEASE, THEN, IS THE TRANSFER OF THE POSSESSION OF THE
PREMISES TO THE USE OF TENANT AND FILMSTUFF.COM, LLC AND THE PAYMENT OF
MONEY AND OTHER CONSIDERATION BY TENANT FOR THIS TRANSFER BY THE LANDLORD.
TENANT'S RIGHT TO ASSIGN STATED IN ARTICLE 26 IS SUBSIDIARY AND INCIDENTAL
TO THE UNDERLYING PURPOSE HEREOF. TENANT ACKNOWLEDGES THAT IT HAS ENTERED
INTO THIS LEASE IN ORDER TO ACQUIRE THE PREMISES USE BY IT AND
FILMSTUFF.COM LLC AND HAS NOT ENTERED INTO THIS LEASE FOR THE PURPOSE OF
OBTAINING THE RIGHT TO CONVEY THE LEASEHOLD INTEREST HEREUNDER TO OTHERS.
Premises: (Article 2)
Suite: 110 Floor: First
Street Address: 2601 Ocean Park Boulevard, Santa Monica, California
Los Angeles County ("Building")
Approximate area of Premises: 7,508 Square Feet (Rentable Area)
Term: Sixty (60) months. (Article 3)
Commencement Date: February 1, 2000
Rent: (Article 4)
Basic Rent: Commencing with the First month Basic Rent shall be One Hundred
Eighty-six Thousand Four Hundred Eighty and No/100 Dollars ($186,480.00)
per annum, payable in twelve (12) equal monthly installments during each
year, in the amount of Fifteen Thousand Five Hundred Forty and No/100
Dollars ($15,540.00) per month. Commencing on February 1, 2001 Basic Rent
shall be increased annually by Three Percent (3%) per annum, payable in
twelve (12) equal monthly installments each year.
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Additional Rent: Tenant shall pay Tenant's Proportionate Share of all
Utility Costs, Operating Costs and Taxes that exceed Landlord's Base Costs
for the year 2000.
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Tenant's Proportionate Share is Seventeen and 2/10 (Article 6)
percent (17.2%).
Prepaid Rent:
Fifteen Thousand Five Hundred Forty and No/100 Dollars (Article 7)
($15,540.00) as Basic Rent for the First month.
Security Deposit:
Seventeen Thousand Four Hundred Ninety and No/100 Dollars (Article 7)
($17,490 00)
Address for Notices:
To Landlord: Ocean Park Boulevard Management Company, Limited
2601 Ocean Park Boulevard, Suite 300
Santa Monica, California 90405
Attention: Frederick C. Stegeman
To Tenant: To the Premises and
11180 Sunrise Valley Drive
Reston, Virginia 20191
Attention: President
Tenant's Parking: (Article 40)
Thirteen (13) covered spaces and Ten (10) uncovered spaces for Sixty (60)
months.
Security:
Landlord requires as a condition to its execution of the Lease that Tenant
provide a security instrument ("Security Instrument") ensuring the full
performance of the obligations of Tenant under the Lease. Tenant shall provide a
Security Instrument at Tenant's expense in form subject to Landlord's approval
from a bank to be approved by Landlord in the amount of Ninety Three Thousand
Two Hundred Forty and No/100 Dollars ($93,240.00) to be paid to the Landlord if
Tenant has not paid any and all monetary obligations becoming due. Failure to so
pay timely shall be a "Breach" herein. Upon Landlord certifying to the issuer of
the Security Instrument that such a Breach has occurred, the issuer of the
Security Instrument shall immediately pay to Landlord the full amount of the
Security Instrument.
The Security Instrument may be diminished in the following manner. Upon
receipt by Landlord and clearance by Tenant's bank of Basic Rent of Fifteen
Thousand Five Hundred Forty and No/100 Dollars ($15,540.00) exclusive of the
annual Three per cent (3%) increase, for each of the 30th, 36th, 42nd, 48th,
54th and 60th months of the Term of the Lease, Landlord shall acknowledge
receipt of the respective month's Basic Rent, exclusive of the annual Three per
cent (3%) increase, and the Security Instrument may be diminished by the like
amount.
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Option to Extend:
Provided Tenant is not in default, Tenant shall have an option to extend
the Lease for an additional sixty (60) month term (Option Term). Basic Rent for
the Option Term shall be at the then prevailing market rate, terms and
conditions. Should Landlord and Tenant disagree as to prevailing market rate,
terms and conditions, the parties agree to submit to binding arbitration in
accordance with American Arbitration Association rules. Tenant shall provide
Landlord with written notice of Tenant's intention to extend no later than six
(6) months prior to commencement of the Option Term. In the event Tenant so
notifies Landlord, all other terms and provisions of the Lease shall remain in
effect. In the event Tenant fails to so notify Landlord, this Lease shall be
terminated at the end of the initial Term of this Lease.
Right of First Refusal:
During the Term or Option Term hereof, Tenant shall have the continuing
Right of First Refusal to lease any space on the First floor that is or becomes
available and for which no senior Option to Renew now exists. Landlord shall
provide at least Three (3) months notification to Tenant that such space is
becoming or is available. Tenant shall thereafter have One (1) month to respond.
If Tenant refuses the space, Tenant's Right of First Refusal for that space
ceases until after a subsequent tenant notifies Landlord of its intention to
vacate the space. If Tenant accepts the space, the Term for the space shall be
co-terminus with the Tenant's Lease. Basic Rent for the Term or Option Term
shall be at the then prevailing market rate, terms and conditions.
2. PREMISES
The premises demised and leased hereunder (the "Premises") are
cross-hatched, outlined or otherwise shown or marked on the plan or drawing
attached hereto as Exhibit A and incorporated herein by reference. The Premises
consist of that certain office space described in Article 1 hereof, situated in
that certain office building (the "Building") described in Article 1 hereof
3. TERM
(a) The term of this Lease shall commence on the "Commencement Date"
set forth in Article 1 hereof. If Landlord, for any reason whatsoever, cannot
deliver possession of the Premises to Tenant at the Commencement Date of the
lease term, this Lease shall not be void or voidable, nor shall Landlord or its
agent be liable to Tenant for any loss or damage resulting therefrom. In that
event, however, Tenant shall not be liable for any Rent until Landlord delivers
possession of the Premises to Tenant. If Landlord tenders possession of the
Premises to Tenant prior to the Commencement Date of the term and Tenant chooses
to accept such possession, then the term of this Lease and Tenant's obligations
hereunder shall commence on the date that it accepts such possession. Any
failure to deliver possession at the Commencement Date or delivery of possession
prior to the Commencement Date shall not in any way affect the obligations of
Tenant hereunder. Any revision in the Commencement Date shall be confirmed in
writing by the parties and incorporated herein promptly upon such commencement.
(b) The Premises shall be deemed completed and possession delivered
when Landlord has substantially completed the work to be constructed or
installed pursuant to the
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provisions of Article 8 hereof, exclusive of the installation of all telephone
and other communications facilities and equipment and other finish work or
decorating work to be performed by Tenant. Such Tenant work performed by Tenant
may occur at the same time as Landlord performs its work, so long as Tenant's
work does not interfere with or slow down Landlords work. Tenant shall accept
the Premises upon notice from Landlord that said work to be constructed or
installed by Landlord pursuant to Article 8 hereof has been substantially
completed. Tenant's obligation to pay Rent hereunder shall commence on the
earlier to occur of (i) the date on which said work has been so substantially
completed, or (ii) the date on which Tenant takes possession of, or commences
the operation of its business in, any or all of the Premises. Landlord shall use
its best efforts to advise Tenant of the anticipated date of completion at least
thirty (30) days prior to such date, but the failure to give such notice shall
not constitute a default hereunder by Landlord.
4. BASIC RENT
Tenant shall pay the "Basic Rent" as set forth in Article 1 hereof for
the Premises payable in twelve (12) equal monthly installments on the first day
of each month in advance, except that if the Commencement Date occurs on a day
other than the first day of the month, then the Basic Rent for the fraction of
the month starting with the Commencement Date shall be paid on said Commencement
Date, prorated on the basis of the actual number of days in said month. If the
term hereof ends on a day other than the last day of a month, then the Basic
Rent for the month during which said expiration occurs shall be prorated on the
basis of the actual number of days in said month. In addition to said Basic
Rent, Tenant agrees to pay "Additional Rent" as and when hereinafter provided in
this Lease. Said Basic Rent and Additional Rent are hereinafter sometimes
referred to collectively as the "Rent." The Rent shall be payable to Landlord,
without deduction or offset, in lawful money of the United States of America at
the office maintained by Landlord in the Building, or to such other person or at
such other place as Landlord may from time to time designate in writing.
Tenant shall pay prepaid Basic Rent concurrently with the execution of
this Lease, as set forth in Article 1 hereof.
5. LATE CHARGES
If Tenant shall fail to pay to Landlord any Rent or other sums when
due hereunder, such unpaid amounts shall bear interest at the prime commercial
rate then being charged by Bank of America plus two percent (2%) per annum from
the date due to the date of payment. In addition, Tenant hereby acknowledges
that late payment by Tenant to Landlord of Rent and other sums due hereunder
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges, and late charges
which may be imposed on Landlord by the terms of any mortgage or trust deed
covering the Premises. Accordingly, if any installment of Rent or other sum due
from Tenant shall not be received by Landlord or Landlord's designee within five
(5) days after such amount shall be due, Tenant shall pay to Landlord a late
charge equal to ten percent (10%) of such overdue amount. No late charge may be
imposed more than once for the same late Rent payment. The parties hereby agree
that such late charge by
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Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted at law or equity or pursuant to this Lease.
6. ADDITIONAL RENT
(a) Landlord hereby agrees to pay Landlord's Base Costs for Utility
Costs, Operating Costs and Taxes (as defined herein) As set forth in this
Article, it is understood that the Basic Rent specified in Article 4 of this
Lease does not provide that Landlord shall pay any amount in excess of
Landlord's Base Cost for Utility Costs, Operating Costs and Taxes ("Expenses").
Therefore, in order that the Rent payable throughout the term of this Lease
shall reflect any such excess amounts or increases, the Rent payable by Tenant
shall be increased in accordance with the provisions of this Article. In this
regard, all of such Expenses, as well as any other expenses for which Tenant
shall be liable hereunder, including, but not limited to, parking charges
imposed pursuant to Article 40, shall constitute Additional Rent, and upon the
failure of Tenant to pay any of such Expenses or other expenses, Landlord shall
have the same rights and remedies as otherwise provided in this Lease for the
failure of Tenant to pay Rent.
Definitions
(1) The term "Usable" Area (square feet) shall mean the actual
occupiable area of the Premises provided for the exclusive use of the Tenant,
and is measured to the Tenant side of corridor or Building Shell partitions, to
the nominal glass line at the exterior of the building whether or not the entire
wall is glass, and to the middle of partitions demising the Premises from an
adjoining rentable Premise. Columns are included within the Usable Area at no
reduction of area.
(2) The term "Landlord's Base Costs" shall mean the sum of the Utility
Costs, Operating Costs, and Taxes (all as defined below) for the calendar year
set forth in Article 1 hereof.
(3) The term "Utility Costs" shall mean the sum of all expenses paid
or incurred by Landlord during any calendar year of the term hereof for
electricity, water, gas and sewers, and similar utilities services in connection
with the operation of the Building and for utility taxes, charges or other
similar impositions paid or incurred by the Landlord in connection therewith.
(4) The term "Operating Costs" shall mean the sum of all expenses paid
or incurred by Landlord during any calendar year of the term hereof in
connection with the operation, janitorial service, maintenance, insurance,
management and repair of the Building, including parking facilities, and the
land on which the Building is located, and shall include the cost of any capital
improvements made to the Building that reduce Operating Costs or Utility Costs
(such costs to amortized over such reasonable periods as Landlord shall
determine with a return on capital at such rate as would have been paid by
Landlord on funds borrowed for the purpose of constructing such capital
improvements). However, Operating Costs shall not include Taxes or Utility Costs
as such terms are defined herein.
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(5) The term "Taxes" shall mean all real property taxes and personal
property taxes, charges and assessments which are levied, assessed upon or
imposed by any governmental authority during any calendar year of the term
hereof with respect to the Building, the parking facilities and the land on
which the Building is located and any improvements, fixtures, and equipment and
all other property of Landlord, real or personal, located in the Project and
used in connection with the operation of the Building (computed as if paid in
permitted installments regardless of whether actually so paid) and any tax which
shall be levied or assessed in addition to or in lieu of such real or personal
property taxes and any license fees, tax measured by or imposed upon Rents, or
other tax or charge upon Landlord's business of leasing the Premises, or other
parts of the Building, but shall not include any federal or state income tax, or
any franchise, capital stock, estate or inheritance taxes.
Proposition 13:
During the initial term hereof Tenant shall not be responsible for any
Property Tax created solely as a result of a re-assessment of the Building
caused by sale of the Building
(6) The term "Estimated Utility Costs" shall mean the annual estimates
of Tenant's Proportionate Share of Utility Costs for each calendar year, after
the First Calendar Year, to be given by Landlord to Tenant pursuant to the terms
hereof.
(7) The term "Estimated Operating Costs" shall mean the annual
estimates of Tenant's Proportionate Share of Operating Costs for each calendar
year, after the First Calendar Year (as defined herein) to be given by Landlord
to Tenant pursuant to the terms hereof
(8) The term "Estimated Taxes" shall mean the annual estimates of
Tenant's Proportionate Share of Landlord's Taxes for each calendar year, after
the First Calendar Year, to be given by Landlord to Tenant pursuant to the terms
hereof.
(9) The term "Tenant's Proportionate Share" shall mean the proportion
the Usable Area in the Premises bears to the total Usable Area for the Building,
which for this lease is agreed by Landlord and Tenant to be the percentage set
forth in Article 1 hereof
(10) The term "First Calendar Year" shall mean the calendar year
during which Tenant's obligation to pay Rent hereunder first arises or the
calendar year during which Tenant first occupies the Premises under this Lease,
whichever event shall first occur.
(b) Payment of Utility Costs, Operating Costs and Taxes in excess of
Landlord's Base Cost:
Tenant shall pay to Landlord, as Additional Rent, the following
amounts in the manner specified:
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(1) For the first twelve (12) months of the Term there shall be no
Additional Rent for Tenant's Proportionate Share of Utility Costs, Operating
Costs, and Taxes in excess of Landlord's Base Costs.
(2) For each calendar year following the First Calendar Year, Landlord
shall furnish to Tenant prior to January 1, a written statement showing in a
reasonable detail the Estimated Utility Cost, the Estimated Operating Costs, and
the Estimated Taxes for the next forthcoming calendar year, the sum of which
shall in no event be less than the Landlord's Base Cost. At the first monthly
Rent payment date for the next calendar year following Tenant's receipt of such
statement (the "then current calendar year") and at each of the other monthly
Rent payment dates for such then current calendar year, Tenant shall pay to
Landlord as Additional Rent, in the event of an increase, Tenant's Proportionate
Share times one-twelfth (1/12th) the difference between the sum of the Estimated
Costs, Estimated Operating Costs and Estimated Taxes for the next calendar year,
and Landlord's Base Cost, unless exempted in accordance with Article 6 (b) (1)
above. In the event of the inability of the Landlord for any reason to furnish
said statement prior to January 1, as described above, Tenant shall continue to
pay at the estimated rate for the previous year and at the monthly Rent payment
date next following Tenant's receipt of said statement, any Additional Rent
which shall have accrued. Notwithstanding the above definitions or the terms
defined herein, operating costs, utility costs and taxes shall not include a
list of excluded items set forth in Exhibit D.
(3) On or before March 15 (or as soon thereafter as possible) in each
year following the First Calendar Year, Landlord shall furnish to Tenant a
written statement showing in reasonable detail the actual Utility Costs,
Operating Costs, and Taxes for the previous calendar year. At the monthly Rent
payment date next following Tenant's receipt of such statement, Tenant shall pay
to Landlord an amount equal to the excess of Tenant's Proportionate Share of the
sum of the Utility Costs, Operating Costs and Taxes for the previous calendar
year over Tenant's Proportionate Share of the sum of the Estimated Utility
Costs, Estimated Operating Costs, and Estimated Taxes previously given for such
year, unless exempted in accordance with Article 6 (b) (1) above; provided,
however, that in no event shall Tenant receive a credit for any amount
calculated hereunder to be less than Landlord's Base Costs.
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(d) Payments of Additional Rent:
(1) Any and all increases in Rent pursuant to this Article shall be
Additional Rent payable by Tenant hereunder, and in the event of nonpayment
thereof, Landlord shall have the same right with respect to such nonpayment as
it has with respect to any other nonpayment of Rent hereunder. The Basic Rent,
the Additional Rent, and any other sums payable under any provision of this
Lease shall in no event be reduced by any other provision hereof and in no event
shall the Rent payable by Tenant for any calendar year be reduced by the
application of this Article to an amount less than that specified in Article 4.
(2) Upon the expiration or earlier termination (collectively, the
termination) of this Lease, no further credits or payments shall be due to or
from Tenant which have not accrued and are not payable as of the date of such
termination. The amount of increase in Rent payable by Tenant or the decrease in
Rent to which Tenant is entitled for such calendar year shall be prorated on the
basis of the ratio which the number of days which have elapsed from the
commencement of said calendar year to and including said date on which this
Lease terminates bears to 360.
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(3) The determination of Tenant's Proportionate Share of a cost
hereunder shall be made by Landlord based upon Landlord's experience with actual
costs and projections. A statement of such determination shall be made available
to Tenant upon demand.
(e) Additional Taxes Payable by Tenant.
Tenant shall pay before delinquency any and all taxes levied or
assessed and which become payable by Landlord (or Tenant) during the term of
this Lease (excluding, however, state and federal personal or corporate income
taxes measured by the income of Landlord from all sources, capital stock taxes,
and estate and inheritance taxes), whether or not now customary or within the
contemplation of the parties hereto, which are based upon, measured by or
otherwise calculated with respect to: (i) the gross or net payable Rent under
this Lease, including, without limitation, any gross receipts tax levied by any
taxing authority, or any other gross income tax or excise tax levied by any
taxing authority with respect to the receipt of the Rent hereunder; (ii) the
value of Tenant's equipment, furniture, fixtures or other personal property
located in the Premises; (iii) the possession, lease, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion thereof; (iv) the value of any leasehold improvements, alteration or
additions made in or to the Premises, regardless of whether title to such
improvements, alterations or additions shall be in Tenant or Landlord; or (v)
this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises.
7. SECURITY DEPOSIT
Concurrently with Tenant's execution of this Lease, Tenant shall
deposit with Landlord the amount of the Security Deposit as set forth in Article
1 hereof. Said sum shall be held by Landlord as a security deposit for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease, including, but not limited to, the provisions relating to (i) the
payment of Rent and Additional Rent, and (ii) the payment of any other amount
which Landlord may spend by reason of Tenant's default or breach to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
such default or breach. If any portion of said deposit is so used or applied,
Tenant shall, within ten (10) days after written demand therefor, deposit cash
with Landlord in an amount sufficient to restore said deposit to the full amount
set forth in Article 1. Tenant's failure to do so shall be a material breach of
this Lease In the event of a material default or breach of this Lease by Tenant
under the terms of this Article 7 or Article 20 hereof, Landlord shall have the
right, in addition to all other rights hereunder, to recover the aggregate
amount expended by Landlord on behalf of Tenant with respect to leasehold
improvements to the Premises ("Landlord Concessions"). In this regard, Landlord
shall have the right, but not the obligation, to deduct such Landlord
Concessions, or any portions thereof, from the then remaining balance of the
Security Deposit.
Landlord shall not be required to keep this security deposit separate
from its general funds, and Tenant shall not be entitled to interest on such
deposit. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it, the security deposit or any balance thereof shall
be returned to Tenant (or, at Landlord's option, to the last assignee of
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Tenant's interests hereunder) at the expiration of the Lease term and within 30
days after Tenant has vacated the Premises.
8. COMPLETION
(a) The Premises shall be completed by Landlord substantially in
accordance with the description of Landlord's Building Standard Work set forth
in Exhibit B attached hereto. Landlord's obligation for completion of the
Premises shall be defined and limited by said Exhibit B and Landlord shall not
be required to furnish or install any item not indicated thereon. Any additional
charges or improvements to the Premises required by Tenant shall be at Tenant's
sole cost and expense. Promptly following the tendering of possession of the
Premises to Tenant by Landlord, Tenant agrees to proceed with all due diligence
with the installation of its fixtures and equipment. (See also Article 3.b.)
(b) If Tenant shall cause any delay in the construction of the
Premises, whether by reason of any failure by Tenant to comply with the
applicable time schedule set forth in said Exhibit B, or by Tenant's requirement
of materials or installations different from Landlord's Building Standard Work,
or by delays in performance or completion by a party employed by Tenant, or by
reason of building code problems arising from Tenant's design, or by reason of
chances in the work ordered by Tenant, then notwithstanding the provisions of
this Lease relating to the term, and notwithstanding anything to the contrary
contained in said Exhibit B, the Commencement Date of the Lease shall be the
date which Landlord in its sole discretion determines could have been expected
to be the Commencement Date but for such Tenant-caused delay.
(c) Tenant shall pay to Landlord at the time and in the manner
specified in said Exhibit B the entire balance of any and all excess costs of
work and improvement and Tenant shall pay to Landlord the entire amount of any
extra expenses incurred by Landlord as specified herein upon the Commencement
Date of the Lease, or as soon thereafter as Landlord determines such amount and
submits a statement thereof to Tenant. Upon default by Tenant in payment
thereof, Landlord shall (in addition to all other remedies) have the same rights
as in the case of default in Rent under the Lease.
9. USE
(a) The Premises shall be used and occupied by Tenant for general
office purposes and no other purpose without the prior written consent of
Landlord. Such consent shall be at the sole discretion of Landlord.
(b) Suitability: Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises or the Building or with respect to the suitability of either for the
conduct of Tenant's business, nor has Landlord agreed to undertake any
modification, alteration or improvement to the Premises except as provided in
this Lease. The taking of possession of the Premise by Tenant shall conclusively
establish that the Premises and the Building were at the time of such taking in
satisfactory condition except for latent defects and punch list items.
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(c) Uses Prohibited:
(i) Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate or affect any fire or other insurance upon the Building or any of
its contents, or cause a cancellation of any insurance policy covering said
Building or any part thereof or any of its contents, nor shall Tenant sell or
permit to be kept, used or sold in or about said Premises any articles which may
be prohibited by a standard form policy of insurance. Tenant shall promptly upon
demand reimburse Landlord for any additional premium charged under such policy
by reason of Tenant's failure to comply with the provisions of this Article.
(ii) Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them or use or allow the
Premises to be used for any unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not commit or suffer to be committed any waste in or upon the Premises.
(iii) Tenant shall not use the Premises or permit anything to be done
in or about the Premises which will in any way conflict with any law, ordinance,
or governmental rule or regulation or requirement of duly constituted public
authorities now in force or which may hereafter be enacted or promulgated.
Tenant shall at its sole cost and expense promptly comply with all laws,
statutes, ordinances, and governmental rules, regulations or requirements now in
force or which may hereafter be in force and with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted relating
to or affecting the condition, use or occupancy of the Premises
The judgment of any court of competent jurisdiction or the admission
of Tenant in any action against Tenant, whether Landlord is a party thereto or
not, that Tenant has violated any law, statute, ordinance, or governmental rule,
regulation or requirement, shall be conclusive of the fact as between Landlord
and Tenant.
10. SERVICE AND UTILITIES
(a) Landlord's Obligations: Landlord agrees to make available to the
Premises during reasonable hours of generally recognized business days, to be
determined by Landlord, and subject to the Rules and Regulations described in
Article 35 hereof, water, gas and electricity suitable for the intended use of
the Premises, and heat and air conditioning required in Landlord's judgment for
the comfortable use and occupancy of the Premises, subject to governmental
regulation, and trash removal, janitorial service and window washing customary
for similar buildings in the competing geographical areas. Landlord shall also
maintain and keep lighted the common stairs, entries and toilet rooms in the
Building.
(b) Landlord's Non-liability: Landlord shall not be in default or be
liable for any damages directly or indirectly resulting from, nor, except as
expressly provided herein, shall
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the Rent herein reserved be abated by reason of (i) the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing utilities and services, (ii) failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by Acts of God or the elements, labor disturbances of any character, any other
accidents or other conditions beyond the reasonable control of Landlord, or by
the making of repairs or improvements to the Premises or to the Building,
provided, however, that in the event any services or utilities are unavailable
for more than fourteen (14) consecutive days due to an earthquake, rent shall be
reduced proportionate to the restriction of use of the premises by Tenant until
such service or utilities are restored, or (iii) the limitation, curtailment,
rationing or restriction on use of water or electricity, gas or any other form
of energy or any other service or utility whatsoever serving the Premises or the
Building. Furthermore, Landlord shall be entitled to cooperate voluntarily in a
reasonable manner with the efforts of national, state or local governmental
agencies or utilities suppliers in reducing energy or other resources
consumption. Any sums payable under this Article, whether by Landlord or by
Tenant, shall be considered Additional Rent and may be added to any installment
or Rent thereafter becoming due, and Landlord shall have the same remedies for a
default in payment of such sum as for a default in the payment of Rent.
Whenever heat generating machines or equipment other than those
customarily used in general office space are used in the Premises which affect
the temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation, and the cost
of operation and maintenance thereon, shall be paid by Tenant to Landlord upon
demand by Landlord.
(c) Tenant's Obligation: Tenant shall pay for, prior to delinquency,
all telephone and all other materials and services not expressly required to be
paid by Landlord, which may be furnished to or used in, on or about the Premises
during the term of this Lease. Tenant shall also pay, prior to delinquency, all
charges and fees required to be paid by Tenant by the Rules and Regulations
described in Article 35 of this Lease. Tenant will not without the written
consent of Landlord use any apparatus or devise in the Premises, including,
without limitation, electronic data processing machines, punch card machines,
and machines using excess lighting or using current in excess of 110 volts,
which will in any way increase the amount of electricity, air conditioning, or
water usually furnished or supplied for use of the Premises as general office
space; nor connect with electric current, except through existing electrical
outlets in the Premises, or water pipes, any apparatus or device for the
purposes of using electrical current or water. If Tenant shall require water,
air conditioning, or electric current or any other resource in excess of that
usually furnished or supplied for use of the Premises as general office space,
Tenant shall first procure the consent of Landlord, which Landlord may
reasonably refuse, to the use thereof, and Landlord may cause a special meter to
be installed in the Premises so as to measure the amount of water, air
conditioning, electric current or other resource consumed for any such other
use. The cost of any such meters and of installation, maintenance, and repair
thereof shall be paid for by Tenant, and Tenant agrees to pay Landlord promptly
upon demand by Landlord for all such water, air conditioning, electric current,
or other resource consumed, as
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shown by said meters, at the rates charged by the local public utility,
furnishing the same, plus any additional expense incurred in keeping account of
the water, air conditioning, electric current or other resource consumed. If a
separate meter is not installed, such excess cost for such water, air
conditioning, electric current or other resource consumed will be established by
a licensed engineer in the profession applicable.
11. ENTRY BY LANDLORD
Landlord and its authorized representatives shall have the right to
enter the Premises at all reasonable times for any of the following purposes:
(a) To determine whether the Premises are in good condition and
whether Tenant is complying with its obligation under this Lease;
(b) To do any necessary maintenance and to make any restoration to the
Building that Landlord has the right or obligation to perform;
(c) To serve, post, or keep posted any notices required or allowed
under the provisions of this Lease;
(d) To post "for sale" signs at any time during the term, to post "for
rent" or "for lease" signs during the last three (3) months of the term, or
during any period while Tenant is in default;
(e) To show the Premises to prospective brokers, agent, buyers,
tenants, or persons interested in an exchange, at any time during the term;
(f) To shore the foundations, footings, and walls of the Building and
to erect scaffolding and protective barricades around and about the Building or
the Premises, but not so as to prevent entry into the Premises, and to do any
other act or thing necessary for the safety or preservation of the Premises or
the Building if any excavation or other construction is undertaken or is about
to be undertaken on any adjacent or nearby street. Landlord's right under this
provision extends to any owner of adjacent property on which excavation or
construction is to take place, and any authorized representative of such owner.
For each of the aforesaid purposes, Landlord shall at all times have
and retain a key with which to unlock all the doors in, upon and about the
Premises, excluding Tenant's vaults and safes, and Landlord shall have the right
to use any and all means which Landlord may deem proper to open said doors in an
emergency, in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord by any of said means, or otherwise, shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction of Tenant from the
Premises or any portion thereof.
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<PAGE> 15
Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby,
except as caused by Landlord willful misconduct.
Tenant shall not be entitled to an abatement or reduction of Rent if
Landlord exercises any rights reserved in this Article.
12. MAINTENANCE AND REPAIRS
(a) Landlord's Obligation: Landlord shall maintain in good order,
condition and repair the Building and all other portions of the Premises not the
obligation of Tenant or of any other tenant in the Building.
(b) Tenant's Obligations.
(1) Tenant at Tenant's sole cost and expense, except for services
furnished by Landlord pursuant to Article 10 hereof, shall maintain the Premises
in good order, condition and repair, including the interior surfaces of the
ceilings, walls and flooring, all doors, interior windows, all plumbing pipes
for express use of Tenant, fixtures, accessible electrical wiring, switches,
fixtures, building standard furnishings, special items in excess of building
standard furnishings, and equipment installed by or at the expense of Tenant.
(2) Tenant agrees to repair any damage to the Premises of the Building
caused by or in connection with the removal of any articles of personal
property, business or trade fixtures, machinery, equipment, cabinetwork,
furniture, movable partition, or permanent improvements or additions, including,
without limitation thereto, repairing the floor and patching and painting the
walls where required by Landlord to Landlord's reasonable satisfaction, all at
the Tenant's sole cost and expense. Tenant shall indemnify the Landlord against
any loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation thereto, any claims made by any
succeeding tenant founded on such delay.
(3) In the event Tenant fails to maintain the Premises in good order,
condition and repair, Landlord shall give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. In the event Tenant fails to
promptly commence such work and diligently prosecute it to completion, then
Landlord shall have the right to do such acts and expend such funds at the
expense of Tenant as are reasonably required to perform such work. Any amount
expended by Landlord shall be paid by Tenant promptly after demand with interest
at the prime commercial rate then being charged by Bank of America plus two
percent (2%) per annum, from the date of such work, but not to exceed the
maximum legal rate of interest per annum. Landlord shall have no liability to
Tenant for any damage, inconvenience, or interference with the use of Premises
by Tenant as a result of performing any such work.
(c) Compliance with Law: Landlord and Tenant shall each do all acts
required to comply with all applicable laws, ordinances, and rules of any public
authority relating to their respective maintenance obligation as set forth
herein.
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(d) Waiver by Tenant: Tenant expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford the Tenant the
right to make repairs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the Premises in good order, condition and repair.
13. ALTERATIONS AND ADDITIONS
(a) Tenant shall make no alterations, additions or improvements to the
Premises or any part thereof other than minor changes without obtaining the
prior written consent of Landlord.
(b) Landlord may impose as a condition to the aforesaid consent such
requirements as Landlord may deem necessary in its sole discretion, including,
without limitation thereto, the manner in which the work is done, the contractor
by whom it is performed, the times during which it is accomplished, and the
requirement that upon written request of Landlord prior to 30 days following the
expiration of earlier termination of the Lease, Tenant will remove any and all
permanent improvements or additions to the Premises installed by Tenant at
Tenant's expense, will remove all movable partitions, counters, personal
property, equipment, fixtures and furniture at Tenant's expense, and will repair
any damage to the Premises or the Building caused by such removal.
(c) All such alterations, additions or improvements shall at the
expiration or earlier termination of the Lease become the property of Landlord
and remain upon the Premises, unless specified pursuant to Section 13(b) above.
(d) All articles of personal property and all business and trade
fixtures, machines and equipment, cabinetwork, furniture and movable partitions
owned by Tenant or installed by Tenant at its expense in the Premises shall be
and remain the property of Tenant and may be removed by Tenant at any time
during the Lease term when Tenant is not in default hereunder, provided that
Tenant repairs any damage to the Premises or the Building caused by such
removal.
14. INDEMNITY
(a) Tenant shall indemnify and hold Landlord harmless from and defend
Landlord against any and all claims or liability for any injury or damage to any
person or property whatsoever (i) occurring in, on or about the Premises or any
part thereof, and (ii) occurring in, on or about any facilities (including,
without prejudice to the generality of the term "facilities," elevators,
stairways, passageways, hallways, and parking areas), the use of which Tenant
may have in conjunction with other tenants of the Building, when such injury or
damage is caused in part or in whole by the act, neglect, fault of or omission
of any duty with respect to the same by the act, neglect, fault of or omission
of any duty with respect to the same by Tenant, its agents, contractors,
employees or invitees. Tenant shall further indemnify and hold Landlord harmless
from and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, or employees, and from and against all
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costs, attorney's fees, expenses and liabilities incurred in the defense of any
such claim or action or proceeding brought thereon. In case any action or
proceeding is brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause except
Landlord's negligence, and Tenant hereby waives all claims in respect thereof
against Landlord.
(b) Exemption of Landlord from Liability: Landlord shall not be liable
for injury or damage which may be sustained by the person, goods, wares,
merchandise or property of Tenant, its employees, invitees or customers, or any
other person in or about the Premises caused by or resulting from fire, steam,
electricity, gas, water, or rain, which may leak or flow from or into any part
of the Premises, or from the breakage, leakage, obstruction, or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures of the same, whether the said damage or injury results from conditions
arising upon the Premises or upon other portions of the Building of which the
Premises are a part, or from other sources unless due to Landlord willful
misconduct. Landlord shall not be liable for any damages arising from any act or
neglect of any other tenant of the Building.
15. INSURANCE
(a) All insurance required to be carried by Tenant hereunder shall be
issued by responsible insurance companies, qualified to do business in the State
of California, reasonably acceptable to Landlord and Landlord's lender. Each
policy shall name Landlord, and at Landlord's request, any mortgagee of
Landlord, as an additional insured, as their respective interests may appear,
and copies of all policies or certificates evidencing the existence and amounts
of such insurance shall be delivered to Landlord by Tenant at least ten (10)
days prior to Tenant's occupancy of the Premises. No such policy shall be
cancelable except after ten (10) days written notice to Landlord and Landlord's
lender. Tenant shall furnish Landlord with renewals or "binders" of any such
policy at least ten (10) days prior to the expiration thereof. Tenant agrees
that if Tenant does not take out and maintain such insurance, Landlord may (but
shall not be required to) procure said insurance on Tenant's behalf and charge
the Tenant the premiums together with a twenty-five percent (25%) handling
charge, payable upon demand. Tenant shall have the right to provide such
insurance coverage pursuant to blanket policies obtained by the Tenant provided
such blanket policies expressly afford coverage to the Premises and to Tenant as
required by this Lease.
(b) At all times during the term hereof, Tenant shall maintain in
effect policies of casualty insurance covering (i) all leasehold improvements
(including any alterations, additions or improvements as may be made by Tenant
pursuant to provisions of Article 13 hereof), and (ii) trade fixtures,
merchandise and other personal property from time to time in, on or upon the
Premises, in an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time during the term of this Lease, providing
protection against any peril included with the classification "Fire and Extended
Coverage" together with insurance against sprinkler damage, vandalism and
malicious mischief. Upon termination of this Lease
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following casualty as set forth herein, the proceeds under (i) shall be paid to
Landlord, and the proceeds under (ii) above shall be paid to Tenant.
(c) Tenant shall at all times during the term hereof and at its own
cost and expense procure and continue in force Workers' Compensation insurance
and bodily injury liability and property damage liability insurance adequate to
protect Landlord against liability for injury to or death of any person in
connection with the construction of improvements on the Premises or with the
use, operation or condition of the Premises. Such insurance at all times shall
be in an amount of not less than Two Million Dollars ($2,000,000) for injuries
to persons in one accident, not less than One Million Dollars ($1,000,000) for
injury to any one person and not less than Two Hundred Thousand Dollars
($200,000) with respect to damage to property.
(d) Not less than every three years during the term of this Lease,
Landlord and Tenant shall mutually agree to increase in all of Tenant's
insurance policy limits for all insurance to be carried by Tenant as set forth
in this Article. In the event Landlord and Tenant cannot mutually agree upon the
amounts of said increases, then Tenant agrees that all insurance policy limits
as set forth in this Article shall be adjusted for increases in the Cost of
Living in the same manner as is set forth in Section 6(c) hereof for the
adjustment of the Basic Rent.
16. WAIVER OF SUBROGATION
Landlord and Tenant each hereby waive any and all rights of recovery
against the other or against the officers, employees, agents and representatives
of the other, on account of loss or damage occasioned to such waiving party or
its property or the property of others under its control to the extent that such
loss or damage is insured against under any fire and extended coverage insurance
policy which either may have in force at the time of such loss or damage. Tenant
shall, upon obtaining the policies of insurance required under this Lease, give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease. The waiver of Landlord and Tenant shall
be required to the extent the same are available from the insurer without
additional premium; if an extra charge is incurred to obtain such waiver, it
shall be paid by the party in whose favor the waiver runs.
17. DAMAGE AND DESTRUCTION
(a) Partial Damage - Insured: In the event the Premises or the
Building are damaged by any casualty which is covered under fire and extended
coverage insurance carried by Landlord, then Landlord shall restore such damage
provided insurance proceeds are available to pay eighty percent (80%) or more of
the cost of restoration and provided such restoration can be completed within
one hundred twenty (120) days after the commencement of the work in the opinion
of a registered architect or engineer appointed by Landlord. In such event this
Lease shall continue in full force and effect, except that Tenant shall be
entitled to an equitable reduction of Rent while such restoration takes place,
such reduction to be based upon the extent to which the restoration efforts
interfere with Tenant's business in the Premises.
(b) Partial Damage - Uninsured: In the event the Premises or the
Building are damaged by a risk not covered by Landlord's policy or the proceeds
of available insurance are
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less than eighty percent (80%) of the cost of restoration, or if the restoration
cannot be completed within one hundred twenty (120) days after the commencement
of work in the opinion of the registered architect or engineer appointed by
Landlord, then Landlord shall have the option either to (i) repair or restore
such damage, or (ii) give notice to Tenant at any time within thirty (30) days
after such damage terminating this Lease as of a date to be specified in such
notice, which date shall be not less than thirty (30) days nor more than sixty
(60) days after giving such notice. In the event of the giving of such notice,
this Lease shall expire and all interest of Tenant in the Premises shall
terminate on such date so specified in such notice and the Rent, reduced by any
proportionate reduction based upon the extent, if any, to which said damage
interfered with the use and occupancy of Tenant, shall be paid to the date of
such termination; Landlord agrees to refund to the Tenant any Rent theretofore
paid in advance for any period of time subsequent to such date.
(c) Total Destruction: In the event the Premises are totally destroyed
or in Landlord's judgment the Premises cannot be restored as required herein
under applicable laws and regulations, notwithstanding the availability of
insurance proceeds, this Lease shall be terminated effective the date of the
damage.
(d) Landlord's Obligations: The Landlord shall not be required to
repair any injury or damage by fire or other cause, or to make any restoration
or replacement of any panelings, decorations, partitions, ceilings, floor
covering, office fixtures, or any other improvements or property installed in
the Premises by Tenant or at the direct or indirect expense of Tenant. Tenant
shall be required to restore or replace same in the event of damage. Tenant
shall have no claim against Landlord for any damage suffered by reason by any
such damage, destruction, repair or restoration.
(e) Waiver by Tenant: Tenant shall have no right to terminate this
Lease as a result of any statutory provision now or hereafter in effect
pertaining to the damage and destruction of the Premises of the Building, except
as expressly provided herein, and Tenant expressly waives the provisions of
Civil Code Section 1932(2) and Civil Code Section 1933(4) with respect to any
destruction of the Premises.
18. CONDEMNATION AND OTHER TAKINGS
(a) If all or any part of the Premises shall be taken or appropriated
for public or quasi-public use by the right of eminent domain, with or without
litigation or transferred by agreement in connection with such public or
quasi-public use, either party hereto shall have the right at its option
exercisable within thirty (30) days of receipt of notice of such taking to
terminate this Lease as of the date possession is taken by the condemning
authority, provided, however, that before Tenant may terminate this Lease by
reason of taking or appropriation as provided herein above, such taking or
appropriation shall be to such an extent and nature as to economically frustrate
Tenant's business as well as to substantially handicap, impede or impair
Tenant's use of the Premises. If any part of the Building other than the
Premises shall be so taken or appropriated, Landlord shall have the right at its
option to terminate this Lease. No award for any partial or entire taking shall
be apportioned, and Tenant hereby assigns to Landlord any
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award which may be made in such taking or condemnation, together with any and
all rights of Tenant now or hereafter arising in or to the same or any part
thereof; provided, however, than nothing contained herein shall be deemed to
give Landlord any interest in or to require Tenant to assign to Landlord any
award made to Tenant for taking of personal property and fixtures belonging to
Tenant. In the event of a partial taking which does not result in a termination
of this Lease, Rent shall be equitably abated to the extent Tenant's business is
economically impaired. A sale by Landlord under threat of condemnation shall
constitute a "taking" for the purpose of this Article.
(b) No temporary taking of the Premises or any part of the Premises,
parking area or any part of the Premises, parking area or any other temporary
taking, shall terminate this Lease or give Tenant any right to any abatement of
Rent hereunder.
19. LIENS
Tenant shall keep the Premises and the Building free from any liens
arising out of work performed, materials furnished or obligations incurred by
Tenant and shall indemnify, hold harmless and defend Landlord from any liens and
encumbrances arising out of any work performed or materials furnished by or at
the direction of Tenant. In the event that Tenant shall not, within twenty (20)
days following the imposition of such lien, cause such lien to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but no obligation,
to cause the same to be released by such means as it shall deem proper,
including payment of the claim giving rise to such lien. All such sums paid by
Landlord and all expenses incurred by or in connection therewith, including
attorney's fees and costs, shall be payable to Landlord by Tenant on demand with
interest at the prime commercial rate then being charged by Bank of America plus
two percent (2%) per annum, from the due date, by not to exceed the maximum
legal rate of interest per annum. Landlord shall have the right at all times to
post and keep posted on the Premises any notices permitted or required by law,
or which Landlord shall deem proper, for the protection of Landlord and the
Premises, and any other party having any interest therein, from mechanics' and
materialmens' liens. Tenant shall give to Landlord at least ten (10) business
days prior written notice of the expected date of commencement of any work
relating to alterations or additions to the Premises (to afford Landlord an
opportunity to post said notices) and shall secure, at Tenant's own cost and
expense, a completion and lien indemnity bond, satisfactory to Landlord, for
said work.
20. DEFAULTS
The occurrence of any one or more of the following events shall
constitute a material default and breach of this Lease by Tenant:
(a) The abandonment of the Premises by Tenant (without limitation,
absence from the Premises for ten (10) days after default in payment of Rent
shall constitute an event of abandonment).
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(b) The failure by Tenant to make any payment of Rent or any other
payment or charge required to be made by Tenant hereunder, which default
continues for 10 days after receipt of written notice thereof.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease hereinafter to be served or performed by
Tenant, where such failure shall continue for a period of ten (10) days after
written notice thereof from Landlord to Tenant, provided, however, that if the
nature of Tenant's default is such that it cannot be cured solely by payment of
money and that more than ten (10) days are reasonably required for its cure,
then Tenant shall not be deemed to be in default if Tenant shall commence such
cure within said ten (10) day period and thereafter diligently prosecute such
cure to completion.
21. REMEDIES
In the event of any such material default or breach by Tenant,
Landlord may at any time thereafter, with or without limiting Landlord in the
exercise of any right or remedy at law or in equity which Landlord may have by
reason of such default or breach:
(a) Maintain this Lease in full force and effect and recover the Rent
and other monetary charges as they become due, without terminating Tenant's
rights to possession irrespective of whether Tenant shall have abandoned the
Premises. In the event Landlord elects not to terminate the Lease, Landlord
shall have the right to attempt to relet the Premises at such Rent and upon such
conditions, and for such a term, and to do all acts necessary to maintain or
preserve the Premises as Landlord deems reasonable and necessary without being
deemed to have elected to terminate the Lease including removal of all persons
and property from the Premises; such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Tenant. In
the event any such reletting occurs, this Lease shall terminate automatically
upon the new Tenant taking possession of the Premises. Notwithstanding that
Landlord fails to elect to terminate the Lease initially, Landlord at any time
during the term of this Lease may elect to terminate this Lease by virtue of
such previous default by Tenant, if such default or breach has not been cured by
Tenant. In the event of such termination, Landlord shall be entitled to recover
from Tenant all damages incurred by Landlord by reason of Tenant's default as
specified in the following paragraph.
(b) Terminate Tenant's right to possession by any lawful means, in
which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event Landlord shall be entitled
to recover from Tenant all damages incurred by Landlord by reason of Tenant's
default, including, without limitation thereto, the following: (1) the worth at
the time of the award of any unpaid Rent which had been earned at the time of
such termination; plus (2) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that Lessee proves could have been
reasonably avoided; plus (3) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such Rent loss that the Lessee proves could be reasonably
avoided; plus (4) any other amount necessary to compensate Landlord for all the
detriment
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proximately caused by Tenant's failure to perform his obligations under this
Lease or which in the ordinary cause of things would be likely to result
therefrom (including, without limiting the generality of the foregoing, the
amount of any commissions and/or finder's fee for a replacement tenant); plus
(5) at Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable State Law. Upon
any such reentry Landlord shall have the right to make any reasonable repairs,
alterations or modifications to the Premises, which Landlord in his sole
discretion deems reasonable and necessary. As used in subparts (1) and (2) of
this subparagraph (b), the "worth at the time of award" is computed by allowing
interest at the prime commercial rate being charged at the time of award by Bank
of America plus two percent (2%), but not to exceed the then legal maximum rate
of interest; and, as used in subpart (3) of this subparagraph (b), the worth at
the time of award is computed by discounting such amount at the discount rate of
the U.S. Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%). The term "Rent" as used in this Article shall be deemed to be and
to mean all Rents be paid pursuant to this Lease and all other monetary sums
required to be paid by Tenant pursuant to the terms of this Lease.
(c) Landlord shall not be deemed to be in default in the performance
of any obligation required by it under this Lease, or under any Addenda executed
in connection herewith, unless and until it has failed to perform such
obligation within thirty (30) days after receipt of written notice by Tenant to
Landlord, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for its performance, then Landlord shall not
be deemed to be in default if it shall commence such performance within such
thirty (30) day period and thereafter diligently prosecute the same to
completion.
(d) Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by
Registered Mail, a copy of any Notice of Default served upon the Landlord,
provided that prior to such notice Tenant has been notified, in writing (by way
of Notice of Assignment of Rents and Leases, or otherwise), of the address of
such Mortgagees and/or Trust Deed Holders. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgages and/or Trust Deed Holders shall have an
additional thirty (30) days within which to cure such default on the part of
Landlord or if such default cannot be cured within that time, then such
additional time as may be necessary if within thirty (30) days any Mortgage
and/or Trust Deed Holder has commenced and is pursuing the remedies necessary to
cure such default (including, but not limited to, commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so pursued.
22. COSTS OF SUIT
(a) If Tenant or Landlord shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of Rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorney's fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment.
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(b) Should Landlord, without fault on Landlord's part, be made a party
to any litigation instituted by Tenant or any third party against Tenant, or by
or against any person holding under or using the Premises by license of Tenant,
or for the foreclosure of any lien for labor or material furnished to or for
Tenant or any such other person or otherwise arising out of or resulting from
any act or transaction of Tenant or of any such other person, Tenant covenants
to save and hold Landlord harmless from any judgment rendered against Landlord
or the Premises or any part thereof, and all costs and expenses, including
reasonable attorney's fees, incurred by Landlord in or in connection with such
litigation.
23. SURRENDER OF PREMISES BY TENANT
On expiration of the term, Tenant shall surrender to Landlord the
Premises and all Tenant's improvements and alterations in good condition (except
for ordinary wear and tear occurring after the last necessary maintenance made
by Tenant and destruction to the Premises covered in Article 17 of this Lease,
and except for alterations that Tenant has the right to remove or is obligated
to remove so long as Tenant repairs any damage to the Premises under the
Provisions of this Article). Tenant shall remove all personal property prior to
the expiration of the term, including any signs, notices and displays placed by
Tenant. Tenant shall perform all restoration made necessary by the removal of
any alterations of Tenant's personal property prior to the expiration of the
term.
Landlord can elect to retain or dispose of in any manner any
alterations or Tenant's personal property that Tenant does not remove from the
Premises on expiration or termination of the term as allowed or required by this
Lease. Title to any such alterations or Tenant's personal property that Landlord
elects to retain or dispose of on expiration of the term shall vest in Landlord.
Tenant waives all claims against Landlord for any damage to Tenant resulting
from Landlords' retention or disposition of any such alterations or Tenant's
personal property. Tenant shall be liable to Landlord for Landlord's costs for
storing, removing and disposing of any alterations to Tenant's personal
property.
If Tenant fails to surrender the Premises to Landlord on expiration of
the term hereof as required by this Article, Tenant shall hold Landlord harmless
from all damages resulting from Tenant's failure to surrender the Premises,
including, without limitation, claims made by a succeeding tenant resulting from
Tenant's failure to surrender the Premises.
24. SURRENDER OF LEASE
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work as a merger and shall, at the option of the
Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
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25. TRANSFER OF LANDLORD'S INTEREST
In the event of a sale or conveyance by Landlord of Landlord's
interest in the Premises other than a transfer for security purposes only,
Landlord shall be relieved from and after the date specified in any such notice
of transfer of all obligations and liabilities accruing thereafter on the part
of the Landlord provided that any funds in the hands of the Landlord at the time
of transfer in which Tenant has an interest shall be delivered to the successor
of Landlord. This Lease shall not be affected by any such sale and Tenant agrees
to attorn to the purchaser or assignee provided all Landlord's obligations
hereunder are assumed in writing by the transferee.
26. ASSIGNMENT AND SUBLETTING
(a) General. Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld: (1) assign,
mortgage, pledge, encumber, or otherwise transfer this Lease, the Term or estate
hereby granted, or any interest hereunder; (2) permit the Premises or any part
thereof to be utilized by anyone other than Tenant (whether as concessionaire,
franchisee, licensee, permittee, or otherwise); or (3) except as hereinafter
provided, sublet or offer or advertise for subletting the Premises or any part
thereof. Subject to the provisions of this Lease and Tenant's compliance with
the provisions of this Article 26, Landlord shall not withhold its consent to a
proposed assignment or sublease so long as the use of the Premises by the
proposed assignee or sublessee would be permitted under Article 9 (Use) hereof,
and the proposed assignee or sublessee is of good business reputation and of
sound financial condition, as determined by Landlord. Tenant acknowledges,
however, that one or more existing or future lenders who hold a lien affecting
the Premises may have the right to approve any such assignment, sublease, or
other transfer before Tenant may carry it out, and that, whenever such is the
case, it shall be reasonable for Landlord to withhold its consent under this
subsection (a) to the assignment, sublease, or other transfer if any such lender
withholds its consent thereto. Any assignment, mortgage, pledge, encumbrance,
transfer or sublease without Landlord's consent shall be voidable and, at
Landlord's election, shall constitute a default. If Tenant is a corporation, any
dissolution, merger, consolidation, or other reorganization of Tenant, or the
sale or other transfer of a controlling percentage of the capital stock of
Tenant or the sale of fifty percent (50%) or more of the value of the assets of
Tenant, shall be deemed a voluntary assignment of this Lease by Tenant. The
phrase "controlling percentage" shall mean the ownership of, and the right to
vote, stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of Tenant's capital stock issued, outstanding, and entitled
to vote for the election of directors. The preceding two sentences shall not
apply to corporations, the stock of which is traded through an exchange or over
the counter. If Tenant is a partnership, a withdrawal or change, voluntary,
involuntary, or by operation of law, of any partner or partners owning a total
of fifty percent (50%) or more of the partnership, or the dissolution of the
partnership, shall be deemed a voluntary assignment of this Lease by Tenant. If
Tenant consists of more than one person, a purported assignment, voluntary,
involuntary, or by operation of law, by any one of the persons executing this
Lease shall be deemed a voluntary assignment of this Lease by Tenant.
Tenant shall have the right to sublease all or any portion of the
Premises to either St. Nick Productions, Adelson Entertainment, Filmstuff.com
LLC or any of them, without the
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prior consent of Landlord so long as each of the three named subtenants abide by
and conform with the terms of the Lease.
(b) Notice and Procedure. Notwithstanding anything above to the
contrary, if at any time or from time to time during the Term Tenant desires to
assign or sublet all or any part of the Premises, then at least thirty (30)
days, but not more than one hundred twenty (120) days, prior to the date when
Tenant desires the assignment or subletting to be effective (the "Transfer
Date"), Tenant shall give Landlord a notice (the "Notice") which shall set forth
the name, address and business of the proposed assignee or sublessee,
information (including financial statements and references) concerning the
character of the proposed assignee or sublessee, a detailed description of the
space proposed to be assigned or sublet, which must be a single, self-contained
unit (the "Space"), any rights of the proposed assignee or sublessee to use
Tenant's improvements and the like, the Transfer Date, the term and the fixed
rent and/or other consideration, and all other material terms and conditions of
the proposed assignment or subletting, all in such detail as Landlord may
reasonably require. If Landlord requests additional detail, the Notice shall not
be deemed to have been received until Landlord receives such additional detail.
Landlord shall have the option, exercisable by giving notice to Tenant at any
time within twenty (20) days after Landlord's receipt of the Notice, (1) in the
case of an assignment or sublease, to terminate this Lease as to the Space as of
the date (the "Termination Date") set forth in Landlord's notice, in which event
Tenant shall be relieved of all further obligations hereunder as to the Space as
of the Termination Date; or (2) in the case of a sublease, to sublease the Space
from Tenant upon the terms and conditions set forth in the Notice, except that
the rent shall be the lower of the per square foot monthly Basic Rent and
Additional Rent described in Articles 4 and 6 payable under this Lease for the
Space, or that part of the rent and other consideration set forth in the Notice
which is applicable to the Space. If Landlord exercises its option to sublet the
Space, Tenant shall sublet the Space to Landlord upon the terms and conditions
contained in the Notice; provided, however, that: (i) Landlord shall at all
times under such sublease have the right and option further to sublet the Space
without obtaining Tenant's consent or sharing any of the economic consideration
received by Landlord; (ii) the provisions of Article 9 shall not be applicable
thereto; (iii) Landlord and its subtenants shall have the right to use in common
with Tenant all lavatories, corridors and lobbies which are within the Premises
and the use of which is reasonably required for the use of the Space; (iv)
Tenant shall have no right of setoff or abatement or any other right to assert a
default hereunder by reason of any default by Landlord under such sublease; and
(v) Landlord's liability under such sublease shall not be deemed assumed or
taken subject to by any successor to Landlord's interest under this Lease. No
failure of Landlord to exercise either option with respect to the Space shall be
deemed to be Landlord's consent to the assignment or subletting of all or any
portion of the Space. If Landlord does not exercise either option, Tenant shall
be free to assign or sublet the space to any entity or person upon receipt of
Landlord's consent, which cannot be unreasonably withheld, but only if Tenant's
proposed assignment or sublease complied with the following conditions:
(aa) The assignment or sublease shall be on the same terms set
forth in the Notice given to Landlord;
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(bb) No assignment or sublease shall be valid, and no assignee or
sublessee shall take possession of the Space until an executed counterpart of
the assignment or sublease has been delivered to Landlord;
(cc) No assignee or sublessee shall have a right further to
assign or sublet;
(dd) Any proposed subletting would not result in more than two
subleases of portions of the Premises being in effect at any one time during the
Term;
(ee) The monthly Basic Rent (adjusted on a rentable square foot
basis) shall be at or higher than the Monthly Basic Rent then being agreed upon
by Landlord on new leases in the Building for comparable size space for
comparable terms and Tenant shall not grant greater concessions to the assignee
or sublessee than is then being offered by Landlord (adjusted on a rentable
square foot basis) to new tenants leasing a comparable amount of space for a
comparable period of time;
(ff) No assignee or sublessee shall be an existing tenant of the
Building nor have been negotiating with Landlord in the last six (6) months for
space in the Building;
(gg) No assignee or sublessee shall be a governmental entity;
(hh) The portion of the Premises to be sublet or assigned is
regular in shape with appropriate means of ingress and egress.
(ii) The Use of the Premises by the assignee or sublessee is
permitted by the Use Provision of this Lease.
(jj) No proposed sublease or assignment would result in more
people working at or visiting the Premises than the number of people who worked
at or visited the Premises at the time when Tenant was the sole occupant of the
Premises.
(kk) The assignee or sublessee has the financial capability to
fulfill the obligations imposed by the assignment or sublease.
(ll) The Use of the Premises does not violate an exclusive
"granted" by Landlord to another Tenant.
(mm) The assignee or sublessee is in Landlord's reasonable
opinion of reputable or good character.
(nn) In connection with any assignment of the Lease, Tenant shall
pay to Landlord, upon receipt thereof, fifty percent (50%) of all Assignment
Proceeds. For purposes of this subsection (nn), "Assignment Proceeds" shall mean
all consideration payable to Tenant,
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directly or indirectly, by any assignee, or any other amount received by Tenant
from or in connection with any assignment (including, but not limited to, sums
paid for the sale or rental or consideration received on account of any
contribution of any of Tenant's property);
(oo) (1) In connection with any subletting of all or any portion
of the Premises, Tenant shall pay to Landlord, at Landlord's option, subject to
subsection (oo) (3) hereof, either (i) a sum equal to fifty percent (50%) of any
Net Sublease Proceeds (as hereinafter defined) derived therefrom, (ii) a sum
equal to forty percent (40%) of any Sublease Proceeds (as hereinafter defined)
derived therefrom, or (iii) if the Sublease Rent Per Square Foot (as hereinafter
defined) derived therefrom exceeds one hundred fifteen percent (115%) of the
Rent Per Square Foot (as hereinafter defined), then a sum equal to five percent
(5%) of any Sublease Rent (as hereinafter defined), derived therefrom. All sums
payable hereunder by Tenant shall be calculated on an annualized basis, but
shall be paid to Landlord, as Additional Rent, within ten (10) days after
receipt thereof by Tenant.
(2) For purposes of this Lease:
(i) "Net Sublease Proceeds" shall mean Sublease Proceeds
less Permitted Expenses amortized over the term of the sublease.
(ii) "Permitted Expenses" shall mean the aggregate of (1)
reasonable broker commissions and reasonable legal fees incurred by
Tenant in connection with any such sublease, to the extent actually
paid, and (2) the costs, if any, incurred by Tenant in preparing the
sublease space for occupancy, including cash allowances in lieu
thereof.
(iii) "Rent Per Square Foot" shall mean the total Annual
Base Rent (as adjusted pursuant to Article 6 of this Lease) for the
Premises divided by the Usable Square Feet in the Premises.
(iv) "Sublease Proceeds" shall mean the product of (x) the
Sublease Rent Per Square Foot less the Rent Per Square Foot,
multiplied by (y) the number of Usable Square Feet constituting the
space covered by the sublease (the "Sublease Space").
(v) "Sublease Rent" shall mean any rent or other
consideration paid to Tenant directly or indirectly by any subtenant,
or any other amount received by Tenant from or in connection with any
subletting (including, but not limited to, sums paid for the sale or
rental, or consideration received on account of any contribution of
any property of Tenant's or sum paid in connection with the supply of
electricity or HVAC).
(vi) "Sublease Rent Per Square Foot" shall mean the Sublease
Rent divided by the Usable Square Feet of the Sublet Space.
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(vii) Net sublease Proceeds, Sublease Proceeds and/or
Sublease Rent shall be recalculated from time to time to reflect any
corrections in the prior calculation thereof due (x) to subsequent
payments received by Tenant, (y) the final adjustment of payments to
be made to Tenant, or (z) to mistake. Promptly upon the receipt of any
such payment, the making of any such adjustment or the discovery of
any such mistake, Tenant shall submit to Landlord a recalculation of
the Net Sublease Proceeds, Sublease Proceeds, and/or Sublease Rent,
and an adjustment shall be made between Landlord and Tenant, if
applicable, with respect thereto on account of prior payments made
pursuant to this Section (b).
(3) If and for so long as Landlord, or any constituent
partners or partners of partners of Landlord, shall be an entity described in
Section 511 (a) (2) of the Internal Revenue Code (the "Code") or shall desire to
qualify for taxation as a real estate investment trust pursuant to Sections 856
et seq. of the Code, Landlord shall only be entitled to elect the option set
forth in subsection (b) (oo) (1) (iii) above, and to revoke or, once revoked,
reinstate such election, all upon written notice to Tenant. If and for so long
as Landlord, and the constituent partners or partners of partners of Landlord,
if any, shall not be an entity described in Section 511 (a) (2) of the code or
shall not desire to qualify for taxation as a real estate investment trust, then
Landlord shall, from time to time, be entitled to elect any of three options set
forth in subsection (b) (oo) (1) above; and
(c) Continuing Liability of Tenant. Regardless of Landlord's consent,
no subletting or assignment shall release Tenant's obligation or alter the
primary liability of Tenant to pay the rent and to perform all other obligations
to be performed by Tenant hereunder. The acceptance of rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting. If any assignee or Tenant or any
successor of Tenant defaults in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such assignee or successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto, and such action
shall not relieve Tenant of its liability under this Lease. If Tenant assigns
this Lease, or sublets all or a portion of the Premises, or requests the consent
of Landlord to any assignment or subletting, or if Tenant requests the consent
of Landlord for any act that Tenant proposes to do, then Tenant shall pay to
Landlord a non-refundable fee for Landlord's time and efforts, and for expenses
incurred by Landlord in connection with reviewing the subject transaction
(including any administrative expenses for Landlord's property manager), but in
no event less than five hundred dollars ($500.00), and reimburse Landlord for
all reasonable attorneys' fees incurred in connection therewith.
(d) Bankruptcy. If a petition is filed by or against Tenant for relief
under Title 11 of the Untied States Code, as amended (the "Bankruptcy Code"),
and Tenant (including for purposes of this Section Tenant's successor in
bankruptcy, whether a trustee or Tenant as
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debtor in possession) assumes and proposes to assign, or proposes to assume and
assign, this Lease pursuant to the provisions of the Bankruptcy Code to any
person or entity who has made or accepted a bona fide offer to accept an
assignment of this Lease on terms acceptable to Tenant, then notice of the
proposed assignment setting forth (a) the name and address of the proposed
assignee, (b) all of the terms and conditions of the offer and proposed
assignment, and (c) the adequate assurance to be furnished by the proposed
assignee of its future performance under the Lease, shall be given to Landlord
by Tenant no later than twenty (20) days after Tenant has made or received such
offer, but in no event later than ten (10) days prior to the date on which
Tenant applies to a court of competent jurisdiction for authority and approval
to enter into the proposed assignment. Landlord shall have the prior right and
option, to be exercised by notice to Tenant given at any time prior to the date
on which the court order authorizing such assignment becomes final and
non-appealable, to receive an assignment of this Lease upon the same terms and
conditions, and for the same consideration, if any, as the proposed assignee,
less any brokerage commissions which may otherwise be payable out of the
consideration to be paid by the proposed assignee for the assignment of this
Lease. If this Lease is assigned pursuant to the provisions of the Bankruptcy
Code, Landlord: (i) may require from the assignee a deposit or other security
for the performance of its obligations under the Lease in an amount
substantially the same as would have been required by Landlord upon the initial
leasing to a tenant similar to the assignee; and (ii) shall receive, as
additional rent, the sums and economic consideration described in Section (b) of
this Article 26. Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed, without further act or
documentation, to have assumed all of the Tenant's obligations arising under
this Lease on and after the date of such assignment. Any such assignee shall,
upon demand, execute and deliver to Landlord an instrument confirming such
assumption. No provisions of this Lease shall be deemed a waiver of Landlord's
rights or remedies under the Bankruptcy Code to oppose any assumption and/or
assignment of this Lease, to require a timely performance of Tenant's
obligations under this Lease, or to regain possession of the Premises if this
Lease has neither been assumed nor rejected within sixty (60) days after the
date of the order for relief or within such additional time as a court of
competent jurisdiction may have fixed. Notwithstanding anything in this Lease to
the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated as rent, shall constitute rent
for the purposes of Section 502(b)(6) of the Bankruptcy Code.
27. INVOLUNTARY ASSIGNMENT
No interest of Tenant in this Lease shall be assignable by operation
of law (including, without limitation, the transfer of this Lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment:
(a) If Tenant is or becomes bankrupt or insolvent, makes an assignment
for the benefit of creditors, or institutes a proceeding under the Bankruptcy
Act in which Tenant is the bankrupt; or, if Tenant is a partnership or consists
of more than one person or entity, if any partner of the partnership or other
person or entity is or becomes bankrupt or insolvent, or makes an assignment for
the benefit of creditors;
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(b) If a writ of attachment or execution is levied on this Lease;
(c) If, in any proceeding or action to which Tenant is a party, a
receiver is appointed with authority to take possession of the Premises.
An involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant.
28. ATTORNMENT
In the event any proceedings are brought for default under the ground
or any underlying lease or in the event of foreclosure or the exercise of the
power of sale under any mortgage or deed of trust made by the Landlord covering
the Premises, the Tenant shall attorn to the purchaser upon any such foreclosure
or sale and recognize such purchaser as the Landlord under this Lease, provided
said purchaser expressly agrees in writing to be bound to all future obligations
by the terms of this Lease.
29. SUBORDINATION
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, this Lease shall be subject
and subordinate at all times to: (a) all ground leases or underlying lease which
may now exist or hereafter be executed affecting the Building or the land upon
which the Building is situated or both, and (b) the lien of any first mortgage
or deed of trust which may now exist or hereafter be executed in any amount for
which said Building, land, ground leases or underlying leases, or Landlord's
interest or estate in any of said items, is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. In the event that any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord at the option of such successor in interest.
Tenant covenants and agrees to execute and deliver, upon demand by Landlord and
in the form requested by Landlord, any additional documents evidencing the
priority or subordination of this Lease with respect to any such ground leases
or underlying Leases or the lien of any such first mortgage or deed of trust.
Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to
execute, deliver and record any such documents in the name and behalf of Tenant.
30. ESTOPPEL CERTIFICATE
(a) Tenant shall at any time upon not less than ten (10) business days
prior to written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect), and the date to which the Rent and other charges are paid in
advance, if any, (ii) acknowledging that there are not, to Tenant's knowledge,
any uncured defaults on the part of
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Landlord hereunder, or specifying such defaults if they are claimed, and (iii)
fulfilling any other reasonable requirements establishing tenancy of a
prospective purchaser or encumbrancer of the Premises. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance, and (iii) that not more than
one month's Rent has been paid in advance.
(c) If the Tenant fails to deliver such statement within such time,
Tenant irrevocably constitutes and appoints the Landlord as its special
attorney-in-fact to execute and deliver such statement to any third party and
Landlord shall have the option to terminate this Lease.
32. NONRECORDABILITY OF LEASE
Landlord and Tenant agree that in any and all events this Lease shall
not be recorded by Tenant.
33. QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that upon Tenant paying Rent
and other monetary sums due under the Lease, performing its covenants and
conditions under the Lease and upon recognizing purchaser as Landlord pursuant
hereto, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises for the term, subject, however, to the terms of the Lease.
34. WAIVER OF REDEMPTION BY TENANT; HOLDING OVER
Tenant hereby waives for Tenant and for all those claiming under
Tenant all right now or hereafter existing to redeem by order or judgment of any
court or by any legal process or writ, Tenant's right of occupancy of the leased
Premises after any termination of this Lease. If Tenant holds over the term
hereof, with or without the express or implied consent of Landlord,
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such tenancy shall be from month-to-month only, and not a renewal hereof or an
extension for any further term, and in such case Rent shall be payable in the
amount representing One Hundred Twenty Five Percent (125%) of the amount in
effect prior to the termination date and at the time specified in this Lease,
and such month-to-month tenancy shall be subject to every other term, covenant
and agreement contained herein.
35. RULES AND REGULATIONS
The Rules and Regulations attached to this Lease as Exhibit C, as well
as such reasonable rules and regulations as may be hereafter adopted by Landlord
for the safety, care, utilization and cleanliness of the Premises and the
Building, and the preservation of good order thereon, are hereby expressly made
a part hereof, and Tenant agrees to comply with such rules and regulations and
the violation of any of them shall constitute a default by Tenant under this
Lease. If there is a conflict between the rules and regulations and any of the
provisions of this Lease, the provisions of this Lease shall prevail. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Building of any of said rules and regulations.
36. RIGHT TO PERFORMANCE
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent, except as otherwise set forth herein.
If Tenant shall fail to pay any sum of money, other than Rent, required to be
paid by it hereunder or shall fail to perform any other act on its part to be
performed hereunder and such failure shall continue for ten (10) days after
written notice thereof to Tenant, Landlord may, but shall not be obligated so to
do, without waiving or releasing Tenant from any obligation of Tenant, make any
such payment and perform any other act on Tenant's part to be made or performed
as provided in this Lease. All sums so paid by Landlord and all costs incidental
thereto (including reasonable attorney's fees), together with interest thereon
at the prime commercial rate then being charged by Bank of America plus two
percent (2%) per annum from the date of such payment by Landlord shall be
payable by Tenant on demand and Tenant hereby covenants to pay any and all such
sums. Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of the nonpayment of sums due under
this paragraph as in the case of default by Tenant in the payment of Rent.
37. NAME OF BUILDING
Tenant shall not use the name of the Building for any purpose other
than the address of the business to be conducted by Tenant in the Premises.
Tenant shall not use any picture of the Building in its advertising, stationery
or in any other manner imply that the entire Building is leased by Tenant.
Landlord expressly reserves the right at any time to change said name without in
any manner being liable to Tenant therefor.
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38. NOTICES
Any notice required or permitted to be given hereunder by Tenant shall
be deposited in the United States mails, duly registered or certified with
postage fully prepaid thereon, or placed with courier service with guaranteed
overnight service, to Landlord at Landlord's address as set forth in Article 1
hereof, or to such other address to which Tenant last forwarded Rent, and to
such other parties as Landlord may from time to time designate. Any notice
required or permitted to be given hereunder by Landlord may be mailed as above
stated or delivered personally to Tenant at the address of the Premises. Either
party may by written notice similarly given designate a different address for
notice purposes, except that Landlord may in any event use the Premises as
Tenant's address for notice purposes. Notice shall be effective when mailed or
delivered as above specified.
39. WAIVER
No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such a right or remedy or be
construed as a waiver.
The receipt and acceptance by Landlord of delinquent Rent shall not
constitute a waiver of any other default, it shall constitute only a waiver of
timely payment for the particular Rent payment involved.
No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Tenant before the expiration of the term. Only a
notice from Landlord or Tenant shall constitute acceptance of the surrender of
the Premises and accomplish a termination of the Lease.
Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provision of
the Lease.
40. MISCELLANEOUS
(a) Execution by Landlord. 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; this document becomes effective and
binding only upon execution and delivery hereof by Tenant and by Landlord. No
act or omission of any employee or agent of Landlord or of Landlord's broker
shall alter, change or modify any of the provisions hereof.
(b) Landlord and Tenant. As used in this Lease, the words "Landlord"
and "Tenant" shall include the plural as well as the singular. Words used in
neuter gender include the masculine and feminine, words in the masculine or
feminine gender include the neuter. If there is more than one Landlord or
Tenant, the obligations hereunder imposed upon the Landlord or Tenant shall be
joint and several; as to a tenant which consists of a husband and wife, the
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obligations shall extend individually to their sole and separate property as
well as community property. The term "Landlord" shall mean only the owner or
owners at the time in question of the fee title of a tenant's interest in a
ground lease of the Premises. The obligations contained in this Lease to be
performed by Landlord shall be binding on Landlord's successors and assigns only
during their respective periods of ownership.
(c) Brokers. Tenant and Landlord shall each hold the other harmless
from all damages (including attorneys' fees and costs) resulting from any claims
that may be asserted against the other by any broker, finder, or other person
with whom Tenant or Landlord has or purportedly has dealt, except the agent for
the Building duly appointed by Landlord or the agent duly appointed by Tenant.
(d) Signs.
(1) Tenant shall not place or permit to be placed in or upon the
Premises where visible from outside the Premises, or outside the Premises or any
part of the Building any signs, notices, drapes, shutters, blinds, or displays
of any type without written consent of Landlord.
(2) Landlord reserves the right, in Landlord's sole discretion, to
place and locate on the roof, exterior of the Building, and in any area of the
Building not leased to Tenant such signs, notices, displays and similar items as
Landlord deems appropriate in the proper operation of the Building.
(e) Parking. Effective upon the Commencement Date of this Lease,
Tenant shall lease from Landlord the number of spaces for the length of time set
forth in Article 1 hereof. Landlord reserves the right to increase the monthly
parking rates at any time, in his sole discretion, in which case Tenant shall be
obligated to pay Landlord the increased rate or Tenant shall lose all rights to
lease the spaces provided herein. Should Tenant at any time elect to not lease
all of the spaces set forth in Article 1 hereof, Tenant shall lose all rights to
lease the forfeited spaces.
During the term of this Lease, Tenant shall only be entitled to such
use of parking spaces in the parking areas located in the Building as shall be
confirmed in writing by the parties, at rental rates and upon the other terms
and conditions published from time to time by Landlord or Landlord's operator of
the parking areas. Parking rental rates shall be hourly, weekly or monthly, or
such rate system as Landlord deems advisable, and Tenant acknowledges that its
customers, invitees and licensees may be charged at half-hour, hourly and other
similar parking rental rates. Parking spaces shall be rented by Landlord to
Tenant on a nonassigned basis or such other basis as Landlord or Landlord's
operator may deem advisable.
Tenant acknowledges that its employees and the employees of other
tenants of Landlord within the Building shall not be entitled to the use of
parking spaces in the parking areas located in and about the Building which may
from time to time be designated for patrons of
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the Building. Tenant and its employees shall park their cars only in those
portions of the parking areas, if any, designated by Landlord for the purpose of
employee parking. Tenant shall furnish Landlord with a listing of the car
license numbers of it and its employees within fifteen (15) days after the
Commencement Date of the Lease, and Tenant shall thereafter notify Landlord of
any changes to such listing within five (5) days after such change occurs. If
Tenant or its employees fail to park their cars in designated employee parking
areas, then Landlord may charge Tenant Fifty Dollars ($50.00) per day for each
day or partial day per car parked in any areas other than those so designated.
Tenant hereby authorizes Landlord to tow away from the parking areas in and
about the Building any improperly parked car or cars belonging to Tenant or
Tenant's employees and/or to attach violation stickers or notices to such cars.
Tenant acknowledges that neither Landlord nor any agent of Landlord
has made any representation or warranty as to the suitability of the parking
areas, or as to the availability of parking spaces, for the conduct of Tenant's
business.
Landlord shall have certain rights and authority relative to the use
and control of the parking areas, including, without limitations, the right to
decrease the size of the parking areas, to rearrange the parking spaces and
improvements on the parking areas; to take all or any portion of the parking
areas for the purpose of maintaining, repairing or restoring same, or for the
purpose of construction and/or operation of commercial buildings, structures or
areas thereon or adjacent thereto; to have ingress and egress in connection with
any such construction and/or operation; and to do and perform such other acts
in, to and with respect to the parking areas as in the use of good business
judgment Landlord shall determine to be appropriate for the parking areas.
(f) Captions and Attachments:
(1) The captions of the paragraphs of this Lease are for convenience
only and shall not be deemed to be relevant in resolving any question of
interpretation or construction of any section of this Lease.
(2) The exhibits attached hereto, and addenda and schedules initialed
by the parties, are deemed by attachment to constitute part of this Lease, and
are incorporated herein.
(g) Severability. If any term or provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease 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.
(h) Construction. All provisions hereof, whether covenants or
conditions, shall be deemed to be both covenants and conditions. The definitions
contained in this Lease shall be used to interpret the Lease.
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(i) Interest. Except as expressly provided herein, any amount due to
Landlord not paid when due shall bear interest at the prime commercial rate then
being charged by Bank of America plus two percent (2%) per annum, from the due
date, but not to exceed the maximum legal rate of interest per annum. Payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
(j) Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment, subletting or encumbrance by Tenant and subject to
Article 26 of this Lease, all of the provisions hereof shall bind and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.
(k) Time; Joint and Several Liability. Time is of the essence of this
Lease and each and every provision hereof except as to the conditions relating
to the delivery of possession of the Premises to Tenant. All the terms,
covenants and conditions contained in this Lease to be performed by either
party, if such party shall consist of more than one person or organization,
shall be deemed to be joint and several, and all rights and remedies of the
parties shall be cumulative and non-exclusive of any other remedy at law or in
equity.
(l) Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with the By-laws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms. If Tenant
is a corporation Tenant shall, within thirty (30) days after execution of this
Lease, deliver to Landlord a certified copy of a resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.
(m) Partnership Authority. If Tenant is a partnership, joint venture
or other unincorporated association, each individual executing this Lease on
behalf of Tenant represents that this Lease is binding on Tenant; furthermore,
Tenant agrees that the execution of any written consent hereunder, or of any
written modification or termination of this Lease, by any general partner of
Tenant or any other authorized agent of Tenant shall be binding on Tenant.
41. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease
the date and year first above written.
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Landlord: Tenant:
OCEAN PARK BOULEVARD DIGITAL COMMERCE CORPORATION
MANAGEMENT COMPANY, LTD.
-------------------------------
By: By: Alan Krenek
------------------------------
General Partner Its: Controller
-------------------------------
By: Matthew Toloczke
Its: Treasurer
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EXHIBIT A
DESCRIPTION OF DEMISED PREMISES
See Attached Plan
Suite No: 110 Floor: First
Street Address of Demised Premises:
2601 Ocean Park Boulevard
Santa Monica, California
Floor Area: Rentable Area: 7,508 Square Feet
- --------------------------------- -----------------------------------
Landlord's Initials Tenant's Initials
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EXHIBIT B
PROVISIONS RELATING TO CONSTRUCTION
OF THE
PREMISES
Tenant accepts the Premises in an "as is" condition, except that
Landlord shall provide the improvements shown on Exhibit B-1, attached and made
a part by reference, at Landlord's sole cost.
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EXHIBIT B-1
LANDLORD IMPROVEMENTS
1. Drywall partition as shown, including re-use of existing - ceiling height.
2. Building standard doors as shown.
3. Existing cabinets.
4. New 12' wide by full height glass wall at large conference room.
5. New 3' wide glass by full height window.
6. Move existing 8'-0" x 4'-6" window to new location.
7. Furniture partitions not shown are by Tenant.
8. New building standard carpet, base and paint throughout.
9. Building standard HVAC.
10. Existing acoustical ceiling.
11. Power outlets existing in partitions remaining.
12. No floor outlets.
13. 8 new power outlets in enclosed rooms.
14. 14 new power outlets in open spaces.
15. Power to whips from Tenants furniture partitions, as provided in items 10
and 13 above.
16. One dedicated 20 Amp power circuit (if not already existing) in each of two
workrooms.
17. Power poles not shown are by Tenant (see item 14 above).
18. Telecom and computer wiring not shown is by Tenant. Tenant must use plenum
rated cable above ceiling.
19. Power, telecom and computer wiring in Tenant furniture partitions is by
Tenant.
20. Existing number of building standard light fixtures installed and switched
to building standards.
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EXHIBIT C
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Building or the Premises without the written consent of Landlord first had
and obtained, and Landlord shall have the right to remove any such sign,
placard, picture, advertisement, name or notice without notice to and at the
expense of Tenant.
All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord.
Landlord shall not place anything or allow anything to be placed near
the glass of any window, door, partition or wall which may appear unsightly from
outside the Premises; provided, however, that Landlord is to furnish and install
building standard window levelors at all exterior windows.
2. No Tenant shall obtain for use upon the Premises ice, drinking or
bottled water, towel or other similar service or accept barbering or
bootblacking services on the Premises, except from persons authorized by the
Landlord and at the hours and under regulations fixed by the Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the tenants or used by them for any
purpose other than for ingress to and egress from their respective Premises. The
halls, passages, exits, entrances, elevators, stairways, balconies and roof are
not for the use of the general public and the Landlord shall in all cases retain
the right to control and prevent access thereto by all persons whose presence in
the judgment of the Landlord shall be prejudicial to the safety, character,
reputation and interests of the Building and its tenants, provided that nothing
herein contained shall be construed to prevent such access to persons with whom
the Tenant normally deals in the ordinary course of Tenant's business unless
such persons are engaged in illegal activities. No tenant and no employees or
invitees of any tenant shall go upon the roof of the Building.
5. Tenant shall not alter any lock or install any new or additional locks
or any bolts on any door of the Premises without the written consent of
Landlord.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the expense
of any breakage, stoppage or damage
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resulting from the violation of this rule shall be borne by the Tenant who, or
whose employees or invitees shall have caused it.
7. Tenant shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in any way
deface the Premises of any part thereof. No boring, cutting or stringing of
wires or laying of linoleum or other similar floor coverings shall be permitted
except with the prior written consent of the Landlord and as the Landlord may
direct.
8. No furniture, freight or equipment of any kind shall be brought into the
Building without the consent of Landlord and all moving of the same into or out
of the Building shall be done at such time and in such manner as Landlord shall
designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on wood
strips of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Tenant. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or others, any hand trucks except those equipped
with rubber tires and side guards.
9. Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises unless otherwise agreed to by
Landlord. Except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be permitted to enter the Building
for the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by reason of Tenant's carelessness or indifference in the preservation of
good order and cleanliness. Landlord shall in no way be responsible to any
Tenant for any loss of property on the Premises, however occurring, or for any
damage done by the effects of any Tenant by the janitor or any other employee or
any other person. Janitor service shall include ordinary dusting and cleaning by
the janitor assigned to such work and shall not include cleaning of carpets or
rugs, except normal vacuuming, or moving of furniture and other special
services. Janitor service will not be furnished on nights when rooms are
occupied after 9:30 P.M. Window cleaning shall be done only by Landlord and only
between 6:00 A.M. and 5:00 P.M.
10. Tenant shall not use, keep or permit to be used or kept any food or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason of noise, odors, and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building. No Tenant shall make or permit to be made any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring Buildings
or Premises or those having business with them, whether by the use of any
musical instrument, radio, phonograph, unusual
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noise, or in any other way. No Tenant shall throw anything out of doors or down
the passageways.
11. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
for general office purposes. No tenant shall occupy or permit any portion of his
Premises to be occupied as an office for a public stenographer or typist, or for
the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a
medical office, or as a barber shop or manicure shop. No Tenant shall engage or
pay any employees on the Premises nor advertise for laborers giving an address
at the Premises. The Premises shall not be used for lodging or sleeping or for
any illegal purposes.
12. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
13. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of Landlord. The location of telephones, call boxes
and other office equipment affixed to the Premises shall be subject to the
approval of the Landlord.
14. All keys to offices, rooms, toilet rooms, and the Building and parking
structure shall be obtained from Landlord's Building Management Office and
Tenant shall not from any other source duplicate, obtain keys or have keys made.
The Tenant upon termination of the tenancy shall deliver to the Landlord the
keys of the offices, rooms and toilet rooms which shall have been furnished, and
shall pay the Landlord the cost of replacing same or of changing the lock or
locks opened by such lost key if Landlord deems it necessary to make such
change.
15. No Tenant shall lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by the Landlord. The expense of repairing any damage
resulting from a violation of this rule or removal of any floor covering shall
be borne by the Tenant by whom, or by whose contractors, employees or invitees,
the damage shall have been caused.
16. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by Landlord.
17. On Saturdays, Sundays, legal holidays, and on other days between the
hours of 6:00 P.M. and 7:30 A.M. the following day, access to the Building, or
to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Landlord
reserves the right to prevent access to the
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Building during the continuance of the same by closing the doors or otherwise,
for the safety of the Tenants and protection of property in the Building and the
Building. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building on Saturdays, Sundays, legal holidays, and on other
days between the hours of 6:00 P.M. and 7:30 A.M., and during such further hours
as Landlord may deem advisable for the adequate protection of said Building and
the property of its tenants.
18. Landlord shall furnish heating and air conditioning during the hours of
7:30 A.M. and 6:00 P.M. Monday through Friday, except for holidays. In the event
Tenant requires heating and air conditioning during off-hours, Saturdays,
Sundays or holidays, Tenant shall give Landlord at least forty-eight (48) hours
notice of such requirement and Tenant shall pay for services at the rate which
shall be published from time to time by Landlord. Landlord will automatically
switch off all non-emergency lights except during the hours of 7:30 A.M. and
6:00 P.M. Monday through Friday, except for holidays. Light switches in Tenants'
Premises will allow Tenant to restore lights at any time, but lights will
automatically switch off at pre-determined intervals.
19. Tenant shall see that the doors of the Premises are closed and securely
locked before leaving the Building and must observe strict care and caution that
all water faucets or water apparatus are entirely shut off before Tenant or
Tenant's employees leave the Building, and that all electricity shall likewise
be carefully shut off, so as to prevent waste or damage, and for any default or
carelessness Tenant shall make good all injuries sustained by other tenants or
occupants of the Building or Tenant.
20. Tenant shall not disturb or canvass any occupant of the Building nor
shall Tenant solicit in the Building, and Tenant shall cooperate to prevent any
such disturbance, canvassing, and/or solicitation.
21. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or shall in any manner do any act in violation of any of the
rules and regulations of the Building.
22. The requirements of Tenant will be attended to only upon application at
the Office of the Building. Employees of Landlord shall not perform any work or
do anything outside of their regular duties unless under special instructions
from the Landlord, and no employee will admit any person (Tenant of otherwise)
to any office without specific instructions from the Landlord.
23. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises or in the Building without the written
consent of the Landlord.
24. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and the street address of the Building
of which the Premises are a
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part. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
25. Tenant agrees that it shall comply with all fire security regulations
that may be issued from time to time by Landlord and Tenant also shall provide
Landlord with the name of a designated responsible employee to represent Tenant
in all matters pertaining to such fire or security regulations.
26. Landlord reserves the right by written notice to Tenant to rescind,
alter or waive any rule or regulation at any time prescribed for the Building
when, in Landlord's judgment, it is necessary, desirable or proper for the best
interest of the Building and its tenants.
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EXHIBIT D
"Operating Costs", "Liability Costs" and "Taxes shall exclude the
following items:
(a) costs, including marketing costs, legal fees, space planners' fee,
advertising and marketing expenses, and brokerage fees incurred in connection
with the original construction or development, or original or future leases of
the Building, and costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant improvements made for new
tenants in the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of the Building (excluding, however, such costs relating to any common areas of
the Real Property or parking facilities);
(b) except as allowed pursuant to the terms of Section 6(a)(4) of the
Lease; depreciation, costs of capital repairs and alterations, and costs of
capital improvements and equipment:
(c) interest and principal payments on mortgages and other debt costs, if
any, except in connection with costs which are allowed pursuant to item (iv) of
Section 8.1(e) of the Lease;
(d) costs for which the Landlord is reimbursed by any tenant or occupant of
the Building (other than pursuant to provisions comparable to Article 8 of the
Lease) or by insurance by its carrier or any tenant's carrier or by anyone else,
and electric power costs for which any tenant directly contracts with the local
public service company;
(e) any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(f) costs associated with the operation of the business of the partnership
or entity which constitutes the Landlord, as the same are distinguished from the
costs of operation of the Real Property (which shall specifically include, but
not be limited to, accounting costs associated with the operation of the Real
Property). Costs associated with the operation of the business of the
partnership of entity which constitutes the Landlord, including costs of
partnership accounting and legal matters, costs of defending any lawsuits with
any mortgagee (except as the actions of the Tenant may be in issue), costs of
selling, syndicating, financing, mortgaging or hypothecating any of the
Landlord's interest in the Project, and costs incurred in connection with any
disputes between Landlord and its employees, between Landlord and Building
management, or between Landlord and other tenants or occupants, and Landlord's
general corporate overhead and general and administrative expenses;
(g) the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Building unless such wages
and benefits are prorated to reflect time spent on operating and managing the
Building vis-a-vis time spent on matters unrelated to operating and managing the
Building; provided, that in no event shall Operating Expenses for purposes of
this Lease include wages and/or benefits attributable to personnel above the
level of Building manager;
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<PAGE> 47
(h) amount paid as ground rental for the Real Property by the Landlord
(except to the extent Operating Expenses which are allowed hereunder are
included in the ground rental);
(i) except for a Building management fee to the extent allowed pursuant to
item (m), below, overhead and profit increment paid to the Landlord or to
subsidiaries or affiliates of the Landlord for services in the Building to the
extent the same exceeds the costs of such services rendered by qualified,
first-class unaffiliated third parties on a competitive basis;
(j) any compensation paid to clerks, attendants or other persons in
commercial concessions operated by the Landlord, provided that any compensation
paid to any concierge at the Building shall be includable as an Operating
Expense;
(k) rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment which if purchased the cost of which would
be excluded from Operating Expenses as a capital cost, except equipment not
affixed to the Building which is used in providing janitorial or similar
services and, further excepting from this exclusion such equipment rented or
leased to remedy or ameliorate an emergency condition in the Building;
(l) all items and services for which Tenant or any other tenant in the
Building reimburses Landlord (except pursuant to provisions comparable to
Article 6 of the Lease) or which Landlord provides selectively to one or more
tenants (other than Tenant) without reimbursement;
(m) management fees equal to (A) five percent (5%) of the gross rentals
collected for the Building;
(n) any costs expressly excluded from Operating Expenses elsewhere in this
Lease;
(o) costs arising from the gross negligence or willful misconduct of
Landlord or its agents, employees, vendors, contractors, or providers of
materials or services;
(p) costs incurred to comply with laws relating to the monitoring, testing,
reporting, management, and removal of Hazardous Material (as defined under
applicable law) which was in existence in the Building or on the Real Property
prior to the Commencement Date, and was of such a nature that a federal, State
or municipal governmental authority, if it had then had knowledge of the
presence of such Hazardous Material, in the state, and under the conditions that
it then existed in the Building or on the Real Property, would have then
required the monitoring, testing, reporting, management, or removal of such
Hazardous Material or other remedial or containment action with respect thereto;
and costs incurred to monitor, test, report, manage, remove, remedy, contain, or
treat Hazardous Material, which Hazardous Material is brought into the Building
or onto the Real Property after the date hereof by Landlord or any other tenant
of the Real Property and is of such a nature, at that time, that a federal,
State or municipal governmental authority, if it had then had knowledge of the
presence of such Hazardous Material, in the state, and under the conditions,
that it then exists in the Building or on the Real Property, would have
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<PAGE> 48
then required the monitoring, testing, reporting, management, or removal of such
Hazardous Material or other remedial or containment action with respect thereto;
(q) costs arising from Landlord's charitable or political contributions;
(r) repairs or replacements to any utility systems which are wholly
dedicated to the use of a single other tenant or concession operator;
(s) reserves for future expenses beyond current year anticipated expenses;
(t) any recalculation of or additional Operating Expenses actually incurred
prior to the year in which the Landlord proposes that such costs be included in
Operating Expenses, and
(u) costs relating to the removal, treatment, abatement, encapsulation or
entombment of asbestos in the Building.
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<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. FUNDAMENTAL LEASE PROVISIONS..............................................1
2. PREMISES..................................................................3
3. TERM......................................................................3
4. BASIC RENT................................................................4
5. LATE CHARGES..............................................................4
6. ADDITIONAL RENT...........................................................5
7. SECURITY DEPOSIT..........................................................9
8. COMPLETION...............................................................10
9. USE......................................................................10
10. SERVICE AND UTILITIES....................................................11
11. ENTRY BY LANDLORD........................................................13
12. MAINTENANCE AND REPAIRS..................................................14
13. ALTERATIONS AND ADDITIONS................................................15
14. INDEMNITY................................................................15
15. INSURANCE................................................................16
16. WAIVER OF SUBROGATION....................................................17
17. DAMAGE AND DESTRUCTION...................................................17
18. CONDEMNATION AND OTHER TAKINGS...........................................18
19. LIENS....................................................................19
20. DEFAULTS.................................................................19
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C>
21. REMEDIES.................................................................20
22. COSTS OF SUIT............................................................21
23. SURRENDER OF PREMISES BY TENANT..........................................22
24. SURRENDER OF LEASE.......................................................22
25. TRANSFER OF LANDLORD'S INTEREST..........................................23
26. ASSIGNMENT AND SUBLETTING................................................23
27. INVOLUNTARY ASSIGNMENT...................................................28
28. ATTORNMENT...............................................................29
29. SUBORDINATION............................................................29
30. ESTOPPEL CERTIFICATE.....................................................29
32. NONRECORDABILITY OF LEASE................................................30
33. QUIET ENJOYMENT..........................................................30
34. WAIVER OF REDEMPTION BY TENANT; HOLDING OVER.............................30
35. RULES AND REGULATIONS....................................................31
36. RIGHT TO PERFORMANCE.....................................................31
37. NAME OF BUILDING.........................................................31
38. NOTICES..................................................................32
39. WAIVER...................................................................32
40. MISCELLANEOUS............................................................32
EXHIBIT A DESCRIPTION OF DEMISED PREMISES..................................37
EXHIBIT B PROVISIONS RELATING TO CONSTRUCTION OF THE PREMISES..............38
</TABLE>
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<PAGE> 51
<TABLE>
<S> <C>
EXHIBIT B-1 LANDLORD IMPROVEMENTS............................................39
EXHIBIT C RULES AND REGULATIONS............................................40
EXHIBIT D....................................................................46
</TABLE>
-51-
<PAGE> 1
EXHIBIT 10.13
OFFICE LEASE AGREEMENT
between
FIRST CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C.,
FAIRFAX CORNER ASSOCIATES L.C., BLUE RIDGE ASSOCIATES L.C.,
MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord")
and
DIGITAL COMMERCE CORPORATION
a Delaware corporation
("Tenant")
1
<PAGE> 2
OFFICE LEASE AGREEMENT
THIS OFFICE LEASE AGREEMENT (this "Lease") is made and entered into
this 24th day of January, 2000, by and between FIRST CAMPBELL ASSOCIATES, L.C.,
LOUDOUN CENTER L.C., FAIRFAX CORNER ASSOCIATES L.C., BLUE RIDGE ASSOCIATES L.C.,
MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C., all Virginia limited
liability companies (collectively, "Landlord") and DIGITAL COMMERCE CORPORATION,
a Delaware corporation ("Tenant"), upon all terms set forth in this Lease and in
all Exhibits hereto, to each and all of which terms Landlord and Tenant hereby
mutually agree, and in consideration of One Dollar and other valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
and of the rents, agreements and benefits flowing between the parties hereto, as
follows:
ARTICLE 1
BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS
Section 1.01. Each reference in this Lease to information and
definitions contained in Article 1 and each use of the terms capitalized and
defined in this Section 1.01 shall be deemed to refer to, and shall have the
following meanings:
A. Building: Dulles Overlook
575 Herndon Parkway
Herndon, Virginia 20170
B. Premises: The Premises located on the entire third (3rd) floor
of the Building, as more fully described and shown on the
floor plan attached as Exhibit "A".
C. Term: Commencing on the Commencement Date and shall end five
(5) years after the Rent Commencement Date.
D. Estimated Delivery Date: February 1, 2000.
E. Rent Commencement Date: That date which is ninety (90) days
after the Commencement Date.
F. Expiration Date: The date that is five (5) years after the
Rent Commencement Date.
G. Rentable Area of the Building: 135,375 square feet.
H. Rentable Area of the Premises: 28,575 square feet.
I. Tenant's Proportionate Share: 21.11%.
J. Base Rent: $785,812.50 per year ($65,484.38 per month), which
amount is based upon $27.50 per square foot of Rentable Area
in the Premises per year.
K. Base Operating Expenses Amount: The actual Base Operating
Expenses for the Building incurred during Calendar Year 2000.
L. Base Real Estate Taxes Amount: The actual Real Estate Taxes
assessed against the Building or against Landlord for the
Calendar Year 2000. Appropriate adjustments will be made to
the Base Real Estate Taxes to the extent the real estate tax
assessment used in determining the Base Real Estate Taxes was
not based on a fully assessed value for the Building.
M. Adjustment Factor: Two and one-half percent (2 1/2%).
N. Security Deposit: $300,000.00, subject to adjustment pursuant
to Part 23 of the General Lease Provisions attached hereto as
Exhibit "C".
2
<PAGE> 3
O. Landlord's Address for Notices:
c/o The Peterson Companies L.C.
12500 Fair Lakes Circle
Suite 400
Fairfax, Virginia 22033
Attention: Asset Manager for 575 Herndon Parkway
P. Tenant's Address for Notices:
Before the Commencement Date:
Digital Commerce Corporation
11180 Sunrise Valley Drive
Reston, VA 20191
Attn: Controller
After the Commencement Date:
Digital Commerce Corporation
575 Herndon Parkway, Suite 300
Herndon, VA 20170
Attn: Controller
Q. Lease: Collectively refers to this Office Lease Agreement
together with the following Exhibits which are attached hereto
and incorporated herein by this reference.
Exhibits
"A" -- Floor Plans
"B" -- Leasehold Improvements
"C" -- General Lease Provisions
"D" -- Rules and Regulations
"E" -- Commencement Date Notice
"F" -- Janitorial Cleaning Specifications
R. Broker: Cushman & Wakefield of Virginia, Inc.
ARTICLE 2
DEMISE AND TERM
Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises located in the Building for the Term and subject to the provisions
hereof. During the Term, Tenant and its agents, employees, and invitees, shall
also have the nonexclusive right with others designated by Landlord to the use
of the common areas of the Building and of the land on which the Building is
located for the common areas' intended and normal purpose. Common areas include
elevators, sidewalks, parking areas, driveways, hallways, stairways, public
bathrooms, common entrances, lobby, and other similar public areas and access
ways. The common areas may be changed by Landlord from time-to-time. The Term of
this Lease shall be for the period specified in Section 1.01 and shall begin at
midnight on the Commencement Date (as defined in the General Lease Provisions)
and shall, unless this Lease is sooner terminated in accordance with the
provisions of this Lease, end at midnight on the Expiration Date, provided,
however, that if for any reason the Expiration Date shall be a day other than
the final day of a calendar month then, the Term of this Lease shall be extended
so that it will expire on the last day of the calendar month in which the
Expiration Date takes place.
3
<PAGE> 4
ARTICLE 3
RENEWAL OPTION
Subject to the expansion rights of other tenants in the Building,
Tenant shall have the right to renew and extend the Term of this Lease with
respect to the Premises then subject to this Lease for the Renewal Term (herein
so called) described below, upon and subject to the following terms and
conditions:
1. Tenant may extend this Lease for one (1) Renewal Term of five (5)
years by Tenant's giving written notice thereof to Landlord no later than twelve
(12) months prior to the expiration of the original Term. The Renewal Term shall
commence immediately upon the expiration of the original Term and upon exercise
by Tenant of its right to a Renewal Term, the Expiration Date of the Term shall
automatically become the last day of the Renewal Term. If Tenant does not
exercise its rights to a Renewal Term in a timely manner, Tenant's failure shall
conclusively be deemed a waiver of its rights to a Renewal Term.
2. The exercise by Tenant of its right to the Renewal Term must be
made, if at all, by written notice executed by Tenant and delivered to Landlord
on or before the date set forth above, but not earlier than eighteen (18) months
prior to the expiration of the original Term. Once Tenant shall exercise its
rights to the Renewal Term, Tenant may not thereafter revoke such exercise.
Tenant shall not have the right to exercise the Renewal Term if an Event of
Default under this Lease has occurred and is then continuing, either at the time
Tenant gives notice of its election or immediately prior to the commencement of
the Renewal Term.
3. Tenant shall take the Premises "as is" for the Renewal Term and
Landlord shall have no obligation to make any improvements or alterations to the
Premises.
4. Base Rent for the first year of the Renewal Term shall be $30.35 per
square foot of Rentable Area of the Premises. The Base Rent during the Renewal
Term shall thereafter escalate annually on the anniversary date of the
commencement of the Renewal Term in accordance with Section 3.02 of the General
Lease Provisions.
5. Subject to subparagraph 4 above, the leasing of the Premises for the
Renewal Term shall be upon the same terms and conditions as are applicable for
the original Term, and shall be upon and subject to all of the provisions of
this Lease, including, without limitation, the obligation of Tenant to pay
Tenant's Additional Rent under the Lease.
ARTICLE 4
ALLOWANCES GRANTED TO TENANT
In consideration of Tenant's full, prompt and faithful observance and
performance of its obligations under the Lease, and in reliance thereon,
Landlord hereby grants to Tenant an allowance of $10.00 per square foot of
Rentable Area on the third (3rd) floor of the Premises resulting in a total
allowance of $285,750.00 (the "Tenant Allowance") to be applied by Landlord to
the costs to be borne by Tenant pursuant to Exhibit "B" to the Lease. Tenant
shall use one-half (1/2) of the Tenant Allowance to purchase systems furniture
and case goods from Computer Associates. The balance of the Tenant Allowance may
be used by Tenant to defray other hard and soft costs related to the Premises
including cabling and wiring of the Premises and other costs relating to
Tenant's relocation and moving, including the services of consultants related to
Tenant's project. Landlord shall reimburse Tenant for such costs from the Tenant
Allowance within fifteen (15) days after: (i) presentation to Landlord of
receipts and invoices for such work and/or materials, and (ii) Landlord shall
have received copies of satisfactory final lien waivers from all contractors,
subcontractors and materialmen with respect to alterations, installations and
other work performed in and about the Premises. Landlord shall not be obligated
to release any Tenant Allowance money if Tenant has not posted the entire
Security Deposit, or if any other Event of Default has occurred. Landlord shall
have a security lien as provided in Part 24 of the General Lease Provisions.
Provided that no Event of Default under this Lease has occurred, Tenant
may elect to apply up to $91,440.00 of the balance of the Tenant Allowance
toward monthly Base Rent until the said portion of the Tenant Allowance is
exhausted; provided, however, that the amount so applied to
4
<PAGE> 5
Base Rent in any month shall not exceed one-half (1/2) of the amount of Base
Rent payable for that month. Tenant shall notify Landlord of said election
within thirty (30) days of the execution date of this Lease by written notice
specifying the amount to be so applied (up to one-half (1/2) of monthly Base
Rent) and authorizing Landlord to deduct the amount from the Tenant Allowance.
Such notice by Tenant shall be irrevocable.
Without limiting any remedies available to Landlord for Tenant's
Default hereunder, in the Event of Default hereunder such that (in each case,
whether with or without legal proceedings) Landlord recovers possession of the
Premises, or such that Tenant's right to possession of the Premises is
terminated, or such that this Lease is terminated, then, in such event, the then
unrecovered portion of the Tenant Allowance shall become immediately due and
payable to Landlord. For purposes of the preceding sentence, the Tenant
Allowance shall be deemed recovered on a straight-line basis over the Term with
each full payment of Base Rent, commencing on first month after the Rent
Commencement Date in which Tenant pays full Base Rent. For example, assuming
that none of the Tenant Allowance is applied to Base Rent in accordance with
this Article 4 and further assuming that the Premises is not expanded pursuant
to Article 5 hereof, if this Lease is terminated as a result of Tenant's default
after Tenant has paid full Base Rent for twenty-four months, then the
unrecovered portion of the Tenant Allowance would be 60%, calculated as
((60-24)/60) *100.
ARTICLE 5
RIGHT OF FIRST OFFER; EXPANSION RIGHT
Section 5.01 From the execution date of this Lease until February 15,
2000 (the "Expansion Period"), and provided that Tenant is not in Default under
this Lease at the applicable time, Tenant, shall, in the manner described by and
in compliance with the terms and provisions of this Section 5.01, have a
non-assignable and non-transferable right of first offer to expand the Premises
to include all or any portion of the Expansion Space (hereinafter defined).
Notwithstanding the foregoing, said right of first offer to expand the Premises
shall be assigned to an Affiliate upon assignment of Tenant's entire interest in
this Lease to that Affiliate, in accordance with and subject to Section 15.04 of
the General Lease Provisions.
(a) If at any time during the Expansion Period, Landlord shall either
(i) receive a bona-fide offer from a third party to lease all or a portion of
the Expansion Space, which Landlord is prepared to accept, or (ii) prepare a
proposal pertaining to all or a portion of the Expansion Space which Landlord is
prepared to offer as a lease proposal to a third party, then in either such
event, Landlord shall send a written notice (the "Offer Notice") to Tenant of
such proposal. The Offer Notice shall set forth in reasonable detail the size or
portion of the Expansion Space subject to the Offer Notice, and shall contain
(or be deemed to contain) an offer to Tenant to lease the portion of the
Expansion Space subject to the Offer Notice at the same rental rate and on the
same terms and conditions set forth in the Lease, except that the Tenant
Allowance applicable to the Expansion Space shall be $5.00 per square foot of
Rentable Area in the Expansion Space and the Rent Commencement Date applicable
to the Expansion Space shall be sixty (60) days after the later of: (i) the date
of the Offer Notice, or (ii) the date Landlord delivers or tenders possession of
the Expansion Space to Tenant. Tenant may elect to accept the Offer Notice, by
giving written notice to Landlord of its election not more than five (5)
business days after receipt by Tenant of the Offer Notice. Any election by
Tenant shall be irrevocable.
(b) In the event Tenant responds within the five (5) business day
period and elects to accept the proposal set forth in the Offer Notice, then
this Lease shall automatically be amended to include within the Premises,
effective as of the effective date set forth in the Offer Notice, the portion of
the Expansion Space subject to the Offer Notice. The rental rate, terms and
conditions of this Lease shall apply to the portion of the Expansion Space
covered by the Offer Notice except that the Tenant Allowance applicable to the
Expansion Space shall be $5.00 per square foot of Rentable Area in the Expansion
Space, and the Rent Commencement Date applicable to the Expansion Space shall be
sixty (60) days after the later of: (i) the date of the Offer Notice, or (ii)
the date Landlord delivers or tenders possession of the Expansion Space to
Tenant. Any election by Tenant shall be irrevocable. The provisions of this
subparagraph shall be self-enforcing without the need for any further act by
Landlord or Tenant. However, upon request by either party, Landlord and Tenant
shall execute an amendment to this Lease confirming such
5
<PAGE> 6
exercise (including, without limitation, the increased Rentable Area of the
Premises, Security Deposit, Base Rent and Tenant's Proportionate Share).
(c) Should Tenant either fail to respond within the five (5) business
day period, or elects not to accept the Offer Notice, then Tenant shall be
deemed to have elected not to accept the Offer Notice, the portion of the
Expansion Space subject to the Offer Notice shall thereafter be automatically
excluded from the Expansion Space and the rights of Tenant under this Lease, as
they pertain to the portion of the Expansion Space which is subject to the Offer
Notice, shall automatically terminate and be of no further force or effect. The
provisions of this subparagraph shall be self-enforcing without the need for any
further act by Landlord or Tenant.
Section 5.02:
(a) Provided Tenant is not in Default under this Lease at the
applicable time, and further provided that Landlord has not sent Tenant any
Offer Notice, Tenant, during the Expansion Period, shall, in the manner
described by and in compliance with the terms and provisions of this Section
5.02, have a non-assignable and non-transferable right to expand the Premises to
include the entire Expansion Space. Notwithstanding the foregoing, said right to
expand the Premises shall be assigned to an Affiliate upon assignment of
Tenant's entire interest in this Lease to that Affiliate, in accordance with and
subject to Section 15.04 of the General Lease Provisions. Said expansion right
may be exercised as to the entire Expansion Space only, and may not be exercised
as to less than the whole Expansion Space.
(b) Tenant may exercise its right to expand the Premises to include the
Expansion Space by giving written notice (the "Election Notice") to Landlord of
its election no later than the last day of the Expansion Period. Upon Landlord's
receipt of Tenant's Election Notice, this Lease shall automatically be amended
to include within the Premises the Expansion Space. The rental rate, terms and
conditions of this Lease shall apply to the Expansion Space except that the
Tenant Allowance applicable to the Expansion Space shall be $135,645.00 (being
$5.00 per square foot of Rentable Area in the Expansion Space), and the Rent
Commencement Date applicable to the Expansion Space shall be ninety (90) days
after the later of: (i) the date of the Election Notice, or (ii) the date
Landlord delivers or tenders possession of the Expansion Space to Tenant. Any
election by Tenant shall be irrevocable. The provisions of this subparagraph
shall be self-enforcing without the need for any further act by Landlord or
Tenant. However, upon request by either party, Landlord and Tenant shall execute
an amendment to this Lease confirming such exercise (including, without
limitation, the increased Rentable Area of the Premises, Security Deposit, Base
Rent and Tenant's Proportionate Share).
(c) Should Tenant fail to exercise its rights by delivering an Election
Notice to Landlord prior to the expiration of the Expansion Period, then the
rights of Tenant under this Lease to the Expansion Space shall automatically
terminate. The provisions of this subparagraph shall be self-enforcing without
the need for any further act by Landlord or Tenant.
Section 5.03 If Tenant elects to expand the Premises, as provided in
Sections 5.01 or 5.02 hereof, then:
(i) The Expiration Date of the Lease shall automatically be
extended by two (2) years so that the Term shall be seven (7) years from and
after the Rent Commencement Date of the original Premises; and
(ii) The Security Deposit shall be increased by an amount
equal to $11.00 per square foot of Rentable Area of Expansion Space incorporated
within the Premises (the "Additional Security"). The Additional Security shall
be received by Landlord within five (5) business days after the date of Tenant's
written Election Notice or the date of Tenant's written notice per Section
5.01(b) hereof, whichever is applicable. If the Additional Security is not
received within such five (5) business day period, then Tenant's election to
expand the Premises and Tenant's further rights under this Article 5 shall be
considered null and void. Provided that Tenant does not Default under this
Lease, then as provided in and subject to Section 23.04 of the Lease, on each
annual anniversary of the original Premises' Rent Commencement Date, the
Security Deposit and the Additional Security shall be reduced on a straight-line
basis so that on the first day of the last year
6
<PAGE> 7
of the original Term the total amount of the Security Deposit shall be the sum
of $100,000.00 plus $3.69 per square foot of Rentable Area of Expansion Space
incorporated within the Premises; and
(iii) The first sentence of Article 3 hereof shall be
automatically amended by deleting the words "Subject to the expansion rights of
other Tenants in the Building"; and
(iv) The first sentence of subsection (4) of Article 3 hereof
shall be automatically replaced with the following: "Base Rent for the first
year of the Renewal Term shall be $31.89 per square foot of Rentable Area of the
Premises"; and
(v) Notwithstanding anything herein to the contrary, for each
month between the Commencement Date and the Rent Commencement Date, and for each
month following the Rent Commencement Date for which any portion of the Tenant
Allowance is applied toward monthly Base Rent (the "Initial Period"), Tenant
shall pay on a monthly basis, without demand, as Additional Rent for the
Premises, one-twelfth (1/12th) of the Tenant's Proportionate Share of: (i) the
Operating Expenses (as defined in Section 4.01 (b) of the General Lease
Provisions), and (ii) the Real Estate Taxes (as defined in Section 4.02 (c) of
the General Lease Provisions). The terms and conditions of the General Lease
Provisions pertaining to Additional Rent shall apply during the Initial Period
except that no base amount shall be deducted from the Operating Expenses or the
Real Estate Taxes for purposes of calculating Tenant's Additional Rent during
the Initial Period. After the Initial Period, Additional Rent shall be payable
in accordance with the General Lease Provisions.
Section 5.04 As used in this Article 5, the term "Expansion Space"
shall mean and refer to approximately 27,129 square feet of Rentable Area in the
Building comprising the entire second floor of the Building as the same is shown
on Exhibit "A-1" attached hereto. If Tenant elects to expand the Premises as
provided in this Article 5, Tenant shall take the Expansion Space in its "as is"
and "where is" condition.
ARTICLE 6
GENERAL LEASE PROVISIONS
As set forth in Section 1.01 of the Office Lease Agreement, this Lease
includes and incorporates the General Lease Provisions attached hereto as
Exhibit "C". As more fully set forth in the General Lease Provisions, this Lease
sets forth the entire agreement between Landlord and Tenant relating to the
Premises and the Building. The parts of this Lease which are written, printed,
or typewritten shall have no greater force or effect than and shall not control
over other parts of the Lease, but all parts shall be given equal effect.
[SIGNATURES FOLLOW ON NEXT PAGE.]
7
<PAGE> 8
WITNESS the following signatures and seals of Landlord and Tenant made
as of the date first above written.
LANDLORD:
FIRST CAMPBELL ASSOCIATES L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
LOUDOUN CENTER L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
FAIRFAX CORNER ASSOCIATES L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
BLUE RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
MIRROR RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
KING STREET II L.C.
a Virginia limited liability company
By: /s/ William E. Peterson
-----------------------------------
Name: William E. Peterson
Its: Manager
TENANT:
DIGITAL COMMERCE CORPORATION
a Delaware corporation
By: /s/ William H. Seippel
-----------------------------------
Name: William H. Seippel
Its: Chief Financial Officer and
Director
8
<PAGE> 9
EXHIBIT "A" TO LEASE
Floor Plan of the Premises
Third Floor of Building
[FLOOR PLAN OF THE PREMISES]
A-1
<PAGE> 10
EXHIBIT "A-1" TO LEASE
Floor Plan of the Expansion Space
[FLOOR PLAN OF THE EXPANSION SPACE]
A-1-1
<PAGE> 11
EXHIBIT "B" TO LEASE
Between
FIRST CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C.,
FAIRFAX CORNER ASSOCIATES L.C., BLUE RIDGE ASSOCIATES L.C.,
MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord")
and
DIGITAL COMMERCE CORPORATION
("Tenant")
Leasehold Improvements
This Exhibit "B" is attached to and made a part of that certain Office
Lease Agreement dated January 24, 2000 (the "Lease"), between FIRST CAMPBELL
ASSOCIATES, L.C., LOUDOUN CENTER L.C., FAIRFAX CORNER ASSOCIATES L.C., BLUE
RIDGE ASSOCIATES L.C., MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord"), and DIGITAL COMMERCE CORPORATION, ("Tenant"). The
terms used in this Exhibit that are defined in the Lease shall have the same
meanings as provided in the Lease.
The purpose of this Exhibit "B" is to set forth the relative rights and
obligations of Landlord and Tenant with respect to the construction and
installation of the initial tenant improvements, it being acknowledged by both
parties that such initial tenant improvements, if any, shall be constructed
after the Commencement Date.
A. DEFINITIONS
1. "Building Standard" means the allowances, materials, finishes and
design services required by Landlord for the Building as specified on Schedule 1
attached hereto and incorporated herein.
2. "Non-Building Standard" means all materials, finishes, and design
services used in connection with the construction and installation of the
Leasehold Improvements which exceed Building Standard allowances or deviate from
Building Standard specifications.
3. "Landlord's Contractor" means the person or firm from time to time
selected by Landlord to construct and install the Leasehold Improvements in the
Premises.
4. "Leasehold Improvements" shall mean the aggregate of Building
Standard and Non-Building Standard work in the Premises required by the Approved
Plan.
5. "Landlord's Architect" shall mean the architect or space planner
engaged by Landlord to prepare the plans and specifications for the Leasehold
Improvements.
6. "Approved Plan" shall mean the plan for Leasehold Improvements
approved by Landlord and Tenant pursuant to Paragraph D.4. hereof.
B. GENERAL PROVISIONS
1. Unless otherwise agreed to in writing by Landlord and Tenant, all
work involved in the design and construction of the Leasehold Improvements shall
be carried out by Landlord's Architect, and Landlord's Contractor under the sole
direction of Landlord. Tenant shall cooperate with Landlord, Landlord's
Contractor, and Landlord's Architect to promote the efficient and expeditious
completion of such work so that completion may occur no later than May 1, 2000
(the "Estimated Completion Date").
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2. On or before the Estimated Completion Date, Landlord shall use its
best efforts to substantially complete the Leasehold Improvements which are to
be constructed or installed by Landlord in the Premises pursuant to the Approved
Plan.
3. If the cost to construct the Leasehold Improvements exceeds the
Tenant Allowances stipulated in the Lease, Landlord shall have no obligation to
commence installation of any Leasehold Improvements in the Premises or continue
construction of the Leasehold Improvements until Landlord receives Tenant's
advance payment as described in this Exhibit. Tenant agrees that in the event of
default of payment thereof, Landlord (in addition to other remedies) shall have
the same rights as in the Event of Default of payment of Rent under the Lease
and all delays in the completion of the Leasehold Improvements resulting from
Tenant's non-payment of such deficiency shall constitute Tenant Delay.
C. DESIGN
1. Tenant shall devote such time in consultation with Landlord's
Architect as reasonably necessary to enable Landlord's Architect to develop
Tenant's complete working drawings and specifications of the Leasehold
Improvements.
2. All design, construction and installation shall conform to the
requirements of applicable building, plumbing and electrical codes and the
requirements of any authority having jurisdiction over, or with respect to, such
work.
3. All architectural, mechanical and electrical plans and
specifications must be approved by Landlord. Any changes in the Approved Plan
must also be approved by Landlord. Tenant shall not be permitted to modify the
Building in any way, including but not limited to the structural, mechanical and
electrical systems, except as approved by Landlord on the Approved Plan. No
alterations by Tenant to the Leasehold Improvements shall be allowed at any time
except as provided in the Lease.
D. PROCEDURES FOR COMPLETION OF LEASEHOLD IMPROVEMENTS
The following procedures shall be followed in completing the Leasehold
Improvements.
1. As soon as reasonably practical after the execution of the Lease,
Tenant shall meet the Landlord's Architect and provide information for design of
a space plan for the Premises.
2. Landlord's Architect shall complete the space plan and submit the
same to Tenant and Landlord approval. Within ten (10) business days after
Tenant's receipt of such space plan, Tenant shall notify Landlord whether Tenant
approves or disapproves the same.
3. Upon approval of the space plan by Tenant, Landlord shall cause a
preliminary budget to be prepared indicating the estimated total design and
construction costs to construct the space plan. The budget will indicate the
estimated costs to be borne by both Landlord and Tenant, pursuant to the
allowances set forth in this Lease. Tenant acknowledges that the budget is
merely an estimate of the anticipated costs to improve the Premises generally in
accordance with the space plan, and that the budget is subject to change pending
completion of all design and construction work.
4. Upon approval of the space plan and budget by Tenant and Landlord,
Landlord's Architect shall be authorized to complete architectural, mechanical,
and electrical working drawings and specifications. Tenant shall provide
Landlord's Architect with any additional information needed for completion of
the working drawings.
5. Landlord's Architect shall complete working drawings and
specifications and submit the same to Tenant and Landlord for approval. Within
ten (10) business days after Tenant's receipt of such working drawings and
specifications, Tenant shall notify Landlord in writing as to whether Tenant
approves or disapproves such working drawings and specifications.
6. Upon approval of working drawings by Tenant and Landlord, Landlord
shall, within a reasonable period, have the working drawings bid by several
contractors approved by Landlord.
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Landlord will submit the construction pricing along with all other estimated
costs for design, engineering, permits and Landlord's construction management
fees (not to exceed three percent (3%)) to Tenant for Tenant's approval,
indicating the estimated costs, if any, to be borne by Tenant. Within ten (10)
business days after Tenant's receipt of Landlord's price, Tenant shall notify
Landlord in writing as to whether Tenant approves or disapproves of Landlord's
price. If Tenant fails to notify Landlord within such ten (10) business day
period, Tenant shall be deemed to have approved Landlord's prices. Tenant's
signature on the working drawings, plans and specifications shall acknowledge
Tenant's full acceptance of the working drawings, plans and specifications and
Tenant's binding obligation to pay for all items shown on or in the same as
priced by Landlord. Tenant's failure to sign the working drawings, plans and
specifications within the ten (10) business day period provided for herein shall
be deemed a "Tenant Delay" pursuant to Paragraph F below. Upon approval of
working drawings and specifications by Tenant and Landlord such drawings and
specifications shall be the Approved Plan.
7. Any costs to be borne by Tenant shall be paid by Tenant to Landlord
as follows:
(a) 50% of Tenant's costs shall be paid prior to the
commencement of construction.
(b) 50% of Tenant's costs shall be paid upon substantial
completion of the Leasehold Improvements.
8. Landlord and Landlord's Contractor shall seek all necessary permits
for construction of the Leasehold Improvements. As soon as the permits required
for construction have been obtained, Landlord shall authorize Landlord's
Contractor to commence construction of Leasehold Improvements.
9. In the event Tenant desires to make any changes or revisions to the
Approved Plan, then any delay in the furnishing, delivery or installation of any
such changed items, including all delays in the revision or working drawings and
specifications, shall be deemed Tenant Delay. The increased cost of such
changes, including any changes by the Landlord's Architect or Contractor, shall
be due from Tenant upon the submission of pricing for such changed items.
E. DELIVERY OF PREMISES
1. Tenant is permitted to make periodic inspections of the Premises
during construction provided that such inspections are made during reasonable
business hours and Tenant is accompanied by a representative of Landlord or has
received Landlord's approval. If Tenant enters the Premises or non-public areas
of the Building without Landlord's approval, Tenant shall be deemed to be
trespassing upon the Premises or non-public areas of the Building and Landlord
shall not be liable for any damage or injury sustained by Tenant, or any of
Tenant's agents, representatives or employees arising from Tenant's unauthorized
entry upon the Premises or non-public areas of the Building.
2. Prior to delivery of possession of the Premises to Tenant or
acceptance of the Premises by Tenant, a final inspection of the Premises shall
be made by Tenant, Landlord, Landlord's Architect, and Landlord's Contractor to
make certain that construction was accomplished in substantial accordance with
the Approved Plan. A punch-list of items which require completion or correction
shall be prepared as a result of final inspection, if necessary. Landlord's
Architect shall have authority to determine when, in his best judgment,
substantial completion of the Leasehold Improvements has been accomplished.
3. Tenant shall be given possession of the Premises on the Commencement
Date. Landlord shall provide Tenant with reasonable advance notice of the
anticipated date of substantial completion if different than the Estimated
Completion Date. Landlord will promptly complete all punch-list items.
4. Landlord's Contractor shall be responsible for obtaining the final
inspections and all necessary governmental approvals which are required for
lawful occupancy of the Premises, including the non-residential use permit.
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5. Nothing contained in this Section E shall be deemed to grant Tenant
any authority to direct Landlord's Architect or Landlord's Contractor in the
performance of their duties during the construction of the Premises.
F. TENANT DELAY
Tenant's obligation for payment of Rent under this Lease shall commence
on the Rent Commencement Date, unless such date has been changed and
acknowledged in writing by Landlord and Tenant.
Landlord shall not be responsible for any delays caused by Tenant which
result in substantial completion of the Leasehold Improvements later than the
Estimated Completion Date nor shall the Commencement Date or the Rent
Commencement Date be modified for such delay. Such delays include, but are not
limited to the following, all such delays being referred to as "Tenant Delay":
1. Tenant's failure to comply with the procedures for completion of the
Leasehold Improvements outlined in this Exhibit on a timely basis;
2. Tenant's request for changes or modifications to the work after the
development of the Approved Plan;
3. Late delivery of or inability to obtain materials required for
Non-Building Standard improvements, provided Landlord informed Tenant of such
issues prior to the start of construction, but in no event shall Landlord be
liable for the delay;
4. Building code problems related to Non-Building Standard design or
construction, provided Landlord's Architect informed Tenant of such issues prior
to completion of the working drawings, but in no event shall Landlord be liable
for the delay; and
5. The performance of any work by any person or entity employed or
retained by Tenant.
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EXHIBIT "B" - SCHEDULE 1
BUILDING STANDARD WORKLETTER
DULLES OVERLOOK OFFICE BUILDING
The following shall constitute the general description and minimum
quality of Building Standard Work, which are utilized in the construction of
Leasehold Improvements. Tenant, at its sole cost (which shall be reimbursable
from the Tenant Allowance, to the extent available), shall have the right, after
consultation with and reasonable approval of the Landlord, to make reasonable
substitutions for specific items described herein, provided that such
substitutions meet or exceed Building Standard Work.
A. Partitions
1. Interior partitions will be constructed of 2 1/2" metal studs
at 24" on center, from floor slab to the underside of the
finished ceiling, with 1/2" gypsum wallboard panels with taped
and finished joints prepared for paint.
2. Demising and corridor partitions will be constructed of 2 1/2"
studs at 24" on center from floor slab to underside of the
deck above with 1/2" gypsum wallboard panels insulated with
2 1/2" Batt and with taped and finished joints prepared for
paint.
B. Doors
1. Suite Entry Doors shall be single 3'0" x 8'0" solid core,
mahogany veneer with building standard finish, and polished
stainless steel butt hinges, lever handles, and mortised
lockset, keyed to Landlord's master system.
2. Tenant Interior Doors shall be 3'0" x 7'0" solid core,
painted, with brushed stainless steel lever hardware.
3. All doors shall have building standard hollow metal frames.
C. Ceiling
1. Suspended ceilings will consist of a 2' x 2' suspended system
with 5/8" acoustical tile in a 1-inch wide grid. The
approximate finished ceiling height is 8'6".
D. Painting
1. All partitions, columns and walls will be painted with two
coats of flat latex wall paint. Door frames and interior doors
will be painted with two coats of semi-gloss enamel. Suite
entry doors will be stained and sealed and will match the
building standard finish.
E. Flooring
1. Carpeting shall be a minimum of 30 ounce face weight cut pile
or 24 ounce face weight loop in a color chosen by Tenant from
the manufacturer's standard pallet and approved by Landlord.
2. Vinyl composition tile may be substituted for carpet at
selected areas such as work rooms, pantries, supply rooms,
etc. Color may be chosen by Tenant from the manufacturer's
standard pallet as approved by Landlord.
3. Vinyl wall base will be provided in all areas receiving carpet
or floor tile. Color may be chosen by Tenant from the
manufacturer's standard pallet as approved by Landlord.
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F. Electrical
1. Lighting Fixtures will be the Building Standard 2' x 4'
florescent lights.
2. Electric duplex receptacles and light switches will be black
with brushed stainless steel or plastic cover plates to match
existing.
3. Telephone or data outlets will consist of pre-cut openings in
the wall with pull strings up to the ceiling. All
telephone/data wiring and cover plates are by Tenant's
installer and are not considered part of Leasehold
Improvements. All telephone/data outlets shall have cover
plates.
G. Heating, Ventilating, Air Conditioning
1. A variable air volume (VAV) system provides temperature
control to all areas of the Building. Conditioning is provided
through light troffer air boots or ceiling diffusers.
H. Sprinklers and Fire Safety
1. An Automatic Sprinkler and Fire Alarm System will be provided
in accordance with all national and local codes, including
required exit and emergency lights, fire horns, fire hose
cabinets and wall mounted extinguishers as required by local
authorities. All sprinkler heads shall be recessed.
I. Window Coverings
1. Thin-line horizontal blinds shall match the base building
color pallet.
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EXHIBIT "C" TO LEASE
Between
FIRST CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C.,
FAIRFAX CORNER ASSOCIATES L.C., BLUE RIDGE ASSOCIATES L.C.,
MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord")
and
DIGITAL COMMERCE CORPORATION
("Tenant")
General Lease Provisions
Table of Contents
<TABLE>
<S> <C>
PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA................... 1
Section 1.01. Commencement Date........................................ 1
Section 1.02. Delivery of the Premises to Tenant....................... 1
Section 1.03. Rentable Area............................................ 1
Section 1.04. Termination due to Failure to Deliver Possession......... 2
Section 1.05. Early Entry by Tenant.................................... 2
PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT................... 2
PART 3 - BASE RENT........................................................... 2
Section 3.01. Base Rent................................................ 2
Section 3.02. Adjustments to Base Rent................................. 2
Section 3.03. Payment.................................................. 3
Section 3.04. Acceptance of Rent....................................... 3
Section 3.05. Survival of Rent Obligation.............................. 3
Section 3.06. Late Payment Fee......................................... 4
Section 3.07. Interest on Past Due Rent................................ 4
PART 4 - ADDITIONAL RENT..................................................... 4
Section 4.01. Operating Expenses....................................... 4
Section 4.02. Real Estate Taxes........................................ 6
Section 4.03. Parking.................................................. 7
Section 4.04. Additional Rent Defined.................................. 7
Section 4.05. Rent Defined............................................. 7
Section 4.06. Audit by Tenant.......................................... 8
PART 5 - SERVICES BY LANDLORD................................................ 8
PART 6 - UTILITIES........................................................... 9
Section 6.01. Computerized Energy Management System.................... 9
Section 6.02. Water, Heating, Ventilating and Air Conditioning......... 9
Section 6.03. Electricity.............................................. 9
PART 7 - USE................................................................. 10
</TABLE>
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<TABLE>
<S> <C>
PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS....................... 10
Section 8.01. Compliance with Laws..................................... 10
Section 8.02. Observance of Building's Rules and Regulations........... 10
Section 8.03. Hazardous Materials...................................... 10
PART 9 - ALTERATIONS......................................................... 11
Section 9.01. Approval of Landlord..................................... 11
Section 9.02. Ownership of Improvements to Premises.................... 12
PART 10 - LIENS.............................................................. 12
PART 11 - REPAIRS............................................................ 13
Section 11.01. Tenant's Obligations.................................... 13
Section 11.02. Landlord's Obligations.................................. 13
PART 12 - INSURANCE.......................................................... 13
Section 12.01. Tenant's Insurance...................................... 13
Section 12.02. Insurance Rating........................................ 14
Section 12.03. Landlord's Insurance.................................... 15
Section 12.04. Waiver of Subrogation................................... 15
PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY................................... 15
Section 13.01. Damage to Premises...................................... 15
Section 13.02. Damage to Building...................................... 15
Section 13.03. Partial Damage.......................................... 16
Section 13.04. Damage During Last Year of Term......................... 16
Section 13.05. No Landlord Liability................................... 16
Section 13.06. Apportionment of Rent................................... 16
PART 14 - CONDEMNATION....................................................... 16
Section 14.01. Entire Building......................................... 16
Section 14.02. Portion of Building..................................... 17
Section 14.03. Portion of Premises..................................... 17
Section 14.04. Termination of Lease.................................... 17
Section 14.05. Landlord's Right to Award............................... 17
PART 15 - ASSIGNMENT AND SUBLETTING.......................................... 17
Section 15.01. Rights of Tenants....................................... 17
Section 15.02. Excess Rent............................................. 18
Section 15.03. Rights of Landlord...................................... 18
Section 15.04. Affiliate Transfer...................................... 19
PART 16 - INDEMNIFICATION.................................................... 19
PART 17 - SURRENDER OF THEPREMISES........................................... 19
Section 17.01. Condition of Premises................................... 19
Section 17.02. Tenant Holdover......................................... 20
PART 18 - ESTOPPEL CERTIFICATES.............................................. 20
PART 19 - SUBORDINATION AND ATTORNMENT....................................... 21
Section 19.01. Subordination........................................... 21
Section 19.02. Attornment.............................................. 21
Section 19.03. Non-Disturbance Agreement............................... 21
</TABLE>
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<TABLE>
<S> <C>
PART 20 - QUIET ENJOYMENT.................................................... 21
PART 21 - SIGNS AND FURNISHINGS.............................................. 22
Section 21.01. Signs and Advertisements................................ 22
Section 21.02. Furnishings............................................. 22
PART 22 - DEFAULTS AND REMEDIES.............................................. 22
Section 22.01. Events of Default....................................... 22
Section 22.02. Remedies................................................ 23
Section 22.03. Remedies Cumulative..................................... 24
Section 22.04. No Acceptance or Surrender.............................. 24
Section 22.05. Customs and Practices................................... 24
Section 22.06. Payment of Tenant's Obligations by Landlord............. 24
Section 22.07. Default by Landlord..................................... 24
PART 23 - SECURITY DEPOSIT................................................... 25
Section 23.01. Application of Security Deposit......................... 25
Section 23.02. Transfer of Security Deposit............................ 25
Section 23.03. Letter of Credit........................................ 25
Section 23.04. Reduction of Security Deposit........................... 26
PART 24 - LANDLORD'S LIEN AND SECURITY INTEREST.............................. 26
PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES.................................. 26
PART 26 - NOTICES............................................................ 26
PART 27 - MISCELLANEOUS...................................................... 27
Section 27.01. No Partnership.......................................... 27
Section 27.02. Brokers................................................. 27
Section 27.03. Severability............................................ 27
Section 27.04. Trial by Jury........................................... 27
Section 27.05. Force Majeure........................................... 27
Section 27.06. Captions................................................ 28
Section 27.07. Benefit and Burden...................................... 28
Section 27.08. No Representations by Landlord.......................... 28
Section 27.09. Entire Agreement........................................ 28
Section 27.10. No Offer................................................ 28
Section 27.11. Authority............................................... 28
Section 27.12. Changes Requested by Lender............................. 29
Section 27.13. Governing Law and Construction.......................... 29
Section 27.14. Landlord's Liability.................................... 29
Section 27.15. Use of Name of Building................................. 29
Section 27.16. Changes by Landlord..................................... 29
Section 27.17. Time of Essence......................................... 30
Section 27.18. Satellite Dish.......................................... 30
</TABLE>
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PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA
SECTION 1.01. COMMENCEMENT DATE.
The Commencement Date shall be the earliest of the following: (i) the
date on which Tenant takes possession or commences business operations upon the
Premises or any part thereof; or (ii) the date Landlord delivers or tenders the
Premises to Tenant (but in any event not earlier than the Estimated Delivery
Date unless otherwise agreed by Tenant). Upon delivery or tender of the Premises
to Tenant, Landlord and Tenant agree to execute the commencement date notice
(the "Commencement Date Notice") attached hereto as Exhibit "E" and made a part
hereof by this reference. The Premises shall be delivered in its "as is",
broom-clean condition and free of tenants.
SECTION 1.02. DELIVERY OF THE PREMISES TO TENANT.
On or before the Estimated Delivery Date, Landlord shall use its best
efforts to deliver the Premises in broom clean condition to Tenant. In the event
that the Premises are not delivered on or before the Estimated Delivery Date,
for any cause or reason, Landlord, its agents and employees, shall not be liable
or responsible for any damages or liabilities in connection therewith incurred
by Tenant as a result thereof, nor shall the obligations of Tenant provided
herein be excused by reason of any such delay, however, if the failure to
deliver the Premises on the Estimated Delivery Date is due solely to the
unexcused actions of Landlord hereunder (or Landlord's failure to deliver free
of tenants), then, in such event, Tenant's sole right and remedy (subject to
Section 1.04 hereof) shall be to delay the Commencement Date by the number of
days that delivery is delayed solely by the unexcused actions of Landlord, but
in no event shall the Commencement Date be later than the date on which Tenant
takes possession or commences business operations upon the Premises or part
thereof. On or before the Estimated Completion Date, Landlord shall use its best
efforts to substantially complete the Leasehold Improvements to be constructed
or installed by Landlord in the Premises pursuant to Exhibit "B" to this Lease.
In the event that the Leasehold Improvements are not completed on or before the
Estimated Completion Date, for any cause or reason, Landlord, its agents and
employees, shall not be liable or responsible for any damages or liabilities in
connection therewith incurred by Tenant as a result thereof, nor shall the
obligations of Tenant provided herein be excused by reason of any such delay.
The Leasehold Improvements shall be deemed completed upon the date Landlord's
Architect (as defined in Exhibit "B") certifies that the Premises have been
substantially completed, subject to completion of those items, if any, listed on
Landlord's punch list. Nothing herein shall delay or extend the Commencement
Date or the Rent Commencement Date.
SECTION 1.03. RENTABLE AREA.
The term "Rentable Area" as used herein means all floor area in the
Building. The Rentable Area of the Premises is approximately stated in the Basic
Lease Information and shall be specifically calculated by Landlord's Architect
in accordance with Building Owners and Managers Association Method of
Measurement 1996 (ANSI/BOMA Z65.1-1996). Upon such determination by Landlord's
Architect, the Rentable Area of the Premises shall be appropriately adjusted, if
necessary, to reflect the number of square feet of Rentable Area of the Premises
as determined by such calculation. Tenant, at its expense, may have the
measurement of the Premises verified by its architect. If Tenant's measurement
shall determine that the measurement of the Premises does not comply with
ANSI/BOMA Z65.1-1996 and if Landlord's Architect concurs with said
determination, then an appropriate adjustment to the Rentable Area of the
Premises shall be made by Landlord. Tenant must notify Landlord of any such
assertion within ninety (90) days after the Commencement Date or Tenant shall be
deemed to have approved the Rentable Area of the Premises and waived its right
to object. The Rentable Area of the Building and the Premises shall be adjusted,
if necessary, by Landlord's Architect in the event of any future expansion or
modification of the Building and/or the Premises. If the number of square feet
of (i) the Rentable Area of the Building, or (ii) the Rentable Area of the
Premises changes, then Tenant's Proportionate Share shall be adjusted effective
as of the date of any such change.
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SECTION 1.04. TERMINATION DUE TO FAILURE TO DELIVER POSSESSION.
Notwithstanding any contrary provision contained in Section 1.02
hereof, if Landlord has not tendered possession of the Premises to Tenant within
one hundred twenty (120) days from the Estimated Delivery Date, and such delay
was not the result of either (i) delays caused by force majeure or (ii) Tenant
Delay, or (iii) any act or omission of Tenant or anyone for whom Tenant is
responsible, then Tenant may, at its option, by notice in writing to Landlord
given within thirty (30) days thereafter, cancel this Lease, however, Tenant's
rights under this Section shall terminate in the event that Landlord, prior to
its receipt of Tenant's notice exercising its termination right, has notified
Tenant that the Leasehold Improvements are substantially completed. If Tenant
cancels the Lease, Landlord shall return to Tenant, without interest, the first
installment of Base Rent and the Security Deposit (if previously delivered by
Tenant) and the parties shall be discharged from any and all obligations
hereunder. If Tenant fails to provide Landlord with its notice of election
within the time period specified herein, then Tenant shall be deemed to have
irrevocably waived its rights under this Section 1.04.
SECTION 1.05. EARLY ENTRY BY TENANT.
It is acknowledged and agreed that Tenant (and its agents, contractors,
and employees) may enter upon the Premises on the Commencement Date to perform
construction work required by this Lease to be performed by Tenant. Any entry
shall be subject to all of the terms and conditions of this Lease, however,
Tenant's obligations to pay Rent hereunder shall commence on the Rent
Commencement Date. Landlord and Tenant shall cooperate in the scheduling of
their respective work in the Premises so that such work may be completed in a
timely manner.
PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT
Taking possession of the Premises by Tenant shall be conclusive
evidence that Tenant: (i) accepts the Premises as suitable for the purposes for
which they are leased; (ii) accepts the Building and every part and appurtenance
thereof as being in a good and satisfactory condition; and (iii) waives any
defects in the Premises or the Building except for the completion of those
items, if any, on Landlord's punch list or latent defects which reasonably
cannot be discovered by an inspection of the Premises prior to taking
possession. Landlord represents and warrants that as of the Commencement Date
the Base Building and all common areas within the Building shall be in
compliance with all applicable codes and ordinances, including fire and life
safety compliance and the Americans with Disabilities Act.
PART 3 - BASE RENT
SECTION 3.01. BASE RENT.
Tenant shall pay to Landlord monthly, in advance, without demand, on
the first day of each calendar month, the monthly Base Rent specified in the
Basic Lease Information, subject to adjustment as provided in Section 3.02 of
the General Lease Provisions. The first monthly installment of Base Rent shall
be payable by Tenant on the Rent Commencement Date. If the Rent Commencement
Date is a date other than the first day of a calendar month, then Tenant shall
pay to Landlord on the Rent Commencement Date a prorated installment of Base
Rent for the first fractional month of the Term.
SECTION 3.02. ADJUSTMENTS TO BASE RENT.
(a) During the Term and the Renewal Term of this Lease, the Base Rent
shall be adjusted on the first year anniversary of the Rent Commencement Date
and on the first day of each annual anniversary of the Rent Commencement Date
thereafter pursuant to this Section. The dates described in this Section for
computing the adjustment in Base Rent are hereinafter sometimes
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referred to collectively as "Rental Adjustment Dates" and singularly as a
"Rental Adjustment Date". All adjustment to Base Rent required by this Section
3.02 shall be made as hereinafter described:
(1) On the first Rental Adjustment Date, the Base Rent shall
be multiplied by the Adjustment Factor and the amount computed shall be added to
the Base Rent as of the first Rental Adjustment Date and the resulting sum shall
be the adjusted rent (hereinafter the "Adjusted Rent") to be paid by the Tenant
to Landlord, in advance, without demand, in equal monthly installments, on the
first day of each calendar month until the next Rental Adjustment Date.
(2) On the second Rental Adjustment Date and on every Rental
Adjustment Date throughout the term of this Lease, the Adjusted Rent payable in
the year immediately preceding the Rental Adjustment Date in question shall be
multiplied by the Adjustment Factor and the amount computed shall be added to
the Adjusted Rent for the year immediately preceding the Rental Adjustment Date
and the resulting sum shall be the Adjusted Rent for that rental year to be paid
by the Tenant to Landlord, in advance, without demand, in equal monthly
installments, on the first day of each calendar month until the next Rental
Adjustment Date.
(b) Landlord shall provide Tenant with written notice of each
adjustment pursuant to Section 3.02(a), which notice shall provide the basis
upon which such adjustment has been calculated; provided, however, that if for
any reason Landlord does not notify Tenant of the amount of such adjustment
until after any Rental Adjustment Date, Tenant shall continue to pay the Base
Rent or Adjusted Rent, as the case may be, payable prior to the Rental
Adjustment Date, and Tenant, within fifteen (15) days following Landlord's
delivery of written notice of such adjustment, shall pay to Landlord in a lump
sum the amount of any increase in the Base Rent resulting from such adjustment
for all months in the existing calendar year prior to and including the month in
which such notice of adjustment is received and during the remainder of such
year Tenant shall pay to Landlord the Adjusted Rent as set forth in such notice.
SECTION 3.03. PAYMENT.
All Base Rent, Adjusted Rent and Additional Rent (as hereinafter
defined) shall be paid to Landlord by Tenant when due, without deduction or
offset, in lawful money of the United States, at Landlord's address for Notice
or such other place as Landlord may from time to time designate in writing.
SECTION 3.04. ACCEPTANCE OF RENT.
If Landlord shall direct Tenant to pay Base Rent, Adjusted Rent and/or
Additional Rent to a lockbox or other depository whereby checks issued in
payment of Base Rent, Adjusted Rent and/or Additional Rent (or both or all, as
the case may be) are initially cashed or deposited by a person or entity other
than Landlord (albeit on Landlord's authority), and if, for whatever reason,
Landlord does not wish to accept Tenant's payment, then, Landlord shall not be
deemed to have accepted such payment if (and only if) within ten (10) days after
Landlord shall have actually received such funds, Landlord has refunded (or
attempted to refund) such payment to Tenant. Nothing contained in the
immediately preceding sentence shall be construed to place Tenant in default of
Tenant's obligation to pay rent if and for so long as Tenant shall timely pay
the rent required pursuant to this Lease in the manner designated by Landlord.
SECTION 3.05. SURVIVAL OF RENT OBLIGATION.
The obligation of Tenant with respect to the payment of past due Base
Rent, Adjusted Rent and Additional Rent shall survive the termination of this
Lease.
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SECTION 3.06. LATE PAYMENT FEE.
In the event any installment of Rent due hereunder is not paid within
five (5) calendar days after it is due, then Tenant shall also pay to Landlord
as Additional Rent a late payment fee equal to two percent (2%) of such
delinquent installment of Rent or any component thereof for each and every month
or part thereof that such Rent or any component thereof remains unpaid.
SECTION 3.07. INTEREST ON PAST DUE RENT.
All past due installments of Rent shall bear interest until paid at a
rate per annum equal to four percent (4%) above the prime rate of interest from
time to time publicly announced by Bank of America, N.A., or any successor
thereof (the "Default Rate"); provided, however, that if at the time such
interest is sought to be imposed the rate of interest exceeds the maximum rate
permitted under federal law or under the laws of the Commonwealth of Virginia,
the rate of interest shall be the maximum rate of interest then permitted by
applicable law.
PART 4 - ADDITIONAL RENT
SECTION 4.01. OPERATING EXPENSES.
(a) Throughout the Term, Tenant shall pay on a monthly basis, without
demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the
amount by which Operating Expenses (as defined in Section 4.01(b) hereof) exceed
the Base Operating Expenses Amount. Such payments shall be made as follows:
(1) Prior to the Commencement Date and on the first day of
January of each year during the Term, or as soon thereafter as is reasonably
practicable, Landlord shall furnish Tenant with Landlord's estimate of the
Operating Expenses for the forthcoming year. On the first day of each month
during such year, Tenant shall pay one-twelfth (1/12th) of Tenant's
Proportionate Share of the difference between the estimated Operating Expenses
for such year and the Base Operating Expenses Amount. If for any reason Landlord
has not provided Tenant with Landlord's Operating Expenses estimate on or before
the first day of January of any year during the Term (or by the Commencement
Date, as the case may be), then, until the first day of the calendar month
following the month in which Tenant is given Landlord's estimate of Operating
Expenses, Tenant shall continue to pay to Landlord on the first day of each
calendar month the monthly sum payable by Tenant under this Section 4.01 for the
month of December of the preceding year.
(2) On the first day of March of each year during the Term, or
as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a
reasonably detailed statement of the actual Operating Expenses for the preceding
year. Within thirty (30) days after the delivery of that statement, a lump sum
payment will be made by Tenant equal to the amount, if any, by which Tenant's
Proportionate Share of the actual Operating Expenses exceeds the amount, if any,
which Tenant has paid toward the estimated Operating Expenses pursuant to
Section 4.01(a)(1) above. If Tenant's Proportionate Share of the actual
Operating Expenses is less than the amount Tenant has paid toward the estimated
Operating Expenses pursuant to Section 4.01(a)(1) above, Landlord shall apply
such amount to the next accruing installments of Rent due hereunder. The
foregoing notwithstanding, Landlord shall have the right from time to time
during any year, but not more frequently than twice in any calendar year, to
notify Tenant in writing of any change in Landlord's estimate of Operating
Expenses for the then current year, in which event Tenant's Proportionate Share
of Operating Expenses, as previously estimated, shall be adjusted to reflect the
amount shown in such notice and shall be effective, and due from Tenant, on the
first day of each month following Landlord's giving of such notice. The effect
of this Section 4.01(a) is that Tenant will pay during each year during the Term
Tenant's Proportionate Share of actual Operating Expenses in excess of the Base
Operating Expenses Amount.
(3) If the Commencement Date occurs on a date other than the
first day of January, or if the Term ends on a date other than the last day of
December, the actual Operating Expenses for the year in which the Commencement
Date or the Expiration Date occurs, as the case
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may be, shall be prorated so that Tenant shall pay that portion of Tenant's
Proportionate Share of Operating Expenses for such year represented by a
fraction, the numerator of which shall be the number of days during such
fractional year falling within the Term, and the denominator of which is 365 (or
366, in the case of a leap year). The provisions of this Section 4.01 shall
survive the Expiration Date or any sooner termination provided for in this
Lease.
(b) As used in this Lease, "Operating Expenses" means all reasonable
expenses, costs, and disbursements of every kind which Landlord incurs, pays or
becomes obligated to pay in connection with the ownership, operation, repair,
and maintenance of the Building, which cost shall include all expenditures by
Landlord to maintain all facilities in operation at the beginning of the Term
and such additional facilities installed in subsequent years as Landlord may
reasonably consider necessary or beneficial for the operation of the Building.
All Operating Expenses shall be determined according to Generally Accepted
Accounting Principles (GAAP) (which shall be consistently applied) and shall
include, but are not limited to, the following:
(1) Wages, salaries, and fees of all personnel or entities
(exclusive of Landlord's executive personnel) exclusively (or pro-rate) engaged
in the operation, repair, maintenance, or security of the Building, including
taxes, insurance, and benefits relating thereto;
(2) All supplies and materials used in the operation, repair,
security, and maintenance of the Building;
(3) Cost of all maintenance and service agreements for the
Building and the equipment therein, including, without limitation, alarm
service, water treatment services, janitorial services, security systems
service, window cleaning, service on electrical and mechanical components, trash
removal, elevator maintenance, extermination service, plumbing service, grounds
keeping, and landscaping;
(4) Cost of all insurance relating to the Building for which
Landlord is responsible hereunder, or which Landlord considers reasonably
necessary for the operation of the Building, including, without limitation, the
cost of property, casualty and liability insurance applicable to the Building
and Landlord's personal property used in connection therewith, and the cost of
business interruption or rental insurance in such amounts as will reimburse
Landlord for all losses of earnings and other income attributable to such perils
as are commonly insured against by prudent landlords or required by Landlord's
lender;
(5) Cost of repairs and maintenance (excluding repairs and
maintenance paid by proceeds of insurance or by Tenant or other third parties,
and alterations attributable solely to tenants of the Building) of the Building;
(6) All utility costs of the Building (exclusive, however, of
such special utility services as described in Part 6 of the General Lease
Provision, the costs of which special utility services shall be payable as
therein provided), including, without limitation, water, power, fuel, heating,
lighting, air conditioning, and ventilating;
(7) Amortization of the cost of installation of capital
investment items which are installed primarily to reduce operating costs for the
general benefit of the Building's tenants or to enhance the Building or which
may be required by any governmental authority. All such costs, including
interest costs, shall be amortized over the reasonable life of the capital
investment items, with the reasonable life and amortization schedule being
determined by Landlord according to generally accepted accounting principles,
but in no event to extend beyond the reasonable life of the Building;
(8) Landlord's central accounting costs, the cost of an annual
audit and Landlord's legal fees relating to the operation of the Building;
(9) A management fee to the manager of the Building not to
exceed three percent (3%) of gross receipts; and
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(10) Pro-rata share of Building office rent or rental value
for any central Building management office in the Building or in another
building owned and managed by Landlord or its affiliates.
(c) Notwithstanding any other provision of this Lease, Operating
Expenses (as defined in Section 4.01(b) above), shall not include, and Landlord
shall be solely liable for, the following expenses:
(1) Costs of a capital nature (other than those permitted by
Section 4.01(b)(7) above), including but not limited to, capital improvements,
capital repairs, capital equipment and capital tools, all in accordance with
GAAP;
(2) Any costs, fines or penalties incurred due to violations
of any intentional nature by Landlord of any governmental rule or authority;
(3) Any and all loss, claim, damage, award, deductibles paid
under any insurance policies or other amount paid or payable by Landlord
(including all attorneys' fees, court costs and other costs incurred in
connection therewith) as a result or arising out of any act of negligence,
breach of contract or willful misconduct by the Landlord or its agents,
employees or contractors to the extent not covered by insurance;
(4) Costs incurred for improving, decorating, building-out,
painting or redecorating premises for other tenants in the Building;
(5) Marketing, advertising, and promotional expenditures of
any kind with respect to the Building except for those expenses that directly
benefit Tenant; and
(6) Leasing commissions, attorneys' fees, cost and
disbursements and other expenses incurred in connection with negotiations or
disputes with present or prospective tenants or other occupants of the Building.
SECTION 4.02. REAL ESTATE TAXES.
(a) Throughout the Term, Tenant shall pay on a monthly basis, without
demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the
amount by which Real Estate Taxes (as defined in Section 4.02(c) hereof) exceed
the Base Real Estate Taxes Amount. Such payments shall be made as follows:
(1) Prior to the Commencement Date and on the first day of
January of each year during the Term, or as soon thereafter as reasonably
practicable, Landlord shall furnish Tenant with Landlord's estimate of the Real
Estate Taxes for the forthcoming year. On the first day of each month during
such year, Tenant shall pay one-twelfth (1/12th) of Tenant's Proportionate Share
of the difference between the estimated Real Estate Taxes for such year and the
Base Real Estate Taxes. If for any reason Landlord has not provided Tenant with
Landlord's estimate of Real Estate Taxes on or before the first day of January
of any year during the Term (or by the Commencement Date, as the case may be),
then until the first day of the calendar month following the month in which
Tenant is given Landlord's estimate of Real Estate Taxes, Tenant shall continue
to pay to Landlord on the first day of each calendar month the monthly sum
payable by Tenant under this Section 4.02 for the month of December of the
preceding year.
(2) On the first day of March of each year during the Term or
as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a
statement of the actual Real Estate Taxes for the preceding year. Within thirty
(30) days after the delivery of that statement, a lump sum payment will be made
by Tenant equal to the amount, if any, by which Tenant's Proportionate Share of
the actual Real Estate Taxes exceeds the amount, if any, which Tenant has paid
toward the estimated Real Estate Taxes pursuant to Section 4.02(a)(1) above. If
Tenant's Proportionate Share of the actual Real Estate Taxes is less than the
amount Tenant has paid toward the estimated Real Estate Taxes pursuant to
Section 4.02(a)(1) above, Landlord shall apply such amount to the next accruing
installment(s) of Rent due hereunder. The foregoing notwithstanding, Landlord
shall have
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the right from time to time during any year, but not more frequently than twice
in any calendar year, to notify Tenant in writing of any change in Landlord's
estimate of Real Estate Taxes for the then current year, in which event Tenant's
Proportionate Share of Real Estate Taxes, as previously estimated, shall be
adjusted to reflect the amount shown in such notice and shall be effective, and
due from Tenant, on the first day of each month following Landlord's giving of
such notice. The effect of this Section 4.02(a) is that Tenant will pay during
each year during the Term Tenant's Proportionate Share of the actual Real Estate
Taxes in excess of the Base Real Estate Taxes.
(b) If the Commencement Date occurs on a date other than the first day
of January, or if the term ends on a date other than the last day of December,
the actual Real Estate Taxes for the year in which the Commencement Date or the
Expiration Date occurs, as the case may be, shall be prorated so that Tenant
shall pay that portion of Tenant's Proportionate Share of Real Estate Taxes for
such year represented by a fraction, the numerator of which shall be the number
of days during such fractional year falling within the Term, and the denominator
of which is 365 (or 366, in the case of a leap year). The provisions of this
Section 4.02 shall survive the Expiration Date or any sooner termination
provided for in this Lease.
(c) As used in this Lease, the term "Real Estate Taxes" shall including
the following:
(1) All real estate taxes, including general and special
assessments, if any, which are imposed upon Landlord or assessed against the
Building or the land upon which the Building is situated; and
(2) Any other present or future taxes or governmental charges
that are imposed upon Landlord, or assessed against the Building or the land
upon which the Building is situated, including, but not limited to, any tax
levied on or measured by the rents payable by tenants of the Building which is
in the nature of, or in substitution for, real estate taxes. Any inheritance,
estate, gift, franchise, corporation, income, or net profits tax which may be
assessed against Landlord and/or the Building shall be excluded.
SECTION 4.03. PARKING.
During the Term, Tenant and its employees, invitees, and guests shall
have the right to use free of charge, in common, with the other tenants of the
Building, the parking areas for the Building, all on an unassigned and
unreserved basis. Landlord reserves the right to promulgate reasonable rules and
regulations of general application for the use of all parking spaces.
Notwithstanding the foregoing, throughout the Term, Landlord shall provide
Tenant, free of charge, with ten (10) reserved parking spaces in a location in
the parking area to be reasonably determined by Landlord.
SECTION 4.04. ADDITIONAL RENT DEFINED.
The term "Additional Rent" shall include, but not be limited to (i) the
late payment fee, if any, under Section 3.06; (ii) Tenant's Proportionate Share
of Operating Expenses as calculated under Section 4.01; (iii) Tenant's
Proportionate Share of Real Estate Taxes as calculated under Section 4.02; and
(iv) all other costs and expenses which Tenant assumes, agrees or is required to
pay to Landlord pursuant to this Lease. In the event of nonpayment of Additional
Rent, Landlord shall have all the rights and remedies herein provided for in
case of nonpayment of Rent.
SECTION 4.05. RENT DEFINED.
The term "Rent" shall include Base Rent, Adjusted Rent and Additional
Rent.
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SECTION 4.06. AUDIT BY TENANT.
Tenant may audit Landlord's Operating Expenses and Real Estate Taxes at
Tenant's sole cost and expense, in order to verify the accuracy of the same,
provided that:
(i) Tenant may audit the expenses of the prior year by
notifying Landlord, in writing, within ninety (90) days after its receipt of
Landlord's statement of the actual expenses incurred during the preceding
calendar year. Failure to notify Landlord within such period shall be deemed a
waiver of Tenant's right to audit expenses for said year.
(ii) Such audit will be conducted only during regular business
hours at the office where Landlord maintains Operating Expenses and Real Estate
Taxes records and only after Tenant gives Landlord fifteen (15) days prior
written notice.
(iii) Such audit shall be conducted on a non-contingent fee
basis.
Tenant shall deliver to Landlord a copy of the results of such audit
within fifteen (15) days of its receipt by Tenant. In the event the audit
determines Tenant has underpaid its share of either the Operating Expenses or
Real Estate Taxes, and if Landlord concedes the accuracy of the audit, Tenant
shall immediately pay to Landlord any amounts which may be owing. In the event
the audit determines that Tenant has overpaid either the Operating Expenses or
Real Estate Taxes, and if Landlord concedes the accuracy of the audit, Landlord
shall grant Tenant a credit for the amount of the overpayment against the next
accruing installments of Rent due hereunder. In the event Tenant's Proportionate
Share of Operating Expenses or Real Estate Taxes has been overstated by Landlord
by more than five percent (5%), and if Landlord concedes the accuracy of the
audit, Landlord shall also reimburse Tenant for the reasonable costs and
expenses of the audit, not to exceed $2,000.00.
PART 5 - SERVICES BY LANDLORD
While Tenant is occupying the Premises and is not in Default under this
Lease, Landlord shall furnish the Premises with: (i) (7 days per week, 24 hours
a day) passenger elevator service in common with other tenants for access to and
from the Premises, provided that Landlord may reasonably limit the number of
elevators to be operated at night after normal business hours and on Saturdays,
Sundays, and holidays and that Landlord may remove elevators from service for
maintenance in a manner designed to reduce interference to the tenants; (ii)
janitorial cleaning services Monday through Friday (except holidays) as
described in Exhibit "F" hereto, subject to modification as required in
Landlord's reasonable judgment; (iii) replacement, as necessary, of all lamps
and ballasts in Building Standard light fixtures within the Premises; and (iv)
the utility services provided for in Part 6 below. If Tenant requires services
which are not specified herein and Landlord elects to provide such services to
Tenant, Tenant will pay to Landlord, upon demand, as Additional Rent, Landlord's
charges for providing such services.
Failure to furnish, or any stoppage of, the services provided for in
this Part 5 and in Part 6 below resulting from any cause will not make Landlord
liable in any respect for damages to any person, property, or business, nor be
construed as an eviction of Tenant, nor entitle Tenant to any abatement of Rent,
or damages because of malfunctions or any interruptions in service.
Notwithstanding the foregoing, if such malfunction or interruption in
service is due solely to the negligent act or willful omission of Landlord or
its agents, employees, contractors or representatives, and such malfunction or
interruption in service (i) continues for five (5) consecutive business days and
(ii) makes it reasonably impossible for Tenant's continued use and occupancy of
the Premises (or portion thereof), and (iii) requires Tenant to vacate the
Premises, then Tenant shall be entitled to an abatement of Base Rent and/or
Adjusted Rent for the portion of the Premises vacated for the period commencing
on the date of vacation of the Premises due to the malfunction or interruption
of services, and continuing until the earlier of the following (i) the date such
service is corrected or restored or (ii) the date Tenant reoccupies any part of
the Premises which was vacated because of the interruption in service,
notwithstanding the fact that the malfunction or interruption in service has not
been corrected.
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PART 6 - UTILITIES
SECTION 6.01. COMPUTERIZED ENERGY MANAGEMENT SYSTEM.
The Building has been designed with a Computerized Energy Management
System (the "CEMS") which controls the heating, ventilating and air conditioning
system (the "HVAC") for the Premises. Tenant will designate to Landlord
authorized representatives of the Tenant who will be given, through the CEMS,
direct control of the HVAC system for use after normal Building hours.
SECTION 6.02. WATER, HEATING, VENTILATING AND AIR CONDITIONING.
(a) While Tenant is occupying the Premises and is not in Default under
this Lease, Landlord shall furnish Tenant with the following utilities in the
manner and to the extent customarily provided in office buildings in the
Northern Virginia area: (1) potable water at those points of supply provided
periodically for normal lavatory use by tenants in the Building; (2) heating,
ventilating, and air-conditioning in season on business days from 7:30 a.m. to 6
p.m., and on Saturdays from 8 a.m. to 1 p.m. (except holidays); and (3) electric
lighting for public areas and special service areas of the Building. If Tenant
requires HVAC service outside the hours and days specified above, the additional
service may be requested by use of the CEMS and Tenant will pay for such
services based on measurement from the CEMS at the rate Landlord is then
charging therefor, which rate is currently $30.00 per hour per floor. Landlord
shall have no obligation to provide any additional service to Tenant at any time
Tenant is in Default under this Lease.
(b) Landlord shall not be liable for its failure to maintain
comfortable atmospheric conditions in all or any portion of the Premises due to
heat generated by any equipment or machinery installed by Tenant (with or
without Landlord's consent) that exceeds generally accepted engineering design
practices for normal office purposes. If Tenant desires additional cooling to
offset excessive heat generated by such equipment or machinery, Landlord will,
upon the written request of Tenant, install supplemental air conditioning units
in the Premises, and the full actual and reasonable cost thereof, including the
cost of installation of unit(s) and meter(s), operation and use, will be paid by
Tenant to Landlord on demand. Tenant will be required to maintain any
supplemental air conditioning units installed pursuant to this Section. Pursuant
to the provisions of this paragraph, Landlord approves Tenant's installation of
a 5-ton supplemental air conditioning unit within the Premises, subject to
approval by Landlord of the final construction drawings and the specifications
for such unit, installation of an electrical meter, and subject to applicable
governmental laws, rules, codes and regulations.
SECTION 6.03. ELECTRICITY.
(a) While Tenant is occupying the Premises and is not in Default under
this Lease, Landlord will furnish sufficient power in the Premises twenty-four
hours per day, seven days a week (subject to outages beyond Landlord's control
and reasonable interruptions as may be required from time-to-time for the
maintenance and improvement of the Building and Building systems) for lighting
and for personal desktop computers, a typical network server, typewriters, word
processors, calculating machines, copying machines, and other similar office
equipment of low electrical consumption. Tenant will not install or operate in
the Premises any heavy duty electrical equipment or machinery without first
obtaining prior written consent of Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed. Landlord may require, as a
condition of its consent, for the installation of such equipment or machinery,
payment by Tenant as Additional Rent for excess consumption of electricity that
may be occasioned by the operation of said equipment or machinery. Upon
reasonable prior notice, Landlord may make periodic inspections of the Premises
at reasonable times to determine that Tenant's electrically operated equipment
and machinery complies with the provisions of Part 6.
(b) If the CEMS reveals that Tenant's use of electricity in the
Premises exceeds by more than ten percent (10%) of the electrical demands on a
square foot basis of other tenants on average
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in the Building, then Tenant shall pay to Landlord (or the utility company if
direct service is provided by such company) promptly upon demand therefore, for
all such excessive electric consumption and demand as shown by the CEMS. Tenant
shall also pay a service charge related thereto as calculated by Landlord.
PART 7 - USE
The Premises shall be used solely for general office purposes that are
permitted by applicable zoning ordinances and land use requirements and for no
other purpose. Tenant agrees to use and maintain the Premises in a clean,
careful, safe, lawful, and proper manner.
PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS
SECTION 8.01. COMPLIANCE WITH LAWS.
Tenant shall, at its sole expense, promptly and faithfully (i) comply
with all present and future laws, ordinances, orders, rules, regulations, and
requirements of every governmental authority having jurisdiction over the
Premises; (ii) comply with the provisions of the Americans with Disabilities Act
42 U.S.C. Section 12101 et seq as it applies to the Premises and Tenant's
activities therein; (iii) comply with any direction made pursuant to law by any
public officers which requires abatement of any nuisance or imposes upon
Landlord or Tenant any duty or obligation arising from Tenant's occupancy or use
of the Premises or from conditions which have been created by or at the
insistence of Tenant; (iv) comply with the requirements of the local board of
fire underwriters, or anybody exercising similar functions with respect to the
construction, care and safety, maintenance and operation of the Premises; and
(v) indemnify Landlord and hold Landlord harmless from any loss, cost, claim, or
expense which Landlord may incur or suffer by reason of Tenant's failure to
comply with its obligations under clauses (i), (ii), (iii) or (iv) above;
provided, however, that nothing herein shall require Tenant to make structural
changes to the Premises unless necessitated by: (i) Tenant's use of the Premises
for purposes other then general office use (however any change of use shall
require Landlord's prior written consent, which may be withheld), (ii) Tenant's
particular manner of use of the Premises, or (iii) other conditions created by
or at the insistence of Tenant. If Tenant receives notice of any such direction
or of violation of any such law, order, ordinance, or regulation, Tenant shall
promptly notify Landlord thereof.
SECTION 8.02. OBSERVANCE OF BUILDING'S RULES AND REGULATIONS.
Tenant and its servants, employees, agents, visitors, and licensees
shall observe faithfully and comply strictly with the Rules and Regulations
attached to this Lease as Exhibit "D". Landlord shall at all times have the
right to make reasonable changes in and additions to such Rules and Regulations;
provided Tenant is notified in writing of such changes and that such changes in
existing or new rules and regulations do not materially interfere with the
lawful conduct of Tenant's business in the Premises. Any failure by Landlord to
enforce any of the Rules and Regulations now or hereafter in effect, either
against Tenant or any other tenant in the Building, shall not constitute a
waiver of any such Rules and Regulations. Landlord shall not be liable to Tenant
for the failure or refusal by any other tenant, guest, invitee, visitor, or
occupant of the Building to comply with any of the Rules and Regulations. If
there is any inconsistency between this Lease and the Rules and Regulations set
forth in Exhibit "D" hereto, this Lease shall govern. Landlord shall, however,
enforce the Rules and Regulations in a non-discriminatory manner in what
Landlord reasonably determines in its sole discretion, to be the best interest
of the Building and its tenants.
SECTION 8.03. HAZARDOUS MATERIALS.
(a) Except for those materials that are necessary in the normal course
of Tenant's business activities associated with the Permitted Use, Tenant, its
agents, employees, contractors or invites shall not (i) cause or permit any
Hazardous Materials (hereinafter defined) to be brought upon, stored, used or
disposed on, in or about the Premises and/or the Building, or (ii) permit the
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release, discharge, spill or emission of any substance considered to be a
Hazardous Material from the Premises.
(b) Any Hazardous Materials permitted by subparagraph (a), all
containers therefor, and all materials that have been contaminated by Hazardous
Materials shall be used, kept, stored and disposed of by Tenant in a manner that
shall in all respects comply with all applicable federal, state and local laws,
ordinances, regulations and standards.
(c) Tenant hereby agrees that it is and shall be fully responsible for
all costs, expenses, damages or liabilities (including, but not limited to those
incurred by Landlord and/or its mortgagee) which may occur from the use,
storage, disposal, release, spill, discharge or emissions of Hazardous Materials
by Tenant whether or not the same may be permitted by this Lease. Tenant shall
defend, indemnify and hold harmless Landlord, its mortgagee and its agents from
and against any claims, demands, administrative orders, judicial orders,
penalties, fines, liabilities, settlements, damages, costs or expenses
(including, without limitation, reasonable attorney and consultant fees, court
costs and litigation expenses) of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of or in any way related to the use,
storage, disposal, release, discharge, spill or emission of any Hazardous
Material by Tenant, its agents, employees, contractors or invites. The
provisions of this Section shall be in addition to any other obligations and
liabilities Tenant may have to Landlord at law or in equity and shall survive
the transactions contemplated herein or any termination of this Lease.
(d) As used in this Lease, the term "Hazardous Materials" shall
include, without limitation:
(i) Those substances included within the definitions of "hazardous
substances", "hazardous materials," toxic substances," or "solid waste" in the
Comprehensive Environmental Response Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Resource Conservation and Recovery Act
of 1976 ("RCRA"), and the Hazardous Materials Transportation Act, and in the
regulations promulgated pursuant to said laws, all as amended;
(ii) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (of any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(iii) Any material, waste or substance which is (A) petroleum, (B)
asbestos, (C) polychlorinated biphenyls, (D) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.Section 1251
et seq. (33 U.S.C. Section 1321) or listed pursuant to Section of the Clean
Water Act (33 U.S.C. Section 1317); (E) flammable explosives; or (F) radioactive
materials;
(iv) Those substances regulated pursuant to or identified in the
Virginia Pesticide Law; Air Pollution Control Board; Virginia Waste Management
Act; Environmental Health Service; Transportation of Hazardous Radioactive
Materials; Virginia Hazardous Materials Emergency Response Program; State Water
Control Law; The Groundwater Act of 1973; and Miscellaneous Offenses; and in the
regulations promulgated pursuant to said laws, all as amended; and
(v) Such other substances, materials and wastes which are or
become regulated as hazardous or toxic under applicable local, state or federal
law, or the United States government, or which are classified as hazardous or
toxic under federal, state, or local laws or regulations.
PART 9 - ALTERATIONS
SECTION 9.01. APPROVAL OF LANDLORD.
Tenant shall not, at any time during the Term, without Landlord's prior
written consent (except for non-structural cosmetic alterations not visible
outside of the Premises and the total cost which is less than $20,000.00 in any
lease year), make any alterations (structural or otherwise) to
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the Premises. Should Tenant desire any alterations, Tenant agrees to submit all
plans and specifications for same to Landlord for Landlord's written approval,
before beginning such work and Landlord's approval shall not be unreasonably
withheld, conditioned or delayed. Landlord shall not be considered as
unreasonably withholding its approval by refusing to consent to any alterations
which would (i) alter the exterior appearance of the Building, or the public
lobbies, corridors, or common areas thereof; (ii) causes or are likely to cause
any weakening of any part of the structure of the Premises or Building or which
may cause damage or disruption to any Building system; or (iii) violate any
underlying ground lease or deed of trust or mortgage. Upon Tenant's receipt of
Landlord's written approval, Tenant may proceed with the construction of the
approved alterations, but only so long as they are in substantial compliance
with the plans and specifications and provisions of this Part 9. Additionally,
the construction of any alterations, the alterations themselves, or any
maintenance thereof shall comply with all building, safety, fire, plumbing,
electrical and other codes, governmental requirements (including but not limited
to Title III of the Americans with Disabilities Act of 1990, all regulations
issued thereunder and the Accessibility Guidelines for Buildings and Facilities
issued pursuant thereto, as the same are in effect on the date hereof and may be
hereafter modified, amended or supplemented) and insurance requirements, and
shall not require an amount of water, electricity, gas, heat, ventilation, or
air-conditioning which exceeds Building Standard unless prior written
arrangements reasonably satisfactory to Landlord are made with respect thereto.
All alterations desired by Tenant shall be made at Tenant's expense, either by
Tenant's contractors which have been approved in advance by Landlord or, at
Landlord's option, by Landlord's contractors on terms reasonably satisfactory to
Tenant. If the work is performed by Landlord's contractors under Landlord's
supervision, or if Landlord actually supervises the Alterations, Tenant shall
pay to Landlord a fee equal to fifteen percent (15%) of the actual costs of such
work, such fee to cover Landlord's overhead related to the work, including, but
not limited to, Landlord's review of the plans and specifications, coordination
of the work, consultation with professionals regarding the work, and general
administration allocable to the work. All such construction shall be completed
promptly and in a good and workmanlike manner and shall be performed in
compliance with Part 10 hereof.
SECTION 9.02. OWNERSHIP OF IMPROVEMENTS TO PREMISES.
At Landlord's election, all leasehold improvements and other principal
alterations to the Premises shall be and remain the Landlord's property, and
shall not be removed from the Premises. If Landlord elects not to acquire
ownership of any such alteration, which election shall be made in writing at the
time such alterations and improvements are approved, and upon the termination of
this Lease Tenant shall, at Tenant's sole expense, cause the same to be removed
and restore the Premises to the condition in which they existed prior to the
alterations. Tenant further agrees to remove, at Tenant's expense, all of its
furniture, furnishings, personal property and movable trade fixtures by the
Expiration Date, and to promptly reimburse Landlord for the actual and
reasonable cost of repairing all damage done to the Premises or the Building by
such removal.
PART 10 - LIENS
Tenant shall keep the Premises and the Building free from any liens
arising from any work performed, materials furnished, or obligations incurred by
or at the request of Tenant, its agents, employees or independent contractors.
If any lien is filed against the Premises, the Building or Tenant's leasehold
interest therein, which arises out of any purported act or agreement of Tenant,
Tenant shall discharge same within thirty (30) days after its filing, subject to
Tenant's right to contest the same so long as Landlord is fully secured by
depositing with the Landlord at or before commencing said protest an irrevocable
letter of credit payable to Landlord, cash or a bond equal to one hundred
fifteen percent (115%) of the amount claimed to be due. If Tenant fails to
discharge such lien within such period, then, in addition to any other right or
remedy, (i) Landlord may, at its election, discharge the lien by depositing with
a court or a title company, or by bonding, the amount claimed to be due and;
(ii) Tenant shall pay on demand, as Additional Rent, any amount paid by Landlord
for the discharge or satisfaction of any such lien, and all attorney's fees and
other costs and expenses of Landlord reasonably incurred in defending any such
action or in obtaining the discharge of such lien, together with all necessary
disbursements in connection therewith. Further, if Tenant posts a bond, letter
of credit or cash
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with the Landlord, Landlord reserves the right to require or make the payment of
the amount claimed to be due if it is reasonably necessary to prevent a
foreclosure upon the lien.
PART 11 - REPAIRS
SECTION 11.01. TENANT'S OBLIGATIONS.
Tenant shall keep the Premises and every part thereof in good condition
and repair at all times during the Term and at Tenant's sole cost and expense.
At the end of the Term, Tenant shall surrender to Landlord the Premises and all
alterations, additions, and improvements thereto in the same condition as when
received, subject to the provisions of Part 17 hereof. Landlord shall give
Tenant five (5) days' prior written notice to commence to make repairs, and if
Tenant fails to commence to make such repairs within such time period, Landlord,
at its option, may make such repairs, and Tenant shall pay Landlord, on demand,
Landlord's actual and reasonable costs in making such repairs plus a fee of
fifteen percent (15%) to cover Landlord's overhead, all to constitute Additional
Rent. Landlord has no obligation and has made no promise to alter, remodel,
improve, repair, decorate, or paint the Premises or any part thereof, except as
specifically set forth in this Lease.
SECTION 11.02. LANDLORD'S OBLIGATIONS.
Subject to the other provisions of this Lease imposing obligations in
this respect upon Tenant, and subject to the provisions of Parts 13 and 14
hereof, Landlord shall repair, replace, and maintain (a) the external and
structural parts of the Building and the Building systems and (b) all common
areas.
PART 12 - INSURANCE
SECTION 12.01. TENANT'S INSURANCE.
Tenant, at its sole expense, shall obtain and keep in force the
following insurance:
(a) Commercial general liability insurance coverage on an
"occurrence basis" against claims for personal injury, including, without
limitation, bodily injury, death, and broad form property damage, in combined
single limits of not less than $1,000,000 per occurrence and a $2,000,000
aggregate, with coverage to include a per location endorsement, contractual
liability, fire legal liability in the amount of $500,000, and other broad form
endorsements that would be carried by a prudent individual conducting a business
similar to Tenant's business. All such insurance policies shall name Tenant as
the named insured thereunder and shall name Landlord and Landlord's mortgagees
as additional insureds thereunder, all as their respective interests may appear;
(b) Worker's Compensation and Employer's Liability insurance, with
a waiver of subrogation endorsement waiving rights of subrogation against
Landlord, in form and amount satisfactory to Landlord and at a minimum is equal
to that required by the law of Virginia;
(c) Special Causes of Loss Insurance insuring the Leasehold
Improvements and Tenant's interest in the Premises and all property located in
the Premises, including furniture, equipment fittings, installations, fixtures,
supplies and any other personal property, Leasehold Improvements and alterations
("Tenant's Property"), in an amount equal to the full replacement value, it
being understood that no lack or inadequacy of insurance by Tenant shall in any
event make Landlord subject to any claim by virtue of any theft or loss or
damage to any uninsured or inadequately insured property;
(d) During the course of construction of any work performed by
Tenant or on Tenant's behalf pursuant to Exhibit "B" or any alterations by
Tenant until completion thereof, Builder's Risk Insurance on a "special causes
of loss" basis (including collapse) on a completed
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value (non-reporting) form for full replacement value covering all work
incorporated in the Building and all materials and equipment in or about the
Premises;
(e) Auto liability coverage for owned, hired and non-owned vehicles
with a $1,000,000 combined single limit; and
(f) Excess liability coverage in the amount of $5,000,000 which
will follow form and respond to and increase the limits of the coverages
described in Sections 12.01(a), (b), (c), and (d) above.
All policies shall be issued by companies having a Best's rating
reasonably acceptable to Landlord and shall be in amounts and in form
satisfactory from time to time to Landlord and Landlord's lender. All policies
shall contain an endorsement or agreement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwithstanding any act or
negligence of Tenant which might otherwise result in a forfeiture of said
insurance, and the further agreement of the insurer waiving all rights of
setoff, counterclaim, or deduction against Tenant. Tenant will deliver
certificates of insurance evidencing each policy to Landlord as soon as
practicable after the placing of the required insurance, but not later than ten
(10) days prior to the date Tenant takes possession of all or any part of the
Premises. All policies shall contain an undertaking by their insurers to notify
Landlord and Landlord's lender in writing, by registered or certified U.S. Mail,
return receipt requested, not less than thirty (30) days before any material
change, reduction in the scope or limits of coverage, cancellation, or other
termination thereof. All policies (except worker's compensation and employer's
liability) shall name Landlord and Landlord's manager as additional insureds and
shall be evidenced as such on a Certificate of Insurance issued to Landlord.
Landlord reserves the right to periodically review the insurance
coverages required by this Section 12.01 and to revise such requirements to
reflect insurance industry practices or require other forms or amounts of
insurance as may be reasonably required to reflect changes in insurance industry
practices.
SECTION 12.02. INSURANCE RATING.
Tenant will not keep, use, sell or offer for sale in, or upon the
Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building and the Leasehold Improvements. If
Tenant's occupancy or business in or on the Premises, whether or not Landlord
has consented to the same, results in any increase in premiums for the insurance
periodically carried by Landlord with respect to the Building or the Leasehold
Improvements, Tenant shall pay any such increase in premiums as Additional Rent
within ten (10) days after being billed therefor by Landlord. As of the date it
executed this Lease, Landlord was not aware of any reason why Tenant's occupancy
or business would cause an increase in premiums.
If any of the Landlord's insurance policies shall be canceled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee or subtenant of Tenant or by anyone
Tenant permits on the Premises and, if Tenant fails to remedy the condition
giving rise to such cancellation, threatened cancellation, reduction of
coverage, or threatened reduction of coverage within forty-eight (48) hours
after notice thereof, Landlord may, at its option, either terminate this Lease
or enter upon the Premises and attempt to remedy such condition, and Tenant
shall promptly pay the actual and reasonable cost thereof to Landlord as
Additional Rent. Landlord shall not be liable for any damage or injury caused to
any property of Tenant or of others located on the Premises resulting from such
entry except to the extent caused by the negligence or willful misconduct of
Landlord. If Landlord is unable or elects not to remedy such condition, then
Landlord shall have all of the remedies provided for in this Lease in the event
of a Default by Tenant. Notwithstanding the foregoing provisions of this
Section, if Tenant fails to remedy as aforesaid within any applicable notice and
cure period, Tenant shall be in Default of its obligations hereunder and
Landlord shall have no obligation to remedy such Default.
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SECTION 12.03. LANDLORD'S INSURANCE.
Landlord, as part of the Operating Expenses, shall obtain and keep in
force the following insurance:
(a) Commercial general liability insurance coverage on an
"occurrence basis" against claims in or about the Building (other than the
Premises) for personal injury, including without limitation, bodily injury,
death and broad form property damage, in limits of $1,000,000 per occurrence and
$2,000,000 aggregate;
(b) Workmen's Compensation and Employer's Liability insurance;
(c) Special Causes of Loss Insurance insuring the Landlord's
interest in the Building and improvements therein in form satisfactory to
Landlord and in an amount equal to the full replacement value of the Landlord's
insurable interest in the Building;
(d) Excess liability coverage in the amount of $5,000,000; and
(e) Any other form or forms of insurance as Landlord, or Landlord's
mortgagees may reasonably require from time to time in form, in amounts, and for
insurance risks against which a prudent Landlord of a comparable size and in a
comparable business would protect itself.
Promptly after written request by Tenant (but no more frequently than
once each calendar year), Landlord shall deliver Tenant a certificate of
insurance evidencing the above coverages.
SECTION 12.04. WAIVER OF SUBROGATION.
All policies covering real or personal property which either party
obtains affecting the Premises shall include, if possible, a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured before the occurrence
of injury or loss, if same are obtainable. Each party waives any rights of
recovery against the other for injury or loss due to hazards covered by policies
of insurance containing such a waiver of subrogation clause or endorsement to
the extent of the injury or loss covered thereby.
PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY
SECTION 13.01. DAMAGE TO PREMISES.
Tenant shall immediately notify Landlord of any damage to the Building
which affects the Premises. If all or any portion of the Premises are damaged or
destroyed by any casualty against which Tenant is required to be insured under
Section 12.01 of the General Lease Provisions, and if, in Landlord's reasonable
opinion, (i) the Premises cannot be rebuilt or made fit for Tenant's purposes
within one hundred eighty (180) days of the damage or destruction, or (ii) the
proceeds from Tenant's insurance required to be maintained by Tenant pursuant to
Part 12 are insufficient to repair or restore the damage or destruction, then
either Landlord or Tenant shall have the right, at the option of either party,
to terminate this Lease by giving the other, within sixty (60) days after such
damage or destruction, written notice of termination, and thereupon Rent and any
other payments for which Tenant is liable under this Lease shall be apportioned
and paid to the date of such damage, and Tenant shall immediately vacate the
Premises; provided, however, that those provisions of this Lease which are
designated to cover matters of termination and the period thereafter shall
survive the termination hereof.
SECTION 13.02. DAMAGE TO BUILDING.
If the Building or any portion thereof is damaged or destroyed by any
cause whatsoever, to the extent that, (a) in Landlord's reasonable judgment, it
would not be economically feasible to
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repair or restore such damage or destruction, or (b) in Landlord's reasonable
judgment, the damage or destruction to the Building cannot be repaired or
restored within three hundred sixty (360) days after such damage or destruction,
Landlord may, at its option, terminate this Lease by giving Tenant notice of
such termination within sixty (60) days after such damage or destruction.
SECTION 13.03. PARTIAL DAMAGE.
In the event of partial destruction or damage to the Building or the
Premises which is not subject to Section 13.01 or 13.02, but which renders the
Premises partially, but not wholly untenantable, this Lease shall terminate as
to the portion of the Premises which, in Landlord's reasonable opinion, cannot
be used or occupied by Tenant as a result of such casualty and shall remain in
effect as the remainder of the Premises. Landlord shall in such event, within a
reasonable time after the date of such destruction or damage, subject to Tenant
Delay and to the extent and availability of insurance proceeds, restore the
Premises to as near the same condition as existed prior to such partial damage
or destruction, provided that Tenant pays to Landlord Tenant's insurance
proceeds as required in Section 13.05 of the General Lease Provisions. In no
event shall Rent abate or shall any termination occur if damage to or
destruction of the Premises is the result of either (i) a default by Tenant or
(ii) the negligence or willful act of Tenant, or Tenant's agents, employees,
representatives, contractors, successors or assigns, licensees or invitees.
SECTION 13.04. DAMAGE DURING LAST YEAR OF TERM.
If the Building or the Premises or any material portion thereof is
destroyed by fire or other causes at any time during the last year of the Term,
then either Landlord or Tenant shall have the right, at the option of either
party, to terminate this Lease by giving written notice to the other within
sixty (60) days after the date of such destruction.
SECTION 13.05. NO LANDLORD LIABILITY.
Landlord shall have no liability to Tenant for inconvenience, loss of
business, or annoyance arising from any repair of any portion of the Premises or
the Building. If Landlord is required by this Lease or by any lender or lessor
of Landlord to repair or if Landlord undertakes to repair, Tenant shall pay to
Landlord that amount of Tenant's insurance proceeds which insures such damage as
a contribution towards such repair, and Landlord shall use reasonable efforts to
have such repairs made promptly and in a manner which will not unnecessarily
interfere with Tenant's occupancy.
SECTION 13.06. APPORTIONMENT OF RENT.
In the event of termination of this Lease pursuant to this Part 13,
then all Rent shall be apportioned and paid to the date on which possession is
relinquished or the date of such damage, whichever last occurs, and Tenant shall
immediately vacate the Premises according to such notice of termination;
provided, however, that those provisions of this Lease which are designated to
cover matters of termination and the period thereafter shall survive the
termination hereof.
PART 14 - CONDEMNATION
SECTION 14.01. ENTIRE BUILDING.
In the event that the whole or substantially the whole of the Building
and/or the Premises are taken or condemned for any public purposes, this Lease
and the leasehold estate created hereby shall cease and terminate as of the date
of such taking.
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SECTION 14.02. PORTION OF BUILDING.
In the event that any portion of the Building shall be taken or
condemned for any public purpose (whether or not such taking includes any
portion of the Premises), which taking, in Landlord's sole judgment, shall
interfere materially with Landlord's use and operation of the Building or is
such that Landlord determines that the Building cannot be restored to usefulness
in an economically feasible manner, then Landlord shall have the option to
terminate this Lease, effective as of the date specified by Landlord in its
notice of termination.
SECTION 14.03. PORTION OF PREMISES.
In the event that a portion, but less than substantially the whole, of
the Premises should be taken or condemned for any public purpose, then this
Lease shall be terminated as of the date of such taking as to the portion of the
Premises so taken, and, unless Landlord exercises its option to terminate this
Lease pursuant to Section 14.02 above, this Lease shall remain in full force and
effect as to the remainder of the Premises. In such event, the Rent will be
diminished by an amount representing the part of such amounts properly
applicable to the portion of the Premises so taken. Further, in such event
Tenant's Proportionate Share shall be recomputed based upon the remaining
Rentable Area in the Premises and in the Building.
SECTION 14.04. TERMINATION OF LEASE.
In the event of the termination or partial termination of this Lease
pursuant to the provisions of this Part 14, this Lease and the Term and the
estate hereby granted shall expire as of the date of such termination in the
same manner and with the same effect as if that were the date set for the normal
expiration of the Term of this Lease, and the Rent shall be apportioned as of
such date.
SECTION 14.05. LANDLORD'S RIGHT TO AWARD.
All awards, damages, and other compensation paid by the condemning
authority on account of such taking or condemnation (or sale under threat of
such a taking) shall belong to Landlord, and Tenant hereby assigns to Landlord
all rights to such awards, damages and compensation. Tenant agrees not to make
any claim against Landlord or the condemning authority for any portion of such
award or compensation attributable to damages to the Premises, the value of the
unexpired term of this Lease, the loss of profits or goodwill, leasehold
improvements, or severance damages. Nothing contained herein, however, shall
prevent Tenant from pursuing a separate claim against the condemning authority
for the value of Non-Building Standard Leasehold Improvements paid entirely by
the Tenant, furnishings, equipment, and trade fixtures installed in the Premises
at Tenant's expense and for relocation expenses, provided that such claim does
not in any way diminish the award or compensation payable to or recoverable by
Landlord in connection with such taking or condemnation.
PART 15 - ASSIGNMENT AND SUBLETTING
SECTION 15.01. RIGHTS OF TENANTS.
(a) Tenant may not sell, assign, transfer, or hypothecate this Lease or
any interest herein (either voluntarily or by operation of law, and including,
if Tenant is a corporation, partnership or limited liability company, the sale
or transfer of a controlling interest in Tenant), or sublet the Premises or any
part thereof without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, conditioned or delayed except as provided herein.
If Tenant should desire to assign this Lease or sublet the Premises (or any part
thereof) and provided that Tenant is not then in Default hereunder, Tenant shall
give Landlord written notice at least forty-five (45) days in advance of the
date on which Tenant desires to make such assignment or sublease. Landlord shall
then have a period of thirty (30) days following receipt of such notice within
which to notify Tenant in writing that Landlord elects:
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(1) to permit Tenant to assign or sublet such space, subject,
however, to the subsequent written reasonable approval by Landlord of the
instrument of assignment or sublease as to form and substance and of the
proposed assignee or subtenant;
(2) to refuse, in Landlord's reasonable discretion, to consent
to Tenant's assignment or subleasing of such space and to continue this Lease in
full force and effect as to the entire Premises. If Landlord should fail to
notify Tenant in writing of such election within such thirty (30) day period,
Landlord shall be deemed to have elected option (2) above; or
(3) in the event Tenant desires to sublease for substantially
all of the remaining Term of the Lease (including any sublease which expires
during the last six (6) months of the Term) to recapture the space so affected
as of the date specified by Tenant in its notice, in which event this Lease
shall be terminated as to such space for a period equal to the term identified
in Tenant's notice to Landlord.
(b) Except as may be otherwise expressly set forth to the contrary, no
assignment or subletting by Tenant shall relieve Tenant of Tenant's obligations
under this Lease. Any attempted assignment or sublease by Tenant in violation of
the terms and provisions of this Section 15.01 shall be void.
(c) For the purposes of this Section 15.01, the following shall be
deemed an assignment of this Lease.
(1) If Tenant is a corporation, the stock of which is not
listed on a "national securities exchange" (as defined in the Securities Act of
1934), then the sale, issuance or transfer (whether cumulatively or in a single
transaction), of stock by Tenant or the shareholders of record, as of the date
hereof, the result of which either changes or makes possible the change in the
voting control of Tenant; and
(2) If Tenant is a joint venture, partnership, limited
liability company or other association (collectively referred to as the
"Partnership"), the sale, issuance or transfer (whether cumulatively or in a
single transaction) of ownership of the entity the result of which changes the
management of the entity or the voting control of the entity.
(d) Nothing herein shall be deemed to make an initial public offering
of Tenant equivalent to an assignment of this Lease.
SECTION 15.02. EXCESS RENT.
If the rent agreed upon between Tenant and its proposed subtenant under
any proposed sublease of the Premises (or any part hereof) is greater than the
Base Rent or Adjusted Rent, as the case may be, that Tenant must pay Landlord
hereunder for that portion of the Premises that is subject to such proposed
sublease, fifty percent (50%) of such excess rent (after Tenant has deducted its
reasonable expenses incurred in procuring said sublease) shall be considered
Additional Rent owed by Tenant to Landlord, and shall be paid by Tenant to
Landlord in the same manner that Tenant pays Rent under this Lease.
SECTION 15.03. RIGHTS OF LANDLORD.
Landlord may sell, transfer, assign, and convey, all or any part of the
Building and/or the Land and any and all of its rights under this Lease, and in
the event Landlord assigns its rights under this Lease, Landlord shall be
released from any further obligations hereunder arising or accruing from and
after the effective date of such transfer, and Tenant agrees to look solely to
Landlord's successor in interest for performance of such obligations. Landlord
shall promptly notify Tenant of any such sale, transfer, assignment or
conveyance.
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SECTION 15.04. AFFILIATE TRANSFER.
Notwithstanding the provisions of Section 15.01 hereof, Tenant shall
have the right, without the prior consent of Landlord, to assign its entire
interest in this Lease to an Affiliate (hereinafter defined) so long as (i) the
Affiliate delivers to Landlord, concurrently with such assignment, a fully
executed original of the assignment and an assumption agreement whereby the
Affiliate assumes and agrees to perform, observe and abide by the terms,
conditions, obligations and provisions of this Lease applicable to Tenant and
(ii) the entity remains an Affiliate. Further, Tenant shall also have the right,
without the prior consent of Landlord, to sublet all or any portion of the
Premises to an Affiliate so long as (i) such sublease contains provisions
stating that is subject to and subordinate to this Lease and to all matters to
which this Lease is or shall be subordinate, and (ii) the entity remains an
Affiliate. No subletting or assignment by Tenant made pursuant to this Section
shall relieve Tenant of Tenant's obligations under this Lease. As used herein,
the term Affiliate shall mean and collectively refer to (a) a corporation,
individual or other entity which owns and controls all or a majority of the
voting stock of Tenant (if it is a corporation) or controls the day-to-day
decision making of Tenant (the "Parent"), or (b) a corporation or other entity
in which either the Tenant or its Parent owns and controls all or a majority of
the voting stock or ownership interests of the entity and is able to elect (by
ownership of stock or proxy) the board of directors and the officers of the
corporation, or (c) an Affiliate of the Parent, and/or (d) a successor or
surviving corporation in the event of a merger, takeover or other form of
business acquisition of the Tenant. A transfer permitted under this Section will
be excluded from the provisions of Section 15.02 hereof. Tenant shall have the
right to sublease up to one-half of one floor of the Premises to PowerTrust.com,
Inc., a Delaware corporation ("PowerTrust"), provided that PowerTrust meets the
definition of Affiliate set forth above at the time the sublease is made and
that such sublease satisfies the other requirements set forth in this Section
15.04. The parties agree that the requirement that PowerTrust remain an
Affiliate shall not be violated by a spin-off of PowerTrust. No such sublease to
PowerTrust shall relieve Tenant of Tenant's obligations under this Lease.
PART 16 - INDEMNIFICATION
The Tenant shall indemnify the Landlord and hold the Landlord harmless
from and against all loss or liability for or on account of any injury
(including death) or damage received or sustained by any person or persons
(including the Landlord and any employee, agent or invitee of Landlord or any of
them) to the extent that such loss or liability is caused by reason of a Default
by Tenant hereunder or any negligent act or omission on the part of the Tenant
or any agent, employee, representative, business visitor or invitee of the
Tenant.
The Landlord shall indemnify the Tenant and hold the Tenant harmless
from and against all loss or liability for or on account of any injury
(including death) or damage received or sustained by any person or persons
(including Tenant or any employee, agent or invitee of the Tenant or any of
them) to the extent that such loss or liability is caused by reason of any
negligent act or omission on the part of Landlord or any agent, employee,
representative or business visitor of Landlord.
If either Landlord or Tenant (the "Indemnitee") is made a party to any
litigation commenced against the Indemnitee which falls within the scope of the
foregoing indemnities, then the other party (the "Indemnitor") shall pay all
costs and expenses, including reasonable attorneys' fees and court costs,
imposed upon or actually and reasonably incurred by Indemnitee because of any
such litigation, and the amount of such costs and expenses, including reasonable
attorneys' fees and court costs, shall be deemed an obligation owing by
Indemnitor to Indemnitee.
PART 17 - SURRENDER OF THE PREMISES
SECTION 17.01. CONDITION OF PREMISES.
Upon expiration of the Term or other termination of this Lease for any
cause whatsoever, Tenant shall peacefully vacate the Premises in as good order
and condition as the same were at the
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beginning of the Term or may thereafter have been improved by Landlord or
Tenant, except for reasonable use and wear thereof and damage to the Premises by
fire or other casualty or condemnation.
SECTION 17.02. TENANT HOLDOVER.
In the event that Tenant shall not immediately surrender the Premises
on the Expiration Date of the Term, Tenant, at the option of Landlord, shall
become a month-to-month Tenant at one hundred fifty percent (150%) of the Rent
in effect during the last month of the Term and subject to all of the terms,
conditions, covenants and agreements of this Lease. Tenant shall give to
Landlord at least thirty (30) days' written notice of any intention to quit the
Premises during any such holdover tenancy, and Tenant shall be entitled to
thirty (30) days' written notice to quit the Premises during any such holdover
tenancy, unless Tenant is in Default hereunder, in which event Tenant shall not
be entitled to any notice to quit, the usual thirty (30) days' written notice to
quit being hereby expressly waived. Notwithstanding the foregoing provisions of
this Section, in the event that Tenant shall hold over after the expiration of
the Term, then at any time prior to Landlord's acceptance of Rent from Tenant as
a monthly Tenant hereunder, Landlord, at its option, may forthwith re-enter and
take possession of the Premises without process, or by any legal process in
force in the Commonwealth of Virginia. Tenant shall be liable to Landlord for
all damage which Landlord suffers because of any holding over by Tenant, and
Tenant shall indemnify Landlord against all claims made against Landlord
resulting from Landlord's delay in delivering possession of the Premises to any
other Tenant or prospective Tenant.
PART 18 - ESTOPPEL CERTIFICATES
Tenant shall execute and return within ten (10) business days any
certificate or agreement that Landlord may request from time to time, stating
that this Lease is unmodified and in full force and effect, or in full force and
effect as modified, and stating the modification. The certificate also shall
state (i) that all work has been completed, and the work and the Premises are
accepted as satisfactory except for items listed on a punchlist, if any,
attached to such certificate; (ii) the amount of Base Rent and Additional Rent
and the dates on which Rent commenced to accrue and to which the Rent has been
paid in advance, and the amount of any security deposit or prepaid Rent; (iii)
that Tenant is paying Rent on a current basis; (iv) that Tenant is in full and
complete possession of the Premises and doing business; (v) that there is no
present default on the part of Landlord, or attach a memorandum stating any such
instance of default; (vi) that Tenant has not advanced any amounts to or on
behalf of Landlord which have not been reimbursed; (vii) that Tenant has no
rights to setoff and no defense or counterclaim against enforcement of its
obligations under the Lease, including the payment of Rent; (viii) that Tenant
understands that this Lease has been collaterally assigned to Landlord's
mortgagee as security for a loan to Landlord and that Rent may not be prepaid
other than as may be provided for in this Lease nor may this Lease be amended,
modified, or waived so as to have a material impact on the financial obligations
of either Tenant or Landlord without such mortgagee's prior written approval;
(ix) that there are no actions, whether voluntary or otherwise, pending against
Tenant under the bankruptcy laws of the United States or any state thereof; (x)
that Tenant has no other notice of any sale, transfer or assignment of this
Lease or of the Rent; and (xi) any other fact pertaining to Tenant's interest in
this Lease which Landlord, or Landlord's mortgagee, may request. Failure to
deliver the certificate within ten (10) business days shall be conclusive upon
Tenant for the benefit of Landlord and any successor to Landlord that this Lease
is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate. Any such certificate may be
relied upon by any prospective purchaser, any ground lessor, or any beneficiary
under the deed of trust on the Building, the underlying land, or any part
thereof.
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PART 19 - SUBORDINATION AND ATTORNMENT
SECTION 19.01. SUBORDINATION.
This Lease is subject and subordinate to any deeds of trust or other
security instruments which may from time to time during the Term cover the
Building, the underlying land, or any interest of Landlord therein, and to any
advances made on the security thereof, and to any refinancings, increases,
renewals, modifications, consolidations, replacements, and extensions of any of
such deeds of trust or security instruments. This provision is declared by
Landlord and Tenant to be self-operative and no further instrument shall be
required to effect such subordination of this Lease. Upon demand, however,
Tenant shall execute, acknowledge, and deliver to Landlord any further
instruments and certificates evidencing such subordination as Landlord, or the
holder of any deed of trust covering the Building, the underlying land, or any
interest of Landlord therein, may reasonably require. This Lease is further
subject and subordinate to all ground or primary leases hereafter in existence
and affecting the Building or the underlying land and to any modifications and
extensions thereof.
SECTION 19.02. ATTORNMENT.
Notwithstanding the generality of the foregoing provisions of Section
19.01 hereof, any such mortgagee shall have the right, unilaterally, at any time
fully or partially to subordinate any such deeds of trust or other security
instruments to this Lease on such terms and subject to such conditions as such
mortgagee may consider appropriate in its discretion, and upon any request, by
such mortgagee, Tenant shall execute an instrument confirming any such full or
partial subordination by any mortgagee. At any time, before or after the
institution of any proceedings for the foreclosure sale under any deed of trust
or other security instrument, or the conveyance of the Building under any deed
of trust or other security instrument, Tenant shall attorn to the purchaser upon
any such sale or to the grantee under any deed in lieu of foreclosure and shall
recognize such purchaser or grantee as Landlord under this Lease without any
change in the terms or other provisions of this Lease. Tenant hereby waives the
right, if any, to elect to terminate this Lease or to surrender possession of
the Premises in the event of foreclosure of any deed of trust or security
instrument (or any transfer in lieu thereof). The foregoing agreement of Tenant
to attorn shall survive any foreclosure sale or conveyance in lieu thereof.
Tenant shall upon demand at any time, before or after any such foreclosure sale
or conveyance in lieu thereof, execute, acknowledge, and deliver to Landlord's
mortgagee or any successor thereof or any then-owner of the Building any written
instruments and certificates evidencing such attornment as Landlord's mortgagee
may reasonably require.
SECTION 19.03. NON-DISTURBANCE AGREEMENT.
Landlord agrees to use commercially reasonable efforts to obtain from
the mortgagee for the existing indebtedness (the "Existing Indebtedness") and in
the event of a future financing (the "New Financing") of the Landlord's interest
in the Building and/or the land upon which the Building is situated a
Subordination, Non-Disturbance and Attornment Agreement on the mortgagee's
standard form which provides that, in the event of a foreclosure or a transfer
in lieu thereof, Tenant will not be disturbed in its possession of the Premises
in accordance with this Lease so long as (i) no Default has occurred on the part
of Tenant under this Lease; and (ii) Tenant attorns to the purchaser or
transferee as landlord under this Lease, in which case this Lease shall,
notwithstanding the foreclosure or transfer in lieu thereof, continue in full
force and effect upon and subject to all terms, covenants, conditions, and
obligations of this Lease.
PART 20 - QUIET ENJOYMENT
Provided Tenant performs all of Tenant's obligations under this Lease,
including the payment of Rent, Tenant shall, during the Term, peaceably and
quietly enjoy the Premises without disturbance from Landlord or any other
persons acting by, through, or under Landlord; subject, however, to (i) the
terms of this Lease; (ii) the deeds of trust, ordinances, restrictive covenants,
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leases, easements, and other agreements or encumbrances now or hereafter
affecting the Building or the land on which the Building is situated; (iii) the
right of Landlord to construct on its property any additional buildings or other
improvements now or hereafter permitted by the governmental authorities having
jurisdiction over Landlord's property; (iv) the right of Landlord to relocate
parking spaces for the Building or for the Premises so long as the relocated
parking area remains reasonably accessible to the Premises, conduct renovations
to the Building or make alterations to the Building so long as Landlord's
exercise of these rights does not substantially interfere with Tenant's use of
the Premises; and (v) the right of the Landlord to enter upon the Premises for
purposes of general inspection or during the final twelve (12) months of the
Term future leasing of the Premises. This covenant and all other covenants of
Landlord in this Lease shall be binding upon Landlord and its successors only
with respect to breaches occurring during its and their respective ownership of
Landlord's interest hereunder.
PART 21 - SIGNS AND FURNISHINGS
SECTION 21.01. SIGNS AND ADVERTISEMENTS.
No sign, advertisement, or notice referring to Tenant shall be
inscribed, painted, affixed, or otherwise displayed on any part of the exterior
or the interior of the Building, except those installed by Landlord on the
directories and the entrance door to the Premises and such other areas, if any,
as Landlord may determine. If Tenant exhibits or installs any sign,
advertisement or notice not permitted hereunder, Landlord shall have the right
to remove the same at Tenant's expense. Landlord reserves the right to affix,
install, and display signs, advertisements, and notices on any part of the
exterior or interior of the Building.
Notwithstanding the foregoing, Tenant, at its sole cost and expense,
shall have the non-exclusive right to display a sign on the exterior of the
Building facing the Dulles Toll Road, subject to Landlord's approval, in
accordance with all governmental authorities, so long as Tenant is the largest
or second largest tenant of the Building as determined by the amount of Rentable
Area of the Building leased. Tenant is solely responsible for the maintenance,
repair and replacement of said sign.
SECTION 21.02. FURNISHINGS.
Landlord shall have the right to prescribe the weight and position of
safes and other heavy equipment and fixtures, which, if considered necessary by
Landlord, shall be installed in such manner as Landlord directs in order to
distribute their weight adequately. In no event shall Tenant place on any part
of the floor of the Premises a load exceeding 80 pounds per square foot which
such floor was designed to carry and which is allowed by law. Any and all damage
or injury to the Premises or the Building caused by moving such heavy equipment
or fixtures or the same being in or upon the Premises, shall be repaired by and
at the sole cost of Tenant. All furniture, equipment, and other bulky matter of
any description shall be delivered to the Premises only through the designated
service entrance of the Building and the designated service elevator during
normal business hours or as otherwise directed or scheduled by Landlord. All
moving of furniture, equipment, and other materials shall be under the
supervision of Landlord, who shall not, however, be responsible for any damage
to or charges for moving the same, except to the extent caused by the negligence
or willful misconduct of Landlord or its agents, representatives or employees.
Tenant agrees to remove promptly from the sidewalks adjacent to the Building any
of Tenant's furniture, equipment, or other material there delivered or
deposited.
PART 22 - DEFAULTS AND REMEDIES
SECTION 22.01. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute a Default or an Event of Default under this Lease: (a) if Tenant
fails to pay any Rent hereunder as and when such Rent becomes due and such
failure shall continue for more than five (5) business days after
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Landlord gives Tenant written notice of past due Rent; (b) if Tenant fails to
pay Rent on time more than twice in any period of twelve (12) months,
notwithstanding that such payments have been made within the applicable cure
period; (c) if Tenant permits to be done anything which creates a lien upon the
Premises and fails to discharge, or bond such lien or post such security with
Landlord as is required by Part 10 hereof; (d) if Tenant violates the provisions
of Part 15 hereof by making an unpermitted assignment or sublease; (e) if Tenant
fails to maintain in force all policies of insurance required by this Lease and
any such failure shall continue for more than ten (10) days after Landlord gives
Tenant written notice of such failure; (f) if any petition is filed by or
against Tenant under any present or future section or chapter of the Bankruptcy
Code, or under any similar law or statute of the United States or any state
thereof (which, in the case of an involuntary proceeding, is not discharged,
dismissed, stayed, or vacated, as the case may be, within sixty (60) days of
commencement), or if any order for relief shall be entered against Tenant in any
such proceedings; (g) if Tenant becomes insolvent or makes a transfer in fraud
of creditors or makes an assignment for the benefit of creditors; (h) if a
receiver, custodian, or trustee is appointed for the Premises or for all or
substantially all of the assets of Tenant, which appointment is not vacated
within sixty (60) days following the date of such appointment; (i) if Tenant
fails to perform or observe any other term of this Lease and such failure shall
continue for more than thirty (30) days after Landlord gives Tenant notice of
such failure, or, if such failure cannot be corrected within such thirty (30)
day period, if Tenant does not commence to correct such default within said
thirty (30) day period and thereafter diligently prosecute the correction of
same to completion within a reasonable time and in any event prior to the time
failure to complete such correction could cause Landlord to be subject to
prosecution for violation of any law, rule, ordinance or regulation or causes,
or could cause a default under any deed of trust, mortgage, underlying lease,
tenant lease or other agreement applicable to the Building or the land upon
which it is situated; or (j) if Tenant fails to perform a particular provision
(other than the payment of Rent) of this Lease more than three (3) times in any
period of twelve (12) months, notwithstanding that Tenant has corrected any
previous failures within the applicable cure period.
SECTION 22.02. REMEDIES.
Upon the occurrence of any Event of Default, Landlord shall have the
right, at Landlord's option, to terminate this Lease. With or without
terminating this Lease, Landlord may re-enter and take possession of the
Premises and the provisions of this Section 22.02 shall operate as a notice to
quit, any other notice to quit or of Landlord's intention to re-enter the
Premises being hereby expressly waived. If necessary, Landlord may proceed to
recover possession of the Premises under and by virtue of the laws of the
Commonwealth of Virginia or by such other proceedings, including re-entry and
possession, as may be applicable. If Landlord elects to terminate this Lease,
everything contained in this Lease on the part of Landlord to be done and
performed shall cease without prejudice; subject, however, to the right of
Landlord to recover from Tenant all Rent and other sums accrued up to the time
of termination or recovery of possession by Landlord, whichever is later.
Whether or not this Lease is terminated by reason of Tenant's Default, Landlord
shall use commercially reasonable efforts, but shall not be obligated to, relet
the Premises for such rent and upon such terms as are not unreasonable under the
circumstances and, if the entire Rent provided in this Lease plus the costs,
expenses, and damages hereafter described shall not be realized by Landlord,
Tenant shall be liable for all damages sustained by Landlord, including, without
limitation, deficiencies in Base Rent, Adjusted Rent and Additional Rent, the
value of any rent abatement, tenant allowance or other payments made to Tenant,
attorney's fees and expenses reasonably incurred, brokerage fees, and the
expense of placing the Premises in rentable condition comparable to the
condition the Premises were in on the Commencement Date or as subsequently
improved and the expense of making any minor repairs or alterations necessary to
put the Premises in a condition reasonably acceptable to a new tenant. Landlord
shall in no way be responsible or liable for any failure to collect any rent due
and/or accrued from such reletting, to the end and intent that Landlord may
elect to hold Tenant liable for the Base Rent, Adjusted Rent, and Additional
Rent, and any and all other items of cost and expense which Tenant shall have
been obligated to pay throughout the remainder of the Term. Any damages or loss
of rent sustained by Landlord may be recovered by Landlord, at Landlord's
option, at the time of the reletting, or in separate actions, from time to time,
as said damage shall have been made more easily ascertainable by successive
relettings, or, at Landlord's option, may be deferred until the expiration of
the Term, in which event Tenant hereby agrees that the cause of action shall not
be deemed to have accrued until the date of
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Expiration of the Term. The provisions contained in this Section 22.02 shall be
in addition to, and shall not prevent the enforcement of, any claim Landlord may
have against Tenant for anticipatory breach of this Lease.
SECTION 22.03. REMEDIES CUMULATIVE.
All rights and remedies of Landlord set forth herein are in addition to
all other rights and remedies available to Landlord at law or in equity. All
rights and remedies available to Landlord hereunder or at law or in equity are
expressly declared to be cumulative. The exercise by Landlord of any such right
or remedy shall not prevent the concurrent or subsequent exercise of any such
right or remedy. No delay in the enforcement or exercise of any such right or
remedy shall constitute a waiver of any Default by Tenant hereunder or of any of
Landlord's rights or remedies in connection therewith. Landlord shall not be
deemed to have waived any Default by Tenant hereunder unless such waiver is set
forth in a written instrument signed by Landlord. If Landlord waives in writing
any Default by Tenant, such waiver shall not be construed as a waiver of any
covenant, condition, or agreement set forth in this Lease except as to the
specific circumstances described in such written waiver.
SECTION 22.04. NO ACCEPTANCE OR SURRENDER.
No act or thing done by Landlord or its agents during the Term shall
constitute an acceptance of an attempted surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless made in
writing and signed by Landlord. No re-entry or taking possession of the Premises
by Landlord shall constitute an election by Landlord to terminate this Lease,
unless a written notice of such intention is given to Tenant. Notwithstanding
any such reletting or re-entry or taking possession, Landlord may at any time
thereafter terminate this Lease for a previous Default. Landlord's acceptance of
Rent following an Event of Default hereunder shall not be construed as a waiver
of such Event of Default. No waiver by Landlord of any breach of this Lease
shall constitute a waiver of any other violation or breach of any of the terms
hereof. Forbearance by Landlord to enforce one or more of the remedies herein
provided upon a breach hereof shall not constitute a waiver of any other breach
of this Lease.
SECTION 22.05. CUSTOMS AND PRACTICES.
No custom or practice which may develop between the parties in the
administration of the terms of this Lease shall be construed to waive or lessen
Landlord's or Tenant's right to insist upon strict performance of the terms of
this Lease.
SECTION 22.06. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD.
In the Event of Default, Landlord may, but shall not be required to,
make such payment or do such act required to be performed by Tenant. If Tenant
fails to act and Landlord makes such payment or does such act, all costs and
expenses actually and reasonably incurred by Landlord, plus interest thereon at
the Default Rate from the date paid by Landlord to the date of payment thereof
by Tenant, shall be paid by Tenant to Landlord within ten (10) days of written
demand therefor. The taking of such action by Landlord shall not be considered
as a cure of such Default by Tenant or to prevent Landlord from pursuing any
remedy it is otherwise entitled to in connection with such Default.
SECTION 22.07. DEFAULT BY LANDLORD.
Tenant agrees to give written notice of any default by Landlord under
this Lease to any lender of Landlord secured by the Premises upon request
thereof by such lender and a reasonable time within which to cure such default
prior to Tenant taking any action to remedy such default or cancel the Lease.
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PART 23 - SECURITY DEPOSIT
SECTION 23.01. APPLICATION OF SECURITY DEPOSIT.
Within five (5) business days of the full execution of this Lease,
Tenant shall deliver to Landlord the sum stipulated in the Basic Lease
Information as a Security Deposit. If Tenant fails to timely deliver said
Security Deposit, Landlord shall have the right to terminate this Lease by
notice to Tenant. Landlord shall not be required to maintain such deposit in a
separate account. If the Security Deposit is in the form of cash, it shall
accumulate simple interest for the benefit of Tenant at a rate of three percent
(3%), less any applicable bank fees. In the event that there is an increase in
the Rentable Area of the Premises during the Term, then Tenant, upon demand from
Landlord, shall immediately deposit with Landlord an additional sum of money to
become part of the Security Deposit equal to the product of the square foot
increase in Rentable Area of the Premises times the (i) Base Rent or Adjusted
Rent, as the case may be, or (ii) the Base Rent agreed to by Landlord and Tenant
for such square foot increase, as either (i) or (ii) may be applicable,
calculate on a one (1) month basis. The Security Deposit shall be security for
the performance by Tenant of all of Tenant's obligations, covenants, conditions,
and agreements under this Lease. Within thirty (30) days after the expiration of
the Term, and provided Tenant has vacated the Premises and is not then in
Default hereunder, Landlord shall return the Security Deposit to Tenant, less
such portion thereof as Landlord shall have appropriated to satisfy any Default
by Tenant hereunder. In the event of any Default by Tenant hereunder, Landlord
shall have the right, but shall not be obligated to use, apply or retain all or
any portion of the Security Deposit for (i) the payment of any Base Rent,
Adjusted Rent, Additional Rent or any other sum as to which Tenant is in
Default, (ii) the payment of any amount which Landlord may spend or become
obligated to spend to repair physical damage to the Premises or the Building
pursuant to Part 11 hereof, or (iii) the payment of any amount Landlord may
spend or become obligated to spend or for compensation of Landlord for any
losses incurred by reason of Tenant's Default, including, but not limited to,
any damage or deficiency arising in connection with the reletting of the
Premises. If any portion of the Security Deposit is so used or applied, within
ten (10) business days after written notice to Tenant of such use or
application, Tenant shall deposit with Landlord an amount sufficient to restore
the Security Deposit to its original amount, and Tenant's failure to do so shall
constitute a Default under this Lease.
SECTION 23.02. TRANSFER OF SECURITY DEPOSIT.
In the event of the sale or transfer of Landlord's interest in the
Building, Landlord shall have the right to transfer the Security Deposit to the
purchaser or assignee, in which event Tenant shall look only to the new landlord
for the return of the Security Deposit (subject to the provisions of this
Lease), and Landlord shall thereupon be released from all liability to Tenant
for the return of the Security Deposit.
SECTION 23.03. LETTER OF CREDIT.
Provided the conditions of this Section 23.03 have been satisfied,
Tenant shall have the right to post a letter of credit in the amount of the
Security Deposit as the Security Deposit. The letter of credit shall (i) be
issued by a federally insured bank having an office in the Washington, D.C.
metropolitan area which bank is reasonably acceptable to Landlord; (ii) be
irrevocable; (iii) authorize the Landlord to draw by its sight draft accompanied
by a certificate by Landlord (or its representative) that Landlord is entitled
to draw upon the same pursuant to provisions of this Lease, and (iv) by its
terms not expire prior to the first year anniversary of the Rent Commencement
Date. At least thirty (30) days prior to the expiration of the Letter of Credit,
Tenant shall deliver to Landlord one of the following (i) cash in an amount
equal to the Security Deposit, (ii) an amendment to the letter of credit
extending the expiry date for an additional year, or (iii) a new letter of
credit complying with the terms of this Section 23.03 which has an expiry date
of at least one year from the date of expiration of the existing letter of
credit. Should Tenant deliver either a new letter of credit or cash in lieu of
the letter of credit, then, Landlord will return the letter of credit to Tenant.
The failure of Tenant to deliver Landlord an extension of the letter
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of credit, a new letter of credit or cash in lieu of the letter of credit, at
least thirty (30) days prior to the expiration of the date of the letter of
credit Landlord is holding as a Security Deposit shall entitle Landlord to draw
upon the letter of credit and hold such proceeds pursuant to the provisions of
Section 23.01 hereof.
SECTION 23.04. REDUCTION OF SECURITY DEPOSIT.
Provided that no monetary Event of Default has occurred during the
twelve (12) months prior to each of the following dates, the required Security
Deposit shall be reduced in accordance with the chart listed below. If the
Security Deposit is in the form of cash, then within thirty (30) days of each
date set forth below, Landlord shall return to Landlord such amount, including
any accrued interest, necessary to reduce the Security Deposit to the Adjusted
Security Deposit.
<TABLE>
<CAPTION>
Effective Date Adjusted Security Deposit
-------------- -------------------------
<S> <C>
First anniversary of the Rent Commencement Date $250,000.00
Second anniversary of the Rent Commencement Date $200,000.00
Third anniversary of the Rent Commencement Date $150,000.00
Fourth anniversary of the Rent Commencement Date $100,000.00
</TABLE>
PART 24 - LANDLORD'S LIEN AND SECURITY INTEREST
Landlord shall have a lien upon, and Tenant hereby grants to Landlord a
security interest in, all personal property and equipment of Tenant located in
the Premises and purchased in whole or in part with the Tenant Allowance
(including, without limitation, the systems furniture and case goods purchased
from Computer Associates), as security for the payment of all Rent and the
performance of all other obligations of Tenant required by this Lease. At any
time after a Default by Tenant hereunder, Landlord may seize and take possession
of any and all such personal property and equipment. If Tenant fails to redeem
the personal property and equipment so seized by payment of all sums then due
and unpaid Landlord under and by virtue of this Lease, Landlord shall have the
right, after twenty (20) days' written notice to Tenant, to sell such personal
property and equipment so seized at public or private sale and upon such terms
and conditions as to Landlord may appear advantageous. After the payment of all
proper charges incident to such sale, the proceeds thereof shall be applied to
the payment of any and all sums due to Landlord pursuant to this Lease. In the
event there shall be any surplus remaining after the payment of all sums due to
Landlord, such surplus shall be held by Landlord and applied in payment of
future Rent as it becomes due, and any surplus remaining after payment of all
such Rent shall be paid over to Tenant. Landlord shall have all of the rights
and remedies of a secured party under the Virginia Uniform Commercial Code, and,
upon request by Landlord, Tenant shall execute and deliver to Landlord a
financing statement in form sufficient to perfect the security interest of
Landlord in the aforementioned property and proceeds thereof. A photographic
reproduction of this Lease shall be sufficient as a financing statement, but
shall be filed as such only in the event Tenant fails to execute and deliver a
financing statement requested by Landlord hereunder within five (5) business
days of such request.
PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES
In any action or proceeding brought by either party against the other
under this Lease, the prevailing party shall be entitled to recover from the
other party reasonable attorneys fees, and other reasonable legal expenses and
court costs incurred by such prevailing party in such action or proceeding as
the court may find to be reasonable.
PART 26 - NOTICES
Any notice, demand, request, consent, approval or other communication
which either party hereto is required or desires to give or make or communicate
to the other shall be in writing and shall be given or made or communicated by
United States registered or certified mail or by any overnight or express mail
service which provide receipts to indicate delivery, addressed to the
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parties hereto at the respective addresses specified in the Basic Lease
Information, or at such other address as they have subsequently specified by
written notice.
All notices shall be effective upon being deposited in the manner
prescribed above, however, the time period in which a response to such notice
must be given shall commence to run from the date of receipt by the addressee
thereof as shown on the return receipt of the notice. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no
notice was given, shall be deemed to be receipt of the notice as of the date of
such rejection, refusal or inability to deliver.
PART 27 - MISCELLANEOUS
SECTION 27.01. NO PARTNERSHIP.
Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of landlord and
tenant.
SECTION 27.02. BROKERS.
Landlord recognizes the Broker as the Broker under this Lease and shall
pay the Broker a commission pursuant to a separate agreement between the Broker
and Landlord, Landlord and Tenant each represent and warrant to the other that,
except as provided above, neither of them has employed or dealt with any broker,
agent or finder in carrying on the negotiations relating to this Lease. In the
event of a breach by a party of their foregoing representation and warranty (the
"Defaulting Party"), the Defaulting Party shall indemnify and hold the other
party harmless from and against any claim or claims, damages or expenses
(including any claims for brokerage or other commissions asserted by any broker,
agent, or finder fees) which may arise as a result of such breach.
SECTION 27.03. SEVERABILITY.
Every agreement contained in this Lease is, and shall be construed as,
a separate and independent agreement. If any term of this Lease or the
application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
SECTION 27.04. TRIAL BY JURY.
Landlord and Tenant each hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other in
connection with any matter arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or
occupancy of the Premises, or any claim of injury or damage.
SECTION 27.05. FORCE MAJEURE.
Whenever a period of time is herein prescribed for action to be taken
by a party, the party shall not be liable or responsible for, and there shall be
excluded from the computation for any such period of time, any delays due to
strikes, riots, acts of God, shortages of labor or materials, war, governmental
laws, regulations, or restrictions, or any other cause of any kind whatsoever
which is beyond the reasonable control of the party. However, the failure or
inability to obtain or have funds required for a performance of a party's
obligation shall not be a basis of force majeure. Force Majeure shall not be
applicable to Tenant's obligation to pay Rent hereunder as
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<PAGE> 47
and when it is due and payable. Nor shall Force Majeure modify the rights of
Tenant under Part 8 hereof.
SECTION 27.06. CAPTIONS.
The article, part, and section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
provisions hereof. Words of any gender used in this Lease shall include any
other gender, and words in the singular number shall be held to include the
plural, unless the context otherwise requires.
SECTION 27.07. BENEFIT AND BURDEN.
If there be more than one Tenant or Landlord, the obligations hereunder
imposed upon Tenant or Landlord, as the case may be, shall be joint and several,
and all agreements and covenants herein contained shall be binding upon the
respective heirs, personal representatives, successors, and, to the extent
permitted under this Lease, assigns of the parties hereto.
SECTION 27.08. NO REPRESENTATIONS BY LANDLORD.
Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises or the Building except
as herein expressly set forth and all reliance with respect to any
representations or promises is based solely on those contained herein. No
rights, easements, or licenses are acquired by Tenant under this Lease by
implication or otherwise except as expressly set forth in this Lease.
SECTION 27.09. ENTIRE AGREEMENT.
This Lease sets forth entire agreement between the parties and cancels
all prior negotiations, arrangements, brochures, agreements, and understandings,
if any, between Landlord and Tenant regarding the subject matter of this Lease.
No amendment or modification of this Lease shall be binding or valid unless
expressed in a writing executed by both parties hereto.
SECTION 27.10. NO OFFER.
The submission of this Lease to Tenant shall not be construed as an
offer, nor shall Tenant have any rights with respect thereto unless Landlord
executes a copy of this Lease and delivers the same to Tenant.
SECTION 27.11. AUTHORITY.
If Tenant signs as a corporation, each of the persons executing this
Lease on behalf of Tenant represents and warrants that Tenant is a duly
organized and existing corporation, that Tenant has been and is qualified to do
business in the Commonwealth of Virginia, that the corporation has full right
and authority to enter into this Lease, and that all persons signing on behalf
of the corporation were authorized to do so by appropriate corporate actions. If
Tenant signs as a partnership, trust, or other legal entity, each of the persons
executing this Lease on behalf of Tenant represents and warrants that Tenant has
complied with all applicable laws, rules, and governmental regulations relative
to its right to do business in the Commonwealth of Virginia, that such entity
has the full right and authority to enter into this Lease, and that all persons
signing on behalf of the Tenant were authorized to do so by any and all
necessary or appropriate partnership, trust, or other actions. Each of the
persons executing this Lease on behalf of a Landlord entity represents and
warrants that such entity has complied with all applicable laws, rules, and
governmental regulations relative to its right to do business in the
Commonwealth of Virginia, that such entity has the full
C-28
<PAGE> 48
right and authority to enter into this Lease, and that all persons signing on
behalf of such entity were authorized to do so by any and all necessary or
appropriate partnership, trust, or other actions.
SECTION 27.12. CHANGES REQUESTED BY LENDER.
If, in connection with obtaining financing for the Building, any lender
shall request reasonable modifications in this Lease as a condition for such
financing, Tenant will not unreasonably withhold, delay, or defer its consent
thereto, provided such modifications do not increase the obligations of Tenant
hereunder or adversely affect either the leasehold interest hereby created or
Tenant's use and enjoyment of the Premises.
SECTION 27.13. GOVERNING LAW AND CONSTRUCTION.
This Lease shall be governed by and construed under the laws of the
Commonwealth of Virginia. This Lease consists of three (3) parts, the Basic
Lease, General Lease Provisions and Exhibits which are to be read together as a
complete integrated document. Printed parts of this Lease shall be as binding on
the parties hereto as other parts hereof. Parts of this Lease which are written
or typewritten shall have no greater force or effect than and shall not control
parts which are printed, but all parts shall be given equal effect. Tenant
declares that Tenant has read and understands all parts of this Lease, including
all printed parts thereof. Should any provision of this Lease require judicial
interpretation, it is agreed that the court interpreting or considering same
shall not apply the presumption that the terms hereof shall be more strictly
construed against a party by reason of the rule or conclusion that a document
should be construed more strictly against the party who itself or through its
agents prepared the same, it being agreed that all parties hereto have
participated in the preparation of this Lease and that each party had full
opportunity to consult with legal counsel of its choice before the execution of
this Lease.
SECTION 27.14. LANDLORD'S LIABILITY.
Anything contained in this Lease to the contrary notwithstanding,
Tenant agrees that Tenant shall look solely to the estate and property of
Landlord in the Building and the land upon which is situated for the collection
of any judgment or other judicial process requiring the payment of money by
Landlord for any default or breach by Landlord under this Lease, subject,
however, to the prior rights of any mortgagee or lessor of the Building and land
upon which the Building is situated. No other assets of Landlord or any
partners, shareholders, or other principals of Landlord shall be subject to
levy, execution or other judicial process for the satisfaction of Tenant's
claim.
SECTION 27.15. USE OF NAME OF BUILDING.
Tenant shall not, without prior written consent of Landlord, use the
name of the Building for any purpose other than as the address of the business
to be conducted by Tenant on the Premises, and Tenant shall not do or permit the
doing of anything in connection with Tenant's business or advertising which in
the reasonable judgment of Landlord may reflect unfavorably on Landlord or the
Building or confuse or mislead the public as to any apparent connection or
relationship between Tenant and Landlord, the Building or the land upon which it
is situated.
SECTION 27.16. CHANGES BY LANDLORD.
Landlord shall have the unrestricted right to make changes to all
portions of the Building, without materially or adversely affecting Tenant's
access to or use of the Premises (of which the Building and land upon which it
is situated are a part) in Landlord's reasonable discretion for the purpose of
improving access of or security to the Building or the flow of pedestrian
vehicular traffic therein. Landlord shall be entitled to change the name or
address of the Building (subject to Landlord's obligation to reimburse Tenant up
to $500 for replacement of Tenant's stationery as provided herein). Landlord
shall have the right to close, from time to time, the common areas of
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<PAGE> 49
the land upon which the Building is situated, for such temporary periods as
Landlord deems legally sufficient to evidence Landlord's ownership and control
thereof and to prevent any claim of adverse possession by, or any implied or
actual dedication to the public or any party other than Landlord.
SECTION 27.17. TIME OF ESSENCE.
Time is of the essence in this Lease.
SECTION 27.18. SATELLITE DISH.
(a) Tenant shall have the right, subject to the provisions of this
Section, to install, at its sole cost and expense, upon the roof of the Building
a satellite dish antenna. Tenant shall pay to Landlord, on a monthly basis as
Additional Rent, a fee of $300.00 per month for the use of the roof of the
Building for the antenna. The location of the antenna shall be mutually agreed
upon by Landlord and Tenant prior to the Commencement Date. The size, design,
and appearance of the antenna shall be subject to the approval of all applicable
governmental authorities and Landlord. No roof penetrations shall be permitted
or made.
(b) In the event that Tenant constructs the antenna then, such
construction shall be subject to all of the provisions of this Lease. Tenant
further agrees that the provisions of Part 9 hereof shall apply to Tenant's use
of the roof for the installation and operation of the antenna. Tenant shall
maintain the antenna and the portion of the roof upon which is situated in a
good, clean and proper condition and will, at the end of the Term, remove the
antenna and will return the building to its original appearance where the
antenna was located subject to Landlord's approval.
C-30
<PAGE> 50
EXHIBIT "D" TO LEASE
Between
FIRST CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C.,
FAIRFAX CORNER ASSOCIATES L.C., BLUE RIDGE ASSOCIATES L.C.,
MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord")
and
DIGITAL COMMERCE CORPORATION
("Tenant")
Rules and Regulations
This Exhibit "D" is attached to and made a part of that Office Lease
Agreement dated January 24, 2000 (the "Lease"), between FIRST CAMPBELL
ASSOCIATES, L.C., LOUDOUN CENTER L.C., FAIRFAX CORNER ASSOCIATES L.C., BLUE
RIDGE ASSOCIATES L.C., MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord"), and DIGITAL COMMERCE CORPORATION, ("Tenant"). Unless
the context otherwise requires the terms used in this Exhibit that are defined
in the Lease shall have the same meanings as provided in the Lease.
The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to ensure compliance with
governmental and other requirements. Any continuing violation of these rules and
regulations by Tenant shall constitute a Default by Tenant under the Lease.
Landlord may, upon request of any Tenant, waive compliance by such
Tenant with any of the following rules and regulations, provided (i) no waiver
shall be effective unless signed by Landlord; (ii) any such waiver shall not
relieve such Tenant from the obligation to comply with such rule or regulation
in the future unless otherwise agreed to by Landlord; (iii) no waiver granted to
any Tenant shall relieve any other tenant from the obligation of complying with
these rules and regulations, unless such other tenant has received a similar
written waiver from Landlord; and (iv) any such waiver by Landlord shall not
relieve Tenant from any liability to Landlord for any loss or damage occasioned
as a result of Tenant's failure to comply with any rule or regulation.
1. Sidewalks, plaza areas, entrances, courts, elevators, stairways,
corridors and all other public areas of the Building shall not be obstructed or
encumbered by any tenant or used for any purpose other than ingress and egress
to and from the premises of such tenant.
2. No awnings or other projections shall be attached to the outside
wall or windows of the Building. No curtains, blinds, shades, or screens (other
than those furnished by Landlord as Building Standard) shall be attached to or
hung in, or used in connection with, any window or door of the premises of any
tenant.
3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the corridor, or
other public areas of the Building.
4. Plumbing fixtures and appliances shall be used only for the purposes
for which they were constructed, and no sweepings, rubbish, rags, or other
substances (including, without limitation, coffee grounds) shall be thrown
therein. The cost of repairing any stoppage or damage resulting from misuse of
such fixtures by a tenant or such tenant's servants, employees, agents,
visitors, or licensees, shall be paid by such tenant.
5. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable (excluding normal and customary cleaning supplies, and office
supplies, so long as such are
D-1
<PAGE> 51
properly stored and in quantities appropriate for immediate use), combustible,
or explosive fluid, materials, chemical, or substance in or about its premises.
6. No tenant shall mark, paint, drill into, or in any way deface, any
part of the Building or its premises; provided, however Tenant shall be
permitted to hang or install decorative artworks and/or pictures on the interior
walls of the Premises. No boring, cutting, or stringing of wires shall be
permitted.
7. No cooking shall be done or permitted in the Building by any tenant,
except for that which is consistent with an employee kitchen within the
premises. No tenant shall cause or permit any unusual or objectionable odors to
emanate from its premises.
8. Neither the whole nor any part of the premises of any tenant shall
be used for manufacturing, for the storage of merchandise, or for the sale or
exchange of merchandise, goods, or property of any kind.
9. Tenants shall not construct, maintain, use, or operate within their
respective premises any electrical device, wiring, or apparatus in connection
with a loud-speaker system or other sound system, except as reasonably required
as part of a communication system approved prior to the installation thereof by
Landlord. No such loud-speaker system shall be constructed, maintained, used or
operated outside of the premises.
10. No tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with other tenants or occupants of the
Building or neighboring buildings whether by the use of any musical instrument,
radio, television, or other audio device, whistling, singing, or in any other
way. Nothing shall be thrown out of any doors, windows, or any passageways.
11. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall any changes be made in any
existing locks or the locking mechanisms therein, without Landlord's approval
(which approval shall not be unreasonably withheld, conditioned or delayed). The
doors leading to the corridors or main halls shall be kept closed during
business hours except as they may be used for ingress or egress. Each tenant
shall, upon the termination of its tenancy, restore to Landlord all keys of
offices and storage and toilet rooms either furnished to, or otherwise procured
by, such tenant. In the event of the loss of any keys so furnished, such tenant
shall pay to Landlord the replacement cost thereof.
12. The normal hours of operation of the Building shall be 7:30 a.m. to
6 p.m. Monday through Friday, and 8 a.m. to 1 p.m. on Saturdays, customary legal
holidays excluded, but Tenant shall have access twenty-four (24) hours a day,
seven (7) days a week.
13. No tenant shall use or occupy or permit any portion of its premises
to be used or occupied as an employment bureau or for the storage, manufacture,
or sale of liquor, narcotics, or drugs. No tenant shall engage or pay any
employees in the Building, except those actually working for such tenant in the
Building, nor advertise for laborers giving an address at the Building.
14. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
Building management or watchman on duty. Landlord may at its option, require all
persons admitted to or leaving the Building between the hours of 6 p.m. and 7:30
a.m., Monday through Friday, and at any hour on Saturdays, Sundays, and legal
holidays, to register. Each Tenant shall be responsible for all persons for whom
it authorizes entry into the Building, and shall be liable to Landlord for all
acts or omissions of such persons.
15. Each tenant, before closing and leaving its premises at any time,
shall lock all entrance doors and turn off all lights and electrical appliances.
16. No premises shall be used, or permitted to be used, for lodging or
sleeping or for any immoral or illegal purpose.
D-2
<PAGE> 52
17. Landlord's employees shall not perform, and shall not be requested
by any tenant to perform, any work outside of their regular duties, unless under
specific instructions from the office of Landlord. The requirements of tenants
will be attended to only upon application to Landlord, and any such special
requirements shall be billed to tenants (and paid when the next installment of
rent is due) in accordance with the schedule of charges maintained by Landlord
from time to time or at such charge as is agreed upon in advance by Landlord and
such tenant.
18. Canvassing, soliciting, and peddling in the Building are
prohibited, and each tenant shall cooperate in seeking their prevention.
19. No animals of any kind shall be brought into or kept about the
Building by any tenant.
20. No vending machines for commercial or public use shall be permitted
to be placed or installed in any part of the Building by any Tenant. Tenant may
have vending machines in kitchen or other non-public areas of the Premises so
long as (i) such machines are not available for use by the general public, (ii)
Landlord has approved such machines and (iii) the machines are not visible to
the exterior of the Premises or the Building. Landlord reserves the right to
place or install vending machines in any of the public areas of the Building.
21. No plumbing or electrical fixtures shall be installed by any Tenant
without the written consent of Landlord, (which approval shall not be
unreasonably withheld, delayed or conditioned).
22. Bicycles, motorcycles, or any other type of vehicle shall not be
brought into the lobby or elevators of the Building or into the premises of any
tenant.
23. Landlord has the right to evacuate the Building in event of
emergency or catastrophe.
24. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
Building, provided that Landlord shall reimburse Tenant for replacement of its
stationary (not to exceed $500.00).
25. Landlord reserves the right to rescind any of these Rules and
Regulations and make such other and further rules and regulations as in the
judgment of Landlord shall from time to time be needed for the safety,
protection, care, and cleanliness of the Building, the operation thereof, the
preservation of good order therein, and the protection and comfort of its
tenants, their agents, employees, and invitees, which Rules and Regulation when
made and notice thereof given to a Tenant shall be binding upon him in like
manner as if originally herein prescribed.
D-3
<PAGE> 53
EXHIBIT "E"
COMMENCEMENT DATE NOTICE
THIS COMMENCEMENT DATE NOTICE (the "Commencement Date Notice") is made
and entered into this ____ day of ________________, 2000 by and between FIRST
CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C., FAIRFAX CORNER ASSOCIATES L.C.,
BLUE RIDGE ASSOCIATES L.C., MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II L.C.
(collectively, "Landlord") and DIGITAL COMMERCE CORPORATION ("Tenant"), wherein
Landlord and Tenant have entered into that certain Lease Agreement dated
September 14, 1998 (the "Lease"). Unless otherwise defined herein, all
capitalized terms used herein shall have the same meaning as described in the
Lease.
WITNESSETH:
WHEREAS, Landlord and Tenant wish to confirm and memorialize the
Commencement Date, Rent Commencement Date and the Expiration Date as defined in
the Lease, Landlord and Tenant agree as follows:
1. The Commencement Date as defined in the Lease is established to
_________________________.
2. The Rent Commencement Date as defined in the Lease is established to
_________________________.
3. The Expiration Date as defined in the Lease is established to be
_________________________.
4. The Landlord's work and/or delivery of the Premises as required by
the Lease has been substantially completed.
5. Tenant has accepted possession of the Premises pursuant to the terms
of the Lease.
Except as described herein, all terms and conditions of the Lease are
and shall remain in full force and effect.
LANDLORD:
FIRST CAMPBELL ASSOCIATES L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
LOUDOUN CENTER L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
[Signatures continue on next page.]
<PAGE> 54
FAIRFAX CORNER ASSOCIATES L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
BLUE RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
MIRROR RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
KING STREET II L.C.
a Virginia limited liability company
By:
-----------------------------------
Name:
-----------------------------------
Its: Manager
TENANT:
DIGITAL COMMERCE CORPORATION
a Delaware corporation
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
E-2
<PAGE> 55
EXHIBIT "F" TO LEASE
JANITORIAL CLEANING SPECIFICATIONS
SPECIFICATIONS
AREAS: The entire Premises, including all office space, entrance lobby(ies),
basement areas, loading platform(s), receiving areas, landings/steps,
public halls, stairways, lavatories, passageways and elevator cabs.
PART A - DAILY SERVICES (Excluding Saturdays, Sundays, and Holidays)
1. Toilet Rooms & Showers
Rest rooms are to receive complete cleaning and sanitation each night
according to the specifications listed below:
a. Commodes and Urinals: Commodes shall be washed inside and
outside including under the lips of each bowl. All seats shall
be washed. This work shall be performed using an approved
disinfectant cleanser. All bright metal shall be cleaned and
dry polished. Deodorant blocks shall not be used in the
urinals.
b. Washbasins: Washbasins shall be washed inside and outside
using an approved disinfectant cleanser. All bright metal
fixture units and plumbing shall be dry polished.
c. Stall Partitions: All stall partitions shall be damp cleaned
using an approved disinfectant cleanser. Special attention
shall be given to urinal partitions.
d. Entrance Doors: All entrance doors, including stops, jambs,
and frames shall be cleaned.
e. Mirrors and Lights: All mirrors and lights immediately above
mirrors shall be cleaned. Burned out lights shall be reported
to the maintenance department.
f. Couches and Chairs: Leather or vinyl couches and chairs shall
be damp cleaned. All vanity chairs, stools and other furniture
shall be treated in a like manner.
g. Sanitary Napkin Disposal Containers: All sanitary napkin
containers shall be emptied, damp cleaned with an approved
disinfectant cleanser and provided with a new paper bag liner
daily.
h. Installation of Supplies: All supplies (the quality of which
is to be approved by Tenant) such as toilet tissue, toilet
seat covers, paper towels, liquid hand soap and bar soap is to
be replenished. Insure that proper liquid soap is used in
dispensers to avoid malfunction (dilute with water if
necessary to prevent clogging). Periodically, clean operating
mechanisms and replace liquid soap supply in each dispenser to
insure proper operation.
i. Mosaic Floors: o Pick up loose paper and trash
o Sweep all floors
o Wet mop floors, using a disinfectant cleanser
j. Walls: Wash/clean walls around soap dispensers, towel
containers, and light switches as required to maintain
clean/bright appearance.
<PAGE> 56
k. Traps and Floor Drains: Shall be maintained free from odor at
all times. Periodically, water shall be poured down through
these traps/floor drains to insure vapor seal.
NOTE: No harsh or abrasive cleaner shall be used without
consulting the Property Manager.
2. Room Cleaning
Executive Offices - Private Offices - Semi-Private Offices including
other work stations and work areas - Reception Areas - Conference Rooms
- General Offices
The areas stated above are to receive complete general cleaning daily
according to the specifications listed below.
a. Wastepaper and Trash Containers: All trash containers as
designated shall be emptied and returned to original
locations. Plastic liners shall be used in trash containers
and changed as necessary for appearance and sanitation. Trash
containers shall be periodically washed, for appearance and
sanitation. All trash collected shall be deposited in exterior
bulk trash containers provided by the Property Manager. Doors
on these containers shall be kept closed when not in use. Any
spills occurring during emptying of trash shall be cleaned up
immediately (inside or outside), and related stains shall be
washed/shampooed as required.
b. Entrances to Executive Offices and Entrances of Office Areas
on Various Floors: All glass doors, plate glass side panels
and mirrors, including metal frames, stops, jambs shall be
cleaned as necessary.
c. Ash Trays: All ash trays shall be emptied. Ash trays shall
then be wiped clean with a damp cloth to remove stains and
odors.
d. Desks and Chairs: Wood desks shall be thoroughly dusted with a
treated dust cloth and oiled/waxed as required. Metal desks
shall be damp wiped as necessary to remove spots and stains,
including front and side vertical surfaces. All glass desk
tops will be damp cleaned. Papers on desks shall not be
disturbed. All chairs shall be dusted or vacuumed from top to
bottom, as required.
e. File and Storage Cabinets: All file and storage cabinets shall
be thoroughly dusted with a treated dust cloth. Cabinets lined
in a row shall be dusted along the horizontal and vertical
surface of each cabinet. Spill stains shall be damp cleaned
when required.
f. Tables and Lamps: Tables shall be treated in a like manner as
desks. Lamps shall be dusted thoroughly, using a treated dust
cloth. When dusting lamp shades, be certain that cloth is not
laden with dust. Cloth lamps shades shall be vacuumed with a
soft brush type tool.
g. Hand Dust/Clean daily the following using a treated dust
cloth:
o Window Sills
o Pictures and Frames
o Counters
o Radiator and Fan Coil Unit enclosures
(damp clean as required)
o Ledges and Shelves under six feet
o Doors, Jambs and Stops
(particularly along top/horizontal surface)
o Pushplates and Kickplates
o Coat rack and trees
o Telephones, all types including office and
telephones in booths
o Panel boxes, fire extinguishers and cabinets, and
fire hose cabinets/enclosures
F-2
<PAGE> 57
h. Vinyl (Resilient) Tile Floors: All resilient tile floors shall
be dusted with a treated dust mop. All spillage will be
removed, including damp mop cleaning when required. (Spray
buff floor, using a commercial floor polishing machine,
synthetic fiber pad and an approved acrylic polymer finish as
required to maintain gloss.)
i. Carpets: All carpets shall be thoroughly vacuumed. Special
attention will be paid to all spills, spots and adherents for
removal. Spot clean carpeting as required.
j. Glass Partitions: All glass partitions will be washed to
remove fingermarks and smudges.
3. Other Cleanable Areas
Main Entrance Lobby - Elevators - Corridors - Snack Bars - Stairways,
Landings, Loading Platforms, and Receiving Rooms
The areas listed above are to receive complete daily cleaning as
prescribed in paragraphs A 1 and 2 above and specialty cleaning
according to the specifications listed below.
a. Main Entrance Lobby: All hard surface floors shall be
thoroughly cleaned and non-slip floor finish applied as
necessary. (Spray buff floor, using a commercial floor
polishing machines, synthetic fiber pad and an approved
acrylic polymer finish as required to maintain gloss.) All
entrance door glass shall be cleaned. Area mats shall be
removed and thoroughly cleaned and returned to their original
location. Carpet areas shall be vacuumed daily and spot
cleaned as necessary.
b. Elevators: Interior walls and ceilings shall be dusted with a
treated dust cloth and spot cleaned as required. All carpets
shall be vacuumed daily and stains removed when possible.
Telephone boxes shall be checked and cleaned of any
trash/ashes, etc.
c. Corridors/Snack Bars:
1. Carpeted areas shall be vacuumed daily and all stains
removed when possible. Resilient flooring shall be
swept and damp mopped to remove spillage. (Spray buff
floor, using a commercial floor polishing machine,
synthetic fiber pad and an approved acrylic polymer
finish as required to maintain gloss.)
2. All refuse, trash and garbage from snack bars and
vending machine areas shall be collected and removed
from the building. Cans used for collection of food
remnants shall be periodically washed inside and out.
d. Water Fountains: To insure a clean, health condition at the
water fountains, the dispensing area shall be washed, cleaned
and polished.
e. Stairways: Stair landings and steps shall be swept or
vacuumed. Hand railings, ledges, grilles, fire apparatus and
doors shall be dusted. Spills shall be wiped up daily. Spray
buff resilient flooring as required to maintain gloss.
f. Outside Entrances: Landings and steps shall be swept. Both
sides of entrance glass shall be cleaned. Kick plates and push
bars shall be cleaned and polished.
g. Loading Platforms/Receiving Rooms: Loading dock areas,
platforms and receiving rooms shall be swept daily and damp
mopped as required.
F-3
<PAGE> 58
PART B - WEEKLY SERVICES
1. Toilet Rooms
Damp clean and dry polish tile walls.
2. Room Cleaning
a. Vertical Surfaces:
1. Wood wall paneling in Executive Offices shall be
dusted using a treated dust cloth.
2. Dust vertical surfaces of cabinets, files, etc.
3. All woodwork, doors, walls (including stairwells)
shall be spot cleaned to remove smudges/spills, etc.
b. Other:
1. Air conditioning return air grills shall be cleaned
(vacuumed if necessary).
2. Vacuum all upholstered furniture and clean any
leather furniture with a treated cloth.
3. Other Cleanable Areas
Stairways and Landings: All stairways and landings shall be damp mopped
weekly. Dust light fixtures and exposed pipes in stairwells.
PART C - MONTHLY SERVICES
1. Toilet Rooms
Dust all high areas and vacuum exhaust grills.
2. Room Cleaning
a. Vertical surfaces and under surfaces (knee wells, chair rungs,
table legs, etc.) shall be thoroughly dusted and all glass in
doors, partitions, pictures, and bookcases shall be
damp-wiped. Dust walls and horizontal surfaces over six feet
high.
b. Venetian Blinds: Venetian blinds will be dusted in place with
a treated dust cloth or venetian blind tool.
3. Other Cleanable Areas
Elevators: Carpet shall be lifted where appropriate, and flooring swept
and damp mopped.
Garage and parking facilities shall be maintained in a first class
manner in accordance with specifications that are provided by Landlord
and acceptable to Tenant in its reasonable discretion.
F-4
<PAGE> 1
EXHIBIT 10.14
FIRST AMENDMENT TO OFFICE LEASE AGREEMENT
THIS FIRST AMENDMENT TO OFFICE LEASE AGREEMENT (this "First Amendment")
is made and entered into this 22nd day of February, 2000 by and between FIRST
CAMPBELL ASSOCIATES, L.C., LOUDOUN CENTER L.C., FAIRFAX CORNER ASSOCIATES L.C.,
BLUE RIDGE ASSOCIATES L.C., MIRROR RIDGE ASSOCIATES L.C. AND KING STREET II
L.C., all Virginia limited liability companies (collectively, "Landlord")
("Landlord") and DIGITAL COMMERCE CORPORATION, a Delaware corporation
("Tenant"), with reference to the following:
R E C I T A L S :
A. Pursuant to that Office Lease Agreement dated January 24, 2000, by
and between Landlord and Tenant (the "Lease"), Landlord leased to Tenant and
Tenant leased from Landlord certain premises more particularly described therein
in the building commonly known as Dulles Overlook, 575 Herndon Parkway, Herndon,
Virginia 20170 (the "Building").
B. Landlord and Tenant desire to amend the Lease as more particularly
described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
1. All capitalized terms used herein unless specifically defined shall
have the same meaning and definition as used in the Lease.
2. Pursuant to the letter dated January 28, 2000 (attached hereto as
Exhibit "A"), Tenant has exercised its Expansion Right as set forth in Article
5.02 of the Lease to add the entire Expansion Space to the Premises. Tenant
shall take the Expansion Space in its "as is" and "where is" condition.
3. Effective as of January 28, 2000 and pursuant to Section 5.02 and
5.03 of the Lease, the following terms set forth in Article I, Section 1.01 of
the Lease shall be amended as follows:
(i) Term: Commencing on the Commencement Date and ending seven
(7) years after the Rent Commencement Date as set forth in this First Amendment.
(ii) Premises: 55,704 square feet of Rentable Area (28,575
square feet comprising the entire third (3rd) floor (the "Original Premises"),
and 27,129 square feet comprising the entire second (2nd) floor (the "Expansion
Space") of the Building, as more fully described and shown on the floor plans
attached to the Lease as Exhibits "A" and "A-1" (collectively, the "Premises").
(iii) Tenant's Proportionate Share: 41.15%
1
<PAGE> 2
(iv) Base Rent: $1,531,860.00 ($127,655.00 per month), based
upon $27.50 per square foot of Rentable Area in the Premises, per year
(v) Security Deposit: $600,000.00, subject to adjustment
pursuant to Part 23 of the General Lease Provisions, as modified herein.
4. The Rent Commencement Date for the Premises is that date which is
ninety (90) days after the Commencement Date.
5. The Expiration Date for the Premises is seven (7) years after the
Rent Commencement Date.
6. The Tenant Allowance is hereby increased by $135,645.00 (the
"Expansion Allowance") to a total Tenant Allowance of $421,395.00. The Tenant
Allowance shall be utilized and applied under the terms and conditions set forth
in Article 4 of the Lease.
7. The first sentence of Article 3 of the Lease is hereby amended by
deleting the words "Subject to the expansion rights of other Tenants in the
Building".
8. The first sentence of subsection (4) of Article 3 of the Lease is
hereby deleted in its entirety and replaced with the following:
"Base Rent for the first year of the Renewal Term shall be
$31.89 per square foot of Rentable Area of the Premises".
9. From the period commencing on the Commencement Date and expiring on
the Rent Commencement Date (the "Initial Period"), and for each month following
the Rent Commencement Date in which any portion of the Tenant Allowance is
applied toward monthly Base Rent, Tenant shall pay its Proportionate Share of
Operating Expenses and Real Estate Taxes, which amount shall be $32,772.52 per
month (the "Initial Period Rent"). The Initial Period Rent is based upon
Landlord's estimate for Operating Expenses and Real Estate Taxes, a copy of
which is attached hereto as Exhibit "B" to this First Amendment.
10. Section 23.04, Reduction of Security Deposit, shall be deleted in
its entirety and replaced with the following:
Provided that no monetary Event of Default has occurred during
the twelve (12) months prior to each of the following dates, the required
Security Deposit shall be reduced in accordance with the chart listed below. If
the Security Deposit is in the form of cash, then within thirty (30) days of
each date set forth below, Landlord shall return to Tenant such amount,
including any accrued interest, necessary to reduce the Security Deposit to the
Adjusted Security Deposit.
2
<PAGE> 3
<TABLE>
<CAPTION>
Effective Date Adjusted Security Deposit
------------------ -------------------------
<S> <C>
First anniversary of the Rent Commencement Date $533,333.00
Second anniversary of the Rent Commencement Date $466,666.00
Third anniversary of the Rent Commencement Date $400,000.00
Fourth anniversary of the Rent Commencement Date $333,333.00
Fifth anniversary of the Rent Commencement Date $266,666.00
Sixth anniversary of the Rent Commencement Date $200,000.00
</TABLE>
11. Article V of the Lease has been superceded by this First Amendment
and said Article V shall be of no further force or effect.
12. The first sentence of Section 1.04 of the Lease is hereby amended
by deleting the phrase "that the Leasehold Improvements are substantially
completed" and replacing them with the words "of the delivery or tender of the
Premises to Tenant."
13. Except as amended by this First Amendment, the Lease remains
unmodified and in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First
Amendment as of the day and year first above written.
LANDLORD:
FIRST CAMPBELL ASSOCIATES L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
LOUDOUN CENTER L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
[SIGNATURES CONTINUE ON NEXT PAGE.]
3
<PAGE> 4
FAIRFAX CORNER ASSOCIATES L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
BLUE RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
MIRROR RIDGE ASSOCIATES L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
KING STREET II L.C.
a Virginia limited liability company
By:
------------------------------
Name:
------------------------------
Its: Manager
TENANT:
DIGITAL COMMERCE CORPORATION
a Delaware corporation
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
4
<PAGE> 5
EXHIBIT "A"
[DIGITAL COMMERCE LETTERHEAD]
January 28, 2000 VIA FAX #703/631-6481
Mr. Thomas J. Scavone
The Peterson Companies
12500 Fair Lakes Circle, Suite 400
Fairfax, VA 22033
Dear Tom,
As discussed with you on January 27, DCC wishes to exercise the right
to expand our lease to include the entire second floor as per article 5 in our
lease agreement with you.
Please call me to discuss the specifics in accomplishing this.
Regards,
/s/ ALAN KRENEK
Alan Krenek
Controller
Cc William H. Seippel
Ken Koph - Winstead, Sechrist & Minick, P.C.
5
<PAGE> 6
EXHIBIT "B"
Dulles Overlook Office Building
Estimate of Operating Expenses and Real Estate Taxes
Calendar Year 2000
<TABLE>
<CAPTION>
Total Per Sq. Ft.
-------- -----------
<S> <C> <C>
Payroll $136,294 $ 1.01
Administrative $ 82,397 $ 0.61
Utilities $218,503 $ 1.61
Maintenance Contracts $146,705 $ 1.08
Repairs & Maintenance $ 61,077 $ 0.45
Licenses, Taxes, Insurance $ 19,676 $ 0.15
-------- --------
Subtotal Operating Expenses $664,652 $ 4.91
Real Estate Taxes $291,060 $ 2.15
TOTAL EXPENSES: $955,712 $ 7.06
</TABLE>
6
<PAGE> 1
EXHIBIT 10.15
OFFICE LEASE
LEASE made this 20th day October, 1997 by and between Churoad
Associates, L.P.(hereinafter called "LANDLORD"), and DATAMATIX a Pennsylvania
Corporation (hereinafter called "TENANT").
WITNESSETH, THAT:
1. DEMISED PREMISES. Landlord, for the term and subject to the
provisions and conditions hereof, leases to Tenant and Tenant accepts from
Landlord, the space consisting of 9,390 rentable square feet of office space on
the FIRST AND GROUND FLOORS floor known as Suite, AND 131 SQUARE FEET OF STORAGE
SPACE ON THE GROUND FLOOR (hereinafter referred to as the "DEMISED PREMISES") of
the building known as 215 WEST CHURCH ROAD located in KING OF PRUSSIA,
PENNSYLVANIA (hereinafter referred to as the "BUILDING"), and more particularly
described by the cross-hatched area on the floor plans annexed herein as Exhibit
"A", to be used by Tenant for the purpose of ADMINISTRATIVE AND SALES OFFICES
and for no other purpose. The size of the Demised Premises is based on a
building factor of 15%. Within six (6) months after Tenant's occupancy of the
Demised Premises, Landlord at Landlord's sole discretion, shall have an
architect measure the Building to determine the accurate size of the Demised
Premises and the actual building factor (Rentable vs. Usable). In the event the
size of the Demised Premises increases or decreases Landlord and Tenant will
execute an amendment to this Lease adjusting the size, Tenant's Fraction and
Rent Rider. Notwithstanding the foregoing the Tenant shall not be required to
recognize a building factor which is greater than twenty percent (20%) or less
than fifteen percent (15%).
2. TERM. Tenant shall use and occupy the Demised Premises for a term of
FIVE (5) years and ZERO (0) months, commencing on the FIRST day of JANUARY, 1998
and ending on the THIRTIETH day of DECEMBER, 2004 unless sooner terminated as
herein provided.
3. MINIMUM RENT.
(a) See Rent Rider attached. The first installment to be
payable on the execution of this Lease and subsequent installments to be payable
on the first day of each successive month of term hereof following the first
month of such terms.
(b) If the term of this Lease begins on a day other than the
first day of a month, rent from such day until the first day of the following
month shall be prorated at the rate of one-thirtieth of the fixed monthly rental
for each day of the first full calendar month of the term hereof (and, in such
event, the installment of rent paid at execution hereof shall be applied to the
rent due for the first full calendar month of the term hereof).
(c) All rent and other sums due to Landlord hereunder shall be
payable to CHUROAD ASSOCIATES, L.P. and mailed to the office of Landlord at
EQUIVEST MANAGEMENT COMPANY, P.O. BOX 13700, PHILADELPHIA, PENNSYLVANIA,
19191-1062, or to such other party or at
<PAGE> 2
such other address as Landlord may designate, from time to time, by written
notice to Tenant, without demand and without deduction, set-off or counterclaim
(except to the extent demand or notice shall be expressly provided for herein).
(d) If Landlord, at any time or times, shall accept said rent
or any other sum due to it hereunder after the same, shall become due and
payable such acceptance shall not excuse delay upon subsequent occasions, or
constitute or be construed as, a waiver of any of Landlord's rights hereunder.
4. ESCALATION IN TAXES, OPERATING COSTS, COSTS OF LIVING: COST OF
ELECTRICITY.
(A) DEFINITIONS. As used in this Section 4, the following terms shall be defined
as hereinafter set forth.
(i) "TAXES" shall mean all real estate taxes and assessments,
general and special, ordinary or extraordinary, foreseen or unforeseen, imposed
upon the Building or with respect to the ownership thereof and the parcel of
land appurtenant thereto. If, due to a future change in the method of taxation,
any franchise, income, profit or other tax, however designated, shall be levied
or imposed in substitution in whole or in part, for (or in lieu of) any tax
which would otherwise be included within the defined herein.
(ii) "BASE YEAR OPERATING EXPENSES" shall be $4.00 per square
foot.
(iii) "TENANT'S FRACTION" shall be a fraction, the numerator
of which is the Demised Rentable Square Feet and the denominator of which is the
Rentable Square Feet in the Building.
9,390/58,023
(iv) (a) "OPERATING EXPENSES" shall mean except as hereinafter
limited, Landlord's reasonable and actual out-of-pocket expenses in respect of
the operation, maintenance and management of the Building (after deducting any
reimbursement, discount, credit, reduction or other allowance received by
Landlord) and shall include, without limitation: (1) wages and salaries (and
taxes imposed upon employers with respect to such employed by Landlord for
rendering service in the normal operation, cleaning, maintenance, and repair of
the Building; (2) contract costs of contractors hired for the operation,
maintenance and repair of the Building; (3) the cost of steam, electricity,
water and sewer and other utilities (except for electricity, which is separately
charged by Landlord as herein provided) chargeable to the operation and
maintenance of the Building; (4) cost of insurance for the Building including
fire and extended coverage, elevator, boiler, sprinkler leakage, water damage,
public liability and property damage, plate glass, and rent protection, but
excluding any charge for increased premiums due to acts or omissions of other
occupants of the Building or because of extra risk by such other occupants; (5)
supplies; and (6) legal and accounting
-2-
<PAGE> 3
expenses; (7) Taxes (8) management expense. Landlord agrees to prohibit the
increase of items (4), (5), (6) and (8) of this section by more than ten percent
(10%) from year to year.
The term "OPERATING EXPENSES" shall not include: (1) the cost of redecorating or
repairing not provided on a regular basis to tenants of the Building; (2) the
cost of any repair or replacement item which, by standard accounting practice,
should be capitalized; (3) any charge for depreciation, interest or rents paid
or incurred by Landlord; (4) any charge for Landlord's income tax, excess profit
taxes, franchise taxes or similar taxes on Landlord's business; (5) commissions.
(b) In determining Operating Expenses for any year,
if less than ninety-five percent (95%) of the Building rentable area shall have
been occupied by tenants at any time during such year, Operating Expenses shall
be deemed for such year to be an amount equal to the like expenses which
Landlord reasonably determines would normally be incurred had such occupancy
been ninety-five percent (95%) throughout such year.
(c) If, after the Base Year for Operating Expenses,
Landlord shall eliminate any component of Operating Expenses, as a result of the
introduction of a labor saving device or other capital improvement, the
corresponding item of Operating Expenses shall be deducted from the Operating
Expenses expended by Landlord in said Base Year for purposes of calculating
Tenant's Proportionate Share of any increased Operating Expenses.
(v) "DEMISED RENTABLE SQUARE FEET" shall mean 9,390 square
feet.
(vi) "RENTABLE SQUARE FEET IN THE BUILDING" shall mean 58,023
square feet.
(B) ESCALATION OF OPERATING EXPENSES.
(i) For and with respect to each calendar year of the term of
this Lease (and any renewals or extensions thereof) subsequent to the Base Year
for Operating Expenses, there shall accrue, as additional rent, an amount equal
to the product obtained by multiplying the Tenant's Fraction by the amount of
the increase, if any, of Operating Expenses for such year over the Base Year
Operating Expenses (appropriately prorated for any partial calendar year
inducted within the beginning and of the term).
(ii) Landlord shall furnish to Tenant as soon as reasonably
possible after the beginning of each calendar year of the term hereof subsequent
to the Base Year for Operating Expenses;
(a) A statement (the "EXPENSE STATEMENT") setting
forth (1) Operating Expenses for the previous calendar year, and (2) Tenant's
Fraction of the Operating Expenses for the previous calendar year, and
-3-
<PAGE> 4
(b) A statement of Landlord's good faith estimate of
Operating Expenses, and the amount of Tenant's Fraction thereof (the "ESTIMATED
SHARE"), for the current calendar year.
(iii) Beginning with the next installment of minimum rent due
after delivery of the foregoing statements to Tenant, Tenant shall pay to
Landlord, on account of its share of Operating Expenses (or Landlord shall pay
to Tenant, if the following quantity is negative):
(a) One-twelfth of the Estimated Share multiplied by
the number of full or partial calendar months elapsed during the current
calendar year up to and including the month payment is made, plus any amounts
due from Tenant to Landlord on account of Operating Expenses for prior periods
of time, less:
(b) The amount, if any, by which the aggregate of
payments made by Tenant on account of Operating Expenses for the previous
calendar year exceed those actually due as specified in the Expense Statement.
(iv) On the first day of each succeeding month up to the time
Tenant shall receive a new Expense Statement and statement of Tenant's Estimated
Share, Tenant shall pay to Landlord, on account of its share of Operating
Expenses, one-twelfth of the then current Estimated Share. Any payment due from
Tenant to Landlord, or any refund due from Landlord to Tenant, on account of
Operating Expenses not yet determined as of the expiration of the term hereof
shall be made within twenty (20) days after submission to Tenant of the next
Expense Statement.
5. UTILITIES SEPARATELY CHARGED TO DEMISED PREMISES. Tenant shall be
responsible for all utilities (including gas and electric) which are consumed
within the Demised Premises. If a separate meter is installed, Tenant shall pay
for the consumption of such utilities based on its metered usage. If no meter is
installed, Tenant shall pay a pro-rata share of any utility charges covering the
Demised Premises and other areas of the Building which pro-rata share shall be
based on the percentage which the Demised Rentable Square Feet bears to the
square footage of the areas of the Building serviced by such utility. Tenant
shall pay utility bills within fifteen (15) days after the receipt and
non-payment or late payment of such bills shall be considered a default under
this Lease.
6. SECURITY DEPOSIT. As additional security for the full and prompt
performance by Tenant of the terms and covenants of this Lease, Tenant has
deposited with the Landlord the sum of THIRTEEN THOUSAND ONE HUNDRED THIRTY
EIGHT DOLLARS AND THIRTY SEVEN CENTS ($13,138.37) which shall not constitute
rent for any month (unless so applied by Landlord on account of Tenant's
default). Tenant shall, upon demand, restore any portion of said security
deposit, which may be applied by Landlord to the cure of any default by Tenant
hereunder. To the extent that Landlord has not applied said sum on account of a
default, the security deposit shall be returned (without interest) to Tenant
promptly at termination of this Lease.
-4-
<PAGE> 5
7. SERVICES. Landlord agrees that it shall:
(a) Provide passenger elevator service to the Demised Premises
during all days with one (1) elevator subject to call at all other times. Tenant
and its employees and agents shall have access to the Demised Premises at all
times, subject to compliance with such security measures as shall be in effect
for the Building.
(b) Provide water for drinking, lavatory and toilet purposes
drawn through fixtures installed by Landlord; and
(c) Furnish the Demised Premises with electric for heating,
hot and chilled water and air-conditioning. Tenant shall not install or operate
in the Demised Premises any electrically operated equipment or other machinery,
other than typewriters, adding machine and other machinery and equipment
normally used in modem offices, or any plumbing fixtures, without first
obtaining the prior written consent of the Landlord. Landlord may condition such
consent upon the payment by Tenant of additional rent as compensation for the
additional consumption of water and/or electricity occasioned by the operation
of said equipment, fixtures, or machinery.
Tenant, at Tenant's sole expense, shall be responsible for the installation,
maintenance, and use of any equipment of any kind or nature whatsoever which
would or might necessitate any changes, replacements, or additions to the water
system, plumbing system, heating system, air-conditioning system, or the
electrical system servicing the Demised Premises or any other portion of the
Building without the prior written consent of the Landlord, and in the event
such consent is granted, such replacement, changes or additions shall be paid
for by Tenant. It is understood that Landlord does not warrant that any of the
services referred to in this Section 7 will be free from interruption from
causes beyond the reasonable control of Landlord. No interruption of service
shall ever be deemed an eviction or disturbance of Tenant's use and possession
of the Demised Premises or any part thereof or render Landlord liable to Tenant
for damages by abatement or rent or otherwise relieve Tenant from performance of
Tenant's obligations under this Lease, unless Landlord, after reasonable notice,
shall willfully and without cause fail or refuse to take action within its
control.
8. CARE OF DEMISED PREMISES. Tenant agrees, on behalf of itself, its
employees and agents that it shall:
(a) Comply at all times with any and all federal, state and
local statutes, regulations, ordinances, and other requirements of any of the
constituted public authorities relating to its use and occupancy of the Demised
Premises.
(b) Give Landlord access to the Demised Premises at all
reasonable times, without charge or diminution of rent, to enable Landlord (i)
to examine the same and to make such repairs, additions and alterations as
Landlord may be permitted to make hereunder or as Landlord may deem advisable
for the preservation of the integrity, safety and good order of the Building or
any part
-5-
<PAGE> 6
thereof; and (ii) upon reasonable notice, to show the Demised Premises to
prospective mortgagees and purchasers and, during the six (6) months prior to
expiration of the term, to prospective tenants;
(c) Keep the Demised Premises in good order and condition and
replace all glass broken by Tenant, its agents, employees or invitees with glass
of the same quality as that broken, except for glass broken by fire and extended
coverage type risks, and commit no waste in the Demised Premises;
(d) Upon the termination of this Lease in any manner
whatsoever, remove Tenant's goods, effects and those of any other person
claiming under Tenant, and quit and deliver up the Demised Premises to Landlord
peaceably and quietly in as good order and condition at the inception of the
term of this Lease or as the same hereafter may be improved by Landlord or
Tenant, reasonable use and wear thereof, damage from fire and extended coverage
type risks, and repairs which are Landlord's obligation excepted. Goods and
effects not removed by Tenant at the termination of this Lease, however
terminated, shall be considered abandoned and Landlord may dispose of and/or
store the same as it deems expedient, the cost thereof to be charged to Tenant;
(e) Not place signs on the Demised Premises except on doors
and then only of a type and with lettering and text approved by Landlord.
Identification of Tenant and Tenant's location shall be provided in a directory
in the Building Lobby;
(f) Not overload, damage or deface the Demised Premises or do
any act which might make void or voidable any insurance on the Demised Premises
or the Building or which may render an increased or extra premium payable for
insurance (and without prejudice to any right or remedy of Landlord regarding
this subparagraph, Landlord shall have the right to collect from Tenant, upon
demand, any such increase or extra premium). Tenant shall maintain at its own
sole cost adequate insurance coverage for all of its equipment, furniture,
supplies and fixtures and provide Landlord with certificates evidencing such
coverage;
(g) Not make any alteration of or addition to the Demised
Premises without the prior written approval of Landlord (except for work of a
decorative nature);
(h) Not install or authorize the installation of any coin
operated vending machine, except for the dispensing of cigarettes, coffee, and
similar items to the employees of Tenant for consumption upon the Demised
Premises; and
(i) Observe the rules and regulations annexed hereto as
Exhibit "C", as Landlord may from time to time amend the same for the general
safety, comfort and convenience of Landlord, occupants and tenants of the
Building.
9. SUBLETTING AND ASSIGNING. Tenant shall not assign this Lease or
sublet all or any portion of the Demised Premises without first obtaining
Landlord's prior written consent thereto which shall not be unreasonably
withheld or delayed. If such consent is given, it will not
-6-
<PAGE> 7
release Tenant from its obligations hereunder and which will not be deemed a
consent to any further subletting or assignment. If Landlord consents to any
such subletting or assignment, it shall nevertheless be a condition to the
effectiveness thereof that a fully executed copy of the sublease or assignment
be furnished to Landlord and that any assignee assume in writing all obligations
of Tenant hereunder, Tenant shall not mortgage or encumber this Lease.
10. DELAY IN POSSESSION. If Landlord shall be unable to deliver
possession of Demised Premises to Tenant on the date specified for commencement
of the term hereof because of the holding over or retention of possession of any
tenant or occupant, or if repairs, improvements or decoration of the Demised
Premises are not completed, or for any other reason, Landlord shall not be
subject to any liability to Tenant. Under such circumstances, the rent reserved
and covenanted to be paid herein shall not commence until possession of Demised
Premises is given or until Landlord shall give written notice to Tenant that the
Demised Premises are available for occupancy by Tenant, whichever shall first
occur, and no such failure to give possession shall in any other respect affect
the validity of this Lease or any obligation to extend the term of this Lease.
11. FIRE OR CASUALTY. In case of damage to the Demised Premises or the
Building by fire or other casualty, Tenant shall give immediate notice thereof
to Landlord. Landlord shall thereupon cause the damage to be repaired with
reasonable speed, subject to delays, which may arise by reason of adjustment of
loss under insurance policies and for delays beyond the reasonable control of
Landlord. To the extent and for the time that the Demised Premises are thereby
rendered untenantable, the rent shall proportionately abate.
In the event the damage shall be so extensive that Landlord shall decide not to
repair or rebuild, or if any mortgagee, having the right to do so shall direct
that the insurance proceeds are to be applied to reduce the mortgage debt rather
than to the repair of such damage, this Lease shall, at the option of Landlord,
exercisable by written notice to Tenant given within thirty (30) days after
Landlord is notified of the casualty, be terminated as of a date specified in
such notice (which shall not be more than ninety (90) days thereafter), and the
rent (taking into account any abatement as aforesaid) shall be adjusted to the
termination date. Thereafter, Tenant shall promptly vacate the Demised Premises.
12. LIABILITY. Tenant agrees that Landlord and its building manager and
their officers, employees and agents shall not be liable to Tenant, and Tenant
hereby releases said parties, for any personal injury or damage to or loss of
personal property in the Demised Premises from any cause whatsoever unless such
damage, loss or injury is the result of the willful and gross negligence of
Landlord, its building manager, or their officers, employees or agents, and
Landlord and its building manager and their officers or employees shall not be
liable to Tenant for any such damage or loss whether or not the result of their
willful and gross negligence to the extent Tenant is compensated therefor by
Tenant's insurance. Tenant shall and does hereby indemnify and hold Landlord
harmless of and from all loss or liability incurred by Landlord in connection
with any failure of Tenant to fully perform its obligations under this Lease and
in connection with any personal injury or damage of any type or nature occurring
in or resulting out of Tenant's use of the Demised Premises, unless due to
Landlord's fault.
-7-
<PAGE> 8
13. EMINENT DOMAIN. If the whole or a substantial part of the Building
shall be taken or condemned for a public or quasi-public use under a statute or
by right of eminent domain or private purchase in lieu thereof by any competent
authority, Tenant shall have no claim against Landlord and shall not have any
claim or right to any portion of the amount that may be awarded as damages or
paid as a result of any such condemnation or purchase; and all right of the
Tenant to damages therefore are hereby assigned by Tenant to Landlord. The
foregoing shall not, however, deprive Tenant of any separate award for moving
expenses or for any other award which would not reduce the award payable to
Landlord. Upon the date the right to possession shall vest in the condemning
authority, this Lease shall cease and terminate with rent adjusted to such date,
and Tenant shall have no claim against Landlord for the value of any unexplored
term of this Lease.
14. INSOLVENCY.
(a) The appointment of a receiver or trustee to take
possession of all or a portion of the assets of Tenant, or (b) an assignment by
Tenant for the benefit of creditors, or (c) the institution by or against Tenant
of any proceedings for bankruptcy or reorganization under any state or federal
law (unless in the case of involuntary proceedings, the same shall be dismissed
within forty five (45) days after institution), or (d) any execution issued
against Tenant which is not stayed or discharged within thirty (30) days after
issuance of any execution sale of the assets of Tenant, shall constitute a
breach of this Lease by Tenant. Landlord in the event of such a breach, shall
have, without need of further notice, the rights enumerated in Section 15
herein.
15. DEFAULT.
(a) If Tenant shall fail to pay rent or any other sum payable
to Landlord hereunder when due, or if Tenant shall fail to perform or observe
any of the other covenants, terms or conditions contained in this Lease within
twenty (20) days (or such longer period as is reasonably required to correct any
such default, provided Tenant promptly commences and diligently continues to
effectuate a cure), but in any event within sixty (60) days after written notice
thereof by Landlord, or if any of the events specified in Section 14 occur, or
if Tenant abandons the Demised Premises and ceases to pay rent during the term
hereof or removes or manifests an intention to remove any of Tenant's goods or
property therefrom other than in the ordinary and usual course of Tenant's
business, then and in any of said cases (notwithstanding any former breach of
covenant or waiver thereof in a former instance), Landlord, in addition to all
other rights and remedies available to it by law or equity or by any other
provisions hereof, may at any time thereafter:
(i) upon three (3) days notice to Tenant, declare to
be immediately due and payable, the rent and other charges herein reserved for
the balance of the term of this Lease (taken without regard to any early
termination of said term on account of default), a sum equal to the Accelerated
Rent Component (as hereinafter defined), and Tenant shall remain liable to
Landlord as hereinafter provided; and/or
(ii) whether or not Landlord has elected to recover
the Accelerated
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<PAGE> 9
Rent Component, terminate this Lease on at least five (5) days notice to Tenant
and, on the date specified in said notice, this Lease and the term hereby
demised and all rights of Tenant hereunder shall expire and terminate and Tenant
shall thereupon quit and surrender possession of the Demised Premises to
Landlord in the condition elsewhere herein required and Tenant shall remain
liable to Landlord as hereinafter provided.
(b) For purposes herein, the Accelerated Rent Component shall
mean the aggregate of:
(i) all rent and other charges, payments, costs and
expenses due from Tenant to Landlord and in areas at the time of the election of
Landlord to recover the Accelerated Rent Component;
(ii) the minimum rent reserved for the then entire
unexpired balance of the term of this Lease (taken without regard to any early
termination of the term by virtue of any default), plus all other charges,
payments, costs and expenses herein agreed to be paid by Tenant up to the end of
said term which shall be capable of precise determination at the time of
Landlord's election to recover the Accelerated Rent Component; and
(iii) Landlord's good faith estimate of all charges,
payments, costs and expenses herein agreed to be paid by Tenant up to the end of
said term which shall not be capable to precise determination as aforesaid (and
for such purposes no estimate of any component of the additional rent to accrue
pursuant to the provisions of Section 4 hereof shall be less than the amount
which would be due if each such component continued at the highest monthly rate
or amount in effect during the twelve (12) months immediately preceding the
default).
(c) In any case in which this Lease shall have been
terminated, or in any case in which Landlord shall have elected to recover the
Accelerated Rent Component and any portion of such sum shall remain unpaid,
Landlord may without further notice, enter upon and repossess the Demised
Premises, by force, summary proceedings, ejectment or otherwise, and may
dispossess Tenant and remove Tenant and all other persons and property from the
Demised Premises and may have, hold and enjoy the Demised Premises and the rents
and profits therefrom. Landlord may, in its own name, as agent for Tenant, if
this Lease has not been terminated, or in its own behalf, if this Lease has been
terminated, relet the Demised Premises or any part thereof for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the term of this Lease) and on such terms (which may
include concessions of free rent) as Landlord in its sole discretion may
determine. Landlord may, in connection with any such reletting, cause the
Demised Premises to be decorated, altered, divided, consolidated with other
space or otherwise changed or prepared for resetting. No reletting shall be
deemed a surrender and acceptance of the Demised Premises.
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<PAGE> 10
(d) Tenant shall, with respect to all periods of time up to
and including the expiration of the term of this Lease (or what would have been
the expiration date in the absence of default or breach) remain liable to
Landlord as follows:
(i) In the event of termination of this Lease on
account of Tenant's fault or breach, Tenant shall remain liable to Landlord for
damages equal to the rent and other charges payable under this Lease by Tenant
as if this Lease were still in effect, less the net proceeds of any reletting
after deducting all costs incident thereto (including without limitation all
repossession costs, brokerage and management commission, operating and legal
expenses and fees, alteration costs and expenses of preparation for reletting
(and to the extent such damages shall not have been recovered by Landlord by
virtue of payment by Tenant of the Accelerated Rent Component (but without
prejudice to the right of Landlord to demand and receive the Accelerated Rent
Component), such damages shall be payable to Landlord monthly upon presentation
to Tenant of a bill for the amount due.
(ii) In the event and so long as this Lease shall not
have been terminated after default or breach by Tenant, the rent and all other
charges payable under this Lease shall be reduced by the net proceeds of any
reletting by Landlord (after deducting all costs incident thereto as above set
forth) and by any portion of the Accelerated Rent Component paid by Tenant to
Landlord, and any amount due to Landlord shall be payable monthly upon
presentation to Tenant of a bill for the amount due.
(e) In the event Landlord shall, after default or breach by
Tenant, recover the Accelerated Rent Component from Tenant and it shall be
determined at the expiration of the term of this Lease (taken without regard to
early termination for default) that a credit is due Tenant because the net
proceeds of reletting, as aforesaid, plus amounts paid to Landlord by Tenant
exceed the aggregate of rent and other charges accrued in favor of Landlord to
the end of said term, Landlord shall refund such excess to Tenant, without
interest, promptly after such determination.
(f) Landlord shall in no event be responsible or liable for
any failure to relet the Demised Premises or any part thereof, or for any
failure to collect any rent due upon a reletting.
(g) As an additional and cumulative remedy of Landlord in the
event of termination of this Lease by Landlord following any breach or default
by Tenant, Landlord, at its option, shall be entitled to recover damages for
such breach in an amount equal to the Accelerated Rent Component (determined
from and after the date of Landlord's election under this subsection (g) less
the fair rental value of the Demised Premises for the remainder of the term of
this Lease (taken without regard to the early termination) and such damages
shall be payable by Tenant upon demand. Nothing contained in this Lease shall
limit or prejudice the right of Landlord to prove and obtain as damages incident
to a termination of this Lease, in any bankruptcy reorganization or other court
proceedings, the maximum amount allowed by any statute or rule of law in effect
with such damages are to be proved.
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<PAGE> 11
(h) In the event of any monetary default occurrence by which
Landlord shall have the rights and remedies specified in this Section 15:
(i) INTENTIONALLY DELETED.
(ii) For the purpose of obtaining possession of the
Demised Premises, Tenant hereby authorizes and empowers any prothonotary or
attorney of any court of record to appear for Tenant and to file in any court an
agreement for entering an amicable action and judgment in ejectment for recovery
of possession, and/or to confess judgment for possession against Tenant and
those claiming by, through or under Tenant in favor of Landlord by Complaint to
Confess Judgment or otherwise, and Tenant agrees that upon such entry or
judgment a writ of possession for the Demised Premises may forthwith issue; and
(i) Tenant hereby waives all errors and defect of a procedural
nature in any proceedings brought against it by Landlord under this Lease.
Tenant further waives the right to any notices to quit as may be specified in
the Landlord and Tenant Act of Pennsylvania, as amended, and agrees that five
(5) days notice shall be sufficient in any case where a longer period may be
statutorily specified.
(j) If rent or any other sum due from Tenant to Landlord shall
be over due for more than five (5) days after notice from Landlord, it shall
thereafter bear interest at the rate of twenty percent (20%) per annum (or, if
lower, the highest legal rate) until paid.
16. SUBORDINATION. This lease is and shall be subject and subordinate
to all the terms and conditions of all underlying mortgages and to all ground or
underlying leases of the entire Building which may now or hereafter be secured
upon the Building, and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and no
further instrument of subordination, Tenant shall execute, within fifteen (15)
days after request, any certificate that Landlord may reasonably require
acknowledging such subordination. Notwithstanding the foregoing, the party
holding the instrument to which this Lease is subordinate shall have the right
to recognize and preserve this Lease in the event of any foreclosure sale or
possessory action, and in such case this Lease shall continue in full force and
effect at the option of the party holding the superior lien, and Tenant shall
attorn to such party and shall execute, acknowledge and deliver any instrument
that has for its purpose and effect the confirmation of such attornment.
17. NOTICES. All bills, statements, notices or communications which
Landlord may desire or be required to give to Tenant shall be deemed
sufficiently given or rendered if in writing and either delivered to an officer
of Tenant or sent by registered, or certified mail or overnight delivery service
addressed to Tenant at the Building, and the time of the giving of such notice
or communication shall be deemed to be the time when the same is delivered to
Tenant or deposited in the mail, as the case may be. Any notice by Tenant to
Landlord must be served by registered; certified mail or overnight delivery
addressed to Landlord at the address where the last previous
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rental hereunder was payable, or in the case of subsequent change upon notice
given, to the latest address furnished.
18. HOLDING-OVER. Should Tenant continue to occupy the Demised Premises
after expiration of the term of this Lease or any renewal or renewals thereof,
or after a forfeiture incurred, such tenancy shall (without limitation of any of
Landlord's rights or remedies therefor) be one at sufferance from month to month
at a minimum monthly rental equal to twice the rent payable for the last month
of the term of this Lease.
19. MISCELLANEOUS.
(a) Tenant represents and warrants that it has not employed
any broker or agent other than Tony Nichols, Jr. of Brandywine Realty Services
Corporation located at 16 Campus Boulevard, Suite 150 in Newtown Square, PA
19073, as its representative in the negotiation for or the obtaining of this
Lease, and agrees to indemnify and hold Landlord harmless from any and all cost
or liability for compensation claimed by any broker or agent with whom it has
dealt.
(b) The word "TENANT" as used in this Lease shall be construed
to mean tenants in all cases where there is more than one tenant, and the
necessary grammatical changes required to make the provisions hereof apply to
corporations, partnerships or individuals, men or women, shall in all cases be
assumed as though in each case fully expressed. This Lease shall not inure to
the benefit of any assignee, heir, legal representative, transferee or successor
of Tenant except upon the express written consent or election of Landlord.
Subject to the foregoing limitation, each provision hereof shall extend to and
shall, as the case may require, bind and inure to the benefit of Tenant and its
heirs, legal representatives, successors and assigns.
(c) The term "LANDLORD" as used in this Lease means the fee
owner of the Building or, if different, the party holding and exercising the
right, as against all others (except space Tenants of the Building) to
possession of the entire Building. Landlord above-named represents that it is
the holder of such rights as of the date of execution hereof. In the event of
the voluntary transfer of such ownership or right to a successor-in-interest of
Landlord, Landlord shall be freed and relieved of all liability and obligation
hereunder which shall thereafter accrue (and, as to any unapplied portion of
Tenant's security deposit, Landlord shall be relieved of all liability therefor
upon transfer of such portion to its successor in interest) and Tenant shall
look solely to such successor in interest for the performance of the covenants
and obligations of the Landlord hereunder (either in terms of ownership or
possessory rights). The successor in interest shall not (i) be liable for any
previous act or omission of a prior landlord; (ii) be subject to any rental
offsets or defenses against a prior landlord; (iii) be bound by any amendment of
this Lease made without its written consent, or by payment by Tenant of rent in
advance in excess of one (1) month's rent; or (iv) be liable for any security
not actually received by it. Subject to the foregoing, the provisions hereof
shall be binding upon and inure to the benefit of the successors and assigns of
Landlord. Notwithstanding anything to the contrary contained in this Lease, any
liability of Landlord, its agents, partners or employees, arising out of or in
respect of this Lease, the Demised Premises or the Building, and if Landlord
shall
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<PAGE> 13
default in the performance of Landlord's obligation under this Lease or
otherwise, Tenant shall look solely to the equity of Landlord in its interest in
the Building.
(d) Tenant agrees to execute a memorandum of this Lease in the
form submitted by Landlord, which may be recorded by Landlord. Tenant also
agrees to execute any assignment of this Lease by Landlord, evidencing its
consent to such assignment.
20. LANDLORD IMPROVEMENT. Landlord shall, in a good and workmanlike
manner, cause the Demised Premises to be completed in accordance with the plans
approved by Landlord and Tenant pursuant to Exhibit "B" the "Plan of Buildout"
hereof, reserving the right to: (a) make substitutions of material of equivalent
grade and quality when and if any specified material shall not be readily and
reasonably available; (b) make changes necessitated or by conditions met during
the course of construction, provided that Tenant's approval of any substantial
change (and any reduction of cost incident thereto) shall first be obtained
(which approval shall not be reasonably withheld so long as there shall be
general conformity with said working drawings).
21. WAIVER OF SUBROGATION. Each party hereto hereby waives any and
every claim which arises or which may arise in its favor and against the other
party hereto during the term of this Lease, or any extension or renewal thereof,
for any and all loss of, or damage to, any of its property located within or
upon or constituting a part of the Building, to the extent that such loss or
damage is recovered under an insurance policy or policies and to the extent such
policy or policies contain provisions permitting such waivers of claims. Each
party agrees to request its insurers to issue policies containing such
provisions and if any extra premium is payable therefor, the party which would
benefit from the provision shall have the option to pay such additional premium
in order to obtain such benefit.
22. RENT TAX. If, during the term of this Lease or any renewal or
extension thereof, any tax is imposed upon the privilege of renting or occupying
the Demised Premises or upon the amount of rentals collected therefor, Tenant
will pay each month, as additional rent, a sum equal to such tax or charge that
is imposed for such month, but nothing herein shall be taken to require Tenant
to pay any income, estate, inheritance or franchise tax imposed upon Landlord.
23. PRIOR AGREEMENT, AMENDMENTS. Neither party hereto has made any
representations nor promises except as contained herein or in some further
writing signed by the party making such representation or promise. No other
agreement hereinafter made shall be effective to change, modify, discharge or
effect an abandonment of this Lease, in whole or in part, unless such agreement
is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought. Tenant agrees to execute any
amendment to this Lease required by a mortgagee of the Building, which amendment
does not materially adversely affect Tenant's rights or obligation hereunder.
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<PAGE> 14
24. CAPTIONS. The captions of the paragraphs in this Lease are inserted
and included solely for convenience and shall not be considered or given any
effect in construing the provisions hereof.
25. MECHANIC'S LIEN. Tenant shall, within ten (10) days after notice
from Landlord, discharge any mechanic's lien for materials or labor claimed to
have been furnished to the Demised Premises on Tenant's behalf (except for work
contracted for by Landlord) and shall indemnify and hold harmless Landlord from
any loss incurred in connection therewith.
26. LANDLORD'S RIGHT TO CURE. Landlord may (but shall not be
obligated), give five (5) days notice to Tenant (except that no notice need be
given in case of emergency) to cure on behalf of Tenant any default hereunder by
Tenant, and the cost of such cure (including any attorney's fees incurred) shall
be deemed additional rent payable upon demand.
27. PUBLIC LIABILITY INSURANCE. Tenant shall at all times during the
term hereof maintain in full force and effect with respect to the Demised
Premises and Tenant's use thereof, comprehensive public liability insurance,
naming Landlord as an additional insured, covering injury to person in amounts
at least equal to One Million ($1,000,000) Dollars combined single limit bodily
injury and property. Tenant shall lodge with Landlord duplicate originals or
certificates of such insurance at or prior to the commencement date of the term
hereof, together with evidence of paid-up premiums, and shall lodge with
Landlord renewals thereof at least fifteen (15) days prior to expiration.
28. ESTOPPEL STATEMENT. Tenant shall from time to time, within ten (10)
days after request by Landlord, execute, acknowledge and deliver to Landlord a
statement certifying that this Lease is unmodified and in full force and effect
(or that the same is in full force and effect as modified, listing any
instruments or modifications), the dates to which rent and other charges have
been paid, and whether or not, to the best of Tenant's knowledge, Landlord is in
default or whether Tenant has any claims or demands against Landlord (and, if
so, the default, claim and/or demand shall be specified).
29. EARLY OCCUPANCY. Tenant may commence to occupy the Demised premises
on December 29, 1997.
30. STORAGE SPACE. During the term of this Lease and any extensions
thereof Tenant may occupy a storage area consisting of 131 rentable square feet
in the ground floor of the building (the "STORAGE AREA"). Rent for the Storage
Area will be $4.00 per square foot plus utilities.
31. RIGHT OF FIRST OFFER. Tenant shall have the "Right of First Offer"
on any contiguous/adjacent space to the Premises. Such right shall be
subordinate to the existing rights of current Tenants and subject to the
following: Tenant must give written notice to Landlord of its desire to lease
all or a portion of the contiguous/adjacent space. Upon its availability,
Landlord shall
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<PAGE> 15
provide Tenant with the amount of space available, its availability date and
other terms and conditions. Tenant shall have five (5) days to either accept or
decline the opportunity.
32. CONCESSION. Landlord will give Tenant a concession equal to the
first month's rent ($13,138.37) to be used to either offset the first month's
Minimum Rent or as payment for additional improvements made by Landlord.
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused this Lease to be executed by their duly authorized representatives the
day and year first above written.
LANDLORD: CHUROAD ASSOCIATES, L.P.
BY:
-------------------------------
DATE: 10/20/97
-------------------
TENANT: DATAMATIX
BY:
-------------------------------
DATE: 10/13/97
-------------------
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<PAGE> 1
EXHIBIT 10.16
SUBLEASE AGREEMENT
This Sublease Agreement (this "Sublease"), is made as of the 25th day of June,
1996 by and between LUCAS INDUSTRIES, INC., a Michigan corporation
("Sublessor"), and DIGITAL COMMERCE CORPORATION, a Delaware corporation
("Sublessee").
RECITALS
A. By Office Lease dated June 23, 1989, with attached Riders 1-4, as
amended by that certain First Amendment To Lease dated September 13, 1989, and
that certain Second Amendment To Lease dated August 10, 1990 (collectively, the
"Overlease"), 3B Limited Partnership, a Virginia limited partnership ("Lessor"),
leased to Lucas Aerospace, Inc., a Michigan corporation, as lessee, the Demised
Premises (defined below) located in the office building at 11180 Sunrise Valley
Drive, Reston, Virginia (the "Building"), at the rent and upon and subject to
the terms and conditions set forth in the Overlease.
B. Sublessor is successor by merger to Lucas Aerospace, Inc. under the
Overlease.
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C. CarrAmerica Realty Corporation (formerly known as Carr Realty
Corporation) is successor by purchase to 3B Limited Partnership under the
Overlease.
D. Sublessee desires to sublet from Sublessor all of the Demised
Premises and to lease certain furniture and furnishings currently located in the
Demised Premises, and Sublessor desires to sublet the Demised Premises and to
lease certain furniture and furnishings to Sublessee, at the rent and upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual promises
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
their successors and assigns, mutually covenant and agree as follows:
1. Demised Premises and Furnishings.
(a) Demised Premises. Sublessor does hereby sublease to Sublessee, and
Sublessee does hereby sublease from Sublessor, for the Term (defined
hereinafter) and upon the conditions hereinafter provided, approximately 21,630
rentable square feet (the "Demised Premises"), which has been determined and
certified in accordance with the 1989 Washington, D.C. Association of Realtors
Standard Method of Measurement (the "Standard"), comprising the entire Fourth
(4th)
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Floor of the Building, less and except an area located in the computer room (the
"Reserved Space") to be reserved and made accessible to Sublessor on the terms
and conditions set forth herein. The Demised Premises is the Floor Plan attached
hereto and made a part hereof as Exhibit A. The Reserved Space is noted on
Exhibit A. During the term of this Sublease, Sublessor shall have access to and
exclusive use of the Reserved Space. Sublessor shall be provided access to the
Reserved Space twenty-four (24) hours a day under a procedure where an
authorized representative of Sublessor will telephone the reception desk of
Sublessee, to arrange for supervised access to the Reserved Space. Sublessor
shall provide to Sublessee from time to time a written list of its authorized
representatives for this purpose. Sublessor recognizes the need of Sublessee for
security in the Demised Premises, and agrees not to access the Reserved Space
other than by the foregoing method except in an emergency where telephone
contact cannot be made with Sublessee. Sublessee shall cooperate with Sublessor
to facilitate supervised access to the Reserved Space as reasonably requested by
Sublessor. The initial list of Sublessor's authorized representatives is
included as Exhibit C to the Sublease.
(b) Furnishings. Sublessor hereby leases to Sublessee during the Term
all the furniture and furnishings owned by Sublessor and located in the Demised
Premises, as designated on Exhibit B attached hereto and made a part hereof (the
"Furnishings") Sublessee leases the Furnishings in their "as-is" condition and
agrees that all of the Furnishings described on
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Exhibit B shall remain on the Demised Premises at all times with title to the
furnishings remaining with Sublessor.
Upon termination of the lease, Sublessee shall return all the
Furnishings as described on Exhibit B to Sublessor and shall, in addition to any
other obligations owing to Sublessor, pay Sublessor for any Furnishings which
are missing or which have been damaged or destroyed during the term of the
Sublease, normal wear and tear expected. The amount to be paid by Sublessee
shall be the fair market value of such missing, damaged or destroyed Furnishings
at the time of termination of the Sublease determined by catalog or fair market
price as though they were not missing, damaged or destroyed. In the event the
parties are unable to agree upon the replacement value of the furnishings, the
Sublessor and Sublessee shall select an appraiser mutually acceptable to them
and such appraiser's determination of value shall be final and binding upon both
parties.
Notwithstanding any provision of this Sublease to the contrary, the
Furnishings are at all tunes subject to the lien rights of Landlord pursuant to
Paragraph 33 of the Overlease entitled "Lien on Personal Property."
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2. Term. The term of this Sublease (the "Term") shall commence on July
1, 1996 (the "Sublease Commencement Date"), and shall end on (i) July 22, 2000,
or (ii) the date upon which the Term may be terminated pursuant to any of the
conditions or limitations or other provisions of this Sublease or by operation
of law.
3. Base Rent. The annual base rent, which Sublessee hereby agrees to
pay to Sublessor and Sublessor hereby agrees to accept shall be a sum equal to
the product of Eighteen Dollars and Fifty Cents ($18.50) multiplied by the
number of rentable square feet (21,630), as certified pursuant to the Standard,
in the Demised Premises (the "Base Rent"). The parties hereby agree that the
Base Rent shall be comprised of the following three elements: (a) rent for the
Demised Premises, $15.63 (b) rent for the Furnishings, $2.75, and (c) Virginia
Sales Tax, $0.12. Notwithstanding this allocation, the entire Base Rent amount
shall be subject to the Annual Base Rent Escalation as set out in Section 4
below. The Base Rent shall be inclusive of Real Estate Taxes and all other
Operating Costs (as such terms are defined in the Overlease). The obligation of
Sublessee to pay Base Rent shall begin on the Sublease Commencement Date. The
annual Base Rent payable during each Sublease Year, as hereinafter defined,
shall be divided into twelve (12) equal monthly installments and such monthly
installments shall be due and payable in advance, on the first day of each month
during each Sublease Year. For the purposes of this Sublease, the term "Sublease
Year" shall mean a period of twelve (12) consecutive months, commencing on the
Sublease Commencement Date, and each successive twelve (12) month
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period thereafter, except that, if the Sublease Commencement Date is a day other
than the first day of a month, then the first Sublease Year shall commence on
the Sublease Commencement Date and shall continue for the balance of the month
in which the Sublease Commencement Date occurs and for a period of twelve (12)
consecutive calendar months after the last day of such month. If the Sublease
Commencement Date is a day other than the first day of a month, then, in the
first Sublease Year, said twelve (12) installments shall be payable beginning on
the first day of the calendar month immediately following the month in which the
Sublease Commencement Date occurs and, in addition, on the Sublease Commencement
Date, a payment of Base Rent shall be payable in an amount equal to the product
of the annual Base Rent then in effect and a fraction, the numerator of which is
the number of days of the Sublease Term in the month in which the Sublease
Commencement Date occurs, and the denominator of which is 365. The monthly Base
Rent, Additional Rent (as defined herein), and any other charges herein reserved
or payable shall be paid to Sublessor by wire transfer to the account of: Lucas
Industries Inc, Account Number 3900-0956 Citibank NY, ABA #021-000-089 with
written confirmation of such transfer to the Sublessor at its offices in the
Building, Attention: Mr. James Zigel or at such other place as Sublessor may
designate in writing, in lawful money of the United States of America, without
demand therefor and without any deduction, setoff or abatement whatever, except
as expressly provided in this Sublease. In the event that Sublessee does not
remit any payment due under this Sublease to Sublessor within seven (7) calendar
days of when it is due, such amount shall be subject to a late fee of 5% of the
amount.
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4. Annual Base Rent Escalation. The annual Base Rent shall be
increased, effective as of the first day of each succeeding Sublease Year after
the first Sublease Year, by an amount equal to Three Percent (3%) of the annual
Base Rent in effect during the Sublease Year preceding the applicable adjustment
without regard to abatement. The attached Exhibit D, incorporated herein by this
reference, sets forth the annual Base Rent during the Term.
5. Additional Rent. Beginning on the first day of the second (2nd)
Sublease Year, and on the first day of each Sublease Year thereafter, Sublessee
agrees to pay to Sublessor, as additional rent under this Sublease, Sublessor's
Pro-Rata Share (defined below) of increases in the Real Estate Taxes and
Operating Costs (as such terms are defined in the Overlease), over the Real
Estate Taxes and Operating Costs for calendar year 1996, grossed-up to reflect
that the Building was a fully leased and fully assessed building for Real Estate
Taxes and Operating Expenses throughout calendar 1996 and each of the Sublease
Years being compared (the "Additional Rent"). Any Additional Rent which may be
payable to Sublessor in any Sublease Year shall be apportioned such that
Sublessee shall be obligated to pay to Sublessor a proportionate share of such
Additional Rent which is attributable to the number of days in the Sublease
Year. For the purpose of this Sublease, Sublessor and Sublessee agree that
Sublessor's Pro-Rata Share is equal to a fraction, the numerator of which is the
number of rentable square feet in the Demised Premises, and the denominator of
which is the number of rentable square feet in the Building. Sublessee shall
also pay to Sublessor, or Lessor as Additional Rent, all charges
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<PAGE> 8
for any additional services provided by Sublessor or Lessor to Sublessee and not
provided for or allocated in this Sublease or in the Overlease.
6. Building Services, Parking, Security.
(a) Services. Building cleaning services, electrical and lighting
service, water and sewer service, and heating, ventilation and air-conditioning
will be provided to Sublessee in accordance with Lessor's obligations to
Sublessor under Paragraph 16 of the Overlease. Sublessee shall be allowed access
to the Building and the Demised Premises twenty-four (24) hours per day, seven
(7) days per week. At least one (1) elevator shall be in use and available for
Sublessee's use at all times. Sublessee shall observe Lessor's requirements
related to moving construction materials, furnishings and equipment into or out
of the Demised Premises and the Building. Sublessor shall use its best efforts
to have Lessor provide Sublessee with a listing on the monument sign in front of
the Building at Sublessee's expense and in the Building directory, at no
additional cost to Sublessee.
(b) Parking. Sublessor shall allocate to and allow Sublessee to use, at
no additional cost to Sublessee, 78 of Sublessor's allocation of unreserved
surface parking spaces in the Building's covered parking structure and/or
surface parking lot. Sublessor shall allocate to and allow Sublessee exclusive
use of the six (6) reserved, covered, and marked parking spaces allocated to
8
<PAGE> 9
the Sublessor in the parking structure shown on Exhibit E attached hereto as
part of the parking allocation hereunder at no additional cost to Sublessee.
Sublessor shall furnish six (6) reserved parking signs at Sublessee's expense,
if any. The Building parking structure and lot will be accessible to Sublessee
twenty-four (24) hours per day, seven (7) days per week.
(c) Security. Sublessor will cause Lessor to provide an electronic card
or key access system for Sublessee's use, monitored at all Building entrances,
and elevators in accordance with Paragraph 16 of the Overlease. Such access
cards and keys for this system shall be provided to Sublessee in a reasonable
quantity as requested by Sublessee. The first fifty (50) such access cards and
keys shall be provided at the Sublessor's expense. All subsequent cards and keys
shall be provided at the Sublessee's expense. Sublessee shall be responsible for
maintaining an accurate listing of all electronic cards or keys provided to
employees. All costs associated with the granting and maintaining of the
electronic card or key access system shall be the responsibility of the
Sublessee.
7. Deposit. Upon execution of this Sublease, Sublessee shall deposit
with Sublessor the sum of one (1) month's Base Rent. The deposit provided herein
shall be considered as partial security for the payment and performance by
Sublessee of all of Sublessee's obligations, covenants, conditions and
agreements under this Sublease. Upon expiration of the Term, the security
deposit, less any legitimate claims of Sublessor against Sublessee with respect
to this
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<PAGE> 10
Sublease, shall be promptly refunded to Sublessee within thirty (30) days. As
additional security, for the Sublease, Sublessee shall supply Sublessor within
forty-five (45) days of the effective date of the Sublease, a letter of credit
in a form and from an institution reasonably acceptable to Sublessor in the
amount equal to six (6) months of base rental payments to be held for the
duration of the Sublease Term. Provided, however, that if Sublessee is not in
default at the end of the thirty-sixth (36th) month, said letter of credit shall
be reduced by one-half. Whenever Sublessee shall be in default for thirty (30)
days or more, Sublessor shall be entitled to retain the security deposit and the
proceeds from the letter of credit and to demand new security deposits/letter of
credit be put into place.
Further, Sublessee's letter of credit may be released in its entirety
immediately upon Sublessee's ability to achieve and maintain a minimum Net Worth
(as defined below) of $40,000,000, and upon Sublessee's filing of the financial
statements, reports, and information with the Sublessor as described below. If
the Net Worth should fall below $40,000,000 once the letter of credit is
released, the Sublessee shall reinstate such letter of credit. The calculation
of Net Worth must be to the satisfaction of the Sublessor in accordance with the
standards set forth below:
For the purposes of this Sublease, Net Worth shall mean, as of any date as of
which the amount thereof is to be determined, all amounts in respect of the
Sublessee's capital stock, plus the amounts of additional paid in capital,
retained earnings and other items designated as part of the
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<PAGE> 11
Sublessee's stockholders' equity all of which would appear as such on a
consolidated balance sheet of the Sublessee, less the amounts of goodwill or
other intangible assets of the Sublessor, all as of such date prepared in
accordance with US Generally Accepted Accounting Principles (GAAP).
The Sublessee shall furnish to the Sublessor, the following financial
statements, reports, and information:
a) promptly when available and in any event within 90 days after the
close of each fiscal year:
i) consolidated balance sheet at the close of such fiscal year,
and consolidated statements of operations, stockholder's equity
and of cash flow for the fiscal year, of the Sublessee and its
consolidated Subsidiaries certified without qualification, by
Ernst & Young or other independent public accountants of
nationally recognized standing selected by the Sublessee.
ii) a letter report of such accountants at the close of such
fiscal year certifying the amount of Net Worth as defined under
this Sublease.
b) promptly when available and in any event within 30 days after the
close of each of the first three fiscal quarters of each fiscal year,
an unaudited consolidated balance sheet at the close of such fiscal
quarter and unaudited consolidated statements of operations,
stockholder's equity, and cash flows for the period commencing
immediately after the
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<PAGE> 12
close of the previous fiscal year and ending with the close of such
fiscal quarter, of the Sublessee and its consolidated subsidiaries
certified as to fairness and accuracy of presentation and compliance
and consistency with GAAP by the chief accounting or financial officer
of the Sublessee.
c) Simultaneously with the delivery of the financial statements
referred to in b) above, a certificate of the chief accounting or
financial officer of the Sublessee setting forth in reasonable detail
whether the Sublessee was in compliance with the Net Worth requirement
on the date of such financial statements and certifying that no
default exists on the date of delivery of such certificate.
8. Use. Sublessee will use and occupy the Demised Premises solely for
general office purposes and ancillary uses and in accordance with the uses
permitted under the Zoning Ordinance of Fairfax County, Virginia. Without the
prior written consent of Lessor and Sublessor, the Demised Premises will not be
used for any other purposes. Sublessee hereby agrees to use the Demised Premises
in accordance with the Rules and Regulations of the Overlease appended hereto as
Exhibit F and incorporated by this reference.
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<PAGE> 13
9. Subtenant Work and Alterations.
(a) Cost of Improvements. Sublessee shall accept possession of the
Demised Premises in their "as is" condition as of the date of this Sublease,
provided however, Sublessor represents to the best of its knowledge that all
building systems are in good working order at the time of execution. Sublessee
recognizes that there are no telephone or computer networking systems in the
Demised Premises. Sublessee shall pay for the cost of planning, design,
demolition and construction of improvements to the Demised Premises, to include
all architectural and engineering services associated therewith (the "Subtenant
Work"), whether performed by Lessor's or Sublessor's independent contractors.
(b) Design of Subtenant Work. Following Sublessee's delivery of plans
for the Subtenant Work (the "Subtenant Work Plan"), Sublessee shall provide a
list of proposed contractors selected by Sublessee to perform the Subtenant Work
to Sublessor and Lessor for approval, Sublessor shall use its best efforts to
obtain immediate written consent for approval to perform from Lessor the
Subtenant Work. Sublessee shall pay any fees or reasonable out of pocket costs
incurred in obtaining the consent from Lessor. The consent from Lessor will be
based upon the Subtenant Work Plan's conformance to the requirements of the
Zoning Ordinance of Fairfax County, Virginia, the contractors being properly
licensed and experienced, and upon the conditions contained in the Overlease.
The consent of Lessor, once obtained, shall be deemed to include the consent of
Sublessor.
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<PAGE> 14
(c) Construction of Subtenant Work. Sublessee shall cause the Subtenant
Work to be constructed in accordance with the Subtenant Work Plan and the
Overlease, and in accordance with all applicable building codes of the Town of
Reston, County of Fairfax, State of Virginia, and any applicable Federal code
including, but not limited to, the American Disabilities Act.
(d) Alterations. Except as otherwise expressly provided in the
Subtenant Work Plan, Sublessee shall not make any alteration, improvement, or
installation other than corrective, cosmetic or decorative improvements
hereinafter called ("Alterations") in or to the Demised Premises, without in
each instance obtaining the prior written consent of Sublessor and Lessor (which
consent of Sublessor shall not be unreasonably withheld, conditioned or
delayed). With reasonable notice to Sublessee, Lessor and Sublessor shall at all
times upon reasonable notice during normal business hours have the right to
inspect the work performed by any contractor selected by Sublessee to perform
the Subtenant Work and any Alterations.
10. Restoration. Upon the expiration of the Term of this Sublease,
Sublessee shall surrender the Demised Premises in good condition, subject only
to reasonable wear and tear.
11. Enforcement of Overlease. Except as otherwise expressly provided
herein, all of the terms, provisions, covenants and conditions of this Sublease
are subject to the Overlease. In the event of a conflict between the Terms of
this Sublease agreement and the Overlease, the Terms
14
<PAGE> 15
of the Overlease shall apply. Sublessor and Sublessee shall each observe and
perform all of the terms, covenants and conditions hereunder. Sublessor shall
observe and perform all applicable terms, covenants and conditions as tenant
under the Overlease with respect to the Demised Premises; and Sublessee shall
observe and perform all applicable terms, covenants and conditions of the
Overlease with respect to the Demised Premises to which Sublessee at the sole
discretion of Sublessor may be subrogated in performing its obligations under
this Sublease. Sublessee shall obtain and maintain all insurance types and
coverages as specified in the Overlease to be obtained and maintained by
Sublessor as "Tenant" in amounts not less than those specified in the Overlease.
All policies of Sublessee shall name Lessor and its Agent as additional insureds
thereon in accordance with the Overlease, and Sublessee's insurance shall be
primary over Lessor's, Agent's and Sublessor's. Except for Riders 1 through 4 to
the Overlease and as otherwise set out in this Sublease, Sublessor agrees to
subrogate Sublessee to the rights and privileges of Sublessor under the
Overlease, and agrees to furnish for Sublessee the following services,
including, without limitation, the furnishing of electrical, lighting, heating,
Building standard ventilation and air-conditioning, water and sewer, elevator
service, cleaning, window washing, and rubbish removal services, which include
all services of which Lessor is obligated to furnish to Sublessor pursuant to
the Overlease. Sublessor shall use its best efforts to obtain and enforce the
full performance by Lessor pursuant to the terms of the Overlease.
15
<PAGE> 16
12. Covenants and Warranties.
(a) Sublessor's Covenants. Sublessor covenants, warrants and agrees not
to do or omit to do anything which would constitute a default under the
Overlease, including without limitation anything which Sublessor is obligated to
do under the terms of this Sublease.
(b) Sublessee's Covenants. Sublessee covenants and agrees not to do or
omit to do anything which would constitute a default under the Overlease,
including without limitation anything which Sublessee is obligated to do under
the terms of this Sublease.
(c) Warranty of No Default. Sublessor warrants and represents to
Sublessee that the Overlease has not been amended or modified except as
expressly set forth in the recitals above, that there is no cross-default or
other contractual relationship between the Overlease and Sublessor's lease
covering the Third Floor at the Building, that Sublessor is the tenant by
operation of law (merger) from its affiliated Lucas Aerospace, Inc., under the
Overlease and has full capacity to enter into and perform under this Sublease,
that this Sublease will be binding and fully enforceable against Sublessor, that
Sublessor is not now, and as of the Sublease Commencement Date will not be, in
default or breach of any term, condition or provision of the Overlease, and that
Sublessor has no knowledge of any claim by Lessor that Sublessor is in default
or breach of the Overlease.
13. Brokers. Sublessor and Sublessee hereby represent and warrant to
the other that neither of them has employed or dealt with any broker in
connection with this Sublease for the
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Demised Premises other than the firms of Grubb & Ellis and The Irving Group
(representing Sublessee), and each hereby agrees to indemnify and hold harmless
the other against any claim by any other broker, agent or finder with whom the
Indemnitor has dealt. Sublessor shall be responsible for the payment of the
brokers' commissions to Grubb & Ellis.
14. Indemnification. Sublessor and Sublessee each shall and hereby does
indemnify and hold the other and Lessor harmless from and against any and all
actions, claims, demands, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' fees) asserted against, imposed upon or
incurred by the other or Lessor by reason of (a) any violation caused, suffered
or permitted by the Indemnitor, its agents, servants, employees or invitees, of
any of the terms, covenants or conditions of the Sublease or the Overlease and
(b) any damage or injury to persons or property occurring upon or in connection
with the Building, including without limitation, the Demised Premises, except as
a result of the acts or omissions of the Indemnitor, or its respective agents,
employees or invitees.
15. Signage. Sublessee shall have the right, at its sole expense, to
install signage on the west side of the Building viewable from the Dulles Access
Road and Virginia Route 267, replacing the existing Lucas sign, subject only to
written consent by Lessor and to any governmental restrictions. Sublessor shall
use best efforts to obtain Lessor's written consent to such signage. Sublessor
and Sublessee shall coordinate the removal of the "Lucas" sign from the
17
<PAGE> 18
west side of the Building, with the installation of Sublessee's sign. Sublessee
shall be responsible for the cost of installing its sign and for the cost of
removal of the Sublessor's sign. The parties will use best efforts not to damage
the Building or the Sublessor's sign.
16. Quiet Enjoyment. Sublessor covenants that it has the right to make
this Sublease for the Term and upon all of the terms and provisions hereof, and
that if Sublessee pays the Base Rent and Additional Rent and performs all of the
covenants, terms and conditions of this Sublease to be performed by Sublessee,
then Sublessee shall, during the Term, freely, peaceably and quietly occupy and
enjoy the full possession of the Demised Premises and all rights under this
Sublease granted to Sublessee, without molestation or hindrance by Sublessor,
Lessor, or any party claiming through or under either Sublessor or Lessor.
17. Entire Agreement. This Sublease contains all of the covenants,
agreements. terms, provisions, conditions, warranties and understandings between
the parties hereto relating to the subleasing of the Demised Premises. All
understandings and agreements, if any, between the parties are merged in this
Sublease, which alone fully and completely expresses the agreement of the
parties. The failure of Sublessor or Sublessee to insist in any instance upon
the strict observance or performance of any covenant, agreement, term, provision
or condition of this Sublease or to exercise any election herein contained shall
not be construed as a waiver or relinquishment for the future of such covenant,
agreement, term, provision, condition or election,
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<PAGE> 19
but the same shall continue and remain in full force and effect. No waiver or
modification of any covenant, agreement, term, provision or condition of this
Sublease shall be deemed to have been made unless expressed in writing and
signed by Sublessor and Sublessee. No surrender of possession of the Demised
Premises or of any part thereof or of any remainder of the Term of this Sublease
shall release Sublessor or Sublessee from any of its obligations hereunder
unless accepted by Sublessor and Sublessee in writing.
18. Successors and Assigns. The obligations of this Sublease shall bind
and benefit the successors and permitted assigns of the parties with the same
effect as if mentioned in each instance where a party hereto is named.
19. Notices. Any and all communications delivered hereunder shall be
sent by first-class mail: if to Sublessor, Attention: Mr. James Zigel in the
Building; and if to Sublessee, Attention: Mr. Donald Miller in the Building, or
to such other addresses as either of the above shall notify the other in
writing.
20. Binding Effect. The terms and provisions of this Sublease will
inure to the benefit of, and will be binding upon, the successors, assigns,
personal representatives, heirs, devises and legatees of the Sublessor and the
Sublessee.
19
<PAGE> 20
21. Severability. If any term, provision, covenant or condition of this
Sublease is held by a court of competent jurisdiction to be invalid, void or
unenforceable, such term, provision, covenant or condition shall be interpreted
so as to be enforceable to the fullest extent permitted by law, and the
remaining terms, provisions, covenants and conditions contained herein shall not
be affected thereby.
22. Headings. The headings of the sections and subsections used in this
Sublease are inserted for the convenience of reference only and are not intended
to affect the meaning or interpretation of this Sublease.
23. Governing Law. This Sublease shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
24. Lessor's Consent. This Sublease shall be effective upon the date
Sublessee receives written consent to this Sublease by Lessor. It is hereby
acknowledged by Sublessor and Sublessee that Lessor's consent to this Sublease
shall not make Lessor or its Agent, Carr Real Estate Services Partnership (or
Agent's subcontractor, Carr Real Estate Services, Inc.) a party to this
Sublease, shall not create any contractual liability, privity or duty on the
part of Lessor or its Agent to the Sublessee, and shall not in any manner
increase, decrease, modify or otherwise
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<PAGE> 21
affect the rights and obligations of Lessor and Sublessor, as "Tenant" under the
Overlease, in respect to the Demised Premises.
25. Payment of Fees. In the event either Sublessor or Sublessee shall
commence an action against the other (including collections under bankruptcy) in
respect to this Sublease, the losing party shall pay the prevailing party all of
its reasonable costs and expenses in connection with such action, including but
not limited to reasonable attorney fees.
26. Sublessor's Right to Terminate. Upon thirty (30) days written
notice to Sublessee, Sublessor shall have the right at any time to terminate the
Sublease after the end of the third (3rd) month in the event Sublessee fails to
achieve and maintain a Net Worth of $5,000,000 initially and $10,000,000 at all
times after the completion of Digital Commerce Corporation's initial public
offering.
For purposes of this paragraph, Sublessee shall provide to Sublessor,
financial statements and certifications as required in paragraphs 7(b) and 7(c)
as of and for the fiscal period ended on the date coincident with the end of the
third month of the Sublease.
IN WITNESS WHEREOF, Sublessor and Sublessee have duly executed this
Sublease under seal as of the day and year first above written.
21
<PAGE> 22
SUBLESSOR:
LUCAS INDUSTRIES INC., a Michigan corporation
By: (SEAL)
------------------------------
Name: Rhonda A. Linovitz
Title: Accounting Director
SUBLESSEE:
DIGITAL COMMERCE CORPORATION a Delaware
corporation
By: (SEAL)
------------------------------
Name: John Thomas Royall
Title: Chairman/CEO
22
<PAGE> 23
This Sublease is consented to by Lessor upon the terms and conditions
acknowledged by Sublessor and Sublessee in the Paragraph of this Sublease
entitled "Lessor's Consent" and in accordance with the terms and conditions of
the Overlease. Lessor's consent shall be required for an assignment of this
Sublease or any further subleasing of the Demised Premises or any portion
thereof.
LESSOR:
CARRAMERICA REALTY CORPORATION, a Maryland
corporation (formerly known as Carr Realty Corporation)
By: (SEAL)
------------------------------
Name: Thomas A. Carr
Title: President and COO
<PAGE> 1
EXHIBIT 10.17
SETTLEMENT AND SUBLEASE MODIFICATION AGREEMENT
THIS SETTLEMENT AND SUBLEASE MODIFICATION AGREEMENT, dated as of the 8th
day of September, 1998, by and between LUCAS INDUSTRIES, INC. ("Lucas"), and
DIGITAL COMMERCE CORPORATION ("Digital"), recites and provides as follows:
Recitals
A. Lucas has alleged that Digital is in default of its obligations under
a certain Sublease Agreement, dated June 25, 1996 (the "Sublease"), between
Lucas and Digital and has instituted a suit against Digital in a case styled
Lucas Industries, Inc. v. Digital Commerce Corporation. At Law No. 163309 (the
"Lawsuit"), currently pending in the Circuit Court for Fairfax County, Virginia.
B. Digital denies that it is in default under the Sublease.
C. Lucas and Digital recognize that continued litigation is uncertain and
will be costly and wish to resolve all disputes asserted in the Lawsuit and
enter into a Sublease modification and mutual release under the terms and
conditions as more fully set forth herein.
Agreement
NOW, THEREFORE, for and in consideration of the foregoing recitals and the
mutual promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally and equitably bound, hereby covenant and agree as
follows:
I. Modification of Sublease.
The Sublease is hereby modified as follows:
A. Section 26 is deleted in its entirety.
B. Section 1(a) shall be modified by (i) deleting the reference to 21,630
rentable square feet and substituting 11,484 rentable square feet [which
includes the building core factor] (the "New Demised Premises" and (ii) deleting
Exhibit A and substituting Exhibit A-1 in its place.
C. Section 3 shall be modified by (i) deleting the references to Eighteen
Dollars and Fifty Cents ($18.50) and rentable square feet (21,630) and
substituting Twenty-two Dollars and Sixty Cents ($22.60) and rentable square
feet of 11,484 in their place and (ii) deleting the references to "rent for the
Demised Premises, $15.63" and "Virginia Sales Tax,
<PAGE> 2
$0.12" and substituting "rent for the Demised Premises, $19.85" and "Virginia
Sales Tax, $0.12" in their place.
D. Section 4 shall be modified by deleting the reference to Exhibit D.
E. Section 7 of the Sublease is deleted in is entirety and replaced with
the following:
7. Deposit. Upon execution of this Sublease, Sublessee shall deposit, or
cause to be deposited with Sublessor the sum of two (2) month's Base
Rent (which Base Rent the parties agree is $21.628.20 per month). The
deposit provided herein shall be considered as partial security for
the payment and performance by Sublessee of all of Sublessee's
obligations, covenants, conditions and agreements under this Sublease.
The deposit shall be held by Sublessor for the duration of the
Sublease Term; provided, however, that upon any default by Sublessee
under this Sublease, which default continues for a period of more that
fifteen (15) days after notice thereof from Sublessor to Sublessee,
Sublessor shall be entitled to offset the deposit in such amounts as
may be necessary to cure such default. Upon any draw by Sublessor of
the deposit in accordance with the foregoing sentence, Sublessor shall
have the right to demand that Sublessee provide additional deposits,
to bring such deposit back up to its original amount. Upon expiration
of the Sublease Term, the security deposit, less any legitimate claims
of Sublessor against Sublessee with respect to this Sublease, shall be
refunded and returned to Sublessee within thirty (30) days.
E. Section 15 of the Lease is deleted in its entirety and replaced with
the following:
15. Signage. The Subleasee shall have the right at its sole expense, to
install signage on the east side of the building viewable from the
Dulles Access Road and Virginia Route 267, subject to written consent
by Lessor and to any governmental restrictions. Sublessee shall be
solely responsible for the costs of installing the signage.
The foregoing changes shall be deemed effective as of October 1, 1998. All other
terms of the Sublease shall remain in full force and effect.
II. By the close of business September 30, 1998, Digital shall vacate
approximately 10,146 rentable square feet (including the building core factor)
of the Fourth Floor so that as of October 1, 1998, it shall occupy the New
Demised Premises.
III. Consent Judgment. Upon execution and delivery of this Agreement,
Digital shall deliver a Consent Judgment Order in favor of Lucas in the form of
Exhibit A attached hereto and made a part hereof. The Consent Judgment Order
will be signed by Digital and it's counsel and
<PAGE> 3
held by the law firm of McGuire, Woods, Battle & Boothe, L.L.P., in escrow,
subject to the terms of this Agreement. In the event of the occurrence of an
event of default under the Lease which continues for a period of more than
fifteen (15) days after notice of such event of default is delivered to Digital,
or in the event of the occurrence of more than two (2) events of default under
the Lease during any twelve (12) month period, then McGuire, Woods, Battle &
Boothe, L.L.P., may release the Consent Judgment Order from escrow and submit
such order to the Court for entry.
IV. Releases.
(a) Digital hereby releases and forever discharges Lucas and each of
its predecessors, assigns, agents, representatives, attorneys, and all persons
acting by, through, under, or in concert with any of them (collectively "Lucas
Releasees") or any of them, from all actions, causes of action, suits, debts,
liens, contracts, agreements, obligations, promises, liabilities, claims,
rights, demands, damages, controversies, losses, costs, and expenses of any
nature whatsoever, known or unknown, suspected or unsuspected, fixed or
contingent ("Claim" or "Claims"), that Digital now has, owns, holds, claims to
have, claims to own, or claims to hold, or any time heretofore had, owned, held,
claimed to have, claimed to own, or claimed to hold against the Lucas Releasees
related to or arising out of the Lawsuit or the Lease, or any actions of any of
the Lucas Releasees taken in connection therewith. This Release shall not apply
to any obligations under this Agreement or the Consent Judgment Order, to any
obligation or liability of Digital under the Sublease arising hereafter, or any
other agreement not referenced herein.
(b) Lucas hereby releases and forever discharges Digital and each of
its predecessors, assigns, agents, representatives, attorneys, and all persons
acting by, through, under, or in concert with any of them (collectively "Digital
Releasees") or any of them, from all actions, causes of action, suits, debts,
liens, contracts, agreements, obligations, promises, liabilities, claims,
rights, demands, damages, controversies, losses, costs, and expenses of any
nature whatsoever, known or unknown, suspected or unsuspected, fixed or
contingent ("Claim" or "Claims"), that Lucas now has, owns, holds, claims to
have, claims to own, or claims to hold, or any time heretofore had, owned, held,
claimed to have, claimed to own, or claimed to hold against the Digital
Releasees related to or arising out of the Lawsuit or the Lease, or any actions
of any of the Digital Releasees taken in connection therewith. This Release
shall not apply to any obligations under this Agreement, to any obligation or
liability of Lucas under the Sublease arising hereafter, or any other agreement
not referenced herein.
V. Dismissal of Suit. Upon receipt of the Deposit and the Consent
Judgment Order, Lucas will cause its counsel to execute a consent dismissal
order dismissing the Lawsuit with prejudice and ordering the Clerk to release
the remaining cash bond to Lucas, which cash shall be applied to meet Digital's
Deposit obligation hereunder, and will cause their counsel to return such
dismissal order to Stauffer, Mannix, Rommel, Decker & Dulany, L.L.C., counsel
for Digital, for entry with the Court. The form of dismissal order to be
executed and delivered shall be in the form of Exhibit B, attached hereto and
made a part hereof.
<PAGE> 4
VI. Successors. This Agreement shall be binding upon the heirs,
administrators, executors, successors and assigns of each party hereto.
VII. Further Assurances. Each party hereto, without further consideration,
agrees to execute and deliver such other documents and take such other action as
may be necessary to consummate this Agreement.
VIII. Miscellaneous.
(a) All notices, requests, demands and other communications with
respect hereto shall be in writing and shall be delivered by hand, sent prepaid
by Federal Express (or a comparable overnight delivery service), sent by the
United States mail, certified, postage prepaid, return receipt requested, or
sent by facsimile (with the original sent by United States mail, certified,
postage prepaid, return receipt requested), in accordance with the following:
If to Lucas, at-
Lucas Industries, Inc.
c/o M. Melissa Glassman, Esquire
McGuire, Woods, Battle & Boothe, L.L.P.
8280 Greensboro Drive, Suite 900
McLean, Virginia 22102-3892
If to Digital, at-
Digital Commerce Corporation
11180 Sunrise Valley Drive, Suite 400
Reston, Virginia 20194-4367
Attention: Mr. Tony Bansal
Any notice, request, demand or other communication delivered or sent in the
manner aforesaid shall be deemed given or made (as the case may be) upon the
earliest of (1) the date it is actually received, (2) on the business day after
the day on which it is delivered by hand, or is delivered to Federal Express (or
a comparable overnight delivery service), or is sent by facsimile, or (3) on the
third business day after the day on which it is deposited in the United States
mail, certified, postage prepaid. Any party may change such party's address by
notifying the other parties of the new address in any manner permitted by this
subsection.
(b) The section headings used in this Agreement are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the interpretations of any of the provisions hereof.
<PAGE> 5
(c) This Agreement may be executed with multiple signature pages in one or
more counterparts, and fully executed counterparts shall be considered one and
the same Agreement. This Agreement shall become a binding agreement when a fully
executed counterparts are received by counsel for each of the parties hereto.
(d) This Agreement shall be construed in accordance with the laws of the
Virginia.
(e) The Parties entering into this Agreement expressly represent that they
have direct and express authority to execute this Agreement in accordance with
the above terms.
(f) This Agreement contains the entire agreement of the parties. No
representations, inducements, promises, or agreements not set forth herein shall
have any force or effect. This Agreement can only be modified in writing signed
by all parties.
[Signatures on following page.]
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be bound thereby as of the day, month and year first above written.
LUCAS INDUSTRIES, INC.
By: [SEAL]
------------------------------------
Name:
Title:
DIGITAL COMMERCE CORPORATION
By: [SEAL]
------------------------------------
Name: Tony Bansal
Title: President & CEO
<PAGE> 1
EXHIBIT 10.18
<TABLE>
<S> <C> <C>
------------------------------
CONTRACT SUPPLEMENT STATE OF CONNECTICUT CONTRACT AWARD NO.:
RFP-37 NEW 6/98 (Rev. 2/99) DEPARTMENT OF ADMINISTRATIVE SERVICES RFP978-A-06-0302
PROCUREMENT SERVICES ------------------------------
Joann McAllister 165 Capitol Avenue, Room G-8A, Ground Floor Contract Award Date:
Buyer Name PO Box 150414 24 August 1998
Hartford, CT 06115-0414 ------------------------------
(860)713-5080 Proposal Due Date:
Buyer Phone Number 7 April 1997
------------------------------
SUPPLEMENT DATE:
26 August 1999
</TABLE>
<TABLE>
============================================================================================================================
CONTRACT AWARD SUPPLEMENT #3
IMPORTANT: THIS IS NOT A PURCHASE ORDER. DO NOT PRODUCE OR SHIP WITHOUT AN AGENCY PURCHASE ORDER.
============================================================================================================================
<S> <C>
COMMODITY CLASS/SUBCLASS AND DESCRIPTION:
0018-099 - Request for Proposal for Electronic Business Solution for Government Procurement Process to State Agencies,
Municipalities, and Not for Profits
- --------------------------------------------------------------- ------------------------------------------------------------
FOR: Department of Administrative Services TERM OF CONTRACT/DELIVERY DATE REQUIRED:
Procurement Services August 24, 1998 in accordance with Contract Term "E"
165 Capitol Avenue inclusive
Hartford, CT 06106
for All Using State Agencies, Political Subdivisions, Not for
Profits
------------------------------------------------------------
AGENCY REQUISITION NUMBER: 169315
</TABLE>
<TABLE>
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
<S> <C> <C> <C>
CHANGE TO IN STATE (NON-SB) CHANGE TO DAS-CERTIFIED SMALL CHANGE TO OUT OF STATE CHANGE TO TOTAL CONTRACT
CONTRACT VALUE BUSINESS CONTRACT VALUE CONTRACT VALUE AWARD VALUE
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
$ 0.00
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
</TABLE>
NOTICE TO CONTRACTORS: This notice of award is not an order to ship. Purchase
Orders against contracts will be furnished by the using agency or agencies on
whose behalf the contract is made.
INVOICE SHALL BE RENDERED DIRECT TO THE ORDERING AGENCY.
NOTE: Dollar amounts listed next to each contractor are possible award amounts,
however, they do not reflect any expected purchase amounts (actual or implied).
They are for CHRO use only.
NOTICE TO AGENCIES: A complete explanatory report shall be furnished promptly to
the Procurement Manager concerning items delivered and/or services rendered on
orders placed against awards listed herein which are found not to comply with
the specifications or which are otherwise unsatisfactory from the agency's
viewpoint, as well as failure of the contractor to deliver within a reasonable
period of time specified. Please issue orders and process invoices promptly.
CASH DISCOUNTS: Cash discounts, if any, shall be given SPECIAL ATTENTION, but
such cash discount shall not be taken unless payment is made within the discount
period.
PRICE BASIS: Unless otherwise noted, prices include delivery and transportation
charges fully prepaid f.o.b. agency. No extra charge is to be made for packing
or packages.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACTOR INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Company Name: DIGITAL COMMERCE CORP. INC.
Address: 11180 SUNRISE VALLEY DRIVE, RESTON, VA 20191-4367
Tel. No.: (610) 354-9500 Fax No.: (610) 354-9590 Contract Value: $
Contact Person: BILL BROWNE SSN/FEIN No.: 54-1766836 Delivery: AS REQUIRED
Certification Type (SBE, MBE, WBE or None): NONE Terms: NET 45 DAYS Agrees to Supply Political SubDivisions: YES
Company E-Mail Address and/or Company Web Site: www.dmx.com
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Contract assigned to Digital Commerce Corporation
APPROVED
-------------------------------------
JIM PASSIER
Procurement Manager
(Original Signature on Document in
Procurement Files)
DATE ISSUED 26 AUGUST, 1999
<PAGE> 2
<TABLE>
<S> <C> <C>
------------------------------
CONTRACT SUPPLEMENT STATE OF CONNECTICUT CONTRACT AWARD NO.:
RFP-37 NEW 6/98 (Rev. 2/99) DEPARTMENT OF ADMINISTRATIVE SERVICES RFP978-A-06-0302
PROCUREMENT SERVICES ------------------------------
Joann McAllister 165 Capitol Avenue, Room G-8A, Ground Floor Contract Award Date:
Buyer Name PO Box 150414 24 August 1998
Hartford, CT 06115-0414 ------------------------------
(860)713-5080 Proposal Due Date:
Buyer Phone Number 7 April 1997
------------------------------
SUPPLEMENT DATE:
31 July 1999
============================================================================================================================
CONTRACT AWARD SUPPLEMENT #3
IMPORTANT: THIS IS NOT A PURCHASE ORDER. DO NOT PRODUCE OR SHIP WITHOUT AN AGENCY PURCHASE ORDER.
============================================================================================================================
COMMODITY CLASS/SUBCLASS AND DESCRIPTION:
0018-099 - Request for Proposal for Electronic Business Solution for Government Procurement Process to State Agencies,
Municipalities, and Not for Profits
- --------------------------------------------------------------- ------------------------------------------------------------
FOR: Department of Administrative Services TERM OF CONTRACT/DELIVERY DATE REQUIRED:
Procurement Services August 24, 1998 in accordance with Contract Term "E"
165 Capitol Avenue inclusive
Hartford, CT 06106
for All Using State Agencies, Political Subdivisions, Not for
Profits
------------------------------------------------------------
AGENCY REQUISITION NUMBER: 169315
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
CHANGE TO IN STATE (NON-SB) CHANGE TO DAS-CERTIFIED SMALL CHANGE TO OUT OF STATE CHANGE TO TOTAL CONTRACT
CONTRACT VALUE BUSINESS CONTRACT VALUE CONTRACT VALUE AWARD VALUE
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
$ 0.00
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
</TABLE>
NOTICE TO CONTRACTORS: This notice of award is not an order to ship. Purchase
Orders against contracts will be furnished by the using agency or agencies on
whose behalf the contract is made.
INVOICE SHALL BE RENDERED DIRECT TO THE ORDERING AGENCY.
NOTE: Dollar amounts listed next to
each contractor are possible award amounts, however, they do not reflect any
expected purchase amounts (actual or implied). They are for CHRO use only.
NOTICE TO AGENCIES: A complete explanatory report shall be furnished promptly to
the Procurement Manager concerning items delivered and/or services rendered on
orders placed against awards listed herein which are found not to comply with
the specifications or which are otherwise unsatisfactory from the agency's
viewpoint, as well as failure of the contractor to deliver within a reasonable
period of time specified. Please issue orders and process invoices promptly.
CASH DISCOUNTS: Cash discounts, if any, shall be given SPECIAL ATTENTION, but
such cash discount shall not be taken unless payment is made within the discount
period.
PRICE BASIS: Unless otherwise noted, prices include delivery and transportation
charges fully prepaid f.o.b. agency. No extra charge is to be made for packing
or packages.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CONTRACTOR INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Company Name: DIGITAL COMMERCE CORP. INC.
Address: 11180 SUNRISE VALLEY DRIVE, RESTON, VA 20191-4367
Tel. No.: (610) 354-9500 Fax No.: (610) 354-9590 Contract Value: $
Contact Person: BILL BROWNE SSN/FEIN No.: 54-1766836 Delivery: AS REQUIRED
Certification Type (SBE, MBE, WBE or None): NONE Terms: NET 45 DAYS Agrees to Supply Political SubDivisions: YES
Company E-Mail Address and/or Company Web Site: www.dmx.com
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Contract assigned to Digital Commerce Corporation
APPROVED
---------------------------------------------
JIM PASSIER
Procurement Manager
(Original Signature on Document in Procurement
Files)
DATE ISSUED: 31 JULY 1999
<PAGE> 3
<TABLE>
<S> <C> <C>
------------------------------
CONTRACT AWARD STATE OF CONNECTICUT CONTRACT AWARD NO.:
_P-38 rev. 11/97 DEPARTMENT OF ADMINISTRATIVE SERVICES RFP978-A-06-0302-C
PROCUREMENT SERVICES ------------------------------
Jim Passier 165 Capitol Avenue, Room G-8A, Ground Floor Contract Award Date:
Procurement Manager PO Box 150414 24 August 1998
Hartford, CT 06115-0414 ------------------------------
(860)713-5086 Bid Opening Date:
Telephone Number 7 April 1998
============================================================================================================================
CONTRACT AWARD
IMPORTANT: THIS IS NOT A PURCHASE ORDER. DO NOT PRODUCE OR SHIP WITHOUT AN AGENCY PURCHASE ORDER.
============================================================================================================================
COMMODITY CLASS/SUBCLASS AND DESCRIPTION:
0018-099 - Request for Proposal for Electronic Business Solution for Government Procurement Process to State Agencies,
municipalities, and Not for Profits
- --------------------------------------------------------------- ------------------------------------------------------------
FOR: Department of Administrative Services TERM OF CONTACT/DELIVERY DATE REQUIRED:
Procurement Services August 24, 1998 in accordance with Contract "E" inclusive
165 Capitol Avenue
Hartford, CT 06106
for All Using State Agencies, and Political Subdivisions, Not
for Profits
------------------------------------------------------------
AGENCY REQUISITION NUMBER: 169315
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
IN STATE (NON-SB) DECD CERTIFIED SMALL OUT OF STATE TOTAL CONTRACT
CONTRACT VALUE BUSINESS CONTRACT VALUE CONTRACT VALUE AWARD VALUE
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
$100,000.00 $100,000.00
- -------------------------------- ------------------------------ ------------------------------ -----------------------------
</TABLE>
NOTICE TO CONTRACTORS: This notice of award is not an order to ship. Purchase
Orders against contracts will be furnished by the using agency or agencies on
whose behalf the contract is made.
INVOICE SHALL BE RENDERED DIRECT TO THE ORDERING AGENCY.
NOTE: Dollar amounts listed next to each contractor are possible award amounts,
however, they do not reflect any expected purchase amounts (actual or implied).
They are for CHRO use only.
NOTICE TO AGENCIES: A complete explanatory report shall be furnished promptly to
the Procurement Manager concerning items delivered and/or services rendered on
orders placed against awards listed herein which are found not to comply with
the specifications or which are otherwise unsatisfactory from the agency's
viewpoint, as well as failure of the contractor to deliver within a reasonable
period of time specified. Please issue orders and process invoices promptly.
CASH DISCOUNTS: Cash discounts, if any, shall be given SPECIAL ATTENTION, but
such cash discount shall not be taken unless payment is made within the discount
period.
PRICE BASIS: Unless otherwise noted, prices include delivery and transportation
charges full prepaid f.o.b. agency. No extra charge is to be made for packing or
packages.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACTOR INFORMATION:
- ----------------------------------------------------------------------------------------------------------------------------
Company Name: IMB CORPORATION
Address: ONE COMMERCIAL PLAZA, HARTFORD, CT 06103
<S> <C> <C>
Tel. No.: (860) 727-6149 Fax No.: (860) 727-6265 Contract Value: $100,000.00
Contact Person: MICHAEL DAHLEM SSN/FEIN No.: ###-##-#### Delivery:
Certification Type (SBE, MBE, WBE or None): NONE Terms: NET 45 DAYS Agrees to Supply Political SubDivisions: YES
Company E-Mail Address and/or Company WebSite:
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
APPROVED
--------------------------------------------
JIM PASSIER
Procurement Manager
DATE ISSUED: 24 AUGUST 1998
<PAGE> 4
ASSIGNMENT AGREEMENT FOR CONTRACT RFP 978-A-06-0302-C
International Business Machines Corporation (IBM) and The Department of
Administrative Services (DAS), an executive branch agency of the State of
Connecticut have entered into a Contract (RFP 978-A-06-0302-C) to provide
certain services described therein. IBM and DAS wish to assign IBM's rights and
obligations under that Contract to Datamatix, Inc. Therefore, in consideration
of the mutual covenants and agreements herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. That IBM assigns all its right and obligations under this contract to
Datamatix, Inc. on the effective date shown.
2. That IBM will transfer the $100,000 payment made by the State of
Connecticut from IBM to Datamatix promptly following execution of this
agreement and in no event greater than 14 days after execution.
3. Pursuant to Public Act 97-9 of the June 18 Special Session, The
Department of Information Technology (DOIT) is vested with the
statutory authority to enter into this Agreement. Accordingly, this
Agreement shall not be considered valid and enforceable unless and
until the agency head of DOIT is a signatory to this Agreement.
4. That IBM shall have no further liability to the State of Connecticut
or Datamatix in connection with the Contract, Datamatix's performance
thereunder, or the IBM payment described in section 2 above.
5. This Contract is being assigned to Datamatix by IBM in response to a
direct request by DAS. IBM has satisfactorily performed all of its
contractual responsibilities with respect to this Contract and has not
otherwise breached any material obligation of the Contract.
6. Datamatix hereby assumes all obligations, liabilities, and duties
under the contract and promises to perform and discharge all
obligations and duties of IBM under the contract from the effective
date of this agreement, for the remainder of the term.
7. That DAS and IBM, will, within 30 days of the effective date of this
agreement, formally notify all parties subscribing to services
provided via the Contract that Datamatix, Inc. has been assigned all
of IBM's rights and obligations contained therein. The content of such
formal notification will be mutually agreed to by DAS and IBM.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized agents on the day and year indicated below.
<TABLE>
<CAPTION>
IBM Sponsor
<S> <C>
By: By:
------------------------------------------------- ---------------------------------------------
Name: Name:
----------------------------------------------- -------------------------------------------
Title: Title:
---------------------------------------------- -----------------------------------------
Date: Date:
----------------------------------------------- ------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Datamatix DOIT
<S> <C>
By: By:
------------------------------------------------ -------------------------------------------
Name: Name:
------------------------------------------------ -------------------------------------------
Title: Title:
------------------------------------------------ -------------------------------------------
Date: Date:
------------------------------------------------ -------------------------------------------
Attorney General
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
Date:
-----------------------------------------------
</TABLE>
<PAGE> 6
IBM COMMERCEPOINT
SPONSOR GOVERNMENT PARTICIPATION AGREEMENT FOR ORDERLINK(TM)
SERVICES
Pursuant to Conn. Gen. Stat. section 4a-50 et seq., as amended by
Connecticut's Public Act 97-9 of the June 18, 1997 Special Session, this
Agreement is entered into on this ____ day of _______ 1998, between the
Department of Administrative Services, an executive branch state agency of the
State of Connecticut, with its principal place of business at 165 Capital Ave,
Hartford, Connecticut (the "Sponsor"), and IBM Corporation, with its principal
business location at 6710 Rockledge Drive, Bethesda, Maryland 20817 ("IBM").
BACKGROUND
The Sponsor routinely solicits and issues master contracts ("Master
Contracts") with suppliers ("Vendors") so as to provide the best available
prices and an easy ordering mechanism for frequently purchased goods and
services by the Sponsor and other state agencies. In addition to other state
agencies, the Sponsor also allows municipalities, and non-profit organizations
(e.g., school systems) (collectively "Users"), to purchase from these Master
Contracts.
The Sponsor desires to make its Master Contracts available to Users in
an on-line electronic format. Datamatix, Inc. ("DMX") has developed a software
application called OrderLink(TM). DMX has authorized IBM to market and
distribute OrderLink(TM) as an Internet-based service. IBM has agreed to offer
OrderLink(TM) to all current and future Sponsor Master Contract Users as an
Internet-based World Wide Web service. IBM has agreed to provide and maintain
this service for the Sponsor in accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
A. DESCRIPTION OF OrderLink(TM) SERVICE
During the term of this Agreement:
1. The OrderLink(TM) Service shall be offered to all
Sponsor Users.
2. OrderLink(TM) shall be accessible on the World Wide
Web via the Internet. Users shall be responsible for
providing their own Internet access. OrderLink(TM)
access shall be controlled by password to ensure
only Users may place orders. OrderLink(TM) shall be
compatible with the version of Microsoft's or
Netscape's browser software currently available at
the time of execution of this Agreement. The method
of access to OrderLink(TM) shall be through a
hotlink from the State
Page 1 of 19
<PAGE> 7
of Connecticut Internet Home Page and/or via
hotlinks from other recognized associations within
the state.
3. Users shall be able to use the OrderLink(TM)service
to read, search, and place orders against Master
Contracts.
4. Master Contracts placed on OrderLink OrderLink(TM)
shall be accessible in an ASCII delimited,
electronic, consistent format and shall be updated
by IBM on a bi-weekly basis using data supplied by
the Sponsor. The data format shall meet the
specifications identified in Attachment C.
5. Uses shall be able to search each Master Contract:
A. By contract number used by the State of
Connecticut;
B. By vendor and
C. By key word search.
6. Users shall be able to see:
A. Summary lines for each Master Contract.
B. Each detailed line item with full item
description, minimum order quantities.
C. Current price unless Master Contract refers User
to vendor's catalog or any document not included
in the Master Contract, and
D. Terms and Conditions of the Master Contract.
7. Subject to Section C below, users shall be able to
place orders against Master Contracts while online.
Such orders shall be sent to the Vendor via Internet
E-mail, Electronic Data Interchange (EDI), or
optionally by FAX.
8. Users shall be able to print out or download to
their PCs, excerpts of Master Contracts such as line
items, for their use. IBM shall provide an
electronic data download capability for extracting
data in a single, mutually agreed format from
OrderLink(TM) for the purpose of report generation
by the Sponsor. Additional data format downloads,
other than for report generation, shall be provided
on a billable basis at the labor rates identified in
Attachment B.
9. Vendors shall have the option to pay IBM for
"hotlinks" from the Master Contracts on
OrderLink(TM) to the Vendors' own Web sites in order
to let Users know more about the Vendor companies,
their new products, or even to show pictures or
demonstrations of their products, if the Vendor
chooses to provide such product information. IBM has
no responsibility for the information provided on
any third party Web site.
10. Access to each Master Contract shall be secured at
multiple levels. All Users shall have a password to
query the contract databases or see contract
details. A second password level shall further
restrict access to placing orders to
Page 2 of 19
<PAGE> 8
authorized representatives of Users. Additional
access shall also be provided for viewing reports in
the system.
11. The Sponsor agrees to deliver to IBM, on diskette or
through electronic download, all Master Contracts in
ASCII delimited consistent data format as specified
in Attachment C. In the event the Sponsor does not
have sufficient resources to provide said Master
Contracts in the required format, IBM shall provide
services to convert the data to the desired format
on a mutually agreeable billable basis to the
Sponsor. However, the state may elect to procure
these services from another vendor and provide the
output to IBM.
12. The OrderLink(TM) service is solely a means to
convey contract information and to facilitate the
placement of orders. Filling orders and otherwise
complying with the Master Contract is the sole
responsibility of Vendor. IBM shall have no
responsibility for performance under the Master
Contract.
13. IBM shall make reasonable efforts to make new or
revised vendor contracts available on OrderLink(TM)
within 15 business days of their receipt by IBM
provided the data is received in the required format
(see Attachment C). IBM retains the right to remove
contracts from OrderLink(TM) that are not utilized
by Users for placing orders with vendors or where
vendors refuse to participate in the service. IBM
shall meet with the Sponsor on a quarterly basis to
discuss and review the purchase utilization levels
of each contract hosted in OrderLink(TM). Contracts
with insufficient levels of purchase utilization
will be identified as candidates for action and
possible removal.
B. ROYALTIES PAID TO SPONSOR.
1. IBM shall pay the Sponsor, a royalty in the amount
of 10% of the OrderLink(TM) Transaction Fee for
orders placed by Users through OrderLink(TM). This
royalty fee shall be paid upon the successful
completion and ongoing support by the Sponsor of all
activities listed in Attachment A to this agreement.
All monies due the Sponsor by IBM shall be paid on a
quarterly basis.
2. IBM's obligation to pay under the terms of B.1 above
shall be based only on fees collected from Vendors.
The Sponsor shall maintain the right to
independently audit the copies of invoices from IBM
to the Master Contact Vendors. IBM shall meet with
the Sponsor on a quarterly basis to report on all
vendors delinquent in payment of the OrderLink(TM)
Transaction Fee. IBM and the Sponsor shall work
together in developing a course of action against
the vendor to resolve the payment issue.
Page 3 of 19
<PAGE> 9
C. SPONSOR AND IBM RESPONSIBILITIES
1. Sponsor and IBM shall have such responsibilities as
provided in this Agreement and Attachment A.
D. MAINTENANCE AND DOCUMENTATION.
1. IBM shall provide maintenance for
OrderLink(TM) (collectively, the "Services") during
the term of this Agreement, without any additional
cost or charge to the Sponsor, any User or any
Vendor. IBM agrees that it shall use its reasonable
good faith efforts to correct any error,
malfunction, or defect in OrderLink(TM) or such
Services, to cause OrderLink(TM) to operate, and the
Services to conform, substantially in accordance
with the documentation delivered under Section D.2,
and to maintain the accuracy and timeliness of the
information contained on the OrderLink(TM) service.
2. IBM shall provide each User with electronic access
to the appropriate documentation sources for the
OrderLink(TM) Service at no cost or charge to such
User or the Sponsor. IBM shall make such
documentation available on-line for Users or
Sponsors that access the Services.
E. TERM AND TERMINATION.
1. The term of this Agreement shall commence from the
date of contract execution and shall remain in
effect unless terminated in accordance with this
section (E). After three (3) years from the
commencement date of this contract, IBM and the
Sponsor shall retain the right to renegotiate
pricing and terms of the contract as mutually
agreed.
2. This Agreement may be terminated:
A. By Sponsor, at its option if: (i) IBM fails
to pay the Sponsor any amount due hereunder
within ten days after Sponsor sends written
notice to IBM of such failure; or (ii) IBM
breaches any of its other obligations under
this Agreement in any material respect and
fails to cure such breach within 30 days of
Sponsor's written notice to IBM of such
breach.
B. By IBM, at its option, if the Sponsor
breaches any of its obligations under this
Agreement in any material respect and fails
to cure such breach within 30 days of IBM
written notice to the Sponsor of such
breach;
C. By either party, at its option, immediately
upon written notice to the other party if:
(i) such other party makes an assignment
for the benefit of its creditors; (ii) such
other parry becomes insolvent; (iii) such
other party
Page 4 of 19
<PAGE> 10
institutes proceedings for its full or partial
liquidation or dissolution; (iv) such other party is
adjudged bankrupt by a court of competent
jurisdiction; (v) a trustee or receiver is appointed
for such other party or any substantial part of its
assets; (vi) a voluntary or involuntary petition
under the United Sponsors Bankruptcy Code or other
similar law, whether Sponsor or federal, for the
relief of debtors is filed against such other party
and not discharged within 30 days; or (vii) such
other party consents to the appointment of a receiver
of a trustee for itself or any substantial portion of
its assets; or
D. By either party upon 3 month's written notice. In the
event the contract is terminated by the Sponsor
within the first year, IBM shall be compensated, by
the Sponsor, for all up-front expenditures incurred
on tire implementation of the program up to the
effective date of termination. The upfront
expenditures include, but are not necessarily limited
to program and project management, direct marketing
campaign support, contract loading, communication
programs and advertising. If the Sponsor terminates
the contract within the first year, IBM shall not
have an obligation -- subsequent to such termination
-- to remit to the Sponsor a royalty or rebate.
3. Upon any expiration or termination of this Agreement, IBM
shall deliver to the Sponsor a copy of all Master Contracts
then resident on OrderLink(TM). IBM shall certify to the
Sponsor in writing that all copies of the data (regardless of
where or how stored) have been returned to the Sponsor. The
expiration or termination of this Agreement shall not excuse
either party from any breach of this Agreement prior to such
termination and full legal and equitable remedies shall
remain available therefore, nor shall it change or eliminate
IBM's obligation to make payment required to be made
hereunder with respect to any period prior to the date of
expiration or termination.
F. WARRANTIES.
1. IBM represents to the Sponsor that it has been authorized by
DMX to grant the Sponsor and Users the right to access
OrderLink(TM) and to use the services: a copy of the
pertinent language from DMX's license to IBM is attached
hereto as Attachment E and is incorporated by reference into
this agreement
2. IBM represents and warrants that, at the time at which the
Services are first made available to Users and for the term
of this Agreement, OrderLink(TM)shall perform, and the
Services conform substantially to the documentation discussed
in Section D.2. IBM makes this warranty solely to the extent
of DMX's warranty to IBM, which appears in Attachment E. In
the event that IBM breaches this warranty, the Sponsor may
cause IBM to cure the problem or
Page 5 of 19
<PAGE> 11
terminate the agreement if IBM is unable to correct the
problem. If the Sponsor terminates the agreement because IBM
is unable to correct the problem, IBM will refund the initial
startup fee paid by the Sponsor, offset by any rebate paid to
Sponsor.
3. THESE WARRANTIES REPLACE ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IBM
has no responsibility for Users' connection to the Internet
or to the World Wide Web through its Internet service
provider(s).
G. INDEMNIFICATION.
1. IBM agrees to indemnify the Sponsor solely to the extent of
DMX's indemnity to IBM, attached hereto as Attachment E and
incorporated by reference into this Agreement.
H. LIABILITIES.
1. IN NO EVENT SHALL EITHER IBM OR THE SPONSOR BE LIABLE FOR ANY
DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR THE USE OR PERFORMANCE OF THE SERVICES HEREUNDER.
2. The above limitation shall not apply to damages for bodily
injury (including death) and damage to personal property for
which IBM is legally liable.
Circumstances may arise where, because of a default on our
part or other liability, you are entitled to recover damages
from us. In each such instance, regardless of the basis on
which you are entitled to claim damages from us (including
fundamental breach, negligence, misrepresentation, or other
contract or tort claim), we are liable only for:
A. Damages for bodily injury (including death) and
damage to real property and tangible personal
property: and
B. The amount of any other actual direct damages or
loss, up to the greater of $100.000 or the charges
(if recurring, 12 months charges apply) for the
Product and Service that is the subject of the
claim.
Page 6 of 19
<PAGE> 12
ITEMS FOR WHICH IBM IS NOT LIABLE
Under no circumstances are we, our subcontractors, or
Program developers liable for any or the following:
1. Loss of, or damage to, your records or data;
provided, however, that IBM shall take all steps
necessary to safeguard data, files, reports or other
information from loss, destruction or erasure. Any
costs or expenses of replacing or damages resulting
from the loss of such data shall be borne by IBM
when such loss or damage occurred through its
negligence, or
2. Special, incidental, or indirect damages or for any
economic consequential damages (including lost
profits or savings), even if we are informed of
their possibility.
I. GENERAL.
1. Independent Vendor. Each party shall be and act as an
independent contractor and not as an agent or partner of the
other party. Neither party by virtue of this Agreement shall
have any right, power or authority to act or create any
obligation, express or implied on behalf of the other party
hereto, or on behalf of any User or any Vendor. Except as
expressly provided in this Agreement or as may be
subsequently agreed between the parties in writing, all
expenses incurred by either party in furtherance of the terms
of this Agreement shall be borne by the party incurring such
expense.
2. Notices. All notices, requests, demands and other
communications required or permitted to be made hereunder
shall be in writing and shall be deemed duly given if hand
delivered, certified mail, return receipt requested, first
class postage prepaid, or sent by nationally recognized
overnight delivery service, in each case addressed to the
party entitled to receive the same at the address specified
below:
<TABLE>
<S> <C>
IF TO SPONSOR, THEN TO: IF TO IBM, THEN TO:
JAMES R. PASSIER, ROOM G8-A IBM CORPORATION
PROCUREMENT MANAGER MR. MICHAEL DAHLEM
165 CAPITOL AVENUE, HARTFORD, CT 06106 ONE COMMERCIAL PLAZA, HARTFORD, CT
</TABLE>
3. Trademarks. Datamatix name and logo, the names of Services,
and any trademarks used in connection with Services are the
property of IBM and Datamatix. Sponsor is authorized to use
these trademarks for the purpose of marketing the Services
and furthering the purposes of this Agreement, and otherwise
in accordance with IBM instructions and guidelines for usage.
4. Products. Other than as expressly provided for herein, any
hardware, software or services will be provided to the
Sponsor under a separate agreement.
Page 7 of 19
<PAGE> 13
5. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with
regard to the subject matter hereof and thereof, and
supersedes all prior agreements, promises, discussions,
understandings, inducements or conditions, express or implied
oral or written, except as herein contained. The express
terms hereof control and supersede any course of performance
and/or usage of trade inconsistent with any of the terms
hereof.
6. Order of Precedence For the term of this contract, the order
of precedence in determining any and all discrepancies
between the documents comprising this Agreement shall be:
A. The contract, including Attachments A-E and all
subsequent amendments,
B. IBM's proposal dated August 28, 1997 complete with
all attachments, and
C. The RFP (RFP 978-A-6-302-C) dated July 25, 1997.
7. Set Aside Goals IBM has provided in Attachment D the IBM
Corporate Small Business Subcontracting Plan approved by the
Federal government which affirms our corporate obligation to
affirm such goals on a national basis.
8. Exclusion of Taxes from Prices The State of Connecticut is
exempt from the payment of excise and sales taxes imposed by
the Federal Government and/or the State. IBM has no provision
in its pricing for any other applicable taxes which if
applicable, will be included as a separate item on our
invoice.
9. Control of Contract Events and Timing Timing and sequence of
events resulting from this contract will be proposed by the
Sponsor and mutually agreed to between the parties.
10. Subcontractors The Sponsor hereby approves any and all
subcontractors utilized by IBM, provided a list of all
subcontractors is provided to Sponsor prior to execution of
this contract. IBM acknowledges that any work provided under
the contract is work conducted on behalf of the State and
that the Commissioner of DAS or her designee may communicate
directly with any subcontractor as determined by mutual
agreement of the parties in writing. Sponsor approval is
required for a replacement subcontractor who will provide
services under this agreement. IBM will provide written
notification and Sponsor agrees that approval of the
replacement subcontractor will not be unreasonably withheld.
Sponsor approval is authorized should Sponsor not respond in
writing within 15 calendar days.
12. Confidentiality of Data The Sponsor represents that any data
provided to IBM under this Agreement is not confidential, as
defined in the state of Connecticut's Freedom of Information
Act. Should any confidential data be subsequently
Page 9 of 19
<PAGE> 14
provided by the Sponsor to IBM, a separate agreement,
mutually agreed to by the parties, for the Exchange of
Confidential Information will be executed.
13. Assignment; Successors and Assigns. Except as expressly
provided herein, neither party may assign or transfer, in
whole or in part, this Agreement or any of its rights or
obligations hereunder, whether voluntarily, by operations of
law or otherwise, without the prior written consent of the
other party hereto. This Agreement, and all rights and powers
granted hereby, shall be binding upon and ensure to the
benefit of the parties hereto and their respective successors
and permitted assigns.
14. No Third Patty Beneficiaries. The parties specifically intend
and agree that no one other than the parties to this
Agreement, including without limitation any User or any
Vendor, is or shall be deemed to be a third party beneficiary
of any of the rights or obligations set forth in this
Agreement.
15. Waivers, Amendments. No modification or amendment of this
Agreement or waiver of any provision of this Agreement shall
be valid unless in writing and signed by both parties.
16. Severability. The provisions of this Agreement are
independent of and severable from each other. No provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any one or more of the
other provisions hereof may be invalid or unenforceable in
whole or in part.
17. Headings. The titles of the Sections and subsections are for
convenience only and are not in any way intended to limit or
amplify the terms or conditions of this Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall
constitute one Agreement. This Agreement shall become binding
when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties
reflected hereon as the signatories hereto.
19. Governing Law. This Agreement and the legal relations among
the parties hereto shall be governed by and construed in
accordance with the laws of the State of Connecticut.
20. Availability to "Piggy-Back". It is understood and agreed by
the parties that this Agreement is being entered into based on
a publicly held, competitive competition and award process
where proposals were received after the Sponsor advertised in
a local newspaper and solicited proposals for Electronic
Commerce Services. It is further agreed that neither party has
any objections to other governmental entities/agencies
entering into similar agreements based
Page 9 of 19
<PAGE> 15
primarily upon the terms and conditions set forth in the RFP,
IBM's response, and resultant Agreement. The parties also
recognize that other governmental entities/agencies may not
receive the same terms and conditions as the Sponsor, and
execution of a similar Agreement is required.
21. Pursuant to Public Act 97-9 of the June 18 Special Session,
the Department of Information ("DOIT") is vested with the
statutory authority to enter into this Agreement.
Accordingly, this Agreement shall not be considered valid and
enforceable unless and until the agency head of DOIT is a
signatory to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized agents on the day and year first above
written.
<TABLE>
<CAPTION>
IBM SPONSOR
<S> <C>
By: By:
------------------------------- ------------------------------
(Authorized Signature) (Authorized Signature)
Name: Mr. Michael Dahlem Name: James Passier
----------------------------- -----------------------------
Title: Business Unit Executive Title: Procurement Manager
State of Connecticut IBM
----------------------------- -----------------------------
Date: Date:
--------------------------- ----------------------------
</TABLE>
Agreed to as to form:
State of Connecticut
Office of the Attorney General
By:
---------------------------
Authorized Signature
Name:
-------------------------
(Type or Print)
Page 10 of 19
<PAGE> 16
Date:
- ---------------------------------------
State of Connecticut
Department of Information Technology
By:
- ---------------------------------------
Chief Information Officer
Name:
- ---------------------------------------
Gregg ("Rock") Regan
Page 11 of 19
<PAGE> 17
ATTACHMENT A
AGREEMENT BETWEEN THE
CONNECTICUT DEPARTMENT OF ADMINISTRATIVE SERVICES (SPONSOR) AND IBM
Roles and Responsibilities
IBM shall provide the Sponsor a revenue share from supplier fees collected on
purchases from established government contracts. IBM intends to negotiate an
OrderLink(TM) Transaction Fee, paid by each supplier to the service, based on
the total purchase order amount processed through the service. IBM shall share
10% of the OrderLink(TM) Transaction Fee with the sponsoring organization based
on the level of commitment and sponsorship. The categories below identify task
activities that IBM and the Sponsor shall complete as part of this agreement.
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------
ACTIVITIES RESPONSIBILITY
- ----------------------------------------------------- ---------------------------
<S> <C>
Provide list of contacts: key executives, top Sponsor
purchasing contacts, purchasing users, including
titles, mail addresses and telephone numbers, for
state and local governments and political
subdivisions that are members of cooperative
purchasing programs. This data must be provided in
electronic, ASCII delimited and consistent format.
- ----------------------------------------------------- ---------------------------
Create and distribute letter endorsing the service Sponsor
to all state agencies, and local governments and
political subdivisions that are members to the
cooperative purchasing program.
- ----------------------------------------------------- ---------------------------
Advertise OrderLink(TM) service on Sponsor's Sponsor
web page with links to IBM, Datamatix, and
EC4GOV web sites.
- ----------------------------------------------------- ---------------------------
Written and telephone contact with senior officers Sponsor
of associations with membership from counties,
cities and municipalities, school districts,
universities and colleges and transit authorities.
- ----------------------------------------------------- ---------------------------
</TABLE>
Page 12 of 19
<PAGE> 18
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------
ACTIVITIES RESPONSIBILITY
- ----------------------------------------------------- ---------------------------
<S> <C>
Eliminate within six months mass distribution of Sponsor
Master Contracts to all state agencies and
cooperative purchasing entities. Paper distribution
of contracts will be supported on a "per request"
basis.
- ----------------------------------------------------- ---------------------------
Provide OrderLink(TM) training and help desk IBM
facilities. Training may include use of IBM or
Sponsor facilities and personnel to demonstrate,
train and promote OrderLink(TM).
- ----------------------------------------------------- ---------------------------
Include requirements in future solicitations to Sponsor
mandate vendor sign-up and participation. The types
of solicitations shall include Master Term
Contracts for commodity items. This shall not include
solicitations for spot buys.
- ----------------------------------------------------- ---------------------------
<CAPTION>
- ----------------------------------------------------- ---------------------------
ACTIVITIES RESPONSIBILITY
- ----------------------------------------------------- ---------------------------
<S> <C>
Create and distribute letters endorsing the service Sponsor
to State suppliers that hold a statewide contracts.
Sponsor will work this activity in conjunction with
IBM marketing programs.
- ----------------------------------------------------- ---------------------------
Telephone or personal contact to all statewide term Sponsor
contract vendors soliciting participation. Vendors
holding contracts for spot buys shall not be
included.
- ----------------------------------------------------- ---------------------------
Complete the Pre-Campaign checklist for direct IBM, Sponsor
marketing activity
- ----------------------------------------------------- ---------------------------
Provide statewide contracts in electronic ASCII Sponsor
delimited and consistent format to IBM (See
Attachment C).
- ----------------------------------------------------- ---------------------------
</TABLE>
Page 13 of 19
<PAGE> 19
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------
ACTIVITIES RESPONSIBILITY
- ----------------------------------------------------- ---------------------------
<S> <C>
Provide timely, electronic updates of contract Sponsor
information in electronic ASCII delimited and
consistent format.
- ----------------------------------------------------- ---------------------------
Provide list of supplier's contacts, mail addresses Sponsor
and telephone numbers for each statewide contract.
This data must be provided in electronic, ASCII
delimited and consistent format.
- ----------------------------------------------------- ---------------------------
Guarantee IBM an exclusive electronic delivery Sponsor
channel to suppliers for electronic purchasing from
statewide contracts over the Internet/Intranet
except in the case where an electronic delivery
channel already exists at the time of this contract
ratification.
- ----------------------------------------------------- ---------------------------
Participate in monthly meetings to discuss status, IBM, Sponsor
progress and future strategy.
- ----------------------------------------------------- ---------------------------
Provide testimonials and presentations at industry IBM, Sponsor
shows and Sponsor meetings and promotions.
- ----------------------------------------------------- ---------------------------
Act as a positive reference account for IBM if IBM Sponsor
performance warrants.
- ----------------------------------------------------- ---------------------------
Publish positive articles on the use of OrderLink(TM) IBM, Sponsor
if warranted.
- ----------------------------------------------------- ---------------------------
Document process improvements in purchasing and IBM, Sponsor
publish white papers on the subject if warranted.
- ----------------------------------------------------- ---------------------------
</TABLE>
Page 14 of 19
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------
ACTIVITIES RESPONSIBILITY
- ----------------------------------------------------- ---------------------------
<S> <C>
Support an interface to the SAAAS system for IBM
transferring required data. The development of the
interface shall be performed by IBM on a billable
basis as mutually agreed. IBM shall make available
an electronic feed of currently available financial
information from OrderLink(TM) to the SAAAS system
through this interface on a periodic basis (as
mutually agreed by parties) at "no charge."
- ----------------------------------------------------- ---------------------------
Operational Requirements IBM
1. All aspects of the application shall be Year 2000
Compliant
2. Application availability shall be 24 hours per
day, seven days per week, with a 3-4 hour
maintenance period each Sunday.
3. Service shall be operated in a production
environment and all planned outages shall be
performed off-hours with advanced notice to the
users.
4. Data security shall be provided via Userid and
Passwords.
- ----------------------------------------------------- ---------------------------
IBM shall waive the one-time fee of $395 for all IBM
Connecticut Certified Small Business Enterprises
(CSBEs) that hold a Master Contract. The Sponsor
is responsible for all marketing efforts to the
CSBEs. IBM shall load CSBE contracts in
OrderLink(TM) upon execution of the supplier
agreement by each CSBE.
- ----------------------------------------------------- ---------------------------
</TABLE>
Page 15 of 19
<PAGE> 21
ATTACHMENT B
ELECTRONIC COMMERCE PRICING
SPONSOR (DAS) PRICING:
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------------- -------------
Product Contract Price Sponsor Fee
- ------------------------------- ---------------------------------- -------------
<S> <C> <C>
OrderLink(TM) $100,000 - Initial Fee N/A
- ------------------------------- ---------------------------------- -------------
Legacy System Integration See pricing for Consulting N/A
Services
- ------------------------------- ---------------------------------- -------------
Consulting Services See pricing tables; Labor Rate N/A
Structure
- ------------------------------- ---------------------------------- -------------
World Source Priced at a Later Date Not Included
- ------------------------------- ---------------------------------- -------------
World Bid Priced at a Later Date Not Included
- ------------------------------- ---------------------------------- -------------
</TABLE>
GOVERNMENT PRODUCT, PRICING, AND REVENUE SHARING SUMMARY
The initial startup fee of $100,000 is used to offset startup costs associated
witty project management and conversion activity is transferring statewide
contracts into the OrderLink(TM) service. IBM and the Sponsor will work
together to drive maximum utilization of the OrderLink(TM) service throughout
state and local governments including political subdivisions. At completion of
the first 12 months of the contract, IBM shall rebate to the Sponsor, based on
Total Revenue processed through the OrderLink(TM) service in Connecticut, an
amount specified in the schedule below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Total Revenue Processed Rebate to the Sponsor
through OrderLink(TM)
- ----------------------------------------------------------------------
<S> <C>
Less than $2,000,000 $ 0
- ----------------------------------------------------------------------
$2,000,000 $ 25,000
- ----------------------------------------------------------------------
$4,000,000 $ 50,000
- ----------------------------------------------------------------------
$8,000,000 $ 60,000
- ----------------------------------------------------------------------
$10,000,000 $ 65,000
- ----------------------------------------------------------------------
$12,000,000 $ 75,000
- ----------------------------------------------------------------------
$14,000,000 $ 80,000
- ----------------------------------------------------------------------
$17,000.000 $ 85,000
- ----------------------------------------------------------------------
$20,000,000 $ 90,000
- ----------------------------------------------------------------------
$22,000,000 $100,000
- ----------------------------------------------------------------------
</TABLE>
Page 16 of 19
<PAGE> 22
The interface design and development between OrderLink(TM) and the SAAAS system
will be performed by IBM on a billable basis under the labor rates identified
in this contract.
The following labor rate table defines the skill levels and rates that IBM will
use in pricing consulting, system integration, and interface development for
the state. The rates are listed in U.S. dollars and applicable to 1998.
LABOR RATE STRUCTURE
<TABLE>
<CAPTION>
- ----------------------------------------------------- -------------------------
LABOR STRUCTURE RATE/HOUR
- ----------------------------------------------------- -------------------------
<S> <C>
Senior Consultant/Project Leader 228
- ----------------------------------------------------- -------------------------
Consultant 195
- ----------------------------------------------------- -------------------------
Senior Programmer 169
- ----------------------------------------------------- -------------------------
Programmer/Analysts 163
- ----------------------------------------------------- -------------------------
Web Developer 117
- ----------------------------------------------------- -------------------------
Clerical 74
- ----------------------------------------------------- -------------------------
</TABLE>
SUPPLIER PRICING:
SUPPLIER PRODUCT, PRICING, AND REVENUE SHARING SUMMARY
<TABLE>
<CAPTION>
- ------------------------------ -------------------------------------- ----------------------
Product Contract Price to Supplier Sponsor Fee
- ------------------------------ -------------------------------------- ----------------------
<S> <C> <C>
OrderLink(TM) $395 - One Time Fee 10% of OrderLink(TM)
2% of Sales (OrderLink(TM) Transaction Fee)
Transaction Fee)
- ------------------------------ -------------------------------------- ----------------------
Consulting Services See pricing tables; Labor Rate N/A
Structure
- ------------------------------ -------------------------------------- ----------------------
World Source Price Not Included Not Included
- ------------------------------ -------------------------------------- ----------------------
World Bid Price Not Included Not Included
- ------------------------------ -------------------------------------- ----------------------
</TABLE>
Page 17 of 19
<PAGE> 23
ATTACHMENT C
REQUIRED DATA FORMAT
The required data format for Datamatrix to receive contract and vendor data is
in ASCII fixed-field files, as specified below. Some fields/files below may not
be applicable to all states. Character lengths can be adjusted, if necessary.
Datamatrix will work with the sponsoring state to make necessary adjustments in
the data files.
<TABLE>
<CAPTION>
========================================= ======================================== ===========================================
VENDOR FILE CONTRACT FILE LINE ITEM FILE
----------------------------------------- ---------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Vendor ID 9 char Contract Number 6 char Contract Number 6 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Vendor Suffix 3 char Contract Name 35 char Line Item Number 4 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Vendor Name 50 char Effective Date 8 char Commodity Code 11 char
(YYYYMMDD)
----------------------------------------- ---------------------------------------- -------------------------------------------
Address 1 35 char Expiration Date 8 char Description 96 char
(YYYYMMDD)
----------------------------------------- ---------------------------------------- -------------------------------------------
Address 2 35 char Minimum Dollar Order 6 char Unit Price 9 char
(5 char for
dollars. 4
char for cents)
----------------------------------------- ---------------------------------------- -------------------------------------------
City 26 char (blank) 1 char Unit of Measure 6 char
----------------------------------------- ---------------------------------------- -------------------------------------------
State 2 char Restriction Type Code 1 char (blank) 8 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Zip 5 char (blank) 1 char Minimum Order Amount 6 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Zip Code Extension 4 char Last Change Date 8 char Minimum Order Quantity 6 char
(YYYYMMDD)
----------------------------------------- ---------------------------------------- -------------------------------------------
Contact Name 30 char Contract Status Code 3 char Vendor ID 9 char
----------------------------------------- ------------------------------------------ -------------------------------------------
Area Code 3 char (blank) 3 char Vendor Suffix 3 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Phone 7 char Condition Number 3 char Payment Term Number 3 char
=========================================
---------------------------------------- -------------------------------------------
(condition number can be Last Change Date 8 char
repeated multiple times if (YYYYMMDD)
multiple conditions exist)
========================================
-------------------------------------------
Contract Status Code 1 char
-------------------------------------------
Contract Distributor Code 1 char
===========================================
</TABLE>
<TABLE>
<CAPTION>
========================================= ======================================== ===========================================
DISTRIBUTOR FILE CONDITIONS FILE PAYMENT TERM FILE
----------------------------------------- ---------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
Vendor ID 9 char Condition Number 3 char Payment Term Number 3 char
----------------------------------------- ---------------------------------------- -------------------------------------------
Vendor Suffix 3 char Condition Text 72 char Payment Term Description 40 char
===========================================
----------------------------------------- ----------------------------------------
Distributor Code 1 char (condition text can be repeated for
longer text strings)
========================================
-----------------------------------------
Contract Number 6 char
-----------------------------------------
Distributor ID 9 char
-----------------------------------------
Distributor Suffix 3 char
-----------------------------------------
Distributor Name 50 char
-----------------------------------------
Distributor Address 1 35 char
-----------------------------------------
Distributor Address 2 35 char
-----------------------------------------
Distributor City 26 char
-----------------------------------------
Distributor State 2 char
-----------------------------------------
Distributor Zipcode 5 char
-----------------------------------------
Distributor Zip Extension 4 char
-----------------------------------------
Distributor Contact Name 30 char
-----------------------------------------
Distributor Area Code 3 char
-----------------------------------------
Distributor Phone 7 char
=========================================
</TABLE>
Page 18 of 19
<PAGE> 24
ATTACHMENT D
IBM CORPORATE SMALL BUSINESS SUBCONTRACTING PLAN
SEE ATTACHED DOCUMENT
Page 19 of 19
<PAGE> 1
EXHIBIT 10.19
[FIRFAX COUNTY LETTERHEAD]
AMENDMENT NO. 5
SUBJECT: EDI Translation Software/Consultation /VAN Services
CONTRACTOR VENDOR CODE CONTRACT NO.
- ---------- ----------- ------------
Digital Commerce Corporation B232704379 0I RQ97-000012-16A
dba Datamatix
215 West Church Road
King of Prussia, PA 19406
By mutual agreement, Contract RQ97-000012-16A is amended to renew the contract
for one (1) years, at existing terms and conditions, effective December 20,
1999 through December 19, 2000. In addition, the contract is being assigned to
Digital Commerce Corporation at the same address as Datamatix (Ref. Datamatix's
letter dated September 15, 1999).
All other terms and conditions remain unchanged.
- ----------------------------------------------
Armand E. Malo, CPPO
Director/County Purchasing Agent
ACCEPTANCE:
BY: Treasurer
---------------------------------- ------------------------------
Signature Title
Matthew Toloczko 10/29/99
---------------------------------- ------------------------------
Printed Date
DISTRIBUTION:
<TABLE>
<S> <C>
DPSM - Systems Administration Section Control Copy
Contractor Administrator DPSM - Mable McCarthy
Contractor(s) DPSM - Sandy Jones
DAHS - Contracts Management, Suite 738 Park Authority - Purchasing Section
DPSM - D'Arcy Roper FCPS/GS - Dean Tistadt
</TABLE>
<PAGE> 2
[FAIRFAX COUNTY LETTERHEAD]
AMENDMENT NO. 3
SUBJECT: EDI Translation Software/Consultation/VAN Services
CONTRACTOR VENDOR CODE CONTRACT NO.
- ---------- ----------- ------------
Datamatix, Inc. B232704379 01 RQ97-000012-16A
215 West Church Road
King of Prussia, PA 19406
Contract RQ97-000012-16A is amended to accept Datamatix's letter dated December
10, 1998, to provide consulting services to assist the County in its electronic
commerce initiative to deliver Notices of Solicitation via e-mail, fax and hard
copy. The estimated fee will not exceed $5,000 (based on the hourly rates in
the contract).
All other terms and conditions remain unchanged.
Note: The vendor code and contract number reflect changes made by the new
County Purchasing System.
- -------------------------------
Larry N. Wellman, CPPO
Director/County Purchasing Agent
LNW/lr\[c:\wpfiles\amendm.ent\]
DISTRIBUTION:
- ------------
Contractor(s) Contract Administrator
Dept. of Education - Financial Services Control Copy
DPSM - Administrative Support Section DPSM - Mable McCarthy
DPSM - Sandy Jones DPSM - Rick Moriarity
<PAGE> 3
[FAIRFAX COUNTY LETTERHEAD]
AMENDMENT NO. 2
SUBJECT: EDI Translation Software/Consultation/VAN Services
CONTRACTOR VENDOR CODE CONTRACT NO.
- ---------- ----------- ------------
Datamatix, Inc. B232704379 01 RQ97-000012-16A
215 West Church Road
King of Prussia, PA 19406
By mutual agreement, Contract RQ97-000012-16A is renewed for one (1) year at
existing prices, terms, and conditions, effective December 20, 1998 through
December 19, 1999. In addition, this amendment reflects the following changes:
o CHANGE THE ADDRESS from 630 W. Germantown Pike, Suite 300,
Plymouth Meeting, PA to 215 West Church Road, King of
Prussia, PA 19406; Phone #610-354-9500 & Fax #610-354-9590.
o CHANGE the Senior Consultant hourly rate from $150 per hour
to $165 per hour. (Ref. Paragraph 11 of the Special
Provisions and Datamatix's letter dated November 20, 1998.)
o CHANGE the annual maintenance charges for Harbinger/Supply
Tech software as follows: (Ref. Datamatix's letter dated
November 20, 1998.)
FROM:
STX for Windows EDI Translation Software $ 900
XMAP Feature $ 600
---------
TOTAL: $ 1,500
TO:
STX - Windows (MRSTXW3S) $ 752.40
External Command Interface (MRSTXW3S006) $ 517.28
STMAP Application File Mapper (MRSTX3STMAP) $ 731.50
---------
TOTAL: $2,001.18
All other items and conditions remain unchanged.
<PAGE> 4
RQ97-000012-16A- Amendment No. 2
Page 2
Note: The vendor code and contract number reflect changes made by the new
County Purchasing System
- --------------------------------
Larry N. Wellman, CPPO
Director/County Purchasing Agent
ACCEPTANCE:
BY: Chairman & CEO
----------------------------------- -----------------------------------
Signature Title
George M. Gordon 12/14/98
----------------------------------- -----------------------------------
Printed Date
<TABLE>
<CAPTION>
DISTRIBUTION:
<S> <C>
Contractor(s) DPSM - Administrative Support Group
Control Copy Contract Administrator
Department of Education - Financial Services DPSM - Rick Moriarity
DPSM - Mable McCarthy DPSM - Sandy Jones
</TABLE>
<PAGE> 5
RQ97-000012-16A- Amendment No. 2
Page 3
AMENDMENT ONE
TO
FAIRFAX COUNTY CONTRACT NUMBER RQ700012.16A
DATED JANUARY 10, 1997 (RENEWED DECEMBER 1998)
AGREEMENT FOR ORDERLINK(TM) SERVICES (AGREEMENT)
This Amendment to Fairfax County Contract number RQ7000012.16A dated January
10, 1997 (Amendment) is entered into on this 25th day of January 1999 between
Fairfax County Public Schools (the "Sponsor") with its principal place of
business at 6800 B Industrial Road, Springfield, VA 22151 and Datamatix, Inc.
(Datamatix) a Delaware corporation with its principal place of business at 215
West Church Road, King of Prussia, PA 19406 each sometimes referred to
hereinafter to as a "Party" and collectively as the "Parties".
BACKGROUND
The Sponsor routinely solicits and issues textbook and other master contracts
("Master Contracts") with suppliers ("Vendors") so as to provide the best
available prices and an easy ordering mechanism for frequently purchased goods
and services by the Sponsor and other authorized and affiliated agencies
(collectively "Users").
The Sponsor desires to make its Master Contracts available on-line in
electronic format. Datamatix has developed a software application known as
OrderLink(TM), an Internet-based service that hosts Master Contracts and makes
them available for on-line ordering. Datamatix has agreed to offer the
OrderLink service to all current and future Sponsor Master Contract Users as an
Internet-based Worldwide Web service. Datamatix has agreed to provide and
maintain this service for the Sponsor under the terms and conditions of this
Agreement.
AGREEMENT
In consideration of the mutual covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
A. DESCRIPTION OF OrderLink(TM) SERVICE
During the term of this Amendment:
1. The OrderLink Service shall be offered to all Sponsor Users.
2. OrderLink shall be accessible on the Worldwide Web via the Internet.
Users shall be responsible for providing their own Internet access.
OrderLink access shall be controlled by password to ensure only
authorized Users may place orders. OrderLink shall be compatible with
the version of Microsoft or Netscape's browser software currently
available at the time of execution of this Amendment. The method of
access to Order Link shall be through
<PAGE> 6
RQ97-000012-16A- Amendment No. 2
Page 4
hotlinks from the Fairfax County Public Schools' Internet Home Page
and/or via hotlinks from other recognized associations.
3. Users shall be able to use the OrderLink service to read, search, and
place orders against Master Contracts.
4. Master Contracts loaded into OrderLink shall be provided to Datamatix
in an ASCII delimited, electronic, consistent format and shall be
updated by Datamatix on a bi-weekly (or mutually agreed to) basis
using data supplied by the Sponsor. The data format shall meet the
specifications identified in Attachment A. In the event the Sponsor
does not have sufficient resources to provide said Master Contracts in
the required format, Datamatix shall provide services to convert the
data to the desired format on a mutually agreeable price based on the
labor rates identified in Attachment B.
5. Users shall be able to search each Master Contract:
a) by contract number used by the Sponsor;
b) by vendor, and
c) by key word search.
6. User shall be able to see:
a) summary lines for each Master Contract,
b) each detailed line item with full item description, minimum
order quantities,
c) current price unless Master Contract refers User to Vendor's
catalog or any document not included in the Master Contract
and
d) terms and conditions of the Master Contract.
7. Subject to Section C below, users shall be able to place orders
against Master Contracts while online. Such orders shall be sent to
the Vendor via Internet e-mail or by FAX. A user can optionally
include procurement card information in the order (Web-based SSL
security is used for all orders).
8. Users shall be able to print out or download to their PCs, excerpts of
Master Contracts such as individual line items, for their use.
Datamatix will provide sponsor with usage information and the ability
to generate standard usage reports. Additional data format downloads,
other than for report generation, may be provided on a billable basis
at the labor rates identified in Attachment B.
9. Vendors shall have the option to pay Datamatix for "hotlinks" from the
Master Contracts on OrderLink to the Vendors' own Web sites in order
to let Users know more about the Vendor companies, their new products,
or even to show pictures or demonstrations of their products, if the
Vendor chooses to provide such product information and a Web site
address. Datamatix has no responsibility for the information provided
on any third party Web sites.
<PAGE> 7
RQ97-000012-16A- Amendment No. 2
Page 5
10. Access to each Master Contract shall be secured at multiple levels.
All Users shall have a password to query the contract database or see
contract details. A second password level shall further restrict
access to placing orders to authorized representatives of Users.
Additional password access shall also be provided for viewing reports
in the system.
11. The OrderLink service is solely a means to convey contract information
and to facilitate the placement of orders. Filling orders and
otherwise complying with the Master Contract is the
a) by Sponsor, at its option, if Datamatix breaches any
of its other obligations under this Agreement in any
material respect and fails to cure such breach
within 30 days of Sponsor's written notice to
Datamatix of such breach;
b) by Datamatix, at its option, if the Sponsor breaches
any of its obligations under this Agreement in any
material respect and fails to cure such breach
within 30 days of Datamatix written notice to the
Sponsor of such breach;
c) by either party, at its option, immediately upon
written notice to the other party if: (i) such other
party makes an assignment for the benefit of its
creditors; (ii) such other party becomes insolvent;
(iii) such other party institutes proceedings for
its full or partial liquidation or dissolution; (iv)
such other party is adjudged bankrupt by a court of
competent jurisdiction; (v) a trustee or receiver is
appointed for such other party or any substantial
part of its assets; (vi) a voluntary or involuntary
petition under the United States Bankruptcy Code or
other similar law, whether Sponsor or federal, for
the relief of debtors is filed against such other
party and not discharged within 30 days; or (vii)
such other party consents to the appointment of a
receiver or a trustee for itself or any substantial
portion of its assets.
3. Upon any expiration or termination of this Agreement, Datamatix shall
deliver to the Sponsor a copy of all Master Contracts then resident on
OrderLink. Datamatix shall certify to the Sponsor in writing that all
copies of the data (regardless of where or how stored) have been
returned to the Sponsor. The expiration or termination of this
Agreement shall not excuse either party from any breach of this
Agreement prior to such termination and full legal and equitable
remedies shall remain available therefore.
E. WARRANTIES
1. Datamatix owns all rights to the OrderLink Service and represents to
the Sponsor that it is authorized to grant the Sponsor and Users
access to OrderLink and to use the Services.
2. Datamatix represents and warrants that, at the time at which the
Services are first made available to Users and for the term of this
Amendment, OrderLink shall perform, and the Services conform
substantially to the documentation discussed in Section C.2.
3. THESE WARRANTIES REPLACE ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
<PAGE> 8
RQ97-000012-16A- Amendment No. 2
Page 6
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Datamatix has no
responsibility for Users' connection to the Internet or to the
Worldwide Web through its Internet service provider(s).
F. INDEMNIFICATION
1. Datamatix agrees to defend, indemnify, and hold harmless Sponsor
against any and all claims, losses, and expenses, including reasonable
attorney fees and other costs of litigation arising out of any claim
that Datamatix breached its representations and warrants under this
Agreement.
2. The foregoing indemnities are conditioned on the following:
a) prompt written notice to Datamatix by Sponsor of any claim or
proceeding subject to indemnification,
b) cooperation by Sponsor in the defense and settlement of any
such claim.
G. LIABILITIES
1. IN NO EVENT SHALL EITHER DATAMATIX OR THE SPONSOR BE LIABLE FOR ANY
DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OR PERFORMANCE
OF THE SERVICES HEREUNDER.
2. The above limitation shall not apply to damages for bodily injury
(including death) and damage to personal property for which Datamatix
is legally liable. Circumstances may arise where, because of default
on the part of Datamatix or other liability, Sponsor may be entitled
to recover damages from Datamatix. In each such instance, regardless
of the basis on which Sponsor is entitled to claim damages from
Datamatix (including fundamental breach, negligence,
misrepresentation, or other contract or tort claim), Datamatix is
liable only for:
a) damages for bodily injury (including death) and damage to
real property and tangible personal property; and
b) the amount of any other actual direct damages or loss, up to
the greater of $100,000 or the charges (if recurring, 12
months charges apply) for the Product and Service that is the
subject of the claim.
3. Under no circumstances is Datamatix, its subcontractors, or Program
developers liable for any or the following:
a) loss of, or damage to, your records or data; provided,
however, that Datamatix shall take reasonable steps to
safeguard data, files, reports or other information from
loss, destruction or erasure.
b) any costs or expenses of replacing or damages resulting from
the loss of such data, or,
c) special, incidental, or indirect damages or for any economic
consequential damages (including lost profits or savings),
even if Datamatix is informed of their possibility.
<PAGE> 9
RQ97-000012-16A- Amendment No. 2
Page 7
H. GENERAL
1. Independent Vendor. Each party shall be and act as an independent
contractor and not as an agent or partner of the other party. Neither
party by virtue of this Agreement shall have any right, power or
authority to act or create any obligation, express or implied on
behalf of the other party hereto, or on behalf of any User or any
Vendor. Except as expressly provided in this Agreement or as may be
subsequently agreed between the parties in writing, all expenses
incurred by either party in furtherance of the terms of this Agreement
shall be borne by the party incurring such expense.
2. Notices. All notices, requests, demands and other communications
required or permitted to be made hereunder shall be in writing and
shall be deemed duly given if hand delivered, delivered by certified
mail, return receipt requested, first class postage prepaid, or sent
by nationally recognized overnight delivery service, in each case
addressed to the party entitled to receive the same at the address
specified below:
If to Sponsor, then to: If to Datamatix, then to:
Dean A. Tistadt, CPPO, Director George M. Gordon, President
Department of General Services Datamatix, Inc.
6800 B Industrial Road 215 West Church Road
Springfield, VA 22151 King of Prussia, PA 19406
3. Trademarks. Datamatix name and logo, the names of Services, and any
trademarks used in connection with Services are the property of
Datamatix. Sponsor is authorized to use these trademarks for the
purpose of marketing the Services and furthering the purposes of this
Agreement, and otherwise in accordance with Datamatix instructions and
guidelines for usage.
4. Products. Other than as expressly provided for herein, any hardware,
software or services will be provided to the Sponsor under a separate
agreement.
5. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the
subject matter hereof and thereof, and supersedes all prior
agreements, promises, discussions, understandings, inducements or
conditions, express or implied oral or written, except as herein
contained. The express terms hereof control and supersede any course
of performance and/or usage of trade inconsistent with any of the
terms hereof.
6. Confidentiality of Data. The Sponsor represents that any data provided
to Datamatix under this Agreement is not confidential, as defined in
the Commonwealth of Virginia's Freedom of Information Act. Should any
confidential data be subsequently provided by the Sponsor to
Datamatix, a separate agreement, mutually agreed to by the parties,
for the Exchange of Confidential Information, will be executed.
<PAGE> 10
RQ97-000012-16A- Amendment No. 2
Page 8
7. Assignment; Successors and Assigns. Except as expressly provided
herein, neither party may assign or transfer, in whole or in part,
this Agreement or any of its rights or obligations hereunder, whether
voluntarily, by operations of law or otherwise, without the prior
written consent of the other party hereto. This Agreement, and all
rights and powers granted hereby, shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
8. No Third Party Beneficiaries. The Parties specifically intend and
agree that no one other than the Parties to this Agreement, including
without limitation any User or any Vendor, is or shall be deemed to be
a third party beneficiary of any of the rights or obligations set
forth in this Agreement.
9. Waivers: Amendments. No modification or amendment of this Agreement or
waiver of any provision of this Agreement shall be valid unless in
writing and signed by both Parties.
10. Severability. The provisions of this Agreement are independent of and
severable from each other. No provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any
one or more of the other provisions hereof may be invalid or
unenforceable in whole or in part.
11. Headings. The titles of the Sections and subsections are for
convenience only and are not in any way intended to limit or amplify
the terms or conditions of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one
Agreement. This Amendment shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the
signature of all of the Parties reflected hereon as the signatories
hereto.
13. Governing Law. This Amendment and the legal relations among the
parties hereto shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized agents on the day and year first above
written.
Datamatix, Inc. Sponsor
By: By:
-------------------------------- ------------------------------
Authorized Signature Authorized Signature
Name: George M. Gordon Name: Dean A. Tistadt
----------------------------
Title: President Title: Director, Supply Operations
------------------------------
Date: January 25, 1999 Date: January 25, 1999
---------------- -------------------------------
<PAGE> 11
[FAIRFAX COUNTY LETTERHEAD]
<TABLE>
- -------------------------------------- --------------------------------------- --------------------------------------
<S> <C> <C>
ISSUE DATE: REQUEST FOR PROPOSAL NUMBER: FOR: Electronic Data Interchange
August 1, 1996 RFP70001216 (EDI) Transaction
Software/Consultation/Value Added
Network (VAN) Services
- -------------------------------------- --------------------------------------- --------------------------------------
AGENCIES: Department of DATE/TIME OF CLOSING: CONTRACT ADMINISTRATOR:
Information Technology/Purchasing & August 30, 1996 at 4:00 PM Lonnette Robinson
Supply Management Agency (703) 324-3281
- -------------------------------------- --------------------------------------- --------------------------------------
</TABLE>
Proposal - In accordance with the following and in compliance with all terms
and conditions, unless otherwise noted, the undersigned offers and agrees, if
the proposal is accepted, to furnish items or services for which prices are
quoted, as the price set opposite each item, delivered or furnished to
designated points within the time specified. It is understood and agreed that
with respect to all terms and conditions accepted by Fairfax County under
acceptance below, items or services offered and accompanying attachments shall
constitute a consent.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AND ADDRESS OF FIRM: Telephone No.: 610-397-0900
------------
<S> <C> <C>
Datamatix, Inc. Va. State Registration No.: application submitted; see attached
- --------------- -----------------------------------
630 W. Germantown Pike Federal Social Security No.: 23-2704379
- ------------------------------- ----------
Suite 300 Prompt Payment Discount: ___% for payment within ____ days.
- -------------------------------
Plymouth Meeting, PA 19462 Fairfax License Tax No.: 000265099
- ----------------------------- ---------
CHECK ONE: [ ] INDIVIDUAL [ ] PARTNERSHIP [X] CORPORATION
State in which Incorporated: Delaware
--------
8/22/96 (Impress
- ----------------------------------- ----------------------- Corporate Seal
Vendor Legally Authorized Signature Date Here)
George M. Gordon, CEO Judith E. Payne
- --------------------- ----------------
Print Name and Title Secretary
</TABLE>
By signing this proposal, Offeror certifies, acknowledges, understands, and
agrees to be bound by the conditions set forth in Paragraph 66 of the General
Conditions and Instructions to Bidders, regarding financial disclosure
requirements.
- -------------------------------------------------------------------------------
ACCEPTANCE AGREEMENT - COUNTY OF FAIRFAX (This is not an order - Purchase Order
will follow.)
CONTRACT NUMBER: RQ70001216 A DATE: January 10, 1997
-------------------------
Accepted as follows: Awarded RFP70001216 in accordance with the technical and
business proposals submitted by your firm on 8/30/96, to include the Memorandum
of Negotiations approved on this date.
----------------------- --------------------------
Contract Administrator Purchasing Agent
LONNETTE ROBINSON, CPPB LARRY N. WELLMAN, CPPO
- -------------------------------------------------------------------------------
Sealed proposal subject to terms and conditions of this Request for Proposal
will be received at 12000 Government Center Parkway, Suite 427. Fairfax,
Virginia 22035 until time/date specified above for furnishing items or services
delivered or furnished to specified destinations within the time specified or
stipulated by the Offeror.
AN EQUAL OPPORTUNITY PURCHASING ORGANIZATION
<PAGE> 12
FAIRFAX COUNTY
MEMORANDUM OF NEGOTIATIONS
RFP 70001216
Provide Electronic Data Interchange (EDI) Translation/Consultation/Value Added
Network (VAN) Services
The County of Fairfax (hereinafter called the County) and the Purchasing &
Supply Management Agency (P&SMA) and Datamatix, Inc. (hereinafter called the
Contractor) hereby agree to the following in the execution of contract
RQ70001216A.
The contract shall consist of the following:
1. RFP70001216, as issued and Addendum No. 1
2. Datamatix's Technical and Business Proposals Dated August 30, 1996
3. Datamatix's letter dated October 2, 1996, responding to the Oral
Interview questions and the letter dated November 12, 1996.
4. This Memorandum of Negotiations
5. Any subsequent amendments to the contract, mutual agreed upon in
writing between the County and Datamatix, Inc.
The following changes in the vendor's proposal are mutually agreed upon:
1. PROJECT DURATION/IMPLEMENTATION: The project time line for
implementing 850 (purchase orders), 860 (change orders), and 997
(functional acknowledgment) transactions sets will be from December
1996 through March 1997. Implementation is defined as: Fairfax County
being fully EDI and EDI-to-Fax capable to transmit the transactions
850/860 sets and receive the transaction 997 sets in a production
environment to/from selected trading partners.
2. COUNTY PROJECT TEAM COMPOSITION: Page 2, Response to question #2
contained in Datamatix's October 2, 1996, the following County project
team has been agreed to:
<TABLE>
<CAPTION>
STAFF (ROLE) ESTIMATED LEVEL OF EFFORT
<S> <C> <C>
Team Leader: David Mullet No more than .25 (25%) time for project duration
Procurement Expert: Rick Moriarty No more than .25 (25%) time for project duration
Technical Expert: Georgea Culpepper Up to 80 hours for project duration
EDI Coordination: Rick Moriarty No more than .50 (50%) for project duration
</TABLE>
3. CONSULTING FEES: Page 3, Section 5A. entitled "Consultation Fees" of
Datamatix's Business proposal is changed as follows:
<PAGE> 13
<TABLE>
A. Datamatix Professional/Technical Consulting Fees
<S> <C> <C>
o Senior Consultant (Payne, Gordon, Browne): $150/Hour
o Senior Technical Consultant (Langerfield, others) $115/Hour
o Associate Consultant (Good, others) $100/Hour
</TABLE>
4. MAPPING OF 850/860 TRANSACTION SETS: Page 1, Item #1, 2nd Bullet of
Datamatix's November 12, 1996 letter has been changed to read: "The
revised estimate is based on a review of the map analysis done by
Fairfax County and the sample flat file format provide to Datamatix is
30 hours, not to exceed the total amount of $5,250."
Accepted by:
- ----------------------------------------------------- -------------------
George M. Gordon, CEO, Datamatix, Inc. Date
- ----------------------------------------------------- -------------------
Larry N. Wellman, CPPO, Director, Purchasing & Supply Date
<PAGE> 1
EXHIBIT 10.20
SAP PUBLIC SECTOR AND EDUCATION, INC.
SOFTWARE END-USER LICENSE AGREEMENT
("AGREEMENT")
This Agreement is made effective as of the 13th day of March, 2000, by
and between SAP Public Sector and Education, Inc., a Delaware corporation, with
offices at The Ronald Reagan Building, International Trade Center, 1300
Pennsylvania Avenue, NW, Suite 500 / North Tower / Gray, Washington, DC 20004
("SAP"), and Digital Commerce Corporation, a Delaware corporation, with offices
at 11180 Sunrise Valley Drive, Reston, Virginia 20191 ("Licensee").
RECITAL
WHEREAS, SAP desires to grant to Licensee and Licensee desires to
accept from SAP, a license to Use (as defined herein) SAP's proprietary Software
(as defined herein) upon the terms and conditions hereinafter set forth; NOW,
THEREFORE, SAP and Licensee agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" means, as to Software licensed hereunder for Licensee's
internal Use, an entity located in the Territory in which Licensee owns more
than fifty percent of the voting securities. Any such entity shall be considered
an Affiliate for only such time as Licensee continues to own such equity
interest. "Affiliate" means, as to the B2B Software licensed in accord with
Appendix 2 hereto and the Business Document Exchange Service provided in accord
with Appendix 3 hereto, an entity located in the Territory in which Licensee
owns more than a 30% equity interest and Licensee operates one or more such
web-site portal(s) for such Affiliate. Any such entity shall be considered an
Affiliate for only such time as Licensee continues to own such equity interest
and operates one or more such web-site portal(s).
1.2 "Business Third Party" means any third party that requires access
to the Software in connection with the operation of Licensee's and/or its
Affiliates' business including, but not limited to, customers, distributors and
suppliers.
1.3 "Correction Level" means a change in the Software between Versions
made generally available to SAP Licensees.
1.4 "Designated Unit" means each individual computer in which the
Software, Third-Party Database Software, and PTS On-Demand Personal Navigation
System Software are installed.
1.5 "Documentation" means SAP's documentation, in any medium, which is
customarily delivered to all licensees of the Software, including SAP's manuals,
training materials, program listings, data models, flow charts, logic diagrams,
functional specifications, instructions, and complete or partial copies of the
foregoing.
SAP CONFIDENTIAL
<PAGE> 2
1.6 "Extension" means an addition to the Software which does not
require a Modification.
1.7 "Modification" means a change to the Software which changes the
source code.
1.8 "Non-Productive Use" means Use of the Software, Third-Party
Database, and PTS On-Demand Personal Navigation System Software solely for
Licensee's or an authorized Affiliate's internal training, testing or
developmental work.
1.9 "Productive Use" means Use of the Software, Third-Party Database,
and PTS On-Demand Personal Navigation System Software solely to operate
Licensee's or an authorized Affiliate's business.
1.10 "Program Concepts" means the concepts, techniques, ideas, and
know-how embodied and expressed in any computer programs or modules included in
the Software, including their structure, sequence, and organization.
1.11 "Proprietary Information" means: (i) with respect to SAP and SAP
AG, the Software and Documentation and any complete or partial copies thereof,
the Program Concepts, Third-Party Database Software, any other third-party
software licensed with or as part of the Software and benchmark results; and
(ii) information reasonably identifiable as the confidential and proprietary
information of SAP or its licensors or Licensee or its licensors excluding, any
part of the SAP or Licensee Proprietary Information which: (a) is or becomes
publicly available through no act or failure of the receiving party; or (b was
or is rightfully acquired by the receiving party from a source other than the
disclosing party prior to receipt from the disclosing party, or (c) becomes
independently available to the receiving party from a source not known by the
receiving party to be obligated to maintain confidentiality; or (d) is required
by law to be disclosed.
1.12 "Release" means each issuance of the Software, excluding third
party software, identified by the numeral to the left of the decimal point
(e.g., 3.0).
1.13 "SAP AG" means SAP Aktiengesellschaft, the licensor of the SAP
Proprietary Information to SAP.
1.14 "Software" means (i) all software specified in agreed upon
Appendices hereto, developed by or for SAP and/or SAP AG and delivered to
Licensee hereunder; (ii) any Releases, Versions, or Correction Levels of the
Software as contemplated by this Agreement; and (iii) any complete or partial
copies of any of the foregoing.
1.15 "Territory" means the United States of America and all other
countries in which SAP AG and its wholly owned affiliates are located or license
the Software, subject to U.S. export control laws. The following are countries
in which SAP, as of the Effective Date of this Agreement, is currently
prohibited from licensing the Software: Cuba, Iran, Iraq, Libya, North Korea,
Syria, and Angola. Further, SAP may from time to time deny the right to license
the software in certain
SAP CONFIDENTIAL 2
<PAGE> 3
countries in order to protect SAP's interests in its proprietary rights, but
only to the extent all similarly situated customers of SAP are denied such
rights.
1.16 "Third-Party Database Software" means third-party proprietary
database software licensed through SAP to Licensee. Third Party Database
Software shall not be deemed to include any data entered into the Third Party
Database Software.
1.17 "Use" means to load, execute, access, employ, utilize, store, or
display the Software, Modifications and Extensions, Third-Party Database, and
PTS On-Demand Personal Navigation System Software.
1.18 "Named Users" means any combination of users licensed under this
Agreement whose name and password have been registered in the Software.
1.19 "Version" means each issuance of each Release of the Software,
excluding third party software, identified by the numeral to the right of the
decimal point (3.1).
1.20 "Transaction Use" means access to or from mySAP.com by any method
which results in, or results from mySAP.com business processes. Transaction Use
shall not include data which upon input is directly operated on by a Named User
or licensed Software Engine as defined in Appendices hereto. "Transaction" means
each individual or group of data record(s) associated with a Software business
process which is input to or output from the Software.
2. LICENSE GRANT.
2.1 Grant of License.
(a) Subject to this Agreement, SAP grants and Licensee accepts, a
non-exclusive, perpetual (unless terminated in accordance with Section 5 herein)
license to Use the Software, Documentation, other SAP Proprietary Information,
Third-Party Database Software, and PTS On-Demand Personal Navigation Software
provided by SAP to Licensee, at specified site(s) within the Territory for
Productive and Non-Productive Uses. This license does not permit Licensee to:
(i) Use the Software, Third-Party Database Software, and PTS On-Demand Personal
Navigation Software for a service bureau application; or (ii) sublicense or rent
the Software, Third-Party Database Software, or PTS On-Demand Personal
Navigation Software.
(b) Licensee agrees to install the Software, Third-Party Database
Software, and PTS On-Demand Personal Navigation Software only on Designated
Unit(s), intranet server(s) or internet server(s) as identified by Licensee
pursuant to this Agreement and which have been previously approved by SAP in
writing or otherwise officially made known to the public as appropriate for Use
or interoperation with the Software, Third Party Database Software, and PTS
On-Demand Personal Navigation Software. The maximum number of Named Users
licensed to access the Software, Third Party Database Software, and PTS
On-Demand Personal Navigation Software, and the maximum number of Transactions
Licensee is authorized to perform on an annual
SAP CONFIDENTIAL 3
<PAGE> 4
basis (or other relevant metric identified in Appendices hereto) shall be
specified in Appendices to this Agreement. Licensee may install the Software on
an unlimited number of Designated Units, as long as such type of Designated
Units have been previously approved by SAP in writing or otherwise officially
made known to the public as appropriate for Use or interoperation with the
Software, Third Party Database Software, and PTS On-Demand Personal Navigation
Software, and as long as Licensee notifies SAP of such Designated Units in
accord with Schedule 1 to Appendix 1 and Schedule 1 to Appendix 2 hereto.
Licensee shall promptly provide written notice to SAP if the number of Named
Users, Transactions or other relevant metric exceeds such maximum numbers.
(c) Licensee may transfer the Software, Third-Party Database Software,
and PTS On-Demand Personal Navigation Software from one Designated Unit to
another at no additional license fee, and shall provide written notice to SAP
within five business days of such installation. Licensee shall be responsible
for the cost of any migration tools, Third-Party Database Software costs,
third-party software or additional Software required for the new Designated
Unit. The Software, Third-Party Database Software, and PTS On-Demand Personal
Navigation Software must be promptly deleted in their entirety from the
Designated Unit no longer in use and from each back-up copy for that Designated
Unit.
2.2 Authorization of Affiliates to Use the Software. Affiliates shall
be authorized to Use the Software, Third-Party Database Software, and PTS
On-Demand Personal Navigation Software; provided that: (i) each Affiliate shall
first sign and deliver to SAP its agreement to be bound by the terms herein in
the forth of Exhibit A attached hereto; and (ii) such Use shall be subject to
the following: (A) Licensee accepts responsibility for the acts or omissions of
such Affiliate as if they were Licensee's acts or omissions; (B) Licensee shall
indemnify SAP against losses or damages suffered by SAP arising from breach of
this Agreement by any such Affiliate as if effected by Licensee; and (C) such
Use shall not constitute an unauthorized exportation of any SAP Proprietary
Information under U.S. Government laws and regulations; and (D) in no
circumstances may those Affiliates in which Licensee owns less than 50% of the
voting securities Use the Software to operate or manage such Affiliate's own
internal business operations.
2.3 Authorization of Business Third Parties to Access the Software.
Business Third Parties may have access to the Software provided (i) all Business
Third Parties accessing the Software through password identification shall be
licensed as Named Users; (ii) all other usage or access to the Software by
Business Third Parties shall be licensed as Transaction Usage; (iii) Business
Third Parties are expressly limited to screen access to the Software; (iv) in no
circumstances may Business Third Parties have access to Software source code;
(v) in no circumstances shall Business Third Parties Use the Software to operate
or manage the business of such Business Third Parties (vi) such Use shall be
subject to the following: (A) Licensee accepts responsibility for the acts or
omissions of such Business Third Parties as if they were Licensee's acts or
omissions; (B) Licensee shall indemnify SAP against losses or damages suffered
by SAP arising from breach of this Agreement by any such Business Third Party as
if effected by Licensee; and (C) such Use shall not constitute an unauthorized
exportation of any SAP Proprietary Information under U.S. Government laws and
regulations.
SAP CONFIDENTIAL 4
<PAGE> 5
2.4 Audit Right. During normal business hours SAP, or its authorized
representative or licensors, shall have the right upon reasonable advance notice
to audit and inspect, in a manner that does not unreasonably interfere with
Licensee's or its Affiliate's business operations, Licensee's or any Affiliate's
utilization of the Software, Documentation, other SAP Proprietary Information,
Third-Party Database Software, or PTS On-Demand Personal Navigation Software in
order to verify compliance with the terms of this Agreement. If SAP Proprietary
Information is given to Business Third Parties pursuant to this Agreement,
Licensee shall secure the right for SAP to audit such Business Third Party as
specified in this Section. Upon SAP's reasonable request, Licensee shall deliver
to SAP a report, as defined by SAP, evidencing Licensee's usage of the Software
licensed under this Agreement.
2.5 Archival Copy; Restriction on Copies; Legends to be Reproduced.
(a) Licensee may make one copy of the Software, Third Party Database
Software, and PTS On-Demand Personal Navigation Software for archival purposes
and such number of backup copies of the Software, Third Party Database Software,
and PTS On-Demand Personal Navigation Software as are consistent with Licensee's
normal periodic backup procedures. Licensee shall maintain a log of the number
and location of all originals and copies of the Software, Third Party Database
Software, and PTS On-Demand Personal Navigation Software.
(b) Licensee may reproduce or copy any portion of the Documentation
into machine-readable or printed form for its internal use and only as required
to exercise its rights hereunder.
(c) Licensee shall include SAP's and its licensors' copyright,
trademark, service mark, and other proprietary notices on any complete or
partial copies of the Software, Documentation, Third-Party Database Software,
SAP Proprietary Information, or PTS On-Demand Personal Navigation Software in
the same form and location as the notice appears on the original work. Licensee
shall not remove SAP's or its licensors' copyright, trademark, service mark, and
other proprietary notices on any complete or partial copies of the Software,
Documentation, Third-Party Database Software, or PTS On-Demand Personal
Navigation Software. The inclusion of a copyright notice on any portion of the
Software, Documentation, Third-Party Database Software, SAP Proprietary
Information, or PTS On-Demand Personal Navigation Software shall not cause or be
construed to cause it to be a published work.
2.6 License for Third-Party Database Software. The Software requires a
third-party database which may be licensed through SAP or directly from a
third-party database licensor approved by SAP. In the event Licensee obtains a
license directly from a third-party database licensor, any restrictions imposed
on Licensee directly by such third-party database licensor shall apply. Except
as set forth in the immediately following sentence, SAP makes no representations
or warranties as to the Third-Party Database Software or its operation. SAP
represents that, as of the Effective Date of the Agreement, the Software is
compatible with the Third Party Database Software and that SAP has all rights
from its licensors necessary to license, in accordance with the terms of this
Agreement, such Third Party Database Software to Licensee.
SAP CONFIDENTIAL 5
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3. DELIVERY. The licensed Software in machine-readable format, and the
Documentation, shall be delivered as specified in Appendices hereto
("Delivery"). Licensee shall be responsible for installation of the Software.
Upon Licensee's request, SAP will install the Software, subject to agreement as
to applicable terms and conditions, including fees.
4. PRICE AND PAYMENT.
4.1 License Fees. Licensee shall pay to SAP license fees for the
Software on such terms as set forth in Appendices hereto ("License Fees"). Fees
for Maintenance ("Maintenance Fees") shall be paid as set forth in Appendices
hereto. Any fees, other than reasonably disputed fees, Licensee does not pay
when due shall accrue interest at the rate of 18% per annum, but not to exceed
the maximum amount as allowed by law. In the event SAP institutes a collection
procedure and SAP is the prevailing party in such procedure, Licensee also
agrees to pay SAP all reasonable costs and expenses of collection, including
attorneys' fees.
4.2 Taxes. License and Maintenance Fees and other charges described in
this Agreement and its Appendices, or in SAP's most recent List of Prices and
Conditions, do not include federal, state or kcal sales, use, property, excise,
service, or similar taxes ("Tax(es)") now or hereafter levied; all of which
shall be for Licensee's account. With respect to state/local sales tax, direct
pay permits or a valid tax-exempt certificate must be provided to SAP prior to
the execution of this Agreement. If SAP is required to pay Taxes (excepting
taxes on SAP's income or franchise taxes), SAP shall invoice Licensee for such
Taxes. Licensee hereby agrees to indemnify SAP for and hold it harmless from any
Taxes (excluding taxes on SAP's income or franchise taxes) and related costs,
interest and penalties paid or payable by SAP in connection with this Agreement,
provided Licensee will not be required to indemnify SAP or hold SAP harmless
from any interest or penalties except to the extent such interest or penalties
arise out of or are attributable to Licensee's failure to promptly pay Taxes
promptly invoiced that are payable by Licensee under this Agreement.
5. TERM AND TERMINATION.
5.1 Term. This Agreement and the license granted hereunder shall become
effective as of the date first set forth above and shall continue in effect
thereafter unless terminated under Section 5.2.
5.2 Termination. This Agreement and the licenses granted hereunder
shall terminate upon the earliest to occur of the following: (i) thirty days
after Licensee gives SAP written notice of Licensee's desire to terminate this
Agreement, for any reason, but only after payment of all License and Maintenance
Fees then due and owing; (ii) thirty days after SAP gives Licensee notice of
Licensee's material breach of any provision of the Agreement (other than
Licensee's breach of its obligations under Section 6), including more than
thirty days delinquency in Licensee's payment of any money due hereunder, unless
Licensee has cured such breach during such thirty day period; (iii) ten days
after SAP gives Licensee notice of Licensee's material breach of Section 6; and
(iv) immediately if Licensee files for bankruptcy, becomes insolvent, or makes
an assignment for the benefit of creditors.
SAP CONFIDENTIAL 6
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5.3 Effect of Termination. Upon any termination of this Agreement:
Sections 2.4, 4, 5.3, 5.4, 6, 7.3, 8, 9, 11.5, 11.6 and 11.7 shall survive such
termination; Licensee's rights under Section 2 shall immediately cease; and SAP
and Licensee each shall promptly perform its obligations under Section 5.4. In
the event of any termination hereunder, Licensee shall not be entitled to any
refund of any payments made by Licensee.
5.4 Duties Upon Termination. Upon any termination hereunder, Licensee
and its authorized Affiliates shall immediately cease Use of all SAP Proprietary
Information and shall irretrievably delete and/or remove such items from all
computer hardware and storage media. Within thirty days after any termination,
Licensee shall deliver to SAP at Licensee's expense (adequately packaged and
insured for safe delivery) or destroy all copies of the SAP Proprietary
Information in every form. Licensee agrees an officer of Licensee's organization
shall certify in writing to SAP that it and each of its authorized Affiliates
has performed the foregoing. Within thirty days after any termination, SAP shall
return the Licensee Proprietary Information to Licensee.
6. PROPRIETARY RIGHTS.
6.1 SAP Proprietary Information.
(a) Licensee acknowledges that ownership of and tittle in and to all
intellectual property rights, including patent, trademark, service mark,
copyright, and trade secret rights, in the SAP Proprietary Information are and
shall remain in SAP and its licensors. Licensee acquires only the right to Use
the SAP Proprietary Information and does not acquire any ownership rights or
title in or to the SAP Proprietary Information and that of SAP's licensors.
SAP acknowledges that ownership of and title in and to all intellectual
property rights, including patent, trademark, service mark, copyright, and trade
secret rights, in the Licensee Proprietary Information are and shall remain in
Licensee and its licensors.
(b) Licensee shall not copy, translate, disassemble, or decompile, nor
create or attempt to create, by reverse engineering or otherwise, the source
code from the object code of the Software. In the event source code is provided
to Licensee, SAP, in its sole discretion, reserves the right to delete, or to
require the deletion of, such source code and all copies thereof in Licensee's
possession or control whenever a future Release, Version, or Correction Level
provides for like functionality in an object code format.
(c) Subject to Section 6.3(b), all Modifications and Extensions to the
Software and Documentation shall be considered part of the Software and
Documentation for purposes of this Section 6.
6.2 Protection of Proprietary Information. In order to protect the
rights of SAP and its licensors and Licensee in their respective Proprietary
Information, SAP and Licensee agree to take all reasonable steps and the same
protective precautions to protect the Proprietary Information of the
SAP CONFIDENTIAL 7
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other party from disclosure to third parties as with its own proprietary and
confidential information. Except as expressly authorized by this Agreement,
neither party shall, without the other party's prior written consent, disclose,
provide, or make available any of the Proprietary Information of the other party
in any form to any person, except to its bona fide employees, officers,
directors, or third parties whose access is necessary to enable the disclosing
party to exercise its rights hereunder. Each party agrees that prior to
disclosing any Proprietary Information of the other party to any third party, it
will obtain from that third party a written acknowledgment that such third party
will be bound by the same terms as specified in this Section 6 with respect to
the Proprietary Information and naming the other party as a third party
beneficiary. Use by a party of the other party's Proprietary Information shall
in any event be solely for the purposes of this Agreement.
6.3 Modifications and Extensions.
(a) Licensee may make Modifications and Extensions to the Software,
other than third party software, for Use on the Designated Unit(s) under the
terms set forth in this section. Licensee shall register all Modifications to
the Software with SAP prior to making such Modifications. Licensee agrees to
insert in all copies of the Software as modified all copyright, trade secret, or
other notices thereon or therein as SAP may from time to time direct.
(b) In the event Licensee without SAP's participation develops any
Modification or Extension (hereinafter referred to as "Licensee Extension" or
"Licensee Modification") to the Software, Licensee shall have all rights, title,
and interest in such Licensee Modification or Licensee Extension subject to
SAP's rights in the Software. Licensee agrees to offer SAP the first right to
negotiate a license to or assignment of such Licensee Modification or Licensee
Extension and the parties agree to negotiate such rights in good faith. Licensee
agrees that prior to SAP's termination or waiver of its first right to
negotiate, such Licensee Modification or Licensee Extension will be used solely
in connection with the business operations of Licensee and its Affiliates, and
that such Licensee Modification or Licensee Extension will not be marketed,
licensed or sublicensed, sold, assigned, or otherwise transferred or made
available to any third party or other entity.
All notices concerning the SAP's first right to negotiate shall be
provided in writing to the attention of SAP's Vice President, Solutions and
Partner Support, Assistant General Counsel, and the Licensee's Chief Financial
Officer. Should Licensee desire to initiate such negotiation, Licensee shall
provide to SAP all documentation and material pertaining to such Licensee
Modification or Licensee Extension reasonably necessary to permit SAP to
determine if it desires to exercise its right to negotiate. SAP shall advise
Licensee of its decision in writing within one hundred and eighty (180) days
after receipt of all such information. In the event SAP declines, in writing, or
fails to exercise its right to negotiate, within the one hundred and eighty
(180) day period, Licensee shall be free to enter into an Agreement with a third
party. Licensee agrees that prior to the passing of one hundred and eighty (180)
days or SAP's waiver of its first right to negotiate, such Licensee Modification
or Licensee Extension will be used solely in connection with the business
operations of Licensee and its Affiliates, and that such Licensee Modification
or Licensee Extension will not be marketed, licensed, or sublicensed, sold,
assigned, or otherwise transferred or made available to any third party.
SAP CONFIDENTIAL 8
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(c) In the event SAP develops either independently, or jointly with
Licensee, any Modification or Extension to the licensed Software, such
Modification or Extensions and all rights associated therewith will be the
exclusive property of SAP and SAP AG, and Licensee will not grant, either
expressly or impliedly, any rights, title, interest, or licenses to such
Modifications or Extensions to any third party. Licensee shall be entitled to
Use such Modifications and Extensions developed for or with Licensee on the
Designated Unit(s) under the terms set forth in this Agreement. Licensee agrees
to assign all right, title and interest in and to jointly developed
Modifications and Extensions to SAP. Licensee agrees to execute, acknowledge and
deliver to SAP all documents and do all things necessary, at SAP's expense, to
enable SAP to obtain and secure such Modifications or Extensions throughout the
world. Licensee agrees to secure the necessary rights and obligations from
relevant employees, or third parties in order to satisfy the above obligations.
(d) The parties hereto agree that the granting of any rights, title, or
interest to Licensee in any Modification or Extension shall not be construed by
the parties hereto, any court of law or equity, or any arbitration panel to mean
that SAP has granted or given up any rights, title, or interest in or to the SAP
Proprietary Information.
7. PERFORMANCE WARRANTY.
7.1 Warranty Period; Warranty. SAP warrants that the Software will in
all material respects conform to the functional specifications contained in the
Documentation for six months following Delivery (the "Warranty Period") when
Used without material alteration on the Designated Unit(s). SAP's warranty is
subject to Licensee providing SAP necessary access, including remote access, to
the Software. Licensee shall provide SAP with sufficient test time and support
on Licensee's Designated Unit(s) to correct any reported defect.
7.2 Scope of Warranty.
(a) The warranty set forth in this Section 7 shall not apply: (i) if
the Software is not used in accordance with the Documentation; or (ii) to any
Extensions or Modifications; or (iii) if the defect is caused by: a Modification
or Extension, Licensee, or a third-party software malfunction.
(b) SAP does not warrant that the Software will operate uninterrupted
or that it will be free from minor defects or errors which do not materially
affect such performance or that the applications contained in the Software are
designed to meet all of Licensee's or its authorized Affiliates' business
requirements.
7.3 Express Disclaimer. EXCEPT AS SET FORTH IN THIS AGREEMENT, SAP AND
ITS LICENSORS DISCLAIM, WITH RESPECT TO THIS AGREEMENT, ALL OTHER WARRANTIES
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE EXCEPT TO THE EXTENT THAT
ANY WARRANTIES IMPLIED BY LAW CANNOT BE VALIDLY WAIVED.
SAP CONFIDENTIAL 9
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8. INDEMNIFICATION.
8.1 SAP Representation. SAP represents that its licensors own the
Proprietary Information licensed by SAP hereunder, including all intellectual
property rights therein, and that SAP has all rights necessary to license, in
accordance with the terms of this Agreement, such Proprietary Information to
Licensee, and to otherwise perform its obligations under this Agreement.
8.2 No Representation Regarding Combination Use. SAP and its licensors
make no representation with respect to the possibility of infringement by
Combination Use of the Software. The parties agree that SAP has no duty to
investigate nor to warn Licensee of any such possibility. "Combination Use"
means Use of the Software in conjunction with any of the following, unless such
Use is prescribed in the Documentation: (i) any software other than the Software
and Third Party Database Software; (ii) any apparatus other than a Designated
Unit; and/or (iii) any activities of Licensee or its authorized Affiliates not
licensed under this Agreement.
8.3 Indemnification of Licensee. Except for Combination Use, SAP shall
indemnify Licensee against all claims, liabilities, and costs, including
reasonable attorneys' fees, reasonably incurred in connection with any claim
brought against Licensee in the Territory by third parties alleging that
Licensee's Use of the Software, Documentation and other SAP Proprietary
Information, excluding the Third Party Database Software and PTS On-Demand
Personal Navigation Software, and any other third party software that may be
licensed, infringes, misappropriates or creates, as applicable: (i) any United
States, Canadian, German or European Union patent; or (ii) a copyright; or (iii)
trade secret rights; or (iv) a trademark; or (v) unfair competition, provided
that, Licensee promptly notifies SAP in writing of any such claim and SAP is
permitted to control fully the defense, unless there is a conflict between SAP's
and Licensee's interests wherein Licensee shall have the ability to control its
own defense, and any settlement of such claim as long as such settlement shall
not include a financial obligation on Licensee. Licensee's failure to provide
the aforementioned prompt notice shall not excuse SAP's obligations to indemnify
Licensee hereunder unless such failure prejudices SAP's ability to indemnify
Licensee in accord with this Section 8. Licensee shall cooperate fully, at SAP's
expense, in the defense of such claim, and may appear, at its own expense,
through counsel reasonably acceptable to SAP, unless there is a conflict between
SAP's and Licensee's interests wherein Licensee shall have the ability to
control its own defense, at SAP's expense. SAP may, in its sole discretion,
settle any such claim on a basis requiring SAP to (i) substitute for the
Software or Documentation or other SAP Proprietary Information, excluding the
Third Party Database Software, PTS On-Demand Personal Navigation Software, and
any other third party software that may be licensed, alternative substantially
equivalent non-infringing programs and supporting documentation; or (ii) obtain
the right for continued use of the Software or Documentation or other SAP
Proprietary Information, excluding the Third Party Database Software, PTS
On-Demand Personal Navigation Software, and any other third party software that
may be licensed, that is the subject of the claim; or (iii) modify the
infringing Software or Documentation or other SAP Proprietary Information,
excluding the Third Party Database Software, PTS On-Demand Personal Navigation
Software, and any other third party software that may be licensed, to avoid the
claimed infringement, while maintaining at least equivalent functionality.
SAP CONFIDENTIAL 10
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In the event that any preliminary injunction, temporary restraining
order or final injunction shall be obtained in the Territory restricting
Licensee's Use of the Software or Documentation or other SAP Proprietary
Information, excluding the Third Party Database Software, PTS On-Demand Personal
Navigation Software, and any other third party software that may be licensed,
SAP shall, at its sole option, either:
(a) obtain the right for continued use of the Infringing Software or
Documentation or other SAP Proprietary Information, excluding the Third Party
Database Software, PTS On-Demand Personal Navigation Software, and any other
third party software that may be licensed; or
(b) modify the infringing Software or Documentation or other SAP
Proprietary Information, excluding the Third Party Database Software, PTS
On-Demand Personal Navigation Software, and any other third party software that
may be licensed to avoid such infringement while obtaining at least equivalent
functionality; or
(c) substitute for the Software or Documentation or other SAP
Proprietary Information, excluding the Third Party Database Software, PTS
On-Demand Personal Navigation Software, and any other third party software that
may be licensed alternative equivalent software and supporting documentation; or
(d) after using best efforts to provide (a), (b), or (c) above, provide
a refund to Licensee of paid license fees for that part of the Software or
Documentation or other SAP Proprietary Information, excluding the Third Party
Database Software, PTS On-Demand Personal Navigation Software, and any other
third party software that may be licensed under claim of infringement, (unless
such part is a major integral function of the Software, in which case a full
refund of paid license fees would be reimbursable). All such refunds shall be
depreciated on a five (5) year straight line basis.
8.4 SAP's Right to Commence Infringement Actions. SAP alone shall be
responsible for taking such actions which it determines are reasonably necessary
or desirable in its sole discretion in connection with any infringement or
alleged infringement by a third party of any portion of the Software and
Documentation. Licensee shall not undertake any action in response to any
infringement or alleged infringement of the Software and Documentation without
the prior written consent of SAP, which consent shall not be unreasonably
withheld. Licensee agrees to cooperate with and assist SAP, at SAP's expense, by
taking whatever action which SAP determines to be reasonably necessary or
desirable in connection with such defense. SAP agrees to reimburse Licensee for
reasonable legal fees and other expenses incurred in connection with any such
claim, suit, damage, or loss.
8.5 SAP's Duty to Indemnify Licensee. THE PROVISIONS OF THIS SECTION 8
STATE THE SOLE, EXCLUSIVE, AND ENTIRE LIABILITY OF SAP AND ITS LICENSORS TO
LICENSEE, AND IS LICENSEE'S SOLE REMEDY, WITH RESPECT TO THE INFRINGEMENT OF
THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS.
SAP CONFIDENTIAL 11
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9. LIMITATIONS OF LIABILITY.
9.1 Licensee's Remedies. Licensee's sole and exclusive remedies for any
damages or loss in any way connected with the failure of the Software or
services furnished by SAP and its licensors to conform in all material respects
with the Documentation, whether due to SAP'S negligence or breach of any other
duty, shall be, at SAP's option: (i) to bring the performance of the Software
into substantial compliance with the functional specifications; (ii)
re-performance of services; or if (i) or (ii) are not commercially reasonable
options, (iii) return of an appropriate portion of any payment made by Licensee
with respect to the applicable portion of the Software or services.
9.2 SAP Not Responsible. SAP will not be responsible under this
Agreement for: (i) any alteration of the Software to fit the particular
requirements of Licensee; or (ii) the correction of any defects resulting from
Modifications or Extensions or as a result of misuse of the Software by
Licensee; or (iii) preparation or conversion of data into the form required for
use with the Software or (iv) ensuring the security of Licensee's networked
installation of the Software. THE SOFTWARE IS NOT SPECIFICALLY DEVELOPED OR
LICENSED HEREUNDER FOR USE IN ANY DIRECT AND ACTIVE OPERATIONS OF ANY EQUIPMENT
IN ANY NUCLEAR, AVIATION, MASS TRANSIT, OR MEDICAL APPLICATIONS, OR IN ANY OTHER
INHERENTLY DANGEROUS APPLICATIONS. THE PARTIES HERETO AGREE THAT USE OF THE
SOFTWARE AND THIRD-PARTY SOFTWARE FOR FINANCIAL APPLICATION PURPOSES OR SUCH
OTHER ADMINISTRATIVE PURPOSES SHALL NOT BE DEEMED INHERENTLY DANGEROUS
APPLICATIONS IF SUCH USE DOES NOT AFFECT THE OPERATIONS OR MAINTENANCE OF SUCH
EQUIPMENT. SAP AND ITS LICENSORS SHALL NOT BE LIABLE FOR ANY CLAIMS OR DAMAGES
ARISING FROM INHERENTLY DANGEROUS USE OF THE SOFTWARE AND/OR THIRD-PARTY
SOFTWARE LICENSED HEREUNDER.
9.3 Limitation of Liability. ANYTHING TO THE CONTRARY HEREIN
NOTWITHSTANDING, EXCEPT FOR DAMAGES RESULTING FROM UNAUTHORIZED USE OR
DISCLOSURE OF THE PROPRIETARY INFORMATION, UNDER NO CIRCUMSTANCES SHALL SAP, ITS
LICENSORS OR LICENSEE BE LIABLE TO EACH OTHER OR ANY OTHER PERSON OR ENTITY FOR
AN AMOUNT OF DAMAGES IN EXCESS OF THE PAID LICENSE FEES (EXCEPT FOR SAP'S
INDEMNITY OBLIGATIONS PURSUANT TO SECTION 8, BUT ONLY IN RELATION TO CLAIMS IN
THE UNITED STATES BASED ON INFRINGEMENT OR MISAPPROPRIATION OF A UNITED STATES
PATENT, COPYRIGHT, TRADE SECRET RIGHT, TRADEMARK OR CLAIM OF UNFAIR COMPETITION)
OR BE LIABLE IN ANY AMOUNT FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT
DAMAGES, LOSS OF GOOD WILL OR BUSINESS PROFITS, WORK STOPPAGE, DATA LOSS,
COMPUTER FAILURE OR MALFUNCTION, OR EXEMPLARY OR PUNITIVE DAMAGES. The
provisions of the Agreement allocate the risks between SAP and Licensee. The
License Fees reflect this allocation of risk and the limitations of liability
herein.
9.4 Severability of Actions. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT
EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION OF
LIABILITY, DISCLAIMER OF WARRANTIES, OR EXCLUSION OF
SAP CONFIDENTIAL 12
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DAMAGES IS INTENDED BY THE PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER
PROVISION AND TO BE ENFORCED AS SUCH.
10. ASSIGNMENT.
Licensee may not, without SAP's prior written consent, assign,
delegate, sublicense, pledge, or otherwise transfer this Agreement, except as
specifically authorized in Section 2.2 of this Agreement, or any of its rights
or obligations under this Agreement, or the SAP Proprietary Information, to any
party, including any Affiliate. Any permitted assignment of this Agreement shall
provide that the provisions of this Agreement shall continue in full force and
effect and that Licensee shall guaranty the performance of its assignee and
shall remain liable for all obligations hereunder. SAP may assign this Agreement
to SAP America, Inc. or SAP AG. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
Notwithstanding the foregoing, Licensee shall have the right to assign
this Agreement (excluding all third-party software) to any entity which acquires
all or substantially all of Licensee's operating assets, or, in the event
Licensee is merged or reorganized pursuant to any plan of merger or
reorganization, subject to the condition that Licensee provides SAP with: (1) a
statement, signed on behalf of the Assignee, that such Assignee agrees to abide
by the terms of this Agreement; (2) evidence, satisfactory to SAP, of such
Assignee's corporate authority to enter into this Agreement; and (3) financial
information showing that such Assignee has a minimum net worth, sufficient in
SAP'S reasonable judgment, to allow Assignee to perform its obligations under
this Agreement.
11. GENERAL PROVISIONS.
11.1 Rights to Injunctive Relief. Both parties acknowledge that
remedies at law may be inadequate to provide SAP or Licensee with full
compensation in the event of Licensee's material breach of Sections 2, 6, 10 or
11.5, or SAP's material breach of Section 6 with respect to Licensee Proprietary
Information, and that the non-breaching party shall therefore be entitled to
seek injunctive relief in the event of any such material breach.
11.2 Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, it will be deemed to be modified to the minimum
extent necessary to be valid and enforceable. If it cannot be so modified, it
will be deleted and the deletion will not affect the validity or enforceability
of any other provision unless, as a result, the rights of either party are
materially diminished or the obligations and burdens of either party are
materially increased so as to be unjust or inequitable.
11.3 No Waiver. If either party should waive any breach of any
provision of this Agreement, it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision hereof.
SAP CONFIDENTIAL 13
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11.4 Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and which shall together constitute
one Agreement.
11.5 Export Control Notice. Regardless of any disclosure made by
Licensee to SAP of an ultimate destination of the Software, Documentation,
Third-Party Database Software, and other provided SAP Proprietary Information
Licensee acknowledges that the Software, Documentation, Proprietary Information,
and the Third-Party Database Software are being released or transferred to
Licensee in the United States and are therefore subject to the U.S. export
control laws. Licensee acknowledges its exclusive obligation to ensure that its
exports from the United States are in compliance with the U.S. export control
laws. Licensee shall also be responsible for complying with all applicable
governmental regulations of any foreign countries with respect to the use of the
Proprietary Information by its Affiliates outside of the United States. Licensee
agrees that it will not submit the Software to any government agency for
licensing consideration or other regulatory approval without the prior written
consent of SAP. Licensee shall defend, indemnify, and hold SAP and is licensors
harmless from and against any and all claims, judgments, awards, and costs
(including reasonable legal fees) arising out of Licensee's noncompliance with
applicable U.S. or foreign law with respect to the use or transfer of the SAP
Proprietary Information outside the United States by Licensee and its
Affiliates.
11.6 Confidential Terms and Conditions. Licensee shall not disclose the
terms and conditions of this Agreement, except as required by law including
without limitation applicable securities laws, and the pricing contained therein
to any third-party. Neither party shall use the name of the other party in
publicity, advertising, or similar activity, without the prior written consent
of the other, except that both parties consent to the other's inclusion of its
name in customer or provider listings, as appropriate, which may be published as
part of a party's marketing efforts.
11.7 Governing Law. This Agreement shall be governed by and construed
under the Commonwealth of Virginia law without reference to its conflicts of law
principles. In the event of any conflicts between foreign law, rules, and
regulations, and United States of America law, rules, and regulations, United
States of America law, rules, and regulations shall prevail and govern. The
United Nations Convention on Contracts for the International Sale of Goods shall
not apply to this agreement.
11.8 Escrow of Source Code.
1. SAP warrants that the source code for the Software, together with
related Documentation as it is or becomes available, has been deposited in an
escrow account maintained at Data Securities International Inc., Burlington, MA
(the "Escrow Agent"), pursuant to an agreement between the Escrow Agent and SAP
(the "Escrow Agreement").
2. SAP will from time to time deposit into the escrow account copies of
source code for Releases and Versions of the Software and related Documentation.
SAP CONFIDENTIAL 14
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3. SAP or SAP's trustee in bankruptcy shall authorize the Escrow Agent
to make and release a copy of the applicable deposited materials to Licensee
upon the occurrence of any of the following events:
(a) The existence of any one or more of the following circumstances,
uncorrected for more than thirty (30) days: entry of an order for relief under
Title 11 of the United States Code; the making by SAP of a general assignment
for the benefit of creditors; the appointment of a general receiver or trustee
in bankruptcy of SAP's business or property; or action by SAP under any state
insolvency or similar law for the purpose of its bankruptcy, reorganization, or
liquidation; unless within the specified thirty (30) day period, SAP (including
its receiver or trustee in bankruptcy) provides to Licensee adequate assurances,
reasonably acceptable to Licensee, of its continuing ability and willingness to
fulfill its maintenance obligations under this Agreement;
(b) SAP has ceased its on-going business operations or that portion of
its business operations relating to the sale, licensing and maintenance of the
Software; or
(c) Failure of SAP to carry out the material maintenance obligations,
by termination of maintenance services by SAP or otherwise, imposed on it
pursuant to this Agreement after reasonable opportunity has been provided to SAP
America, Inc. and SAP AG to perform such obligations.
4. In no event shall Licensee have the right to access the applicable
deposited materials if SAP America, Inc. or SAP AG perform SAP's maintenance
obligations under this Agreement.
5. In the event of release under this Agreement, Licensee agrees that
it will treat and preserve the deposited materials as a trade secret of SAP AG
in accordance with the same precautions adopted by Licensee to safeguard its own
trade secrets against unauthorized use and disclosure and in all cases at least
with a reasonable degree of care. Release under this provision shall not extend
Licensee any greater rights or lesser obligations than are otherwise provided or
Imposed under this Agreement. This provision shall survive any termination of
this Agreement.
11.9 Notices. All notices or reports which are required or may be given
pursuant to this Agreement shall be in writing and shall be deemed duly given
when delivered to the respective executive offices of SAP and Licensee at the
addresses first set forth above.
11.10 Force Majeure. Any delay or nonperformance of any provision of
this Agreement (other than for the payment of amounts due hereunder) caused by
conditions beyond the reasonable control of the performing party shall not
constitute a breach of this Agreement, and the time for performance of such
provision, if any, shall be deemed to be extended for a period equal to the
duration of the conditions preventing performance.
11.11 Account Management. SAP shall assign the following individuals as
SAP representatives for escalation of any licensing or Maintenance related
issues:
SAP CONFIDENTIAL 15
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Senior Management Representative Account Executive
Barbara Rivera Kurt Grotenhuis
Vice President, Field Operations 612-359-5078
Tel. (610) 661-5103
The above named individuals may be changed upon notice to Licensee.
11.12 Entire Agreement. This Agreement and each Appendix hereto
constitute the complete and exclusive statement of the agreement between SAP and
Licensee with respect to the subject matter hereof, and all previous
representations, discussions, and writings regarding such subject matter are
merged in, and superseded by, this Agreement. This Agreement may be modified
only by a writing signed by both parties. This Agreement and each Appendix
hereto shall prevail over any additional, conflicting, or inconsistent terns and
conditions which may appear on any purchase order or other document furnished by
Licensee to SAP.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly
executed this Agreement to become effective as of the date first above written.
DIGITAL COMMERCE CORPORATION
By: /s/ William Seippel
------------------------------------
Title: Chief Financial Officer
---------------------------------
SAP PUBLIC SECTOR AND EDUCATION, INC.
By: /s/ Robert M. Salvucci
------------------------------------
Title: President
---------------------------------
SAP CONFIDENTIAL 16
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EXHIBIT 10.21
SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("Agreement"), is made this 16th day of
June, 1998 (the "Effective Date") by and between U S West Communication
Services, Inc., a Colorado corporation and its Affiliates, having a place of
business at 1999 Broadway, Denver, CO 80202 ("U S West"), and Datamatix, Inc., a
Delaware corporation, having a place of business at 215 West Church Road, King
of Prussia, PA 19406 ("LICENSEE").
RECITALS
U S West is the owner of a certain software program as more fully
described in Schedule A, attached hereto and incorporated herein by this
reference; and
U S West and LICENSEE mutually desire to enter into this Agreement
which grants a license to LICENSEE in the software program to accordance with
the provisions hereof.
AGREEMENT
In consideration of the mutual promises and benefits contained herein,
the parties agree to the accuracy of the above recitals and further agree as
follows:
1.0 DEFINITIONS
The following terms are used in this Agreement, as defined in this
Section:
1.1 "AFFILIATE" shall mean an entity which directly, or indirectly
through one or more intermediaries, controls, is controlled
by, or is under common control with U S West. For the purposes
of this Subsection 1.1, "control" means (i) in the case of
corporate entities, direct or indirect ownership of 20% or
more of the stock or shares entitled to vote for the election
of the board of directors or other governing body of the
entity; and (ii) in the case of non-corporate entities, direct
or indirect ownership of 20% or more of the equity interests
of the entity.
1.2 "PROGRAM" shall mean the software program and all related
materials, documentation and information described in Schedule
A.
1.3 "SOURCE CODE" shall mean the Program written in programming
language, including all comments and procedural code, in a
form intelligible to trained programmers and capable of being
translated into Object Code for operation on computer
equipment through assembly or compiling.
1.4 "OBJECT CODE" shall mean the Program assembled or compiled in
digital binary form on software media, which is readable and
usable by machines, but not generally
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readable by unaided humans without reverse assembly, reverse
compiling, or other reverse engineering.
1.5 "DERIVATIVE WORK" shall mean a work that is based on the
Program, such as a revision, enhancement, modification,
translation, abridgment, condensation, expansion, or any other
form in which such preexisting works may be recast,
transformed, or adapted, and that, if prepared without
authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement.
For purposes hereof, a Derivative Work shall also include any
compilation that incorporates any portion of the Program.
1.6 "CONFIDENTIAL INFORMATION" shall mean any and all technical
information, know-how, inventions or business information,
including third party information, furnished or disclosed by
one party to the other, in whatever form or medium including,
but not limited to, the Program, Source Code, Object Code,
product/service specifications, prototypes, other computer
programs, models, drawings, marketing plans, financial data,
and personnel statistics, which are marked as confidential or
proprietary by the disclosing party or, for information which
is orally disclosed, the disclosing party indicates to the
other at the time of disclosure the confidential or
proprietary nature of the information and provides a summary
of the orally disclosed information in writing to the
receiving party within twenty (20) days after such disclosure,
which summary is also marked as confidential or proprietary.
The Program in any form or medium and all related
documentation shall be deemed by the parties to be
Confidential Information whether or not marked as confidential
or proprietary.
1.7 "DISPUTE" shall mean any claim, controversy or dispute of any
kind or nature whatsoever arising between the parties
hereunder.
2.0 GRANT OF LICENSE
2.1 Subject to the terms and conditions of this Agreement, U S
West hereby grants to LICENSEE a non-exclusive,
non-transferable (except as allowed under the provisions of
Subsection 13.1 below), perpetual, personal license to use,
copy, and create Derivative Works based on the Program, in
Object and Source Code forms, solely for its internal business
purposes.
2.2 LICENSEE shall own all right, title and interest in and to all
Derivative Works that LICENSEE creates or has created.
2.3 U S West shall retain all right, title and interest in and to
the Program subject to the license granted hereunder. The
Program may not be copied, used, modified or distributed for
any purpose other than as expressly authorized under this
Agreement.
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2.4 LICENSEE shall provide U S West, Inc. and its wholly owned
subsidiaries any services it offers its customers that use the
Program, or any Derivative Works thereof, at no charge.
3.0 PAYMENT
3.1 In consideration of the license granted by U S West to
LICENSEE under Section 2 above, LICENSEE shall pay to U S West
all amounts when due in accordance with Schedule B, attached
hereto and incorporated herein by this reference ("Payments").
All Payments are to be made in United States dollars.
3.2 Payments to U S West shall be made payable to "U S West
Communication Services Inc.," and shall be submitted to 1999
Broadway, 8th Floor, Denver, CO 80202, Attention Miles
Morimoto, or at such other address as U S West may specify by
written notice.
3.3 All Payments specified under this Agreement do not include
duties, taxes, withholdings, assessments, surcharges,
value-added taxes, or any other charges imposed by the United
States or any foreign government or any other United States or
foreign taxing authority (collectively, the "Taxes") and
LICENSEE shall pay or reimburse U S West to a like amount if
withheld from Payments due U S West. Any Taxes payable by
LICENSEE which U S West may be required to collect or pay upon
provisions of this license of the Program or any other
services, shall be paid by LICENSEE upon U S West's written
demand. LICENSEE agrees to indemnify and hold U S West
harmless from and against all liability, costs, expense, and
penalties for LICENSEE's failure to timely pay any Taxes.
Notwithstanding this Subsection 3.3, LICENSEE shall not be
responsible for income taxes which may be payable by U S West.
3.4 If LICENSEE fails to pay any amounts due under this Agreement
within sixty (60) days, LICENSEE shall pay to U S West
interest on such past due amounts from the date due until paid
at the rate of one and one half percent (1-1/2%) of the unpaid
balance per month or, where a lower rate is prescribed by law,
the highest rate thereby permitted. In the event of such
nonpayment, U S West may at its option, and in addition to any
other right which it has under this Agreement at law or in
equity, terminate this Agreement and the licenses granted
hereunder for default under the provisions of Section 9.0
below.
4.0 LIMITED SUPPORT
U S West shall provide LICENSEE the limited support services in
accordance with Schedule C, attached hereto and incorporated herein by
this reference.
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5.0 RECORDS AND REPORTS
5.1 LICENSEE shall keep complete and accurate records and books of
account containing all information required for the
computation and verification of the amounts to be paid
hereunder. Such records and books shall be maintained by
LICENSEE in accordance with legal restrictions, but in any
case no less than three (3) years after termination of this
Agreement.
5.2 LICENSEE further agrees, upon at least ten (10) business days
prior written notice from U S West, to permit one or more
accountants selected by U S West to have access during
ordinary business hours to such records as may be necessary to
audit with respect to any payment prior to such request, the
correctness of any report or payment made under this
Agreement, to obtain information as to the payments due for
any such period in the case of failure of LICENSEE to report
or make payment pursuant to the terms of this Agreement. Such
accountant shall not disclose to U S West any information
relating to the business of LICENSEE except that which is
necessary to inform U S West of (i) the accuracy or inaccuracy
of LICENSEE's payments; (ii) compliance or noncompliance by
LICENSEE with any other terms and conditions of this
Agreement; and (iii) the extent of any such inaccuracy or
noncompliance. Such accountant shall have the right to make
and retain copies of any pertinent portions of the records and
books of account. U S West shall bear the cost of any audits
under this Agreement; provided, however, that if the audit
determines that LICENSEE has underpaid to U S West in an
amount of Ten Thousand Dollars ($10,000.00) or more, LICENSEE
shall reimburse U S West for the cost of such audit.
5.3 LICENSEE shall provide U S West with a written statement of
account to accompany the Payments made to U S West in
accordance with Section 3.0 above.
6.0 LIMITED WARRANTY
6.1 U S West warrants that it has full power and authority to
enter into this Agreement.
6.2 EXCEPT FOR THE LIMITED WARRANTY SET FORTH ABOVE, THE PROGRAM
IS LICENSED HEREUNDER "AS IS," AND U S West DISCLAIMS ANY AND
ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING (WITHOUT
LIMITATION) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE PROGRAM WILL
OPERATE ERROR-FREE.
6.3 U S West disclaims any on-going obligations to LICENSEE to
support, maintain, enhance, or update the Program, subject to
Section 4.0 above.
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7.0 LIMITATION OF LIABILITY
U S WEST, ITS RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS,
REPRESENTATIVES AND AGENTS (HEREINAFTER COLLECTIVELY CALLED "THE
GROUP") SHALL HAVE NO LIABILITY TO LICENSEE FOR ANY DAMAGES, LOSSES, OR
EXPENSES INCLUDING BUT NOT LIMITED TO ANY DIRECT, INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR OTHER INDIRECT
DAMAGES, OR LOSS OF PROFITS. LOSS OF USE OR LOSS OF DATA, HOWSOEVER
CAUSED OR ARISING AND REGARDLESS OF LEGAL THEORY OR FORESEEABILITY.
8.0 CONFIDENTIALITY
8.1 Each party agrees to hold all Confidential Information other
than that which describes and/or embodies the Program in
confidence for a period of three (3) years after the date of
disclosure. However, Confidential Information comprising the
description and/or embodiment of the Program shall be held in
confidence for so long as it is confidential to, or a trade
secret of, U S West. During such period each party will use
Confidential Information solely for the purposes of this
Agreement unless otherwise allowed herein or by written
permission of the disclosing party. Each party agrees not to
copy such Confidential Information of the other unless such
party is otherwise licensed to so copy or unless, specifically
authorized by the disclosing party. Each party agrees that it
shall not make disclosure of any such Confidential Information
to anyone except its employees for the purposes set forth
above. Each party shall appropriately notify each such
employee that the disclosure is made in confidence and shall
be kept in confidence in accordance with this Agreement.
Notwithstanding the previous limitation on disclosure,
disclosure may be made to subcontractors of a party and as
permitted under this Agreement but only if such subcontractor
has previously signed a confidentiality agreement in which the
subcontractor agrees to be bound by provisions at least as
restrictive as those contained in this Section 8.0. Each party
also agrees that it will make requests for Confidential
Information of the other party only if necessary to accomplish
the purposes set forth in this Agreement. The obligations set
forth herein shall be satisfied by each party through the
exercise of the same degree of care used to restrict
disclosure and use of its own information of like importance,
but not less than is reasonable under the circumstances.
8.2 Each party agrees that in the event permission is granted by
the other to copy such Confidential Information, each such
copy shall contain and state the same confidential or
proprietary notices or legends, if any, which appear on the
original. Except as provided in this Agreement, nothing herein
shall be construed as granting to either party any right or
license under any copyrights, inventions, or patents now or
hereafter owned or controlled by the other party.
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8.3 Upon termination of this Agreement for any reason or upon
request of the disclosing party, all Confidential Information,
together with any copies of same as may be authorized herein,
shall be returned to the disclosing party or certified
destroyed by the receiving party. The requirements of use and
confidentiality set forth herein shall survive the termination
of this Agreement as provided above.
8.4 The obligations imposed in this Agreement regarding
Confidential Information shall not apply to any information
which:
(i) is already in the possession of the receiving party
and is documented in written records in its
possession prior to such disclosure; or
(ii) is independently developed by the receiving party
without reliance on or access to Confidential
Information hereunder, and is documented in written
records in its possession; or
(iii) is or becomes publicly available through no fault of
the receiving party; or
(iv) is obtained by the receiving party from a third
person who is under no obligation of confidence to
the party whose Confidential Information is
disclosed; or
(v) is disclosed without restriction by the disclosing
party.
9.0 TERMINATION
9.1 Either party has the right to terminate this Agreement if the
other party breaches or is in default of any material
obligation hereunder, which default is incapable of cure or
which, being capable of cure, has not been cured within
forty-five (45) days after receipt of written notice of such
default from the non-defaulting party or within such
additional cure period as the non-defaulting party may
authorize in writing.
9.2 Either party may terminate this Agreement by written notice to
the other party, and may regard the other party as in default,
if the other party becomes insolvent, makes a general
assignment for the benefit of creditors, suffers or permits
the appointment of a receiver for its business or assets,
becomes subject to any proceedings under any bankruptcy or
insolvency law (which has not been terminated within thirty
(30) days of any filing) whether domestic or foreign, or has
wound up or liquidated, voluntarily or otherwise.
9.3 Upon termination of this Agreement, there shall be no refund,
in whole or in part, of any Payments already made, and
LICENSEE shall make all Payments in accordance
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with Section 3.0 above which may be due or may have accrued up
to the date of termination.
9.5 Upon termination of this Agreement, the licenses granted to
LICENSEE shall immediately terminate and LICENSEE shall return
to U S West all copies of the Program and any associated
documentation as set forth in Section 8.3 above.
9.6 Termination of this Agreement shall be in addition to any
other right or remedy which the terminating party may have
either at law or in equity or under this Agreement.
10.0 EXPORT
LICENSEE acknowledges that the Program may be subject to United States
re-export regulations. Specifically, LICENSEE agrees and certifies that
the Program, technical data or information provided by U S West, or the
direct product thereof, will not be re-exported except as permitted by
United States laws and regulations, and the prior written authorization
of U S West. LICENSEE shall be solely responsible for compliance with
all laws and regulations applicable to export of the Program outside of
the United States of America. LICENSEE shall defend and indemnify U S
West against any costs, expenses, fines and other liability for failure
to so comply, provided that U S West shall cooperate with all
reasonable requests from LICENSEE for information.
11.0 PUBLICITY
No identification of the other party, reference to the other party or
reference to the other party's names, codes, drawings or specifications
will be used in any advertising or promotional efforts in reference to
activities undertaken hereunder without the other party's prior written
permission. Each party agrees to indemnify the other against any claim
arising out of its failure to do so.
12.0 DISPUTE RESOLUTION
12.1 If a Dispute arises hereunder and such Dispute cannot be
settled through negotiation, the parties agree to resolve the
matter through binding arbitration. Federal law shall govern
the arbitrability of all claims.
12.2 A single arbitrator engaged in the practice of law, who is
knowledgeable about the subject matter of this Agreement and
the matter in dispute, shall conduct the arbitration under the
then-current Commercial Arbitration Rules of the American
Arbitration Association ("AAA") unless otherwise provided
herein. The arbitrator shall be selected in accordance with
AAA procedures from a list of qualified people maintained by
the AAA. The arbitration shall be conducted in a city selected
by the
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party the Dispute is being brought against and all expedited
procedures prescribed by the AAA rules shall apply. The laws
of the State of Colorado, United States of America, shall
govern the construction and interpretation of this Agreement.
12.3 Either party may request from the arbitrator injunctive relief
to maintain the status quo until such time as the arbitration
award is rendered or the Dispute is otherwise resolved. The
arbitrator shall not have authority to award punitive damages.
12.4 Each party shall bear its own costs and attorneys' fees, and
the parties shall share equally the fees and expenses of the
arbitrator. The arbitrator's decision and award shall be final
and binding, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof.
12.5 If any party files a judicial or administrative action
asserting claims subject to arbitration, as prescribed herein,
and the other party successfully stays such action and/or
compels arbitration of said claims, the party filing said
action shall pay the other party's costs and expenses incurred
in seeking such stay and/or compelling arbitration, including
reasonable attorneys' fees.
13.0 GENERAL
13.1 This Agreement is for the benefit of U S West and LICENSEE and
not for any other person. The rights, duties and privileges of
LICENSEE hereunder shall not be transferred or assigned by it
either in part or in whole without prior written consent of
US West. However, LICENSEE shall have the right to transfer
its rights, duties and privileges under this Agreement in
connection with its merger and consolidation with another firm
or the sale of substantially all its business to another
person or firm, provided that such person or firm shall first
have agreed with U S West to perform the transferring party's
obligations and duties hereunder. U S West may transfer or
assign this Agreement to an Affiliate or successor.
13.2 The relationship of U S West and LICENSEE established by this
Agreement is of licensor and licensee, each to constitute an
independent contractor. Nothing in this Agreement shall be
construed to give either party the power to direct or control
the daily activities of the other party, or to constitute the
parties as principal and agent, employer and employee,
partners, joint ventures, co-owners, or otherwise as
participants in a joint undertaking. U S West and LICENSEE
understand and agree that, except as specifically provided in
this Agreement, U S West does not grant LICENSEE the power or
authority to make or give any agreement, statement,
representation, warranty, or other commitment on behalf of U S
West, or to enter into any contract or otherwise incur any
liability or obligation, express or implied, on behalf of U S
West, or to transfer, release, or waive any right, title, or
interest of U S West.
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<PAGE> 9
13.3 A term or condition of this Agreement can be waived or
modified only with the written consent of both parties.
Forbearance or indulgence by either party in any regard shall
not constitute a waiver of the term or condition to be
performed, and either party may invoke any remedy available
under this Agreement, at law or in equity, despite such
forbearance or indulgence.
13.4 Any notice, demand or other communication required or
permitted to be given to either party to this Agreement shall
be in writing and shall be either personally delivered by hand
or delivered by prepaid courier or sent by electronic means
such as facsimile, telex or electronic mail, charges prepaid
and confirmed by prepaid registered mail. Any notice
personally delivered or delivered by courier shall be deemed
received upon delivery. Any notice sent by electronic means
shall be deemed received upon the date the sending terminal
confirms that the notice was received by the receiving
terminal. Any notice required or permitted to be given to
either party shall be delivered or sent to:
U S West Communication Service, Inc.
1999 Broadway, 8th Floor
Denver, CO 80202
Attn.: Miles Morimoto
Director Transaction Services
LICENSEE
215 West Church Road
King of Prussia, PA 19406
Attn.: William A. Browne
Vice President, Sales & Marketing
cc: U S West
4001 Discovery Drive
Boulder, Colorado 80303
Attn.: Intellectual Property & Technology
Transfer Office
The address at which notice may be given to a party may be
changed by such party giving notice to the other party as
provided in this Subsection 13.4.
13.5 Headings are inserted for convenience of reference only and
shall not be used for the purpose of interpreting this
Agreement.
13.6 The rights and obligations of the parties which by their
nature would be expected to survive termination or expiration
of this Agreement shall so survive.
13.7 Neither party shall be liable for delay or failure in
performance resulting from acts beyond the control of such
party, including but not limited, and whether similar or
dissimilar, to acts of God, acts of war, riot, fire, flood or
other disaster, acts of government, strike, lockout,
communication line or power failure. Either party may delay
delivery or performance occasioned by causes beyond control of
such party in
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accordance with this Subsection 13.7. If such delay exists
beyond a period of sixty (60) calendar days, either party, at
its option, shall have the right to terminate this Agreement,
in whole or in part.
13.8 This Agreement, or portion thereof, may be terminated or
modified by written agreement of the parties in the event of
any notification from the United States Government, or any
judicial statement, whether by appealable order, final
judgment or otherwise that the terms, conditions, or
performance of obligations hereunder are inconsistent with the
terms of the Telecommunications Act of 1996 or other
applicable laws.
13.9 This Agreement and matters connected to the performance
thereof shall be construed, interpreted, applied and governed
in all respects in accordance with the laws of the State of
Colorado.
13.10 This Agreement, appendices and any schedule attached hereto,
when initialed or signed by both parties, contain the complete
and exclusive statement of the agreement between the parties,
and supersedes all prior and contemporaneous agreements,
understandings, proposals, negotiations, representations or
warranties of any kind whether oral or written with respect to
the subject matter hereof. No oral or written representation
that is not expressly contained in this Agreement is binding
on U S West or LICENSEE.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates set forth below.
U S WEST LICENSEE
Accepted By: Accepted By:
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
Name Name
V.P. Internet Services V.P. Sales & Marketing
- ---------------------------------- --------------------------------------
Title Title
6/22/98 6/24/98
- ---------------------------------- --------------------------------------
Date Date
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EXHIBIT 10.22
INTERWORLD CORPORATION SOFTWARE LICENSE AGREEMENT
This Software License Agreement is entered into and made effective on February
4, 1998, between InterWorld Corporation ("InterWorld"), a Delaware corporation,
with offices at 395 Hudson St., New York N.Y. 10014, and Digital Commerce
Corporation ("Client") a Delaware corporation, with offices at 11180 Sunrise
Valley Drive, Reston, VA 20191.
1. DEFINITIONS
"Agreement" means this Software License Agreement, Exhibit A, and any
other addenda attached hereto, and each Supplemental Exhibit A signed by both
parties. "Functionality Specifications" means the functionality of the Software
as described in the Documentation. "Software" means the object code (machine
readable) version of the software product(s) listed in Exhibit A, or any
subsequent Exhibit A, including prior and future releases. "Price List" means
the then-current price list for the country in which the Software a to be used.
"Documentation" means installation manuals and user manuals for the Software.
"Purchase Order" means a purchase authorization document issued by Client for
the licensing of InterWorld Software. "Designated Platform" means the computer
central processing unit ("CPU") and operating system software on which the
InterWorld Software is running and is located at the site designated on Exhibit
A.
2. LICENSE
2.1 InterWorld hereby grants to Client a non-exclusive,
non-transferable license to use the Software on the Designated Platform for: (i)
internal data processing at Client locations within the United States and
Canada; and (ii) enabling on-line users to access information about, and to
order electronically, products and services offered by Client on its Web site.
Client may make copies of the Software in accordance with any such rights
granted hereunder or set forth in an applicable Exhibit A. Client shall notify
InterWorld if Client elects to transfer the Software, at no additional charge to
Client: (i) to a different Client location; or (ii) from one Designated Platform
to another Designated Platform, provided such new Designated Platform runs the
same binary version of the Software and the same number of processors.
2.2 The Software and all copies (in whole or in part) shall remain the
exclusive property of InterWorld and its suppliers. Client shall not modify,
reverse, engineer, decompile or reverse assemble any Software or part thereof
(or otherwise attempt to derive the source code for the Software), except as
expressly described in the Documentation. Client shall not use the Software in a
timesharing arrangement nor encumber, rent, lease, transmit, distribute or
transfer the Software to any third party for any purpose.
2.3 Client may make a reasonable number of copies of the Software for
inactive back-up or archival purposes. Client may also make copies of the
Documentation for its own use.
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3. CONFIDENTIALITY
3.1 Neither party shall disclose or use any business and/or technical
information of the other party designated orally or in writing as "Confidential"
or "Proprietary" (together "Confidential Information") without the prior written
consent of the other party. "Confidential Information" includes, without
limitation, the Software, (including methods and concepts). Documentation and
all information relating to the disclosing party's business a financial affairs.
All Confidential Information shall remain the sole property of the disclosing
party.
3.2 Each party shall expressly undertake, using reasonable efforts not
less than it exercises for its own confidential materials, to retain in
confidence, and to require its employees and consultants to retain in confidence
all Confidential Information. Confidential Information shall not include any
information that: (i) is already known to the other party free of any obligation
to keep it confidential; (ii) is or becomes publicly known through no wrongful
act by the other party; (iii) is received by the other party from a third party
without any restriction on confidentiality; (iv) is independently developed by
one party without access to the Confidential Information of the other.
3.3 Client shall not release the results of any benchmark of the
Software to any third party without the prior written approval of InterWorld for
each such release.
4. PROPRIETARY NOTICES
The Software and related Documentation are proprietary and protected by
copyright, patent, trademark and/or trade secret law. All proprietary notices
incorporated in or fixed to the Software or Documentation shall be duplicated by
Client on all copies or extracts thereof and shall not be altered, removed or
obliterated.
5. AUDIT
InterWorld or its authorized representatives shall have the right,
during normal business hours to audit the relevant records of Client to verify
its compliance with this Agreement. If the number of copies of the Software is
found to be greater than that contracted for, or the platform on which the
Software is installed differs from the Designated Platform specified, Client
shall be invoiced for such additional copies at the price set forth in the
then-current Price List.
6. IDENTIFICATION
Client shall display the file containing the phrase "Powered by
InterWorld" on the initial screen seen by customers or other end-users when they
enter a Software application. InterWorld reserves the right periodically to
change this file, and Client shall use commercially reasonable efforts to effect
such change upon notice from and delivery by InterWorld of such revised file.
This phrase shall be a hypertext link to the following Universal Resource
Locator ("URL"): www.interworld.com.
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7. EXPORT CONTROL
Client shall not transfer, directly or indirectly, any restricted
Software or technical data received from InterWorld, or the direct product of
such data, to any destination subject to export restrictions under U.S. law,
unless prior written authorization has been obtained from the appropriate U.S.
agency.
8. PAYMENTS
8.1 Upon InterWorld's receipt of Client's Purchase Order, InterWorld
shall deliver the applicable Software and Documentation to Client by physical
medium, electronically or otherwise.
8.2 Payment is due InterWorld upon execution of this Agreement, or in
the case of subsequent licensing of Software, as specified on the applicable
Exhibit A. Client will pay all applicable shipping charges and sales, use,
personal property or similar taxes, tariffs or governmental charges, exclusive
of InterWorld's income and corporate franchise taxes. Client shall reimburse
InterWorld for all reasonable costs incurred (including reasonable attorneys'
fees) in collecting past due amounts.
8.3 Client must purchase a support and maintenance plan ("Support") for
the first year for all Software licensed hereunder. Client will be invoiced for
first year Support upon execution of this Agreement. Support shall commence on
the date of invoice. Fees for Support in subsequent years may be purchased
annually in advance ("Support Fees"). Client will be invoiced one month prior to
the anniversary of the Support commencement date, unless Client notifies
InterWorld in writing of its desire not to renew maintenance 60 days prior to
the end of the existing maintenance period. The renewal invoices will be due net
thirty (30) days from the invoice date. Client may reinstate lapsed Support for
any then currently supported Software by paying all Support Fees in arrears and
all time and travel expenses incurred in updating the Software to the current
version.
9. SUPPORT AND MAINTENANCE
Provided Client has paid applicable Support Fees, InterWorld shall
support the Software in accordance with the then current policies and procedures
for such support plan and as follows: Client shall designate a primary and
secondary Client support staff for all communications with InterWorld's
technical support representatives; each support staff may communicate with
InterWorld via telephone, facsimile or email for problem resolution during
InterWorld's published Support hours corresponding to the level of Support
purchased; and InterWorld shall make available to Client all updates to the
Software commercially released by InterWorld during the Support year. Updates
consist of new releases of a particular Software version which provides
functional enhancements and error corrections (for example 1.1 to 1.2).
Depending on the level of Support purchased by Client, InterWorld may reserve
the right to charge a fee for functional enhancements included in the updates.
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10. WARRANTY/LIMITATION OF LIABILITY
10.1 InterWorld warrants that, for a period of ninety (90) days after
receipt by Client of the Software (the "Warranty Period"), the media on which
the Software is delivered will be free of defects in material and workmanship
under normal use and the unmodified Software, when properly installed and used,
will conform in all material respects to the Functional Specifications. Clients
sole remedy in the event of non conformity of the Software, at InterWorld's,
option will be replacement of the defective Software or a refund of the license
fees paid for the affected Software.
10.2 THE EXPRESS WARRANTY SET FORTH IN SECTION 10.1 CONSTITUTES THE
ONLY WARRANTY WITH RESPECT TO THE SOFTWARE. INTERWORLD MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED (EITHER IN
FACT OR BY OPERATION OF LAW). INTERWORLD EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR USE OR A PARTICULAR PURPOSE, AGAINST
INFRINGEMENT, OR ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE
OF TRADE. INTERWORLD DOES NOT WARRANT THAT THE SOFTWARE IS ERROR-FREE, THAT IT
WILL SUIT THE CLIENT'S APPLICATIONS OR REQUIREMENTS OR OPERATE IN THE
COMBINATIONS WHICH MAY BE SELECTED FOR USE BY THE CLIENT, OR THAT THE OPERATION
OF THE SOFTWARE WILL BE SECURE OR UNINTERRUPTED.
10.3 THE TOTAL LIABILITY OF INTERWORLD AND ITS SUPPLIERS, INCLUDING BUT
NOT LIMITED TO LIABILITY ARISING OUT OF CONTRACT, TORT, BREACH OF WARRANTY, OR
CONDITIONS, CLAIMS BY THIRD PARTIES OR OTHERWISE, SHALL NOT IN ANY EVENT EXCEED
THE UNAMORTIZED LICENSE FEES PAID BY CLIENT FOR THE SOFTWARE WHICH GAVE RISE TO
THE CLAIM. INTERWORLD'S SUPPLIERS SHALL NOT BE LIABLE FOR DIRECT DAMAGES
HEREUNDER AND IN NO EVENT SHALL INTERWORLD OR ITS SUPPLIERS BE LIABLE FOR LOSS
OF PROFITS, LOSS OR INACCURACY OF DATA OR ANY INDIRECT, SPECIAL. INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION THE COST OF ANY SUBSTITUTE
PROCUREMENT (EVEN IF SUCH PARTY HAD BEEN ADVISED OF THE POSSIBILITY THEREOF.
11. INFRINGEMENT INDEMNITY
InterWorld, at its own expense, shall (i) defend, or at its option,
settle any claim or suit against Client on the basis of infringement of any
trademark, copyright, trade secret or United States patent ("Intellectual
Property Right") by the Software or use thereof, and (ii) pay all damages and
expenses finally awarded by a court against Client as a result of such claim or
any settlement thereof, provided that: (a) InterWorld has sole control of the
defense and/or settlement, and (b) Client promptly notifies InterWorld of such
claim, and (c) Client cooperates with InterWorld in the defense of such claim or
any related settlement. (Client shall be reimbursed for any reasonable
out-of-pocket expenses). If the Software a alleged to be infringing or is
enjoined, InterWorld shall, at its expense,
4
<PAGE> 5
defend such claim and do one of the following: (A) procure for the Client the
right to use the Software; (B) replace the Software or affected part thereof
with other suitable software; or (C) modify the Software or the affected part
thereof to make it non-infringing. If the foregoing is not commercially
reasonable, InterWorld shall terminate this Agreement and refund the unamortized
aggregate payments made by Client for the Software or affected part thereof.
InterWorld shall not have any obligations under this Section 11 to the extent a
claim a based upon (I) use of any altered version of the Software, (II) use,
operation a combination of the Software on or with programs, data, equipment or
documentation not provided by InterWorld, (III) any information, data,
illustrations, graphics, pictures, text or other content placed on the Web site
by Client or any third party, and (IV) any activities of Client or its
representatives after InterWorld has notified Client that such activities may
result in the infringement of the intellectual property rights of any third
party. This Section 10 states the entire liability of InterWorld and the
exclusive remedy of Client with respect to any alleged infringement by the
Software or any part thereof.
12. TERMINATION
12.1 InterWorld may terminate a license if Client has not paid the
license fees therefor within 15 calendar days after written notice that payment
is past due. Either party may terminate this Agreement if the other party fails
to cure a material breach of any term or condition of this Agreement within
sixty (60) days of receipt of written notice by the other party specifying such
breach.
12.2 Upon termination of this Agreement, Client shall cease using the
Software, Documentation and Confidential Information received from InterWorld
and shall certify to InterWorld in writing that all copies (whether or not
modified or merged with other materials) have been destroyed or returned to
InterWorld. Termination shall not limit either pursuing any other remedies
available to it, including injunctive relief, nor shall it relieve Client of its
obligations to pay InterWorld all fees accrued prior to the effective date of
termination. Sections 3.6, 10.1, 10.3, 11 and 12 shall survive termination of
this Agreement.
13. GENERAL
13.1 Assignment. Neither this Agreement nor any license granted
hereunder may be assigned by Client without the prior written consent of
InterWorld. This Agreement shall inure to the benefit of, and be enforceable by
the successors and permitted assigns of the parties.
13.2 Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to subject matter hereof and supersedes all prior
agreements and understandings between the parties. This Agreement may only be
altered or otherwise amended pursuant to an instrument in writing signed by both
parties, except that either party may waive any obligation owed to it by the
other party. The waiver by either party of any provisions of this Agreement
shall not operate or be construed as a waiver of any breach.
5
<PAGE> 6
13.3 Notices. All notices, claims certificates, requests, demands and
other consents hereunder shall be in writing and either delivered personally, or
sent by first days express carrier or confirmed facsimile transmission to the
address of the party listed above to the attention of its Chief Financial
Officer or General Counsel. All notices shall be deemed given on the business
day actually received
13.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of laws.
13.5 Severability. The provisions of this Agreement are severable and,
in the event a court of competent jurisdiction shall determine one or more of
the provisions contained in this Agreement is invalid, illegal or unenforceable
in any respect, the remaining provisions of this Agreement shall remain in full
force and effect.
13.6 Relationship of the Parties. The parties an independent
contractors and not an employee, agent, partner of, a joint venture with the
other party. Neither party shall have the right to bind the other party to any
agreement with a third party or to incur any obligation or liability on behalf
of the other party.
13.7 Joint Publicity. Within 30 days after the Software licensed under
this Agreement is delivered, Client agrees to cooperate with InterWorld to
create and issue a joint press release stating that Client is using InterWorld
Software. Such press release shall describe the nature of the business
relationship and Client's use of the Software. The press release is subject to
final approval by Client, which approval shall not be unreasonably withheld.
InterWorld may thereafter identify Client as a licensee of the software in its
advertising and marketing materials.
13.8 Amortization. For purposes of this Agreement, amortization shall
be __________ straight line method over a three year period.
13.9 U.S. Government Restricted Rights. Use, duplication or disclosure
by the U.S. Government is subject to restrictions set forth, as applicable, at:
FAR 52.227-1 Alternate III(g)(3)(i), 48 CFR Ch. 1 (10-1-96 Edition); FAR
52.227-19 (JUN 1987 Ch. 1 (10-1-96 Edition); DFARS 252.227-7013(b)(3)(A) (NOV
1995), 48 CFR Ch. 2 Edition); DFARS 252.227-7014(b)(3) (JUN 1995), 48 CRF Ch. 2
(10-1-96 Edition); 252.227-7016(b)(2) (JUN 1995), 48 CFR Ch. 2 (10-1-96
Edition). Manufacturer is Corporation, 395 Hudson Street, New York, NY 10014.
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The parties have caused this Agreement to be executed by their
respective authorized representatives.
INTERWORLD CORPORATION CLIENT: DIGITAL COMMERCE
CORPORATION
BY: /s/ Alan Andreini BY: /s/ Richard R. Casciano
---------------------------------- ------------------------------
its authorized representative its authorized representative
NAME: Alan Andreini NAME: Richard R. Casciano
-------------------------------- ---------------------------
TITLE: President, COO TITLE: Chief Financial Officer
------------------------------- ---------------------------
7
<PAGE> 8
ADDENDUM TO INTERWORLD SOFTWARE LICENSE AGREEMENT
This addendum ("Addendum") entered into and made effective on February 4,1998,
supplements and amends the terms and conditions of the InterWorld Corporation
Software License Agreement dated February 4, 1998 ("Agreement") between
InterWorld Corporation ("InterWorld") and Digital Commerce Corporation
("Client") specific to the transaction contained in the Exhibit A attached
hereto and dated February 4, 1998. Capitalized terms not otherwise defined
herein shall have the meaning set forth in the Agreement. In the event of any
conflict or inconsistency between the Agreement and this Addendum, the latter
shall govern.
Client and InterWorld agree as follows:
Section 6. Identification, "initial screen" is hereby amended to "About" page.
Section 8.2 Payments, specific to the attached Exhibit A dated February 4, 1998,
and herein referenced as "Initial Transaction", is hereby amended as follows:
"Payment specific to the Initial Transaction is due and payable on the earlier
of 120 days from the date of execution of this Agreement or upon Client's
completion of its current round of corporate financing, specifically $15
million. In the event of the latter, payment to InterWorld shall be the lesser
of 25% of the total financing round or 100% of the license and maintenance fees
contained on the above referenced Exhibit A. Should the payment to InterWorld
not sufficiently cover the fees contained on the above referenced Exhibit A, the
remaining amount shall be paid in three equal monthly payments with the first
payable on the first day of the new quarter and the next two payments due on the
1st day of the two following months."
Section 9. InterWorld's current Support Policies and Procedures are attached
hereto.
Section 13.7 is hereby amended to include the following, "In addition, both
parties agree to develop and implement joint marketing plans for the promotion
of Client's business as such pertains to the use of the Software. Both parties
shall use best efforts to develop such plans within 60 days of execution of this
Agreement."
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Except as amended above, the Agreement shall remain in full force and effect.
InterWorld Corporation Digital Commerce Corp.
/s/ Alan Andreini /s/ Richard R. Casciano
- ----------------------------------------- --------------------------------
By: (authorized signature) By: (authorized signature)
Alan Andreini, President & COO Richard R. Casciano, CFO
- ----------------------------------------- --------------------------------
Name and Title Name and Title
2/4/98 2/4/98
- ----------------------------------------- --------------------------------
Date Date
9
<PAGE> 1
EXHIBIT 10.23
SERVICE AGREEMENT AND LICENSE
THIS SERVICE AGREEMENT AND LICENSE ("Agreement" and/or "License") is
made this 20th day of January, 2000, by and between TECH DATA CORPORATION, a
Florida corporation located at 5350 Tech Data Drive, Clearwater, Florida 33760
("Tech Data") and DIGITAL COMMERCE CORPORATION, a Delaware corporation located
at 11180 Sunrise Valley Drive, Reston, Virginia 20191-4367 ("DCC").
1. Purpose. This Agreement sets forth the terms and conditions under
which DCC will perform Phase 1 services for Tech Data and for the development of
Phase 2 services by DCC. This Agreement also sets forth the terms and conditions
under which Tech Data grants to DCC certain rights and licenses in and to the
Licensed Database identified below for the purposes of performing Phase 1
services and constitutes full and complete consideration for Tech Data and DCC
to enter into and support the validity of this License. It is contemplated by
the parties that as a result of the rights and licenses as granted herein, that
Tech Data's customers (hereinafter "Resellers"), will have the ability to access
a modified version of the Licensed Database containing only that Reseller's
assigned government column level pricing that DCC will have modified to reflect
any price changes unique to each Reseller's government pricing.
2. Other Agreements. This Agreement supercedes all prior agreements and
understandings between the parties as to the Phase 1 services described therein.
DCC and Tech Data are negotiating other (Phase 2) functionality, services and
enhancements, the exact and finally agreed upon nature of which shall be set
forth in a separate mutually acceptable agreement and license in writing setting
form the terms and conditions governing such functionality, services and
enhancements at such time as the parties can reach agreement. No contractual
relationship or continuing obligation for Phase 2 shall be deemed created until
each party shall have the opportunity to complete all service level agreement
requirements to be established, consult with their respective legal counsel and
a definitive agreement and license which sets out each and every agreement of
the parties shall have been mutually agreed upon, reduced to writing and
executed by authorized officers of all parties concerned.
3. Definitions. When used in this Agreement, the Terms listed below shall
have the following meanings:
Licensed Database, for the purposes of this License, means the column level
pricing databases unique to Tech Data. Tech Data has created and compiled the
Licensed Database which is Tech Data's compilation of certain product prices
unique to Resellers for the products distributed by Tech Data assigned to
Resellers based upon criteria determined by Tech Data. The databases that are
licensed under this License are more specifically described in Schedule "A"
attached hereto.
Phase 1, for the purposes of this Agreement and License means software,
algorithms and other functionality that permit Tech Data Resellers to view their
respective Tech Data government pricing,
<PAGE> 2
maintained on DCC's website but accessed through Tech Data's website. The
Service Level Agreement for Phase 1 is set forth on Schedule "A" attached
hereto.
Phase 2, for the purposes of this Agreement and License, means additional
functionality, services and enhancements including, but not limited to,
functionality, services, and enhancements which will permit Resellers and their
End-user customers to access the Reseller's respective Tech Data government
pricing by accessing DCC's "Fedsite" website and directly place electronic
orders for product to Tech Data. The exact and finally agreed upon nature of the
additional functionality, services and enhancements shall be set forth in a
mutually acceptable agreement in writing signed by both parties.
4. Tech Data Grant of Right and License. Tech Data hereby grants to DCC a
limited, non-exclusive license to use and modify the Licensed Database so that
the Licensed Database may be accessed by each Reseller, or by DCC on behalf of
the Reseller, to view only that government pricing assigned to that Reseller.
DCC acknowledges that Tech Data is the owner of the Licensed Database and the
information contained therein, but DCC has the right to use and manipulate the
Licensed Database as set forth herein without further compensation. DCC shall
not have any right to grant any other person or entity a license to the Licensed
Database, but may permit Resellers to access the portion of the Licensed
Database which shows the government pricing assigned to that Reseller. DCC shall
not permit any Reseller or other third party access to the Licensed Database in
its entire, original form or permit any Reseller or other third party to access
or receive individual detail about any other Reseller or third party's pricing
level.
DCC MAY NOT, except as otherwise specified in this Agreement, (a) copy any of
the Licensed Database, (b) distribute, rent, sublicense or otherwise transfer or
disclose, or transmit any of the database electronically, to any person or
entity, (c) modify, translate, merge or prepare derivative works from the
database, (d) modify, alter, or make other changes to the Trademarks and will
not allow others to make such modifications, alterations, or changes to the
Trademarks, or (e) use any of the database for service bureau or other purposes
not specified in this Agreement. DCC hereby acknowledges that this Agreement and
the delivery of the Licensed Database is not a deliverable under any contract
with the government of the United States of America or any agency thereof.
Tech Data will update the Licensed Database at such times as may be necessary to
ensure current government-pricing is available to DCC at all times.
DCC will place a disclaimer on the webpages it prepares on behalf of Resellers
containing the Reseller's pricing data notifying the viewer that prices are
subject to change.
5. DCC Grant of Right and License. When Tech Data enters into the Phase 2
Agreement and has provided DCC with all information (including, without
limitation, technical information) and data needed by DCC to initiate the work
with respect to Phase 2, DCC shall deliver to Tech Data true algorithm(s) and
associated software which DCC created to create the government pricing changes
to the Licensed Database and shall grant to Tech Data a non-exclusive, royalty
free, irrevocable,
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worldwide license to use same. This grant of license shall survive termination
or expiration of this Agreement.
6. Services and Support. DCC shall perform Phase 1 services and provide
support pursuant to the Service Level Agreement attached hereto as Schedule "A."
7. Fee. DCC will provide the Phase I services to Tech Data without charge
to Tech Data until April 17, 2000. In the event that as of April 17, 2000 Tech
Data has entered into an agreement with DCC for Phase II services and has
provided DCC with all information (including, without limitation, technical
information) and data needed by DCC to initiate the work with respect to Phase
II, then DCC will continue to provide Phase I Services to Tech Data without
charge for an additional period of 3 up to 6 months (the "Additional Period").
In the event that as of April 17, 2000, Tech Data has not (a) either entered
into an agreement with DCC for the provision of Phase 2 Services or (b) provided
the required information, then commencing April 17, 2000, Tech Data shall pay to
DCC a monthly fee of $20,000 (the "Monthly Fee") for the services described on
Schedules A and B hereto. In addition, in the event that at the end of the
Additional Period Tech Data's customers cannot directly place electronic orders
for product to Tech Data using DCC's "Fedsite" and such failure is not the
result of a failure by DCC to use its best efforts to cause Phase 2 to be
sufficiently complete to allow such transactions to take place, then Tech Data
shall commence paying DCC the Monthly Fee.
8. Expenses. DCC shall maintain and pay all fees payable for all licenses
as are necessary for DCC to perform the Services under this Agreement and
additionally and shall be responsible for payment of all of its own expenses
incurred in connection with the performance of Phase I services hereunder. DCC
is expected to have such facilities and equipment as are necessary to perform
the Services.
9. Invoices. DCC shall provide Tech Data with detailed invoices
representing accurately the Services that are charged. All invoices shall be
accompanied by back up documentation sufficient to verify the charges made, and
shall include a detailed description of the Services provided. Tech Data is only
responsible for paying for those Services and expenses that are within the scope
of the Services contemplated in this Agreement.
10. Relationship of Parties. The parties intend that the relationship
between them created by this Agreement shall be that of an independent
contractor. Neither DCC nor DCC's agents, employees or servants shall be or
shall be deemed to be an employee, agent, or servant of Tech Data. DCC shall be
solely and entirely responsible for DCC's acts and for the acts of DCC's agents,
employees, servants and subcontractors during the performance of this Agreement.
Tech Data and DCC agree that, for federal tax purposes, neither DCC nor DCC's
agents, employees, or servants shall be treated as an employee of Tech Data with
respect to the Services. It is understood that Tech Data does not agree to use
DCC exclusively. It is further understood that DCC shall not have any power or
authority to bind Tech Data.
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11. Conduct by DCC. DCC agrees to conduct DCC's business in a reputable
manner and agrees to comply with all federal, state and municipal laws, rules,
regulations, and codes of ethics that are binding upon or applicable to DCC or
to DCC's business, equipment or personnel engaged in operations covered by this
Agreement, or accruing out of the performance of such operations. DCC, or anyone
engaged directly or indirectly by DCC, shall not act inappropriately, including
but not limited to giving gifts or seeking or giving favors to or from Tech Data
employees. DCC will notify Tech Data if it becomes aware of any inappropriate
act, or activities beyond the scope of the Services contemplated by this
Agreement of its employees or others directly or indirectly engaged by it, or by
Tech Data's employees.
12. Confidentiality.
12.1 The Licensed Database delivered to DCC by Tech Data is "Confidential
Information". In addition, any information regarding the Licensed Database or
Tech Data's systems or procedures, provided in writing or which is presented
orally by Tech Data to DCC, and reduced to a written summary describing such
confidential oral communication and delivered to DCC within thirty (30) days, is
also Confidential Information. All such Confidential Information is proprietary
to Tech Data and constitutes trade secrets. Confidential Information may not be
copied, reproduced or distributed except as expressly permitted in this
Agreement. DCC shall not sell, lease, license, assign, transfer, or disclose the
Confidential Information to any third party and shall not copy, reproduce or
distribute the Confidential Information except as expressly permitted in this
Agreement. DCC shall protect Confidential Information by using the same degree
of care but no less than a reasonable degree of care as it uses to safeguard its
own confidential or proprietary information of a like nature from unauthorized
use, disclosure or dissemination. DCC shall not reverse engineer the Licensed
Database, or software or disassemble, decompile, or apply any procedure or
process to the Licensed Database or Software in order to ascertain, derive,
and/or appropriate for any reason or purpose, the source code or source listings
for the Licensed Database or Software or any trade secret information or process
contained in the Licensed Database or Software.
12.2 The Licensed Database and Tech Data's method of representation of
"column level pricing," approach, and concept shall also be included in the
definition of Confidential Information.
12.3 DCC agrees to restrict access to Confidential Information of Tech Data
to only its employees who require such access in the course of their assigned
duties and responsibilities and who have been informed of Tech Data's
obligations. DCC agrees that its employees and independent contractors who may
have access to any Confidential Information of Tech Data will be legally
obligated, by a written agreement, to preserve the confidentiality of such
information.
12.4 In addition to any and all remedies of Tech Data hereunder or under
applicable law, all of which shall be cumulative and exercisable concurrently,
Tech Data shall be entitled to seek an injunction from a court of competent
jurisdiction for the purpose of stopping or preventing any existing or
anticipated breach of the terms of Section 12 of this Agreement, which rights
shall not preclude the additional right of Tech Data recovering damages for any
breach. The prevailing party
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in any such dispute shall be entitled to its reasonable attorney's fees and
costs. The obligations of the parties under this Section 12 shall survive
termination or expiration of this Agreement.
12.5 The foregoing obligations shall not apply with respect to any
Confidential Information which: (i) was in the possession of or known by the
other party without an obligation of confidentiality prior to receipt from the
disclosing party, or (ii) is or becomes public knowledge through no fault or
acts of the other party, or (iii) is or becomes lawfully available to the other
party from a third party without an obligation of confidentiality; (iv) is
independently developed by the other party without use of any such
Confidential/Proprietary Information, or (v) is required to be disclosed
pursuant to any law, code or regulation, provided the disclosing party is given
ten (10) days prior written notice in order that it may seek a protective order.
13. Work Product/Return of Corporation's Property. DCC agrees that on
termination of this Agreement for any cause whatsoever, DCC will return to Tech
Data any of Tech Data's property in DCC's possession or under DCC's control,
including but not limited to, business records, database information, names,
addresses, and other information with regard to the Licensed Database. It is
acknowledged and agreed that no transfer, grant, license, right, or assignment
of Tech Data's Intellectual Property Rights by Tech Data to DCC is contemplated
by this Agreement.
14. Term. The term of this Agreement shall commence on the date set forth
above and, unless terminated by either party as set forth in this Agreement,
shall remain in full force and effect for a term of one (1) year unless prior
written notification of termination is delivered by one of the parties in
accordance with the notice provision in Section 15 of this Agreement.
15. Termination. Either party may terminate this Agreement at any time,
without cause, by giving the other party at least thirty (30) days prior written
notice. DCC agrees on termination of this Agreement to immediately cease
accessing the Licensed Database and to return the software, if any. The Licensed
Database includes, but is not limited to, data structures, technical and other
specifications, advice and other data or information. All data and other
information available on the database is proprietary, confidential and the sole
property of Tech Data or its licensees. Unauthorized action may violate not only
this Agreement but the copyright laws of the United States, for which both
criminal and civil penalties exist by law.
16. Miscellaneous.
A. Notice. All notices provided for herein shall be in writing,
and may be by hand (or courier) delivery, overnight mail, telecopier, facsimile,
or by certified or registered receipt requested mail, addressed as follows:
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Licensee: DIGITAL COMMERCE CORPORATION
11180 Sunrise Valley Drive
Reston, Virginia 20191-4367
Attn: Tony Bansal, President & CEO
Phone: (703) 391-5300
Telecopier: (703) 381-9689
Tech Data: Tech Data Corporation
5350 Tech Data Drive
Clearwater, FL 33760
Attn: Don Bosse, Senior Manager of Operations, Government Services
with a copy to General Counsel at the same address
Phone: (813) 539-7429
Telecopier: (813) 538-7803
Notice to any party shall be deemed complete upon the occurrence of any one of
the following: (i) hand delivery to said party, (ii) completion of transmission
by telecopy a facsimile of said notice with telephone confirmation of receipt,
(iii) one business day after sending said notice by overnight mail or, (iv) five
business days after depositing the same with the United States Postal Service,
addressed to that party with the proper amount of postage afixed thereto, if
sent by registered or certified mail, return receipt requested. Receipt of any
notice by any of the persons listed above to receive notices to a party shall
constitute actual receipt of such notice by that party.
B. Entire Agreement and Amendment. This Agreement, including any
Schedules and documents referred to in this Agreement or attached hereto,
constitutes the entire and exclusive statement of Agreement between the parties
with respect to its subject matter and there are no oral or written
representations, understandings or agreements relating to this Agreement which
are not fully expressed herein. The parties agree that unless otherwise agreed
to in writing by the party intended to be bound, the terms and conditions of
this Agreement shall prevail over any contrary terms in any purchase order,
sales acknowledgment, confirmation or any other document issued by either party
affecting the purchase or sale of Products hereunder.
C. Waiver. Any waiver by ether party of a breach of any provision
of this Agreement by the other party shall not be construed as a waiver of any
subsequent breach.
D. Severability. If, but only to the extent that, any provision
of this Agreement is declared or found to be illegal, unenforceable or void,
then both parties shall be relieved of all obligations arising under such
provision, it being the intent and agreement of the parties that this Agreement
shall be deemed amended by modifying such provision to the extent necessary to
make it legal and enforceable while preserving its intent.
E. Construction. Section headings, captions, or abbreviations are
used for convenience only and shall not be resorted to for interpretation of
this Agreement. Wherever the context so
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requires, the masculine shall refer to the feminine, the singular shall refer to
the plural, and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first written above.
DIGITAL COMMERCE CORPORATION, a Delaware corporation
By:
---------------------------------------------------
As its:
-----------------------------------------------
TECH DATA CORPORATION, a Florida
corporation ("Tech Data")
By:
---------------------------------------------------
As its:
-----------------------------------------------
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EXHIBIT 10.24
This MASTER SERVICE AGREEMENT between the below named CUSTOMER and FRONTIER
GLOBAL CENTER (collectively referred to as the "PARTIES") establishes the terms
and conditions under which FRONTIER GLOBALCENTER will provide communications
services to CUSTOMER.
Customer: DIGITAL COMMERCE
Project: (2) T1's
Principle Place of Business: 11180 Sunrise Valley Dr.
Address: Reston, VA 20191
Attn: George Hill
Issue Date: 1/29/99
Frontier GlobalCenter Address of Notices:
1224 E. Washington 1224 E. Washington
Phoenix, AZ 85034 Phoenix, AZ 85034
Attn.: Contract Administration
1. The Parties anticipate that CUSTOMER may, at CUSTOMER'S sole discretion,
issue one or more Data Service Orders ("Service Orders") describing certain
services which CUSTOMER desires to purchase from FRONTIER GLOBALCENTER, and
which set forth the prices, minimum term of service and other service specific
details. All Service Orders shall be subject to the terms and conditions of this
Master Agreement for the duration of the Service Order. If Service Order is
accepted in writing by an authorized representative of FRONTIER GLOBALCENTER it
shall supersede any and all prior agreements or understandings with respect to
the service described therein, and shall comprise the full and final Agreement
of the PARTIES. No term or condition hereof shall be modified except by written
agreement of both PARTIES and any preprinted terms and conditions which may
appear on CUSTOMER'S order form are expressly rejected and are void. As used in
this document the word "Term" shall mean the total duration of a Service Order
and the phrase "Initial Term" shall mean the minimum term of service as
specified in a Service Order. The word "Agreement" shall apply to all promises,
terms and conditions of the PARTIES contained in the Master Service Agreement of
a Service Order.
2. The Initial Term of this Agreement shall be as set forth in the Service Order
placed hereunder and shall extend thereafter until terminated by either PARTY
upon no less than ninety (90) days' prior written notice. However FRONTIER
GLOBALCENTER may terminate this Agreement or suspend service hereunder at any
time upon: (a) any failure of CUSTOMER to pay any undisputed amounts as provided
in this Agreement; (b) any breach by CUSTOMER of any material provision of this
Agreement continuing for thirty (30) days after receipt of notice thereof,
except for activities which involve disruption or interference of Frontier
GlobalCenter services including without limitation sending unsolicited mass
e-mailings, propagation of computer worms and viruses, and using the network to
make unauthorized entry to any other machine accessible via the network, which
may result in immediate suspension or termination of service upon notice to
CUSTOMER, (c) any insolvency; bankruptcy, assignment for the benefit of
creditors, appointment of a trustee or receiver or similar event with respect to
CUSTOMER, or (d) any government prohibition or required
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<PAGE> 2
alteration of services to be provided hereunder or any violation of an
applicable law, rule or regulation. Any termination shall not relieve CUSTOMER
of its obligation to pay any charges incurred hereunder prior to such
termination. The PARTIES' rights and obligations, which by their nature would
extend beyond the termination, cancellation or expiration of this Agreement
shall survive such termination, cancellation or expiration.
3. CUSTOMER is responsible for all recurring and non-recurring charges from and
after the date of acceptance. For purposes of this agreement, the date of
acceptance is two (2) business days after FRONTIER GLOBALCENTER establishes a
connection in which the FRONTIER GLOBALCENTER provided services are functioning
properly. Recurring charges will be prorated for the first and last month of the
agreement if service is not provided for a complete month. Proration of monthly
charges will be based on number of days connection was available divided by
total days in the month FRONTIER GLOBALCENTER's targeted service installation
intervals are thirty (30) days after order acceptance for on net services and
forty-five (45) days for all offnet services. In the event CUSTOMER requests
FRONTIER GLOBALCENTER to attempt to accelerate the order process to install
services more quickly, CUSTOMER shall pay an order expedite charge of $500.
Order expedite charges will apply to each site ordered for which expedited
installation is requested.
4. During the term CUSTOMER shall pay FRONTIER GLOBALCENTER for services at the
rates set forth in the service order. FRONTIER GLOBALCENTER shall not increase
pricing during the initial term, but thereafter may increase pricing upon ninety
(90) days written notice. Normal service charges shall be invoiced monthly in
advance. All amounts owed CUSTOMER thereunder shall be paid within thirty days
after the date of the invoice and FRONTIER GLOBALCENTER reserves the right to
charge interest on al delinquent payments at annualized rate of 2 percentage
points above the prime rate as announced in the Wall Street Journal from time to
time.
5. FRONTIER GLOBALCENTER'S bill shall separately identify any excise, sales,
use, or other taxes applicable to FRONTIER GLOBALCENTER's provision of service
or equipment to CUSTOMER, and all such taxes, however designated (excepting
those based on FRONTIER GLOBALCENTER'S net income), shall be paid by Customer in
addition to any other amount owing. FRONTIER GLOBALCENTER will not collect any
otherwise applicable tax if CUSTOMER first provides FRONTIER GLOBALCENTER with a
valid tax exemption certificate.
6. At customer's request, FRONTIER GLOBALCENTER will respond to CUSTOMER'S
report of services interruption and attempt to resolve all problems of
connectivity. If it is determined that all facilities, systems and equipment
furnished by FRONTIER GLOBALCENTER are functioning properly, and that the
connectivity problem arose from some other cause. FRONTIER GLOBALCENTER will
recover labor and materials costs for services actually performed at the
following rates, which shall be the usual and customary rates for similar
services provided by FRONTIER GLOBALCENTER to all customers in the same
locality.
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Labor (4-hour minimum charge):
7 A.M. to 7 P.M. (Mountain Standard Time) weekdays/$150.00 per hour
per technician
All other times: $225.00 per hour per technician Materials: Costs to
FRONTIER GLOBALCENTER X 1.15
FRONTIER GLOBALCENTER reserves the right to modify the above rates upon ninety
(90) days advance written notice to CUSTOMER.
7. FRONTIER GLOBALCENTER may substitute, change or rearrange any equipment,
facility or system providing services at any time and from time to time, but
shall not thereby alter the technical parameters of the services provided
thereunder.
8. CUSTOMER shall not cause or allow any facility or equipment of FRONTIER
GLOBALCENTER to be rearranged, moved, removed, disconnected, altered, or
repaired without FRONTIER GLOBALCENTER'S prior written consent which consent
shall not be unreasonably withheld or delayed. CUSTOMER shall not create or
allow any liens or other encumbrances to be placed on any FRONTIER GLOBALCENTER
equipment facility or system arising from any act, transaction or
circumstance-relating CUSTOMER. If CUSTOMER elects to relocate or otherwise
change the place of services after commencement of the installation or
facilities. CUSTOMER shall pay any disconnection, early cancellation or
termination charges reasonably incurred by FRONTIER GLOBALCENTER for the
original location and installation charges for the new location.
9. FRONTIER GLOBALCENTER will grant a credit allowance for service interruption
calculated and credited in fifteen (15) minute increments. A service
interruption will be deemed to have occurred only if service becomes unusable to
CUSTOMER as a result of failure of FRONTIER GLOBALCENTER'S facility, equipment
or personnel used to provide the service in question, and only where the
interruption is not the result of: (i) the negligence or acts of CUSTOMER or its
agents; (ii) the failure or malfunction of non-FRONTIER GLOBALCENTER equipment
or systems not provided by FRONTIER GLOBALCENTER; (iii) circumstances or causes
beyond the control of FRONTIER GLOBALCENTER; or (iv) a service interruption
caused by scheduled service maintenance, alteration, or implementation. Such
credits will be granted only if (a) CUSTOMER affords FRONTIER GLOBALCENTER full
and free access the applicable equipment located at the CUSTOMER'S premises to
make appropriate repairs, maintenance, testing, etc.; and (b) CUSTOMER does not
unreasonably continue to use the service on an impaired basis.
For purposes of canceling or terminating a service provided under this Agreement
for a FRONTIER GLOBALCENTER service interruption, such service interruption must
equal either twenty-four (24) hours of cumulative service outages during any
continuous twelve (12) month period or a single outage of eight (8) hours or
more. CUSTOMER must notify FRONTIER GLOBALCENTER in the form of written
documentation, the cancellation of this circuit for cause.
The foregoing states customers sole remedy for service interruption under the
Agreement, and in no event shall FRONTIER GLOBALCENTER be liable for harm to
business, lost revenues, lost savings, or lost profits suffered by CUSTOMER,
regardless of the form of action, whether in contract,
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warranty, strict liability, or tort, including without limitation negligence of
any kind, whether active or passive.
10. FRONTIER GLOBALCENTER'S entire liability for any claims, loss, damage or
expense from any cause whatsoever shall in no event exceed sums actually paid to
FRONTIER GLOBALCENTER by CUSTOMER for the specific service giving rise to the
claim. Not withstanding the foregoing, FRONTIER GLOBALCENTER shall not be liable
for any indirect, incidental, consequential, punitive or special damages. No
action or proceeding against FRONTIER GLOBALCENTER shall be commenced more than
one (1) year after service is rendered.
11. There are no warranties, representations or agreements, expressed or implied
either in fact or by operation of law, statutory or otherwise, including
warranties of merchantability or fitness for a particular purpose, except those
expressly set forth herein.
12. In the event that CUSTOMER cancels or terminates service at any time during
the initial Term of this Agreement or any renewal thereof for any reason
whatsoever other than a service interruption (as defined in Paragraph 9 above).
CUSTOMER agrees to pay FRONTIER GLOBALCENTER liquidated damages (which shall not
be deemed a penalty) the following sums which shall become due and owing as of
the effective date of cancellation or termination and be payable in accordance
with Paragraph 3 above. 1) The remainder of the monthly recurring TELCO charges
over the term of the agreement, and 2) 15% of the remaining recurring Internet
Access charges over the term of the agreement.
13. CUSTOMER shall allow FRONTIER GLOBALCENTER continuous access and
right-of-way to the applicable equipment located at the CUSTOMER'S premises to
the extent reasonably determined by FRONTIER GLOBALCENTER to be appropriate to
the provision and maintenance of services, equipment, facilities, and systems
hereunder. Upon reasonable notice, the CUSTOMER shall furnish FRONTIER
GLOBALCENTER, at no charge, such equipment space and electrical power as is
reasonably determined by FRONTIER GLOBALCENTER to be required and suitable to
render services hereunder.
14. CUSTOMER shall be liable for any damages to FRONTIER GLOBALCENTER equipment,
facility, and system which is caused by: (a) negligent or willful acts or
omissions of CUSTOMER, or (b) malfunction or failure of any equipment or
facility provided by CUSTOMER or its agents, employees, or suppliers. CUSTOMER
is responsible for identifying, monitoring, removing and disposing of any
existing hazardous materials (e.g., friable asbestos) prior to any construction
or installation work being performed by FRONTIER GLOBALCENTER and CUSTOMER shall
indemnify, defend and hold FRONTIER GLOBALCENTER harmless from any claim, suit
loss, cost or expense, including lines, abatement charges, legal fees and court
costs incurred in connection with hazardous materials on CUSTOMER'S premises.
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15. Neither PARTY may assign this Agreement without the written consent of the
other PARTY (which consent shall not be unreasonably withheld or unduly
delayed).
16. If any provision of this Agreement is held by a court to be invalid, void or
unenforceable, the remainder of this Agreement shall nevertheless remain
unimpaired and in effect.
17. No license, joint venture or partnership, express or implied, is granted by
FRONTIER GLOBALCENTER or the CUSTOMER pursuant to this agreement.
18. Each PARTY agrees to maintain in strict confidence all plans, designs,
drawings, trade secrets, and other proprietary information of the other party
which is disclosed pursuant to this Agreement. No obligation of confidentiality
shall apply to disclosed information which the recipient 1) already possessed
without obligation of confidentiality; 2) develops independently; or 3)
rightfully receives without obligation of confidentiality from a third PARTY.
19. Neither PARTY shall be liable for any delay or failure in performance of any
part of this Agreement to the extent such delay or failure is caused by an event
of Force Majeure, including, but not limited to, fire, flood, explosion,
accident, war, strike, embargo, governmental requirement, civil or military
authority, Act of God, inability to secure materials, labor, or transportation,
acts or omissions of common carver or warehouseman, or any other causes beyond
their reasonable control. Any such delay or failure shall suspend the Agreement
until the Force Majeure condition ceases and the Term shall be extended by the
length of the suspension.
20. If this Agreement is entered into by more than one CUSTOMER, each is jointly
and severally liable for all agreements. covenants and obligations herein.
21. This Agreement shall be governed by the laws of the State of Arizona without
regard to its choice of law provisions in any action between the parties to
enforce any material provision of this Agreement, the prevailing PARTY shall be
entitled to recover its legal fees and court costs from the non-prevailing PARTY
in addition to whatever other relief a court may award.
22. Each person executing this Agreement on behalf of FRONTIER GLOBALCENTER or
CUSTOMER represents and warrants that he or she has been fully empowered to do
so, and that all necessary corporate actions (if any) required for the execution
of agreements have been taken.
23. Telco charges, if provided, are estimates. Telco charges are subject to
change at anytime during the agreement. Increases will be passed through to the
CUSTOMER.
24. CUSTOMER agrees to be bound by and enforce on the users of its service all
applicable provisions of FRONTIER GLOBALCENTER'S acceptable use policy and user
agreement; in particular those provisions involving "netiquette."
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FRONTIER GLOBALCENTER, INC. DIGITAL COMMERCE
1224 East Washington (2) T1's
Phoenix, AZ 85016 11180 Sunrise Valley Dr.
(602) 416-7112 Reston, VA 20191
Anthony Pampalona George Hill
Account Manager
By: By:
-------------------------------- ------------------------------
Printed Name: Printed Name:
---------------------- ---------------------
Title: Title:
----------------------------- ---------------------------
Date: Date:
------------------------------ -----------------------------
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EXHIBIT 10.25
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
Among
DIGITAL COMMERCE CORPORATION,
WESTON PRESIDIO CAPITAL III, L.P.,
HIGHLAND CAPITAL PARTNERS V LIMITED PARTNERSHIP
AND CERTAIN OTHER INVESTORS
SERIES D PREFERRED STOCK
As of March 13, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS..................................................................1
2. SALE AND PURCHASE OF SECURITIES..............................................7
2.1. Investor Securities.................................................7
2.2. Agreement to Sell and Purchase......................................8
2.3. Closing.............................................................8
2.5. Use of Proceeds.....................................................8
3. CONDITIONS TO PURCHASE.......................................................8
3.1. Investor Agreements.................................................9
3.2. Investor Securities.................................................9
3.3. Legal Opinion.......................................................9
3.4. Representations and Warranties; Officer's Certificate...............9
3.5. Key Executive Insurance.............................................9
3.6. Legality; Governmental Authorization................................9
3.7. Amendment of Certificate of Incorporation; Series B and C Notes....10
3.8. General............................................................10
4. CONDITIONS TO COMPANY'S OBLIGATIONS.........................................10
4.1. Representations and Warranties.....................................10
4.2. Legality, Governmental Authorization...............................10
5. REPRESENTATIONS AND WARRANTIES..............................................10
5.1. Material Agreements................................................10
5.2. Organization and Subsidiaries; Business............................11
5.2.1. The Company................................................11
5.2.2. Subsidiaries...............................................12
5.3. Capitalization.....................................................12
5.3.1. Capital Stock of the Company...............................12
5.3.2. Options, etc...............................................12
5.3.3. Capital Stock of the Subsidiaries..........................12
5.3.4. Subsidiary Options, etc....................................12
5.4. Reports, Financial Statements and Other Documents..................13
5.5. Changes in Condition...............................................13
5.5.1. Material Adverse Effect....................................13
5.5.2. Extraordinary Transactions, etc............................13
5.6. Solvency...........................................................14
5.7. Taxes..............................................................14
5.8. Contractual Obligations, etc.......................................14
5.8.1. Certain Contracts..........................................14
5.8.2. Nature of Contracts........................................15
</TABLE>
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<TABLE>
<S> <C> <C>
5.8.3. Charter or By-Laws.........................................15
5.8.4. Insurance..................................................15
5.8.5. Transactions with Affiliates...............................16
5.9. Litigation.........................................................16
5.10. Violation of Other Instruments.....................................16
5.11. Consents...........................................................16
5.12. Operations in Conformity With Law, etc.............................16
5.13. Environmental Matters..............................................17
5.14. ERISA Matters......................................................18
5.15. Intellectual Property..............................................18
5.16. Labor Relations....................................................18
5.17. Filings, Broker's Fees, etc........................................19
5.18. Governmental Regulation............................................19
5.19. Margin Stock.......................................................19
5.20. Real Property Holding Corporation..................................19
5.21. Disclosure.........................................................19
6. GENERAL COVENANTS...........................................................19
6.1. Covenants Relating to the Company's Board of Directors.............19
6.1.1. Board of Directors.........................................19
6.1.2. Directors Expenses.........................................19
6.1.3. Indemnity..................................................20
6.2. Information and Reports to be Furnished............................20
6.2.1. Annual Statements..........................................20
6.2.2. Quarterly Reports..........................................20
6.2.3. Monthly Reports............................................20
6.2.4. Annual Budgets.............................................21
6.2.5. Officers' Certificates.....................................21
6.2.6. Notice of Litigation, Defaults, etc........................21
6.2.7. Notices under Material Agreements..........................21
6.2.8. Information Provided to Stockholders.......................21
6.2.9. Other Information..........................................22
6.2.10. Interview and Advisory Rights..............................22
6.2.11. Annual Meeting.............................................22
6.3. Merger, Consolidation and Sale of Assets...........................22
6.4. Stock Issuance, etc................................................23
6.5. Transactions with Affiliates.......................................23
6.6. Closing Costs......................................................23
6.7. Subsidiaries Closures and Spin-offs................................23
6.7.1. Anceta.com.................................................23
6.7.2. FilmStuff.com, LLC.........................................24
6.7.3. Powertrust.com, Inc........................................24
6.7.4. Specific Enforcement.......................................24
</TABLE>
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<TABLE>
<S> <C> <C>
6.8. Series A Notes Conversion..........................................24
6.9. Employee Nondisclosure Agreements..................................24
7. INVESTOR REPRESENTATIONS; RESTRICTIONS ON TRANSFER..........................25
7.1. Representations and Warranties of the Investors....................25
7.2. Home Office Payment................................................25
7.3. Replacement of Lost Securities.....................................25
7.4. Transfer, Exchange and Conversion of Investor Securities...........26
7.5. Restrictions on Transfer...........................................26
7.5.1. Restrictive Legend..........................................26
7.5.2. Notice of Proposed Transfer; Opinions of Counsel............27
7.5.3. Termination of Restrictions.................................27
8. EXPENSES, ETC...............................................................27
8.1. Expenses...........................................................27
8.2. Mutual Indemnification.............................................28
8.3. Survival...........................................................28
9. NOTICES.....................................................................28
10. CONFIDENTIALITY.............................................................29
11. AMENDMENTS AND WAIVERS......................................................29
12. SURVIVAL AND TERMINATION OF COVENANTS.......................................29
13. SERVICE OF PROCESS..........................................................29
14. WAIVER OF JURY TRIAL........................................................30
15. GENERAL.....................................................................30
</TABLE>
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TABLE OF EXHIBITS
<TABLE>
<S> <C>
1 Investors, Preferred Stock and Purchase Price
2.1 Certificate of Designation
3.3 Opinion of Counsel to the Company
3.7A Amendment to Certificate of Incorporation
3.7B Amendments to Certificates of Designation
DISCLOSURE LETTER
5.1.1 Stock Option Plans
5.1.2 Employees Executing Non-Competes
5.2.2 Subsidiaries
5.3.1 Capitalization and Stock Ownership
5.3.2 Options
5.3.3 Capital Stock of Subsidiaries
5.3.4 Subsidiary Options, etc.
5.4 Pro Forma Balance Sheet
5.5.2 Extraordinary Transactions
5.7 Taxes
5.8 Contracts, etc.
5.9 Litigation
5.11 Consents
5.13 Hazardous Waste Sites
</TABLE>
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<TABLE>
<S> <C>
5.14 Employee Benefit Plans
5.17 Broker's Fees
</TABLE>
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SECURITIES PURCHASE AGREEMENT
Series D Preferred Stock
This Agreement, dated as of March 13, 2000, is among Digital Commerce
Corporation, a Delaware corporation (the "Company"), Weston Presidio Capital
III, L.P., a Delaware limited partnership, Highland Capital Partners V Limited
Partnership, a Delaware limited partnership, and the other Investors set forth
in Exhibit 1 hereto. The parties agree as follows:
1. DEFINITIONS. Certain capitalized terms are used in this Agreement as
specifically defined below in this Section 1. Except as the context otherwise
explicitly requires, (a) the capitalized term "Section" refers to sections of
this Agreement, (b) the capitalized term "Exhibit" refers to exhibits to this
Agreement, (c) references to a particular Section include all subsections
thereof, (d) the word "including" shall be construed as "including without
limitation", (e) accounting terms not otherwise defined herein have the meaning
provided under GAAP, (f) references to a particular statute or regulation
include all rules and regulations thereunder and any successor statute,
regulation or rules, in each case as from time to time in effect and (g)
references to a particular Person include such Person's successors and assigns
to the extent not prohibited by this Agreement and the other Investor
Agreements. References to "the date hereof" mean the date first set forth above.
1.1. "Adjustment Date" is defined in Section 6.7.3.
1.2. "Affiliate" means any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with the
Company (or other specified Person) and shall include (a) any Person who is an
executive officer, director or beneficial holder of at least 10% of the
outstanding capital stock of the Company (or other specified Person), (b) any
Person of which the Company (or other specified Person) or an Affiliate (as
defined in clause (a) above) of the Company (or other specified Person) shall,
directly or indirectly, either beneficially own at least 10% of the outstanding
equity securities or constitute at least a 10% participant, and (c) in the case
of a specified Person who is an individual, Members of the Immediate Family of
such Person; provided, however, that the Investors shall not be Affiliates of
the Company for purposes of this Agreement.
1.3. "Balance Sheet" is defined in Section 5.4.
1.4. "Balance Sheet Date" is defined in Section 5.4.
1.5. "Board" shall mean the Board of Directors of the Company.
<PAGE> 8
1.6. "By-laws" means all written rules, regulations, procedures and
by-laws and all other similar documents, relating to the management, governance
or internal regulation of a Person other than an individual, each as from time
to time amended or modified.
1.7. "Certificate of Designation" is defined in Section 2.1.
1.8. "Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture or partnership agreement,
management agreement or other charter of any Person other than an individual,
each as from time to time amended or modified.
1.9. "Closings" is defined in Section 2.4.
1.10. "Closing Costs" means the sum of expenses recognized in the
Company's fiscal periods ending after the Balance Sheet Date for amortization of
transaction expenses, including investment banker's fees and legal fees and
expenses relating to the financings contemplated by the Investor Agreements and
the transactions contemplated by the Material Agreements.
1.11. "Closing Dates" is defined in Section 2.4.
1.12. "Code" means the federal Internal Revenue Code of 1986.
1.13. "Common Stock" means the common stock, $0.01 par value, of the
Company.
1.14. "Company" is defined in the Preamble.
1.15. "Company Indemnitees" is defined in Section 8.2.2.
1.16. "Consolidated", when used with reference to any term, means
that term as applied to the accounts of the Company or other indicated Person
and each of its respective Subsidiaries, consolidated or combined in accordance
with GAAP after eliminating all inter-company items and with appropriate
deductions for minority interests in Subsidiaries.
1.17. "Contractual Obligation" means, with respect to any Person,
any contracts, agreements, deeds, mortgages, leases, licenses, other
instruments, commitments, undertakings, arrangements or understandings, written
or oral, or other documents, including any Charter or By-law provisions and any
document or instrument evidencing indebtedness, to which any such Person is a
party or otherwise subject to or bound by or to which any asset of any such
Person is subject.
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1.18. "Disclosure Letter" means the letter provided by the Company
to the Investors which sets forth certain exceptions to the representations and
warranties set forth in Section 5.
1.19. "Distribution" means (a) the declaration or payment of any
dividend on or in respect of any shares of any class of capital stock of the
Company, any of its Subsidiaries or other specified Person, other than dividends
payable solely in shares of the common stock of the payor; (b) the purchase,
redemption or other retirement of any shares of any class of capital stock of
the Company, any of its Subsidiaries or other specified Person directly, or
indirectly through a Subsidiary or otherwise; or (c) any other distribution on
or in respect of any shares of any class of capital stock of the Company, any of
its Subsidiaries or other specified Person.
1.20. "Employee Benefit Plan" means each "employee benefit plan" as
defined in section 3(3) of ERISA, maintained or contributed to by the Company or
any member of an ERISA Group in which the Company is a member, or in which the
Company or any member of an ERISA Group in which the Company is a member
participates or participated and which provides benefits to employees of the
Company or their spouses or covered dependents or with respect to which the
Company has or may have a material liability, including (i) any such plans that
are "employee welfare plans" as defined in section 3(1) of ERISA and (ii) any
such plans that are "employee pension benefit plans" as defined in section 3(2)
of ERISA.
1.21. "Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public health
and safety and protection of the environment.
1.22. "ERISA" means the federal Employee Retirement Income Security
Act of 1974.
1.23. "ERISA Group", with respect to any entity, means any Person
which is a member of the same "controlled group" or under "common control",
within the meaning of section 414(b) or (c) of the Code or section 4001(b)(1) of
ERISA, with such entity.
1.24. "Exchange Act" means the federal Securities Exchange Act of
1934.
1.25. "GAAP" means generally accepted accounting principles,
promulgated by the Financial Accounting Standards Board as in effect from time
to time, applied on a basis consistent with that used in preparation of the
financial statements referred to in Section 4.4.
1.26. "Hazardous Material" is defined in Section 5.13.
1.27. "Highland" means Highland Capital Partners V Limited
Partnership, a Delaware limited partnership, Highland Capital Partners V-B
Limited Partnership, a Delaware
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limited partnership, and Highland Entrepreneurs' Fund V Limited Partnership, a
Delaware limited partnership.
1.28. "Highland Holders" means holders of Investor Securities
originally issued to Highland or issued upon conversion, exercise, transfer or
exchange of Investor Securities originally issued to Highland.
1.29. "Initial Closing" is defined in Section 2.3
1.30. "Initial Closing Date" is defined in Section 2.3
1.31. "Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, designs, methodologies, data bases and computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registration of patents, trademarks, service marks and copyrights.
1.32. "Investment" means, with respect to any entity or business,
(a) the acquisition for value of any share of capital stock, evidence of
Indebtedness or other security issued issued by such entity or business, (b) any
loan, advance, or extension of credit to, or contribution to the capital of, or
on behalf of such en or business, (c) any purchase or commitment to purchase
assets on behalf of such entity or business, (d) payment of any expenses,
obligations or liabilities on behalf of such entity or business whether or not
incurred in the ordinary course of business (including the payment of
obligations under leases and contracts to the extent the benefits of such leases
or contracts are enjoyed by such entity or business and (e) salaries and
benefits of and other expenses relating to employees performing services on
behalf of such entity or business, including benefits and advances to employees
for travel expenses, drawing accounts and similar expenditures.
1.33. "Investor Agreements" means this Agreement, the Certificate of
Designation, the Stockholders Agreement, the Registration Rights Agreement, any
other agreement or instrument entered into between the Company and the Investors
in connection with the transactions contemplated hereby and any amendment or
modification to any of the foregoing.
1.34. "Investor Indemnitees" is defined in Section 8.2.1.
1.35. "Investor Securities" is defined in Section 2.1.
1.36. "Investors" means the holders of Investor Securities, the
original holders of which are listed in Exhibit 1.
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1.37. "IPO" means the initial closing of the first registered,
underwritten public offering of equity securities of the Company on Form S-1 or
any successor form.
1.38. "Legal Requirement" means any federal, state, local or foreign
law, statute, ordinance, code, order, rule, regulation or any final order,
judgment or decree of any court, arbitrator, tribunal or governmental authority,
or any license, franchise, permit or similar right granted under any of the
foregoing.
1.39. "Lien" means (a) any mortgage, pledge, lien, charge, security
interest or other similar encumbrance upon any property or assets of any
character, or upon the income or profits therefrom; or (b) any conditional sale
or other title retention agreement or similar arrangement (including a
capitalized lease); or (c) any sale, assignment, pledge or other transfer for
security of any accounts, general intangibles or chattel paper, with or without
recourse.
1.40. "Margin Stock" means "margin stock" within the meaning of any
regulation, interpretation or ruling of the Board of Governors of the Federal
Reserve System, all as from time to time in effect.
1.41. "Material Adverse Effect" means a material adverse effect upon
the business, assets, financial condition, income or prospects of the Company
and its Subsidiaries on a Consolidated basis.
1.42. "Material Agreements" is defined in Section 5.1.
1.43. "Members of the Immediate Family," as applied to any
individual, means each parent, spouse, child, brother, sister or the spouse of a
child, brother or sister of the individual, and each trust or family limited
partnership created for the benefit of one or more of such persons.
1.44. "Pension Plan" means each pension plan (as defined in section
3(2) of ERISA) established or maintained, or to which contributions are or were
made, by the Company or any of its Subsidiaries or former Subsidiaries, or any
Person which is a member of the same ERISA Group with any of the foregoing.
1.45. "Person" means an individual, partnership, corporation,
company, association, trust, joint venture, unincorporated organization,
business trust, limited liability company and any governmental department or
agency or political subdivision.
1.46. "Powertrust Adjustment Event" is defined in Section 6.7.3.
1.47. "Preferred Director" is defined in Section 4 of the
Stockholders Agreement.
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1.48. "Preferred Stock" means the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock.
1.49. "Principal Holder" means each original holder of Series D
Preferred Stock set forth on Exhibit 1 (and their Affiliates) so long as it
holds Investor Securities having an aggregate initial purchase price of at least
$6,000,000 and, for purposes only of Section 6.1.1, SAP Investments, Inc. so
long as it holds any Investor Securities.
1.50. "Qualified Public Offering" is defined in section 7.2 of the
Certificate of Designation.
1.51. "Registration Rights Agreement" is defined in Section 3.1.
1.52. "Required Holders" means the holders at the relevant time
(excluding the Company or any of its Subsidiaries) of at least a majority of the
voting power of all classes and types of Investor Securities (calculated to give
pro forma effect to the conversion of all Series D Preferred Stock), voting
together as a single class.
1.53. "Remedy Event" is defined in section 7 of the Certificate of
Designation.
1.54. "Second Closing" is defined in Section 2.4
1.55. "Second Closing Date" is defined in Section 2.4.
1.56. "Securities Act" means the federal Securities Act of 1933.
1.57. "Series B Preferred Stock" means the Series B Convertible
Preferred Stock, par value $0.01 per share of the Company.
1.58. "Series C Preferred Stock" means the Series C Convertible
Preferred Stock, par value $0.01 per share, of the Company.
1.59. "Series D Preferred Stock" means the Series D Redeemable
Convertible Preferred Stock, par value $0.01 per share, of the Company.
1.60. "Spin-Off" means with respect to any entity or business, the
distribution to the holders of capital stock of the Company of the equity
interests of such entity or assets comprising such business such that,
immediately after such distribution, such entity or business (or the assets and
liabilities relating thereto) would not be required to be disclosed on a balance
sheet of the Company in any manner (whether prepared on a consolidated basis or
otherwise) and the Company shall have no obligation to make any Investment in or
have any other obligation or liability with respect to, such entity or business
on or after the date of such Spin-Off, including payment of salaries and
benefits of employees performing services on behalf of such entity or
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business, obligations under contracts relating to or benefitting such entity or
business (e.g., payment of rent for office space or other real estate used by
such entity or business, and any trade payables or other current liabilities in
respect of goods, services or assets benefitting such entity or business, but
specifically excluding and permitting an administrative services agreement and
tax allocation agreement in customary form on arm's length terms approved by the
Board of Directors of the Company, including the Preferred Directors whose
approval will not be unreasonably withheld.
1.61. "Stockholders Agreement" is defined in Section 3.1.
1.62. "Stockholders' Equity" means, at any date, stockholders'
equity of the Company and its Subsidiaries determined in accordance with GAAP on
a Consolidated basis, excluding the effect of any foreign currency translation
adjustments.
1.63. "Stock Option Plans" is defined in Section 5.1.1.
1.64. "Subsidiary" means any Person of which the Company or other
specified Person now or hereafter shall at the time (a) own directly or
indirectly through a Subsidiary at least 50% of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally or (b)
constitute a general partner.
1.65. "Welfare Plan" means each welfare plan as defined in section
3(1) of ERISA established or maintained, or to which any contributions are or
were made, by the Company or any of its Subsidiaries or any Person which is a
member of the same ERISA Group with any of the foregoing.
1.66. "WPC" means Weston Presidio Capital III, L.P., a Delaware
limited partnership, and Weston Presidio Entrepreneur Fund, L.P., a Delaware
limited partnership.
1.67. "WPC Holders" means holders of Investor Securities originally
issued to WPC or Investor Securities issued upon conversion, exercise, transfer
or exchange of Investor Securities originally issued to WPC.
2. SALE AND PURCHASE OF SECURITIES.
2.1. Investor Securities. The Series D Preferred Stock being
purchased by the Investors hereunder, together with any securities issued with
respect thereto, upon exercise, conversion or transfer thereof or in exchange
therefor, including the Common Stock issuable upon conversion of the Series D
Preferred Stock, are collectively referred to as "Investor Securities";
provided, however, that once any such securities have been sold in a public
offering or pursuant to Rule 144 promulgated under the Securities Act, they
shall cease to be Investor Securities for all purposes of this Agreement. The
powers, preferences and rights of the Series D Preferred Stock are set forth in
the Company's Charter as amended through the date hereof,
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including the Certificate of Designation, Preferences and Rights for the Series
D Preferred Stock in the form set forth in Exhibit 2.1 (the "Certificate of
Designation").
2.2. Agreement to Sell and Purchase. In reliance on the Investors'
representations and warranties contained in Section 7, and subject to all of the
terms and conditions hereof, the Company agrees to issue and sell to the
Investors and, subject to all of the terms and conditions hereof and in reliance
on the representations and warranties of the Company set forth or referred to
herein, the Investors severally, and not jointly or jointly and severally, agree
to purchase at the Closing the Investor Securities specified in Exhibit 1 for
each Investor at the purchase price, payable by wire transfer of immediately
available funds, so specified in such Exhibit. The Company shall have the right
to terminate this Agreement at the Closing without recourse or liability if the
total purchase price set forth in Exhibit 1 is not delivered at the Closing for
any reason.
2.3. Closing. The initial closing of the purchase and sale of
Investor Securities (the "Initial Closing") shall take place in Reston, Virginia
at the offices of Digital Commerce Corporation on March 13, 2000 (the "Initial
Closing Date") or at such other place and on such other date as the Company and
the Investors may agree upon. At the Initial Closing, the Company will deliver
to the Investors certificates evidencing the respective Investor Securities set
forth in Exhibit 1 for the Initial Closing against payment of the purchase price
therefor.
2.4. Second Closing. The second closing of the purchase and sale of
Investor Securities (the "Second Closing") shall take place in Boston,
Massachusetts at the offices of Ropes & Gray on or after March 22, 2000 (the
"Second Closing Date") or at such other time and place as the Company and the
Investors in the Second Closing may agree upon. At the Second Closing, the
Company will deliver to the Investors certificates evidencing the respective
Investor Securities set forth in Exhibit 1 for the Second Closing against
payment of the purchase price therefor (it being understood that the amount of
Investors Securities to be purchased at the Second Closing shall be either
$18,000,000 in the event CMGI, Inc. purchases Investor Securities at the Second
Closing or $3,500,000 in the event CMGI, Inc. does not purchase Investor
Securities at the Second Closing). The Initial Closing and the Second Closing
are referred to collectively as the "Closings" and the Initial Closing Date and
the Second Closing Date are referred to collectively as the "Closing Dates."
2.5. Use of Proceeds. The Company covenants that it will apply the
cash proceeds from the sale of the Investor Securities solely for the following
lawful purposes: (a) transaction costs and (b) working capital and capital
expenditures as provided for in the Company's business plan, approved from time
to time by the Board. No portion of such proceeds will be used to acquire or
maintain Margin Stock.
3. CONDITIONS TO PURCHASE. The Investors' several obligations to purchase
the Investor Securities pursuant to this Agreement on the Closing Date are
subject to the satisfaction, on or prior to each Closing Date, of the following
conditions:
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3.1. Investor Agreements. The Company and its stockholders (other
than the Investors) party thereto shall have duly authorized, executed and
delivered to the Investors the following agreements:
(a) Stockholders Agreement dated as of the Initial Closing
Date among the Company, the Investors and certain other stockholders of
the Company (as from time to time in effect, the "Stockholders
Agreement").
(b) Registration Rights Agreement dated as of the Initial
Closing Date among the Company, the Investors and certain other
stockholders of the Company (as from time to time in effect, the
"Registration Rights Agreement").
3.2. Investor Securities. The Company shall have issued to the
Investors shown on Exhibit 1 the number of shares of Series D Preferred Stock
shown opposite their names in Exhibit 1 for the aggregate consideration as shown
in Exhibit 1.
3.3. Legal Opinion. On each Closing Date, the Investors shall have
received from Winstead Sechrest & Minick P.C., counsel to the Company and its
Subsidiaries, their opinion in substantially the form of Exhibit 3.3.
3.4. Representations and Warranties; Officer's Certificate. The
representations and warranties of the Company contained herein shall be true and
correct on and as of each Closing Date with the same force and effect as though
originally made on and as of such Closing Date; between the Balance Sheet Date
and the Closing Date, no Material Adverse Effect shall have occurred (in the
judgment of the Required Holders); the Company shall have performed all
obligations required to be performed by it under the Investor Agreements and the
Material Agreements; and the Investors shall have received on such Closing Date
a certificate to these effects signed by the President or Chief Financial
Officer of the Company.
3.5. Key Executive Insurance. The Company will have in full force
and effect as the owner thereof on each Closing Date a key executive life
insurance policy with a financially sound and reputable insurer in the aggregate
amount of $3,000,000 covering the life of Tony Bansal, the proceeds of which
shall be payable to the Company. Such policy shall not be cancelable without at
least 30 days' written notice from the insurer to WPC.
3.6. Legality; Governmental Authorization. The purchase of the
Investor Securities shall not be prohibited by any law or governmental order or
regulation, and shall not subject the Investors to any penalty or tax (other
than a penalty or tax that has been reimbursed by the Company). All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations or filings with, any governmental or administrative
agency or of any other Person, if any, with respect to any of the transactions
contemplated by this Agreement
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or the other Investor Agreements, the absence of which could have a Material
Adverse Effect, shall have been duly obtained or made and shall be in full force
and effect.
3.7. Amendment of Certificate of Incorporation; Series B and C Notes.
The Certificate of Incorporation of the Company shall have been amended as
provided for in Exhibit 3.7A and all issued and outstanding Series B and C Notes
shall have been paid in full or shall have been converted into Series B
Preferred Stock or Series C Preferred Stock, as applicable, having the powers,
rights and preference set forth in the amended Certificate of Designation
attached hereto as Exhibit 3.7B.
3.8. General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement, the other
Investor Agreements and the Material Agreements shall be reasonably satisfactory
in form and substance to the Required Holders, and the Investors shall have
received copies of all documents, including records of corporate proceedings and
officers certificates, which the Required Holders may have reasonably requested
in connection therewith.
4. CONDITIONS TO COMPANY'S OBLIGATIONS. The Company's obligations pursuant
to this Agreement on each Closing Date are subject to the satisfaction, on or
prior to such Closing Date, of the following conditions:
4.1. Representations and Warranties. The representations and warranties
of each of the Investors contained herein shall be true and correct on and as of
such Closing Date with the same force and effect as though originally made on
and as of such Closing Date; and each of the Investors shall have performed all
obligations required to be performed by each of them under the Investor
Agreements.
4.2. Legality, Governmental Authorization. The purchase of the Investor
Securities shall not be prohibited by any law or governmental order or
regulation applicable to the Investors. The Investors shall have obtained or
made all necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations or filings with, any
governmental or administrative agency or of any other Person, if any, with
respect to any of the transactions contemplated by this Agreement or the other
Investor Agreements.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Investors to
enter into this Agreement and to purchase the Investor Securities hereunder, the
Company represents and warrants to the Investors as follows:
5.1. Material Agreements. The Company has furnished to the
Investors correct and complete copies of the documents listed below, all of
which have been executed on or prior to the date hereof and any amendments
thereto, modifications thereof or waivers granted thereunder. The documents
listed below are referred to collectively as the "Material Agreements".
References to any of the Material Agreements mean the Material Agreements in
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the form so furnished to the Investors, without regard to any amendment,
modification, waiver or termination of such document which is made or otherwise
becomes effective after the date hereof, and shall include other documents,
exhibits and schedules which are attached thereto or incorporated therein by
reference:
5.1.1. The Executive Retention Plan, the 1998 Stock Option
Plan, the 1996 Stock Option Plan and the related forms of stock option
agreements in substantially the forms attached to Section 5.1.1 of the
Disclosure Letter (the "Stock Option Plans"), indicating the allocation
of a total of 6,477,847 shares of Common Stock to be reserved for
options to be granted to outside directors, directors selected by the
Company's management (which directors are not also employees or
officers of the Company), officers, executives or other employees
approved by the Board of Directors.
5.1.2. Employment Agreements and non-competition agreements
dated on or about the date hereof between the Company and each of the
employees listed on Section 5.1.2 of the Disclosure Letter of this
Agreement.
Other than customary subscription agreements with respect to the
issuance of shares of Common Stock to the stockholders listed in Section 5.3.1
of the Disclosure Letter or as otherwise set forth in Section 5.3.1 of the
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
or bound by any agreement or understanding affecting the capital stock of the
Company or its Subsidiaries or the voting thereof which is not a Material
Agreement or an Investor Agreement or specifically contemplated by or referred
to in the Material Agreements or the Investor Agreements.
5.2. Organization and Subsidiaries; Business.
5.2.1. The Company. The Company is a duly organized and
validly existing corporation in good standing under the laws of
Delaware. The Company has all necessary corporate power and authority
to enter into and perform this Agreement and the other Investor
Agreements and Material Agreements to which it is party, to issue and
sell the Investor Securities to be issued and sold by it hereunder, and
to carry on the businesses now conducted or presently proposed to be
conducted by it. The Company has taken all corporate action necessary
to authorize the Investor Agreements and Material Agreements to which
it is party and the issuance of the Investor Securities to be issued
and sold by it hereunder. The Investor Agreements and Material
Agreements to which the Company is party and the Investor Securities to
be issued and sold by the Company hereunder have been duly executed and
delivered by the Company and are the legal, valid and binding
obligations of the Company, enforceable in accordance with their
respective terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and
(ii) as
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limited by equitable principles which may affect the availability of
specific performance, injunctive relief or other equitable remedies.
5.2.2. Subsidiaries. The Company does not own or control,
directly or indirectly, or have an interest in, any other corporation,
partnership, association or business entity, except for the
corporations, limited liability companies, partnerships or joint
ventures described in Section 5.2.2 of the Disclosure Letter.
5.3. Capitalization.
5.3.1. Capital Stock of the Company. The authorized capital
stock of the Company is set forth in Section 5.3.1 of the Disclosure
Letter. On the Closing Date, after giving effect to the issuance of the
Investor Securities and the consummation of the transactions
contemplated by the Investor Agreements, the Company will have no
outstanding capital stock except for the shares of Common Stock and
Preferred Stock owned beneficially and of record as set forth in
Section 5.3.1 of the Disclosure Letter, all of which will be validly
issued, fully paid, nonassessable and, to the best knowledge of the
Company, subject to no lien or restriction on transfer, except
restrictions on transfer imposed by the Investor Agreements and
applicable securities laws or as otherwise set forth in Section 5.3.1
of the Disclosure Letter.
5.3.2. Options, etc. Other than as set forth in Section 5.3.2
of the Disclosure Letter, or in the Investor Agreements or Material
Agreements, the Company does not have outstanding (a) any rights
(either preemptive or otherwise) or options to subscribe for or
purchase, or any warrants or other agreements providing for or
requiring the issuance of, any capital stock or any securities
convertible into or exchangeable for its capital stock, (b) any
obligation to repurchase or otherwise acquire or retire any of its
capital stock, any securities convertible into or exchangeable for its
capital stock or any rights, options or warrants with respect thereto,
(c) any rights to require the Company to register the offering of any
of its securities under the Securities Act or (d) any restrictions on
voting any of the Company's securities.
5.3.3. Capital Stock of the Subsidiaries. The authorized
capital stock of each Subsidiary of the Company is set forth in Section
5.3.3 of the Disclosure Letter. Except as set forth in Section 5.3.3 of
the Disclosure Letter, each such Subsidiary has no outstanding capital
stock except for shares of capital stock owned beneficially and of
record by the Company, all of which will be validly issued, fully paid,
nonassessable and subject to no lien or restriction on transfer, except
restrictions on transfer imposed by the Investor Agreements, the
Material Agreements and applicable securities laws and Liens.
5.3.4. Subsidiary Options, etc. Except as set forth in Section
5.3.4 of the Disclosure Letter, none of the Company's Subsidiaries has
outstanding (a) any rights
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(either preemptive or otherwise) or options to subscribe for or
purchase, or any warrants or other agreements providing for or
requiring the issuance of, any capital stock or any securities
convertible into or exchangeable for its capital stock, (b) any
obligation to repurchase or otherwise acquire or retire any of its
capital stock, any securities convertible into or exchangeable for its
capital stock or any rights, options or warrants with respect thereto,
(c) any rights to require the Subsidiary to register the offering of
any of its securities under the Securities Act or (d) any restrictions
on voting any of the Subsidiary's securities.
5.4. Reports, Financial Statements and Other Documents. The
Investors have been furnished with complete and correct copies of the following:
(a) Unaudited Consolidated balance sheet (the "Balance Sheet")
of the Company and its Subsidiaries as of December 31, 1999 (the
"Balance Sheet Date"), together with the related statements of income,
cash flows and stockholders' equity for the year then ended.
(b) Unaudited Consolidated balance sheet of the Company and
its Subsidiaries as of January 31, 2000, together with the related
statement of income for the one-month period then ended.
The financial statements referred to in clauses (a) and (b) above have
been prepared in accordance with GAAP and fairly present the financial condition
of the Company and its Subsidiaries at the dates thereof and the results of
their operations for the periods covered thereby, subject to normal year-end
adjustments and the addition of footnotes in the case of the financial
statements referred to in clause (b) above. Except as set forth in Section 5.4
of the Disclosure Letter, neither the Company nor any of its Subsidiaries has
any material liabilities, contingent or otherwise, which are not referred to in
the Balance Sheet.
5.5. Changes in Condition. Since the Balance Sheet Date:
5.5.1. Material Adverse Effect. No Material Adverse Effect has
occurred.
5.5.2. Extraordinary Transactions, etc. Except as set forth in
Section 5.5.2 of the Disclosure Letter, neither the Company nor any of
its Subsidiaries has (a) declared any dividend or other distribution on
any shares of its capital stock, (b) made any payment (other than
compensation of its directors, officers and employees at rates in
effect prior to the Balance Sheet Date or for bonuses accrued in
accordance with normal practice prior to the Balance Sheet Date) to
any of its Affiliates, (c) increased the compensation, including
bonuses and benefits, payable or to be payable to any of its
directors, officers, employees or Affiliates by more than 10%, or (d)
entered into any Contractual Obligation, or entered into or performed
any other transaction, not in
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the ordinary and usual course of business and consistent with
past practice, other than as specifically contemplated by this
Agreement.
5.6. Solvency. After giving effect to the financing contemplated
hereby, the Company is solvent (within the meaning contemplated by section 548
of Title 11 of the United States Code and any similar state statutes which may
be applicable).
5.7. Taxes. Except as set forth in Section 5.7 of the Disclosure
Letter, since March 1, 1995, each of the Company and its Subsidiaries has filed
all material tax returns and other tax information which are required to be
filed by it and has paid, or made adequate provision for the payment of, all
taxes which have or may become due pursuant to such returns or information or to
any assessment received by it. Neither the Company nor any of its Subsidiaries
has knowledge of any material additional assessments or any basis therefor. The
Company reasonably believes that the charges, accruals and reserves on the
Balance Sheet in respect of taxes or other governmental charges are adequate.
5.8. Contractual Obligations, etc.
5.8.1. Certain Contracts. Section 5.8 of the Disclosure Letter
contains, together with a reference to the subparagraph pursuant to
which each item is being disclosed, a correct and complete list of all
material Contractual Obligations of the Company and its Subsidiaries of
the types described below:
(a) All collective bargaining agreements; all
employment, profit sharing, profit participation, deferred
compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, welfare or incentive plans
or agreements; and all plans, agreements or practices which
constitute "fringe benefits" to any of the employees of the
Company or its Subsidiaries, including vacation programs, sick
leave programs, group medical insurance, group life insurance,
disability insurance and related benefits.
(b) All Contractual Obligations under which the
Company or its Subsidiaries are restricted from carrying on
any business, venture or other activities anywhere in the
world.
(c) All Contractual Obligations (including options)
to sell or lease (as lessor) any of the properties or assets
of the Company or its Subsidiaries except in the ordinary
course of business.
(d) All Contractual Obligations pursuant to which the
Company or its Subsidiaries guarantees any liability of any
Person, or pursuant to which any Person guarantees any
liability of the Company or its Subsidiaries.
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(e) All Contractual Obligations with any Affiliate of
the Company or its Subsidiaries.
(f) All Contractual Obligations constituting license
agreements.
(g) All Contractual Obligations under which the
Company or any of its Subsidiaries leases real property or is
obligated to lease or purchase real property.
(h) All Contractual Obligations of the Company or any
of its Subsidiaries relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien on,
any asset of the Company or any of its Subsidiaries (except
liens imposed by operation of law in favor of landlords,
suppliers, mechanics or others who provide services to the
Company).
(i) All Contractual Obligations pursuant to which the
Company or any of its Subsidiaries is committed to acquire a
business or the stock (or other equity interests) of any
Person or to merge or consolidate with any Person.
5.8.2. Nature of Contracts. All of the material Contractual
Obligations of the Company and its Subsidiaries at the Closing are
enforceable against the Company and, to its knowledge, the other
parties thereto in accordance with their terms, except for Contractual
Obligations the failure of which to be so enforceable has not resulted
in and will not result in a Material Adverse Effect. To the Company's
knowledge, neither the Company nor any of its Subsidiaries is now in
default under, nor are there any liabilities arising from any breach or
default by any Person prior to the date hereof of, any provision of any
such Contractual Obligation other than breaches or defaults which,
individually or in the aggregate, have not resulted, and are not
reasonably likely to result, in a Material Adverse Effect.
5.8.3. Charter or By-Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or in default under, any provision of
its Charter or By-Laws, other than violations or breaches which,
individually or in the aggregate, have not resulted in and will not
result in a Material Adverse Effect and the Investors have been
furnished with copies of such Charter and By-Laws.
5.8.4. Insurance. Each of the Company and its Subsidiaries has
insurance policies in full force and effect, written by reputable
insurers licensed to write insurance in the states in which the Company
and its Subsidiaries conduct their business, which insurance contracts
provide for coverages which are customary in their respective
businesses as to amount and scope.
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5.8.5. Transactions with Affiliates. Other than as set forth
in Section 5.8 of the Disclosure Letter, no Affiliate of the Company or
its Subsidiaries is a competitor, customer or supplier of, or is party
to any material Contractual Obligation with, the Company or any of its
Subsidiaries.
5.9. Litigation. Except as set forth in Section 5.9 of the
Disclosure Letter, no litigation or proceeding before, or investigation by, any
foreign, federal, state or municipal board or other governmental or
administrative agency or any arbitrator, is pending or to the knowledge of the
Company threatened (or to the knowledge of the Company does any basis exist
therefor), against the Company or its Subsidiaries or, to the Company's
knowledge, any officer of the Company or its Subsidiaries, which in the
aggregate could result in any material liability or which may otherwise result
in a Material Adverse Effect, or which seeks rescission of, seeks to enjoin the
consummation of, or which questions the validity of, this Agreement or any other
Investor Agreement or any of the transactions contemplated hereby or thereby.
Neither the Company nor its Subsidiaries has been charged, nor to the Company's
knowledge is it threatened to be charged, with infringement of any trademark,
trade name, service mark, copyright, patent, patent right or other proprietary
right of any Person.
5.10. Violation of Other Instruments. Neither the execution and
delivery of this Agreement or any other Investor Agreement by the Company or its
Subsidiaries party thereto, nor the consummation of any of the transactions
contemplated hereby or thereby, will (a) constitute a breach of or a default
under any Contractual Obligation of the Company or any of its Subsidiaries or,
to the actual knowledge of the Company's Chief Executive Officer and Chief
Financial Officer, any officer of the Company or its Subsidiaries, (b) result in
acceleration in the time for performance of any obligation of the Company or any
of its Subsidiaries under any such Contractual Obligation, (c) result in the
creation of any Lien upon any asset of the Company or any of its Subsidiaries,
(d) require any consent, waiver or amendment to any such Contractual Obligation
that has not been obtained, (e) give rise to any severance payment, right of
termination, securities repurchase right or other right under any such
Contractual Obligation, or (f) violate or give rise to a default under any Legal
Requirement, except for events or conditions described in clauses (a) through
(f) above which will not in the aggregate be reasonably likely to result in a
Material Adverse Effect.
5.11. Consents. No approval, consent, authorization or other order
of, and no declaration, filing, registration, qualification or recording with,
any governmental authority or any other Person is required to be made by or on
behalf of the Company or any of its Subsidiaries in connection with the
execution, delivery or performance of this Agreement or any other Investor
Agreement, or any of the transactions contemplated hereby or thereby, other than
filings described in Section 5.11 of the Disclosure Letter.
5.12. Operations in Conformity With Law, etc. The operations of the
Company and its Subsidiaries as now conducted are not in violation of, nor is
the Company or any of its
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Subsidiaries in default under, any Legal Requirements presently in effect,
except for such violations and defaults as do not and will not, in the
aggregate, have a Material Adverse Effect. The Company has received no notice of
any such violation or default and has no knowledge of any basis on which the
operations of the Company or its Subsidiaries, when conducted as currently
proposed to be conducted after the Closing Date, would be held so as to violate
or to give rise to any such violation or default. The Company and its
Subsidiaries have all franchises, licenses, permits or other authority presently
necessary for the conduct of their business as now conducted, except where the
failure to obtain such franchises, licenses, permits or authority has not had
nor would be reasonably likely to result in a Material Adverse Effect. Based on
the facts presently known to the Company, all future expenditures on the part of
the Company or its Subsidiaries required to meet the provisions of any presently
existing Legal Requirement (including Legal Requirements relating to employment
practices or to occupational or health standards or to environmental
considerations) will not, in the aggregate, have a Material Adverse Effect.
5.13. Environmental Matters. Each of the Company and its
Subsidiaries is in compliance in all material respects with all applicable
published rules and regulations of the United States Environmental Protection
Agency and similar agencies in states in which the Company or its Subsidiaries
conducts its business. No suit, claim, action or proceeding is now pending
before any court, governmental agency or board or other forum or threatened by
any Person for, and the Company and its Subsidiaries have received no written
correspondence from any federal, state or local governmental authority with
respect to, (a) noncompliance by the Company or its Subsidiaries with any
environmental law, rule or regulation, (b) personal injury, wrongful death or
other tortious conduct relating to materials, commodities or products used,
sold, transferred or manufactured by the Company or its Subsidiaries (including
products containing or incorporating asbestos, lead or other hazardous
materials) or (c) the release into the environment by the Company or its
Subsidiaries of any pollutant, toxic or hazardous material or waste (including
any "hazardous substance" or "pollutant" or "contaminant" as defined in section
101(14) of the Comprehensive Environmental Response, Compensation and Liability
Act, as amended) (collectively, "Hazardous Material") generated by the Company
or its Subsidiaries whether or not occurring at or on a site owned, leased or
operated by the Company or its Subsidiaries. Section 5.13 of the Disclosure
Letter lists all waste disposal or dump sites, if any, at which any material
amount of Hazardous Material generated by either the Company or its Subsidiaries
have been disposed of or finally came to be located or lists the hauler who has
taken such Hazardous Material from the Company for disposal, indicates all such
sites which have been included (including as a potential or suspect site) in any
published federal, state or local "superfund" or other list of hazardous or
toxic waste sites and lists any material amount of Hazardous Material present at
the Company's or any of its Subsidiaries' facilities. To the Company's
knowledge, but without having conducted special boring or drilling, no material
amount of Hazardous Material is present in any real property currently or
formerly owned or leased by it or its Subsidiaries.
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5.14. ERISA Matters. Section 5.14 of the Disclosure Letter sets
forth a complete list of all Employee Benefit Plans and all Welfare Plans
applicable to the Company's and its Subsidiaries' employees. To the knowledge of
the Company, each Employee Benefit Plan and Welfare Plan has been administered
in substantial compliance with its terms and all applicable laws, including, the
Code and ERISA, to the extent that failure to do so would have a Material
Adverse Effect. The Company and its Subsidiaries have no obligation under any
Welfare Plan to provide for the continuation of benefits (other than disability
payments and medical benefits incurred for illness arising in the course of
employment) for more than one year after retirement or other termination of
employment, except as may be required pursuant to Code section 4980B regarding
continuation coverage of health insurance or other similar laws regarding such
continuation coverage. No "reportable events" within the meaning of section 4043
of ERISA have occurred with respect to any Employee Benefit Plan. No Pension
Plan is a "multiemployer plan" as defined in ERISA. The present value of
benefits liabilities as described in Title IV of ERISA of Employee Benefit Plans
does not exceed the current value of such Employee Benefit Plans assets
allocable to such benefits liabilities by more than $100,000, determined using
actuarial methods and assumptions consistently applied in the ongoing
administration of each such Employee Benefit Plan.
5.15. Intellectual Property. Except as set forth in Section 5.15 of
the Disclosure Letter, all protectable Intellectual Property rights of the
Company which are, individually or in the aggregate, material to the Company and
its Subsidiaries are valid and subsisting and are in full force and effect and
enforceable. Except as set forth in Section 5.15 of the Disclosure Letter,
neither the Company nor its Subsidiaries is party to or bound by any order,
judgment, decree or stipulation which materially restricts the use or licenses
of any Intellectual Property. Except as set forth in Section 5.15 of the
Disclosure Letter, neither the Company nor its Subsidiaries has entered into any
material agreement to indemnify any other person or entity against any charge of
infringement of any patent, trademark, trade name, service mark, copyright or
trade secret. Except as set forth in Section 5.15 of the Disclosure Letter,
neither the Company nor its Subsidiaries is in breach of any license agreement,
except for such breaches as have not had and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of the Company, the conduct of the business of the Company and its
Subsidiaries as presently conducted and as proposed to be conducted does not,
and will not, conflict with or infringe upon any Intellectual Property rights of
any other person.
5.16. Labor Relations. None of the employees of the Company or any
of its Subsidiaries is presently represented by a labor union, and, to the
Company's Knowledge, no petition has been filed or proceedings instituted by any
employee or group of employees with any labor relations board seeking
recognition of a bargaining representative. No controversies or disputes are
pending between the Company or any of its Subsidiaries and any of its employees,
except for such controversies and disputes as do not and will not, in the
aggregate, have a Material Adverse Effect.
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<PAGE> 25
5.17. Filings, Broker's Fees, etc. Except as set forth in Section
5.17 of the Disclosure Letter, neither the Company nor any of its Subsidiaries
is obligated to pay any broker's fee, finder's fee, investment banker's fee or
other similar transaction fee in connection with any Investor Agreement or the
transactions contemplated hereby or thereby.
5.18. Governmental Regulation. Neither the Company nor its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
or subject to any statute or regulation which regulates the incurring of
indebtedness by the Company for borrowed money.
5.19. Margin Stock. Neither the Company nor its Subsidiaries owns
any Margin Stock.
5.20. Real Property Holding Corporation. Neither the Company nor its
Subsidiaries is a "United States real property holding corporation," as defined
in section 897(c)(2) of the Code and Treasury Regulation section 1.897-2(b).
5.21. Disclosure. To the best knowledge of the Company, neither this
Agreement, nor any agreement, certificate, statement or document furnished in
writing by or on behalf of the Company to the Investors in connection herewith
or therewith (other than the Company's Private Placement Memorandum, dated 1999)
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in any material respect. To the best knowledge of the Company, the
Company's Private Placement Memorandum, dated 1999, as of the date of such
preparation, does not contain any untrue statement of material fact or omit to
state a material fact necessary in order to make the statements contained
therein not misleading in any material respect.
6. GENERAL COVENANTS. The Company covenants that, until the closing of a
Qualified Public Offering it will comply, and will cause each of its
Subsidiaries to comply, with the following provisions:
6.1. Covenants Relating to the Company's Board of Directors.
6.1.1. Board of Directors. The Board of Directors of the
Company (a) shall meet at least once each fiscal quarter and each
Principal Holder shall be notified at least 10 days in advance of such
meetings of the Board of Directors and each Principal Holder (other
than any such Principal Holder whom the Company has reasonably
determined at the time of any such meeting is a competitor of the
Company) shall have the right to have a representative attend all such
meetings in a nonvoting observer capacity, and (b) shall establish and
maintain an Audit Committee and a Compensation Committee, each of which
committees shall include as a member a Preferred Director.
6.1.2. Directors Expenses. The Company will pay all direct
out-of-pocket expenses reasonably incurred by any Preferred Director in
attending each meeting of
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the Board of Directors, or any committee thereof. All director fees and
incentives for directors who are not also employees or officers of the
Company shall be payable at the same rate.
6.1.3. Indemnity. The Company and each of its Subsidiaries
will adopt and maintain in their respective Charter or Bylaws
provisions indemnifying the directors of each such Person to the
fullest extent permitted by applicable law.
6.2. Information and Reports to be Furnished. The Company and its
Subsidiaries will maintain a system of accounting in which correct and complete
entries will be made of all dealings and transactions in relation to their
business and affairs in accordance with GAAP. Until a Qualified Public Offering
occurs (except as otherwise provided below), the Company will furnish the
following information to each holder of shares of Investor Securities holding
Investor Securities with an aggregate original purchase price of at least $2
million; provided, however, that the Company shall not be obligated to provide
to any such Principal Holder whom the Board reasonably determines is a
competitor of the Company any competitively sensitive information provided the
Company provides such Holder with written notice describing the nature of the
information not being disclosed:
6.2.1. Annual Statements. As soon as available, and in any
event within 120 days after the end of each fiscal year of the Company,
the audited Consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the audited
Consolidated statements of income, stockholders' equity and cash flows
for such year of the Company and its Subsidiaries, together with the
consolidated figures for the preceding fiscal year, if any (all in
reasonable detail) such statements being accompanied by the reports
thereon of independent certified public accountants to the effect that
such consolidated financial statements have been prepared in accordance
with GAAP and present fairly in all material respects the financial
position of the Company and its Subsidiaries as of the dates specified
and the results of their operations and cash flows with respect to the
periods specified.
6.2.2. Quarterly Reports. As soon as available, and in any
event within 45 days after the end of each of the first three fiscal
quarters in each fiscal year of the Company, the unaudited Consolidated
balance sheets of the Company and its Subsidiaries as of the end of
such quarter and the Consolidated statements of income, stockholders'
equity and cash flows for such quarter and the portion of the fiscal
year then ended of the Company and its Subsidiaries, together with
comparative Consolidated figures for the corresponding periods of the
preceding fiscal year (all in reasonable detail).
6.2.3. Monthly Reports. As soon as practicable, and in any
event within 45 days after the end of each calendar month, the
financial statements of the Company
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and its Subsidiaries as of the end of such month in the form
customarily prepared by management for internal use.
6.2.4. Annual Budgets. Not later than the end of each fiscal
year of the Company a proposed month by month operating and capital
budget for the following fiscal year of the Company, including a
monthly balance sheet, projected cash flows, and a monthly profit and
loss statement.
6.2.5. Officers' Certificates. Together with delivery of
financial statements of the Company and its Subsidiaries pursuant to
Sections 6.2.1 and 6.2.2 above as of the end of each fiscal quarter of
the Company, a certificate of the Chief Executive Officer or the Chief
Financial Officer of the Company, that such statements have been
prepared in accordance with GAAP and present fairly in all material
respects the Consolidated financial position of the Company and its
Subsidiaries as of the dates specified and the Consolidated results of
their operations and cash flows with respect to the periods specified
(subject in the case of interim financial statements only to normal
year-end audit adjustments and the addition of footnotes).
6.2.6. Notice of Litigation, Defaults, etc. The Company will
promptly, and in any event within 10 days after the Company has
knowledge of such event, give written notice to each Principal Holder
of (a) any litigation or any administrative proceeding to which it or
any of its Subsidiaries may hereafter become a party which after giving
effect to applicable insurance is reasonably likely to result in a
charge against income in excess of $25,000, (b) any resignation of or
other change in executive management of the Company or any serious
illness of any member of such executive management, and (c) any offers
to purchase a majority (or greater) interest in the Company (whether by
means of purchase of securities or assets or otherwise). The Company
will promptly, and in any event within three days after any executive
officer of the Company or any of its Subsidiaries obtains knowledge of
any Remedy Event or material default by the Company under this
Agreement, any other Investor Agreement or any other Contractual
Obligation, furnish notice to each Principal Holder specifying the
nature of such Remedy Event or material default and stating the action
the Company has taken or proposes to take with respect thereto.
Promptly after the receipt thereof, the Company will furnish to each
Principal Holder copies of any reports as to inadequacies in accounting
controls submitted by independent accountants.
6.2.7. Notices under Material Agreements. Prior to an IPO, the
Company will furnish to the Principal Holders copies of all amendments,
modifications, notices of defaults, waivers and consents given to it or
to any of its Subsidiaries pursuant to any Material Agreement.
6.2.8. Information Provided to Stockholders. To the extent not
previously provided, within 10 days after its release to stockholders,
the Company will furnish the
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holders of Investor Securities with copies of all information, proxy
statements, notices, reports and other stockholder material mailed to
stockholders.
6.2.9. Other Information. From time to time prior to an IPO,
upon the reasonable request of any authorized officer of any Principal
Holder, the Company will furnish to any such authorized officer such
information regarding the business, assets or financial condition of
the Company and its Subsidiaries as such officer may reasonably
request. Each such officer shall have the right during normal business
hours at reasonable intervals and upon reasonable notice to examine the
books and records of the Company and its Subsidiaries, to make copies
and notes therefrom, and to make an independent examination of the
books and records of the Company and its Subsidiaries at the expense of
such Principal Holder and in a manner that does not interfere with the
business operations of the Company and its Subsidiaries. The Principal
Holders shall coordinate any visits under this Section 6.2.9 through
the Company's Chief Financial Officer so as to minimize the number of
separate visits by the respective Principal Holders.
6.2.10. Interview and Advisory Rights. For the purpose of
conducting independent investigations pursuant to Section 6.2.9, prior
to an IPO the Company shall make available to an authorized officer of
any Principal Holder upon reasonable notice and at reasonable times,
but no more often than quarterly, (a) the Chief Financial Officer or
the Chief Executive Officer of the Company, and (b) any other officers,
accountants and internal control personnel of the Company. The Company
shall use reasonable efforts to make available any directors of the
Company who are not officers. In addition, prior to an IPO the
Principal Holders shall be permitted to consult with and advise
management of the Company on significant business issues, including
proposed annual operating plans. The Principal Holders shall coordinate
any visits under this Section 6.2.10 through the Company's Chief
Financial Officer so as to minimize the number of separate visits by
the respective Principal Holders.
6.2.11. Annual Meeting. Within 90 days after the Company's
annual financial statements are required to be furnished in accordance
with Section 6.2.1 and on not less than 10 days prior written notice,
the Company will hold an annual meeting for the benefit of its
stockholders, including the holders of Investor Securities. At such
annual meeting the principal executive, financial and operations
officers of the Company and its Subsidiaries will present a review of,
and will discuss with those in attendance, in reasonable detail, the
general affairs, management, financial condition, results of operations
and business prospects of the Company and its Subsidiaries.
6.3. Merger, Consolidation and Sale of Assets. Without the consent
of the Required Holders, neither the Company nor any of its Subsidiaries will
become a party to or authorize any merger or consolidation, or sell, lease,
sublease or otherwise transfer or dispose of
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<PAGE> 29
all or substantially all of its assets, or enter into an agreement therefor, or
enter into or authorize any liquidation, dissolution or recapitalization, except
for:
6.3.1. The merger of a wholly owned Subsidiary of the Company
into the Company or another wholly owned Subsidiary of the Company.
6.3.2. Sales of inventory in the normal course of business.
6.3.3. Other transactions receiving the prior written approval
of the Required Investors.
For purposes of this Section "all or substantially all of if its
assets" shall mean assets having an aggregate fair market value of at least 50%
of the total assets of the Company and its Subsidiaries as of the Balance Sheet
Date or more which are sold, leased, subleased, transferred or disposed of after
the date hereof.
6.4. Stock Issuance, etc. Except with the prior written consent of
the Required Holders, neither the Company nor any Subsidiary will (a) issue,
sell, give away, transfer, assign or otherwise dispose of, (b) grant any rights
(either preemptive or other) or options to subscribe for or purchase, or (c)
enter into any agreements or issue any warrant providing for the issuance of any
of the capital stock of the Company or any stock or securities convertible into
or exchangeable for any of the capital stock of the Company having rights,
privileges and preferences pari passu or senior to the Series D Preferred Stock,
other than as specifically contemplated by the Investor Agreements or the
Material Agreements.
6.5. Transactions with Affiliates. Except for transactions
expressly contemplated by the Investor Agreements or with respect to
transactions to which the Required Holders have given their prior written
consent, neither the Company nor any of its Subsidiaries shall effect any
transaction with any Affiliate or any Member of the Immediate Family of such
Affiliate other than the Company or any wholly owned subsidiary of the
Company (except on terms no less favorable to the Company or any of its
Subsidiaries than it could obtain in an arm's-length transaction with an
unrelated party).
6.6. Closing Costs. The fee paid to Prudential Securities in
connection with the transactions contemplated by this Agreement shall not exceed
the amount calculated in accordance with the letter agreement between the
Company and Prudential Securities referred to in the Disclosure Letter and as
previously furnished to the Investors.
6.7. Subsidiaries Closures and Spin-offs.
6.7.1. Anceta.com. Prior to the earlier of (a) May 15, 2000 or
(b) a Qualified Public Offering, the Company shall have discontinued
its Anceta.com operations and moved all Anceta.com personnel to its
other operations. From March 1, 2000 to the
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earlier of (a) May 15, 2000 or (b) a Qualified Public Offering, the
Company shall invest no more than $50,000 in its Anceta.com operations,
whether to fund operations or otherwise.
6.7.2. FilmStuff.com, LLC. From March 1, 2000 to the earlier
of (a) May 15, 2000 or (b) a Qualified Public Offering, the Company
shall invest no more than $225,000 in its FilmStuff.com, LLC
Subsidiary. Thereafter, the Company and its Subsidiaries shall make no
further investments in FilmStuff.com, LLC and shall not contribute any
employee services, office space, equipment, intellectual property or
any other assets to FilmStuff.com, LLC.
6.7.3. Powertrust.com, Inc. On or prior to the earlier of (a)
June 30, 2000 or (b) a Qualified Public Offering (the "Adjustment
Date"), the Company shall Spin- Off its Powertrust.com, Inc. Subsidiary
to its stockholders (including the Investors in respect of the Investor
Securities) on terms reasonably satisfactory to the Required Holders.
Prior to the Adjustment Date, the Company may make Investments in such
Subsidiary up to an aggregate of $1,800,000 between March 1, 2000 and
the Adjustment Date. If the Company has not accomplished the Spin-Off
of Powertrust.com, Inc. on or prior to the Adjustment Date or the
Company has made Investments in Powertrust.com, Inc. in excess of the
amount provided in the previous sentence (a "Powertrust Adjustment
Event"), then the Conversion Price shall be adjusted on the Adjustment
Date as provided for in section 7.4.2 of the Certificate of
Designation. Notwithstanding the foregoing adjustment, the Company
shall remain obligated to immediately Spin-Off Powertrust.com, Inc. and
in no event shall the Company make any further Investments in
Powertrust.com, Inc. after the Adjustment Date.
6.7.4. Specific Enforcement. Without limiting any other rights
under this Agreement or otherwise, the Investors shall have the right
to specifically enforce their rights under this Section 6.7.
6.8. Series A Notes Conversion. Prior to April 30, 2000 the Company
shall have repaid its outstanding Series A Notes in an aggregate principal
amount not to exceed $240,000 and shall convert or exchange any remaining
outstanding Series A Notes into Common Stock.
6.9. Employee Nondisclosure Agreements. From and after April 30,
2000 all employees of the Company shall be subject to nondisclosure, proprietary
information, inventions and nonsolicitation agreements in favor of the Company.
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7. INVESTOR REPRESENTATIONS; RESTRICTIONS ON TRANSFER.
7.1. Representations and Warranties of the Investors. In order to
induce the Company to enter into this Agreement and to sell the Investor
Securities hereunder, each of the Investors severally represents and warrants to
the Company that:
(a) It is an "accredited investor" for purposes of Regulation
D under the Securities Act and it is acquiring the Investor Securities
at the Closing for investment for its own account, and not with a view
to selling or otherwise distributing the Investor Securities in
violation of the Securities Act; provided, however, that nothing shall
prevent the Investors from transferring the Investor Securities in
compliance with this Section 7.
(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 and has received (or had made available to it) any financial
and business documents requested by it.
(d) It understands that (i) the Investor Securities purchased
by it 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
Rules 505 or 506 under the Securities Act, (ii) such Investor
Securities must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration, (iii) such Investor Securities will bear a legend to such
effect and (iv) the Company will make a notation on its transfer books
to such effect.
(e) It has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
7.2. Home Office Payment. All payments made in respect of the
Investor Securities held by the Investors shall be paid by Company check or
wired to the address shown on Exhibit 1, accompanied by sufficient information
to identify the source and application thereof or by such other method or at
such other address as the Investors shall have from time to time given timely
notice of to the Company.
7.3. Replacement of Lost Securities. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Investor Security and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond in such reasonable amount as the
Company may determine (or, in the case of a security held by any Investor or any
institutional holder meeting the definition of qualified institutional buyer
under
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Rule 144A promulgated under the Securities Act or by such Investor's or such
institutional holder's nominee, of an unsecured indemnity agreement from such
Investor or such other holder reasonably satisfactory to the Company) or, in the
case of any such mutilation, upon the surrender of the Investor Security for
cancellation to the Company at its principal office, the Company at its expense
will execute and deliver in lieu thereof a new security of like tenor. Any
Investor Security in lieu of which any such new security has been so executed
and delivered by the Company shall not be deemed to be outstanding for any
purpose.
7.4. Transfer, Exchange and Conversion of Investor Securities. The
Company shall keep at its principal office a register in which shall be entered
the names and addresses of the holders of the capital stock and other Investor
Securities of the Company and particulars of the respective shares of Common
Stock, Preferred Stock (including the classes thereof) and other Investor
Securities held by them and of all transfers, exchanges, conversions and
redemptions of such securities. Upon surrender at such office or such other
place as shall be duly specified by the Company of any certificate representing
shares of capital stock or instrument evidencing any other Investor Securities
for exchange, conversion or (subject to compliance with the applicable
provisions of this Agreement, including the conditions set forth in Section 7.5)
transfer, the Company shall as appropriate issue, at its expense, one or more
new certificates or instruments in such denomination or denominations as may be
requested, and registered as such holder may request. Any certificate
representing shares of capital stock or instrument evidencing any other Investor
Securities surrendered for transfer shall be duly endorsed, or accompanied by a
written instrument of transfer duly executed by the holder of such certificate
or instruments or an attorney duly authorized in writing.
7.5. Restrictions on Transfer. Investor Securities shall be
transferable only upon satisfaction of the applicable conditions specified in
this Section 7.5 or unless sold in an
offering registered under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act.
7.5.1. Restrictive Legend. Except as otherwise permitted by
Section 7.5.3, each certificate or instrument representing Investor
Securities shall bear a legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and may not be sold,
or otherwise transferred, in the absence of such registration
or an exemption therefrom under such Act and under any such
applicable state laws. In addition, the shares represented by
this certificate are subject to restrictions on transfer
contained in a Securities Purchase Agreement dated as of March
13, 2000, a copy of which is available at the issuer's office
and will be furnished free of charge to the holder hereof."
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7.5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior
to any transfer of any Investor Securities other than pursuant to an
effective registration statement under the Securities Act, the holder
thereof will give written notice to the Company of such holder's
intention to effect such transfer, describing in reasonable detail the
manner of the proposed transfer. If any such holder delivers to the
Company (a) an opinion of counsel in form and substance reasonably
acceptable to the Company addressed to the Company to the effect that
the proposed transfer may be effected without registration of such
Investor Securities under the Securities Act or applicable state
securities laws (or a certificate of an officer of such holder that the
transfer is being made to a wholly owned Subsidiary of the holder's
corporate parent) and (b) the written agreement of the proposed
transferee to be bound by all of the terms and conditions of this
Agreement (including this Section 7.5) applicable to the Investors,
such holder shall thereupon be entitled, within 10 days thereafter, to
transfer such Investor Securities in accordance with the terms of this
Agreement and the notice delivered by such holder to the Company. Each
certificate or instrument issued upon or in connection with such
transfer shall bear the restrictive legend set forth in Section 7.5.1,
in each case unless the restrictions on transfer provided for in
Section 7.5 shall have terminated as to such Investor Securities
pursuant to Section 7.5.3.
7.5.3. Termination of Restrictions. The restrictions imposed
by Sections 7.5.1 and 7.5.2 upon the transferability of Investor
Securities shall terminate as to any particular Investor Securities and
any securities issued in exchange therefor or upon transfer thereof
when, in the opinion of counsel reasonably acceptable to the Company,
such restrictions are no longer required in order to assure compliance
with the Securities Act. Whenever any of such restrictions shall
terminate as to any Investor Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new certificates
or instruments not bearing the legend set forth in Section 7.5.1.
8. EXPENSES, ETC.
8.1. Expenses. If the Closing occurs, the Company hereby agrees to
pay (a) all reasonable out-of-pocket expenses incurred by the Investors in
connection with the transactions contemplated by this Agreement, including
without limitation travel expenses and the reasonable fees, expenses and
disbursements of the Investors' counsel and other advisers in connection with
the transactions contemplated by this Agreement, up to an aggregate of $75,000,
(b) all expenses incurred by any Investors in connection with any amendments or
waivers (whether or not the same become effective) hereof, and (c) all taxes
(other than taxes determined with respect to income), including any recording
fees and filing fees and documentary stamp and similar taxes, at any time
payable in respect of this Agreement, any other Investor Agreement or the
initial issuance of the Investor Securities. In the event (i) the Investors are
successful in a claim against the Company in connection with the enforcement in
good faith of any rights hereunder or under any other Investor Agreements, the
Company agrees to pay all expenses incurred by the Investors
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in connection with such enforcement, and (ii) the Company is successful in a
claim initiated by the Investors against the Company in connection with the
enforcement in good faith of any rights hereunder or under any other Investor
Agreements, the Investors, severally, agree to pay all expenses incurred by the
Company in connection with such enforcement pro rata in accordance with the
relative number of Investor Securities held by each of them.
8.2. Mutual Indemnification.
8.2.1. The Company shall indemnify and hold the Investors and
each of the Investors' partners, stockholders, officers, directors,
employees, attorneys, accountants, consultants and agents
(collectively, the "Investor Indemnitees") free and harmless from and
against all actions, causes of action, suits, litigation, losses,
liabilities and damages, investigations or proceedings instituted by
any governmental agency or any other Person and expenses in connection
therewith, including reasonable attorneys' fees and disbursements,
incurred by any Investor Indemnitee as a result of, or arising out of,
or relating to any claim for brokerage, finders, investment banking or
similar fees incurred by the Company in connection with the
transactions contemplated by this Agreement.
8.2.2. The Investors shall indemnify and hold the Company and
each of the Company's partners, stockholders, officers, directors,
employees, attorneys, accountants, consultants and agents
(collectively, the "Company Indemnitees") free and harmless from and
against all actions, causes of action, suits, litigation, losses,
liabilities and damages, investigations or proceedings instituted by
any governmental agency or any other Person and expenses in connection
therewith, including reasonable attorneys' fees and disbursements,
incurred by any Company Indemnitee as a result of, or arising out of,
or relating to any claim for brokerage, finders, investment banking or
similar fees incurred by the Investors in connection with the
transactions contemplated by this Agreement.
8.3. Survival. The obligations of the Company under this Section 8
shall survive the redemption, conversion, repurchase or transfer of any or all
of the Investor Securities.
9. NOTICES. Any notice or other communication in connection with this
Agreement or the Investor Securities shall be deemed to be delivered if in
writing addressed as provided below and if either (a) actually delivered at such
address, (b) in the case of a letter, seven business days shall have elapsed
after the same shall have been deposited in the United States mails, postage
prepaid and registered or certified, return receipt requested or (c) transmitted
to any address outside of the United States, by telecopy and confirmed by
overnight or two-day courier:
If to the Company, to it at 11180 Sunrise Valley Drive, Suite 400,
Reston, Virginia 20191, telecopy: (703) 391-9589, telephone: (703) 391-6300, or
at such other address as the Company shall have specified by notice actually
received by the Principal Holders.
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<PAGE> 35
If to the Investors, to the Investors' respective addresses set forth
on Exhibit 1, or at such other address as the Investors shall have specified by
notice actually received by the Company, in each case with a copy to WPC and
Highland.
If to any other holder of record of any Investor Security, to it at its
address set forth in the securities registers of the Company.
10. CONFIDENTIALITY. Each Investor will maintain the confidential nature of
information obtained from the Company concerning the Company and its
Subsidiaries and, except as contemplated by this Agreement, will not disclose or
use such information, provided, however, that such Investor shall not be
precluded from making disclosure regarding such information: (a) to counsel for
WPC, Highland or any such Investor, accountants or other professional advisors
on a need-to-know basis, (b) to any other Investor, (c) as required by law or
applicable regulation, (d) to any permitted assignee of any Investor Securities
after notice to the Company so long as such permitted assignee has agreed to be
bound by this Section 10 or (e) to the extent such information has become
publicly available other than as a result of the violation of this Section 10;
provided, further, that in no event may any Investor disclose any such
information which is competitively sensitive to any competitor of the Company.
11. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Required Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each holder of any
Investor Securities and the Company and each of its Subsidiaries.
12. SURVIVAL AND TERMINATION OF COVENANTS. All covenants, agreements,
representations and warranties made herein or in any closing certificate or
other certificate or written report delivered to the Investors pursuant to an
express requirement hereof shall be deemed to have been material and relied on
by the Investors, notwithstanding any investigation made by the Investors or on
the Investors' behalf, shall survive the execution and delivery to the Investors
hereof of the Investor Securities and shall terminate upon the closing of a
Qualified Public Offering.
13. SERVICE OF PROCESS. Each of the Company and the Investors (a)
irrevocably submits to the non-exclusive jurisdiction of the state courts of The
State of Delaware and to the non-exclusive jurisdiction of the United States
District Court for the District of Delaware, for the purpose of any suit, action
or other proceeding arising out of or based upon this Agreement, any other
Investor Agreement or the subject matter hereof or thereof brought by any party
hereto or such party's successors or assigns, and (b) waives to the extent not
prohibited by law that cannot be waived, and agrees not to assert, by way of
motion, as a defense, or otherwise, in any such proceeding, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
-29-
<PAGE> 36
proceeding brought in one of the above-named courts is improper, or that this
Agreement or the Investor Securities, or the subject matter hereof or thereof,
may not be enforced in or by such court.
14. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, THE INVESTORS AND THE COMPANY HEREBY WAIVE, AND COVENANT
THAT NEITHER THE COMPANY NOR THE INVESTORS WILL ASSERT, ANY RIGHT TO TRIAL BY
JURY ON ANY ISSUE IN ANY PROCEEDING, WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE, IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, ANY OTHER INVESTOR AGREEMENT OR THE
SUBJECT MATTER HEREOF OR THEREOF OR IN ANY WAY CONNECTED WITH, RELATED OR
INCIDENTAL TO THE DEALINGS OF THE INVESTORS AND THE COMPANY HEREUNDER OR
THEREUNDER, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
IN TORT OR CONTRACT OR OTHERWISE. The Company acknowledges that it has been
informed by WPC and Highland that the provisions of this Section 14 constitute a
material inducement upon which the Investors are relying and will rely in
entering into this Agreement and purchasing the Investor Securities pursuant
hereto. Any Investor or the Company may file
an original counterpart or a copy of this Section 14 with any court as written
evidence of the consent of the Investors and the Company to the waiver of its
right to trial by jury.
15. GENERAL. If any provision of this Agreement is determined to be invalid
or unenforceable, it will be deemed to be modified to the minimum extent
necessary to be valid and enforceable. If it cannot be so modified, it will be
deleted and the deletion will not affect the validity or enforceability of any
other provision unless, as a result, the rights of any party are materially
diminished or the obligations and burdens of any party are materially increased
so as to be unjust or inequitable. The headings in this Agreement are for
convenience of reference only and shall not alter or otherwise affect the
meaning hereof. This Agreement, the other Investor Agreements and the other
items referred to herein or therein constitute the entire understanding of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all present and prior agreements, whether written or oral. This
Agreement is intended to take effect as a sealed instrument and may be executed
in any number of counterparts which together shall constitute one instrument and
shall be governed by and construed in accordance with the laws (other than the
conflict of laws rules) of The State of Delaware, and shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
Whether or not any express assignment has been made of this Agreement,
provisions of this Agreement that are for the Investors' benefit as the holder
of any Investor Securities are also for the benefit of, and enforceable by, all
subsequent holders of Investor Securities.
-30-
<PAGE> 37
The undersigned have executed this Agreement under seal as of the date
first above written.
DIGITAL COMMERCE CORPORATION
By /s/ Tony Bansal
----------------------------
Title: President
WESTON PRESIDIO CAPITAL III, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P., its General Partner
By: /s/ Carlo A. von Schroeter
--------------------------------------
General Partner
WESTON PRESIDIO ENTREPRENEUR FUND, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P., its General Partner
By: /s/ Carlo A. von Schroeter
--------------------------------------
General Partner
HIGHLAND CAPITAL PARTNERS V LIMITED
PARTNERSHIP
By: HIGHLAND MANAGEMENT PARTNERS V
LIMITED PARTNERSHIP, its General Partner
By: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
--------------------------------------
Authorized Officer
-31-
<PAGE> 38
HIGHLAND CAPITAL PARTNERS V-B LIMITED
PARTNERSHIP
By: HIGHLAND MANAGEMENT PARTNERS V
LIMITED PARTNERSHIP, its General Partner
By: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
----------------------------------------
Authorized Officer
HIGHLAND ENTREPRENEURS' FUND V
LIMITED PARTNERSHIP
By: HEF V LIMITED PARTNERSHIP, its General
Partner
By: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
----------------------------------------
Authorized Officer
eSENTINEL VENTURE CAPITAL, L.L.C.
By: SENTINEL CAPITAL PARTNERS, L.P., its
member
By: SENTINEL PARTNERS, L.P., its general
partner
By: SENTINEL PARTNERS, INC., its general
partner
By: /s/ Illegible
-------------------------------------------
Name:
Title:
-32-
<PAGE> 39
eSENTINEL VENTURE CAPITAL II, L.L.C.
By: SENTINEL CAPITAL PARTNERS II, L.P., its
member
By: SENTINEL PARTNERS II, L.P., its general
partner
By: SENTINEL PARTNERS II, INC., its general
partner
By: /s/ Illegible
---------------------------------------
Name:
Title:
FRANK E. RICHARDSON
/s/ Frank E. Richardson
------------------------------------
MICHAEL J. MYERS
/s/ Michael J. Myers
------------------------------------
SAP INVESTMENTS, INC.
By /s/ Kevin S. McKay
---------------------------------
Name: Kevin S. McKay
Title: Chief Executive Officer
ADAM SOLOMON
/s/ Adam Solomon
------------------------------------
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<PAGE> 40
THE ROMAN ARCH FUND L.P.
By: /s/ Robert Willard
---------------------------------------------
Robert Willard, its E.V.P.
THE ROMAN ARCH FUND II L.P.
By: /s/ Robert Willard
---------------------------------------------
Robert Willard, its E.V.P.
-34-
<PAGE> 41
CHELSEY CAPITAL CORP.
By: Stuart Feldman
---------------------------------------------
Name: Stuart Feldman
Title: President
-35-
<PAGE> 42
RRE VENTURES II L.P.
By: Andrew L. Zalasin
------------------------------------------
Andrew L. Zalasin, its General Partner
RRE VENTURES FUND II L.P.
By: Andrew L. Zalasin
------------------------------------------
Andrew L. Zalasin, its General Partner
-36-
<PAGE> 43
EXHIBIT 1 TO SECURITIES
PURCHASE AGREEMENT
Investors
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Series D Preferred Stock Purchase Price
- ---------------- --------------------------- --------------
<S> <C> <C>
Weston Presidio Capital III, L.P. 2,448,907 $14,288,637.67
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Weston Presidio Entrepreneur Fund, L.P. 121,902 $ 711,261.60
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Highland Capital Partners V 1,814,991 $10,589,927.99
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Capital Partners V-B 467,887 $ 2,729,980.28
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Entrepreneurs' Fund V 287,931 $ 1,679,991.01
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
</TABLE>
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<PAGE> 44
<TABLE>
<S> <C> <C>
eSentinel Venture Capital, L.L.C. 51,373 $ 299,746.04
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
eSentinel Venture Capital II, L.L.C. 856,945 $ 5,000,016.99
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
Michael J. Myers 17,156 $ 100,100.11
First Century Partners
29 Airpark Road
Princeton, New Jersey 08540
Telephone: (609) 683-8848
Telecopy: (609) 683-8123
Frank E. Richardson 17,156 $ 100,100.11
F.E. Richardson & Co., Inc.
245 Park Avenue
New York, New York 10167
Telephone: (212) 490-9271
Telecopy: (212) 490-0015
SAP Investments, Inc. 856,937 $ 4,999,970.31
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Telephone: (610) 661-1811
Telecopy: (610) 661-3260
Adam Solomon 514,162 $ 2,999,981.02
Shaker Investments
237 Park Avenue - Suite 801
New York, New York 10017
Telephone: (212) 692-3662
Telecopy: (212) 692-3609
The Roman Arch Fund L.P. 64,270 $ 374,996.17
One New York Plaza, 18th Floor
New York, NY 10021
</TABLE>
-38-
<PAGE> 45
<TABLE>
<S> <C> <C>
Roman Arch Funds 64,270 $ 374,996.17
One New York Plaza, 18th Floor
New York, NY 10021
Chelsey Capital Corp. 42,847 $ 249,999.39
1370 Avenue of the Americas
26th Floor
New York, NY 10019
Telephone: (212) 586-6479
Telecopy: (212) 765-3112
RRE Ventures II L.P. 434,182 $ 2,533,321.72
126 East 56th Street
New York, NY 10022
RRE Ventures Fund II L.P. 79,980 $ 466,659.31
126 East 56th Street
New York, NY 10022
Individual Investors 569,006 $ 3,319,979.31
--------- ---------------
Total 8,709,902 $ 50,819,665.21
--------- ---------------
</TABLE>
-39-
<PAGE> 1
EXHIBIT 10.26
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Agreement, dated as of March 13, 2000, is among Digital Commerce
Corporation, a Delaware corporation (the "Company"), Weston Presidio Capital
III, L.P., a Delaware limited partnership, Highland Capital Partners V Limited
Partnership, a Delaware limited partnership, and the other investors listed in
Schedule A (collectively, and together with their permitted successors and
assigns, the "Investors"), the holders of Preferred Stock listed on Schedule B
hereto (collectively, the "Other Preferred Holders") and the other security
holders of the Company listed in Schedule C from time to time in effect (the
"Management Stockholders" and collectively with the Investors and the Other
Preferred Holders, the "Holders"). The parties agree as follows:
1. DEFINITIONS. Certain capitalized terms are used in this Agreement as
specifically defined below in this Section 1. Except as the context otherwise
explicitly requires, (a) the capitalized term "Section" refers to sections of
this Agreement, (b) the capitalized term "Exhibit" refers to exhibits to this
Agreement, (c) references to a particular Section include all subsections
thereof, (d) the word "including" shall be construed as "including without
limitation", (e) accounting terms not otherwise defined herein have the meaning
provided under GAAP, (f) references to a particular statute or regulation
include all rules and regulations thereunder and any successor statute,
regulation or rules, in each case as from time to time in effect and (g)
references to a particular Person include such Person's successors and assigns
to the extent not prohibited by this Agreement and the other Investor
Agreements. References to "the date hereof" mean the date first set forth above.
Capitalized terms used and not otherwise defined herein are used herein as
defined in the Purchase Agreement.
1.1. "Common Stock" means the common stock, $0.01 par value, of the
Company.
1.2. "Company" is defined in the preamble.
1.3. "Exchange Act" means the Securities and Exchange Act of 1934.
1.4. "Form S-1", "Form S-2", "Form S-3", "Form S-4" and "Form S-8" mean
such respective forms under the Securities Act as in effect on the date hereof
or any successor registration forms under the Securities Act subsequently
adopted by the SEC.
1.5. "Holder" is defined in the preamble.
1.6. "Investors" is defined in the preamble.
1.7. "Management Stockholders" is defined in the preamble.
1.8. "Other Preferred Holder" is defined in the preamble.
-1-
<PAGE> 2
1.9. "Preferred Stock" means the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock of the Company.
1.10. "Purchase Agreement" means the Securities Purchase Agreement dated
as of the date hereof among the Company and the Investors.
1.11. "Qualified Public Offering" is defined in section 7.2 of the
Certificate of Designation.
1.12. "Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act.
1.13. "Registrable Securities" means (a) the Common Stock issued or
issuable upon conversion, exchange or exercise of the Preferred Stock, (b) any
Common Stock issued (or issuable upon the conversion, exchange or exercise of
any warrant, right or other security which is issued) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, either
such Preferred Stock, or the Common Stock issued or issuable upon conversion,
exchange or exercise of such Preferred Stock, and (c) any Common Stock issued to
the Management Stockholders, either directly or pursuant to options, warrants or
other rights under employee plans or hereafter issued or issuable as a dividend
or other distribution with respect thereto or in exchange therefor or
replacement thereof; provided, however, that any shares previously sold to the
public pursuant to a registered public offering or pursuant to Rule 144 under
the Securities Act shall cease to be Registrable Securities.
1.14. "Registrable Securities then outstanding" means the sum of (a) the
number of shares of Common Stock outstanding which are Registrable Securities
plus (b) the number of shares of Common Stock issuable pursuant to then
exercisable, exchangeable or convertible securities which upon issuance would be
Registrable Securities.
1.15. "Registration Period" means the period commencing on the date that
is 180 days after the effective date of the first Qualified Public Offering of
the Company and terminating on the date that is three and one half years after
the effective date of such Qualified Public Offering.
1.16. "Required Investors" means those Investors who own at least a
majority of the Registrable Securities then outstanding (on an as converted,
exercised and/or exchanged basis) owned by all Investors.
1.17. "Rule 144" is defined in Section 8.
1.18. "SEC" means the Securities and Exchange Commission or any successor
agency.
1.19. "Securities Act" means the Securities Act of 1933.
1.20. "Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
-2-
<PAGE> 3
1.21. "Series C Preferred Stock" means the Series C Convertible Preferred
Stock, par value $0.01 per share, of the Company.
1.22. "Series D Preferred Stock" means the Series D Redeemable
Convertible Preferred Stock, par value $0.01 per share, of the Company.
1.23. "Violation" is defined in Section 7.1.
2. REQUEST FOR REGISTRATION.
2.1. Long- Form Request Rights. If the Company shall receive at any time
during the Registration Period a written request from the Holders owning at
least a majority of the Registrable Securities then outstanding and owned by the
Holders that the Company effect the registration on Form S-1 or Form S-2 (or any
successor form) under the Securities Act of at least 10% of the Registrable
Securities issued pursuant to the Purchase Agreement, then the Company shall,
within five days after the receipt thereof, give written notice of such request
to all Holders. If the Holders initiating such registration intend to distribute
such shares by means of an underwritten offering, they shall so advise the
Company in such written request. Subject to the limitations of this Section 2,
the Company shall use its best efforts to effect such a registration as soon as
practicable, covering all the Registrable Securities which the Holders shall
request in writing within 20 days after receipt of such notice, all other shares
of Common Stock that the Company is contractually obligated, as of the date
hereof, to include in such a registration and all other shares of Common Stock
that the Company may wish to include, subject to any limitation imposed by the
lead underwriters as set forth in Section 2.3. The Company shall use its best
efforts to cause such registration statement to become effective.
2.2. Short Form Request Rights. At any time after the Company becomes
eligible to file a Registration Statement on Form S-3 (or any such successor
form relating to secondary offerings), Holders holding a majority of the
Registrable Securities then outstanding and owned by the Holders may request the
Company, in writing, to effect the registration on Form S-3 (or such successor
form) and any related qualification or compliance with respect to all or a part
of the Registrable Securities held by such Holders; provided, however, that (a)
in the case of a request by Other Preferred Holders or the Management
Stockholders, such Other Preferred Holders and Management Stockholders shall
have requested to register a number of Registrable Securities equal to or
greater than 10% of the Registrable Securities held by such Other Preferred
Holders and Management Stockholders on the date hereof and (b) in the case of a
request by Investors, such Investors shall have requested to register a number
of Registrable Securities equal to or greater than 10% of the aggregate number
of Registrable Securities originally issued to all of the Investors pursuant to
the Purchase Agreement. Upon receipt of such notice, then the Company shall,
promptly after the receipt thereof, give written notice of such request to all
Holders. If the holders of Registrable Securities initiating such registration
intend to distribute such shares by means of an underwritten offering, they
shall so advise the Company in such written request. Subject to the limitations
of this Section 2, the Company shall use its best efforts to effect such a
registration as soon as practicable, covering all the Registrable Securities
which
-3-
<PAGE> 4
the Holders shall request in writing within 20 days after receipt of such
notice, all other shares of Common Stock that the Company is contractually
obligated, as of the date hereof, to include in such a registration and all
other shares of Common Stock that the Company may wish to include, subject to
any limitation imposed by the lead underwriter as set forth in Section 2.3. The
Company shall use its best efforts to cause such registration statement to
become effective; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 2.2 if Form S-3 is not available for such offering by the Holders.
2.3. Underwritten Offering. The lead underwriter for the proposed
offering to be registered under this Section 2 shall be selected by the Board of
Directors, subject to the approval of the holders of a majority of the
Registrable Securities initiating the request, whose approval shall not be
unreasonably withheld in the case of a nationally or regionally recognized firm.
The right of any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of the Registrable Securities to be sold by such
Holder in the underwriting. All Holders proposing to sell Registrable Securities
in such offering shall (together with the Company as provided in Section 4.5)
enter into an underwriting agreement in customary form with the lead underwriter
for such underwriting. Notwithstanding any other provision of this Section 2, if
the lead underwriter for the offering advises the Company in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be so underwritten, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated as follows:
(a) First, to the holders of Registrable Securities initiating
the registration and any holders of equity securities of the Company
which carry registration rights applicable to such registration issued
prior to the date of this Agreement, pro rata in accordance with the
number of shares requested by the initiating holders of Registrable
Securities and such other holders of securities to be included in such
offering.
(b) Second, to all other Holders pro rata in accordance with
the number of Registrable Securities requested by such Holders to be
included in such offering; provided, however, that Registrable
Securities held by Management Stockholders shall be included pursuant
to this clause (b) only if the Company and the lead underwriter shall
have furnished to the Holders requesting registration pursuant to this
Section 3 a certificate signed by the President of the Company stating
that in their good faith judgment, participation by such Management
Stockholders in the registration will not negatively impact such
offering.
(c) Third, to the Company for the shares requested to be sold
by it in such offering.
2.4. Number of Requests. The Company is obligated to effect only two
registrations on Form S-1 or Form S-2 pursuant to this Section 2. No limit
applies on the number of registrations the Company is obligated to effect on
Form S-3 pursuant to this Section 2.
-4-
<PAGE> 5
2.5. Deferral of Registration. Notwithstanding the foregoing provisions
of this Section 2, the Company shall not be obligated to effect the filing of a
registration statement pursuant to this Section 2 if the Company shall furnish
to the Holders requesting a registration statement pursuant to this Section 2 a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, the filing of such
registration statement would have an adverse affect upon the Company. The
Company shall have the right to defer such filing for a period of not more than
90 days after receipt of the request for a registration under this Section 2;
provided, however, that the Company may not utilize the right set forth in the
preceding sentence more than once in any 18-month period.
3. INCIDENTAL ("PIGGY-BACK") REGISTRATION. If the Company proposes to register
any of its capital stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than the initial public offering of securities of the Company or a registration
on Form S-8 or Form S-4 relating to an acquisition), the Company shall promptly
give each Holder written notice of such registration. Upon the written request
of any Holder given within 30 days after such notice, the Company shall, subject
to the further provisions of this Section 3, use its best efforts to include in
such registration all of the Registrable Securities that each such Holder has
requested to be registered to become effective under the Securities Act and all
other shares of Common Stock that the Company is contractually obligated, as of
the date hereof, to include in such a registration. The Company shall be under
no obligation to complete any offering of its securities it proposes to make
under this Section 3 and shall incur no liability to any Holder for its failure
to do so. Notwithstanding any other provisions of this Section 3, if the lead
underwriter for the offering advises the Company in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders of Registrable Securities which would
otherwise be so underwritten, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated as follows:
(a) First, to the Company and any holder of equity securities
of the Company which carry registration rights granted prior to the
date of this Agreement (unless such registration rights permit such
equity securities to be cut back by the underwriters on a pari passu
basis with the Registrable Securities) for shares requested to be sold
by them in such offering.
(b) Second, to the Holders requesting registration in such
offering pro rata in accordance with the number of Registrable
Securities requested by the Holders to be included in such offering;
provided, however, that Registrable Securities held by Management
Stockholders shall be included pursuant to this clause (b) only if the
Company and the lead underwriter shall have furnished to the Holders
requesting registration pursuant to this Section 3 a certificate signed
by the President of the Company stating that in their good faith
judgment, participation by such Management Stockholders in the
registration will not negatively impact such offering.
4. OBLIGATIONS OF THE COMPANY. In connection with any registration of
Registrable Securities pursuant to this Agreement, the Company shall take the
following actions, as expeditiously as reasonably possible:
-5-
<PAGE> 6
4.1. Effectiveness of Registration. In cooperation with the selling
Holders as contemplated by Section 5.2, the Company shall prepare and file with
the SEC a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become effective.
Upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, the Company shall keep any registration statement filed
pursuant to Section 2 effective for up to one hundred eighty (180) days or until
the Holders have informed the Company in writing that the distribution of their
securities has been completed.
4.2. Amendments. The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement, and use its best efforts to
cause each such amendment to become effective, as may be necessary to comply
with the Securities Act with respect to the disposition of all securities
covered by such registration statement; provided, however, that nothing
contained in this Section 4.2 will be deemed to increase the Company's
obligations pursuant to the last sentence of Section 4.1.
4.3. Copies of Registration Statement. The Company shall furnish to each
Holder such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as such Holder may reasonably request in order to facilitate
the disposition of its Registrable Securities covered by such registration
statement.
4.4. State Qualifications. The Company shall use its best efforts to
register or qualify such Registrable Securities under or exempt such Registrable
Securities from registration or qualification requirements of the securities or
blue sky laws of such jurisdictions as each Holder shall reasonably request, and
do all other acts which may be necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such registration statement; provided, however, that the Company
shall not be required to qualify as a foreign corporation in any state where it
is not then required to qualify.
4.5. Underwriting Agreement. The Company shall enter into and perform its
obligations under an underwriting agreement, in customary form not inconsistent
with this Agreement, with the lead underwriter of such offering.
4.6. Changes in Prospectus. The Company shall notify each Holder of
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto covered by such registration statement is required
to be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing. The
Company shall promptly file such
-6-
<PAGE> 7
amendments and supplements which may be required pursuant to Section 4.2 on
account of such event and use its best efforts to cause each such amendment and
supplement to become effective. Upon receipt of such notice and pending the
effectiveness of such amendments and/or supplements, each Holder agrees not to
sell any Registrable Securities pursuant to such Registration.
4.7. Opinions and Comfort Letters. The Company shall furnish on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement (a) an opinion, dated
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given by issuer's counsel
to the underwriters in an underwritten public offering, addressed to the
underwriters and to the Holders requesting registration of Registrable
Securities and (b) a letter dated such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by the issuer's independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters and to the Holders
requesting registration of Registrable Securities.
4.8. Transfer Agent. The Company shall provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such registration statement.
4.9. Listing Shares. The Company shall apply for listing and use its best
efforts to list the Registrable Securities being registered on any national
securities exchange on which a class of the Company's equity securities are
listed. If the Company does not have a class of equity securities listed on a
national securities exchange, but does have equity securities listed for trading
on the automated quotation system of the National Association of Securities
Dealers, Inc., the Company shall apply for qualification and use its best
efforts to qualify the Registrable Securities on such automated quotation
system.
5. PREPARATION OF REGISTRATION STATEMENT.
5.1. Information by Selling Holders. The selling Holders shall furnish to
the Company such information regarding themselves, the Registrable Securities
held by them, and the intended method of disposition of such Registrable
Securities as shall be required to effect the registration of their Registrable
Securities.
5.2. Participation in Preparation of Registration Statement. In
connection with the preparation and filing of each registration statement
registering Registrable Securities under the Securities Act, the Company will
give the selling Holders, their underwriters and one counsel selected by the
selling Holders and approved in writing by the Required Investors, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the reasonable opinion of such
selling
-7-
<PAGE> 8
Holder and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act to protect
themselves from liability thereunder.
5.3. Underwriting Agreement. Each selling Holder shall enter into and
perform its obligations under an underwriting agreement with the lead
underwriter for such offering in customary form not inconsistent with this
Agreement, including furnishing any opinion of counsel and agreeing to
indemnification obligations reasonably requested by the lead underwriter, but in
no event will any holder be liable for indemnification obligations in excess of
the net offering proceeds received by such Holder.
6. EXPENSES OF REGISTRATION. All expenses other than underwriting discounts and
commissions relating to Registrable Securities incurred in connection with each
of the registrations, filings or qualifications pursuant to Sections 2 or 3,
including all registration, filing and qualification fees, all fees and expenses
in connection with compliance with state securities or blue sky laws, printing
and delivery expenses, fees and disbursements of counsel and independent public
accountants for the Company, and the reasonable fees and disbursements of one
law firm acting as counsel for the selling Holders (which are not anticipated to
exceed $20,000 barring unforeseen circumstances) shall be paid by the Company.
Underwriting discounts and commissions relating to Registrable Securities will
be paid ratably by the Holders of such Registrable Securities.
7. INDEMNIFICATION.
7.1. Company Indemnification. To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the officers, directors, partners,
agents and employees of each Holder, any underwriter (as defined in the
Securities Act) for such Holder, and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities (joint or several) to
which any of them may become subject under the Securities Act, the Exchange Act,
other federal or state law or otherwise, and to reimburse them for any legal or
any other expenses reasonably incurred by them in connection with investigating
any claim, or defending any action or proceeding, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (a "Violation"): (a) any untrue statement or alleged untrue statement
of a material fact contained or incorporated by reference in any registration
statement under which Registrable Securities were registered, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (b) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (c) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law. The indemnity provisions in this Section 7.1 shall not apply to amounts
paid in settlement of any loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to a Holder in
any such case for any such loss, claim, damage, liability or action (i) to the
-8-
<PAGE> 9
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by or on behalf of such Holder,
underwriter or controlling person or (ii) in the case of a sale directly by a
Holder of Registrable Securities (including a sale of such Registrable
Securities through any underwriter retained by such Holder to engage in a
distribution solely on behalf of such Holder) such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and such Holder
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Securities, as the case may be, to
the person asserting any such loss, claim, damage or liability in any case where
such delivery is required by the Securities Act.
7.2. Holder Indemnification. To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors,
officers and employees, each person, if any, who controls the Company within the
meaning of the Securities Act, each agent and any underwriter for the Company,
and any other Holder selling securities in such registration statement or any of
its directors, officers, partners, agents or employees or any person who
controls such Holder or underwriter, against any losses, claims, damages or
liabilities (joint or several) to which any of them may become subject, under
the Securities Act, the Exchange Act or other federal or state law or otherwise,
and to reimburse them for any legal or any other expenses reasonably incurred by
them in connection with investigating any claim, or defending any action or
proceeding, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurred in reliance
upon and in conformity with written information furnished by or on behalf of
such Holder expressly for use in connection with such registration; provided,
however, that the liability of any Holder hereunder shall be limited to the
amount of proceeds received by such Holder in the offering giving rise to the
Violation or if the offering is terminated, the amount such Holder would have
received; and provided, further, that the indemnity provisions in this Section
7.2 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld).
7.3. Notice, Defense and Counsel. Promptly after receipt by an
indemnified party under this Section 7 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume and control the
defense thereof with counsel mutually reasonably satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall
-9-
<PAGE> 10
relieve such indemnifying party of any liability to the indemnified party under
this Section 7 only to the extent the indemnifying party is actually prejudiced
in its ability to defend such action.
7.4. Contribution in Lieu of Indemnification. If the indemnification
provided for in Sections 7.1 or 7.2 is unavailable, for any reason other than as
specified in the last sentence of Section 7.3, to a person that would have been
an indemnified party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each person that would
have been an indemnifying party thereunder shall, in lieu of indemnifying such
indemnified party, 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
fault of the indemnifying party on the one hand and such indemnified party on
the other in connection with the untrue or alleged untrue statements of a
material fact or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). 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 indemnifying party or
such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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 Section 7.4 shall include any legal or other expenses in connection with
investigating or defending any such action or claim (which shall be limited as
provided in Section 7.3 if the indemnifying party has assumed the defense of any
such action in accordance with the provisions thereof). No person guilty of
fraudulent misrepresentation (within the meaning of section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7.5. Survival of Rights and Obligations. The obligations of the Company
and the Holders under this Section 7 shall survive the completion of any
offering of Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. In order to provide to the Holders the benefits
of Rule 144 under the Securities Act and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration ("Rule 144"), and in order to make it possible for
Holders to register the sale of the Registrable Securities pursuant to a
registration on Form S-3, the Company agrees to:
8.1. Public Information. Make and keep public information available, as
those terms are understood and defined in Rule 144, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public.
8.2. Exchange Act Registration. Take such action, including the voluntary
registration of its Common Stock under section 12 of the Exchange Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable (but not
later than 90 days) after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective.
-10-
<PAGE> 11
8.3. Timely Filing. File with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act.
8.4. Compliance; Information. Furnish to any Holder, so long as the
Holder owns any Registrable Securities, forthwith upon request (a) a written
statement by the Company whether it has complied with the reporting requirements
of Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold in a secondary offering pursuant to Form S-3 (at any time after it so
qualifies), (b) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (c)
such other information as may be required by Rule 144 in order to permit the
selling of any such securities without registration.
9. LOCK-UP AGREEMENTS. If requested by the lead underwriter in connection with
an underwritten offering, whether under this Agreement or otherwise, the Holders
shall enter into lock-up agreements pursuant to which they will not, for a
period of seven days prior to, and 90 days following, the effective date of a
registration statement for the offering of the Company's securities, or any
other period reasonably requested by the lead underwriter not to exceed 180
days, publicly offer or sell any of the Registrable Securities without the prior
consent of the lead underwriter, provided that (a) the officers and directors of
the Company enter into lock-up agreements with terms at least as restrictive and
(b) the Holders shall be able to offer publicly and sell Registrable Securities
free from the lock-up provisions contemplated by this Section 9 for at least 90
consecutive days in each period of 360 consecutive days.
10. LIMITATIONS ON OTHER REGISTRATION RIGHTS. The Company shall not, without the
prior written consent of the Required Investors, enter into any agreement with
any holder or prospective holder of any securities of the Company which would
allow such holder or prospective holder to (a) require the Company to effect a
registration, or (b) include any securities in any registration filed under
Sections 2 or 3 unless, under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of such securities will not reduce the amount of
Registrable Securities to be included by the Holders or the Company.
11. GENERAL.
11.1. Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing addressed as provided
below and if either (a) actually delivered at such address, whether by telecopy,
overnight or two-day courier (b) in the case of a letter, seven business days
shall have elapsed after the same shall have been deposited in the United States
mails, postage prepaid and registered or certified, return receipt requested or
(c) transmitted to any address outside of the United States, by telecopy and
confirmed by overnight or two-day courier:
-11-
<PAGE> 12
If to the Company, to it at 11180 Sunrise Valley Drive, Suite 400,
Reston, Virginia 20191, telecopy: (703) 391-9589, telephone: (703) 391-6300, or
at such other address as the Company shall have specified by notice actually
received by the Principal Holders.
If to the Investors, to the Investors' respective addresses set forth on
Schedule A or B, or at such other address as the Investors shall have specified
by notice actually received by the Company, in each case with a copy to WPC and
Highland.
If to any other Holder, to it at its address set forth in the securities
registers of the Company.
11.2. Amendments, Waivers and Consents. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only by written agreement signed by (a) the Company and (b)
the Required Investors and if a copy of such modification shall be delivered to
any Holders who did not execute the same; provided, however, that any such
modification adversely affecting the Management Stockholders in a manner
distinct from the effect of such modification on the other Holders shall require
the written consent of the Management Stockholders holding a majority of the
Registrable Securities then outstanding owned by all Management Stockholders.
11.3. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of the Investors holding a majority of the Registrable
Securities then outstanding owned by the Investors. The Holders may assign or
transfer their rights and obligations under this Agreement to the extent (a) the
assignment or transfer of such Registrable Securities is permitted by the other
agreements between the respective Holders and the Company and (b) that such
assignee or transferee owns or obtains Registrable Securities having a fair
value of at least $250,000.
11.4. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, such
provision shall, to the maximum extent allowable by law, be modified by such
court so that it becomes enforceable and, as modified, shall be enforced as any
other provision hereof, all the other provisions hereof continuing in full force
and effect.
11.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.6. Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous understandings, whether written or oral.
11.7. Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute the same instrument.
-12-
<PAGE> 13
11.8. Joinder of Additional Parties. Future holders of the Company's
capital stock (or of options, warrants, conversion rights or other rights to
acquire such capital stock) may become party hereto as a Holder by executing a
joinder hereto in a form reasonably satisfactory to the Company.
11.9. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of the State of
Delaware.
[the remainder of this page is intentionally blank]
-13-
<PAGE> 14
The parties have caused this Agreement to be duly executed under seal as
of the date first above written.
DIGITAL COMMERCE CORPORATION
By /s/ Tony Bansal
-----------------------------------------
Title: President
INVESTORS:
WESTON PRESIDIO CAPITAL III, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P.,
its General Partner
By /s/ Carlo A. von Schroeter
-----------------------------------------
General Partner
WESTON PRESIDIO ENTREPRENEUR FUND,
L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P.,
its General Partner
By /s/ Carlo A. von Schroeter
--------------------------------
Title:
HIGHLAND CAPITAL PARTNERS V LIMITED
PARTNERSHIP
By: HIGHLAND MANAGEMENT
PARTNERS V LIMITED PARTNERSHIP,
its General Partner
By: HIGHLAND MANAGEMENT
PARTNERS V, INC.,
its General Partner
By /s/ Illegible
--------------------------------
Authorized Officer
<PAGE> 15
HIGHLAND CAPITAL PARTNERS V-B
LIMITED PARTNERSHIP
By: HIGHLAND MANAGEMENT
PARTNERS V LIMITED PARTNERSHIP,
its General Partner
By: HIGHLAND MANAGEMENT
PARTNERS V, INC.,
its General Partner
By /s/ Illegible
--------------------------------
Authorized Officer
HIGHLAND ENTREPRENEURS' FUND V
LIMITED PARTNERSHIP
By: HEF V LIMITED PARTNERSHIP, its
General Partner
By: HIGHLAND MANAGEMENT
PARTNERS V, INC.,
its General Partner
By /s/ Illegible
--------------------------------
Authorized Officer
eSENTINEL VENTURE CAPITAL, L.L.C.
By: SENTINEL CAPITAL PARTNERS, L.P., its
member
By: SENTINEL PARTNERS, L.P., its general
partner
By: SENTINEL PARTNERS, INC., its general
partner
By /s/ Illegible
-----------------------------------------
Name:
Title:
<PAGE> 16
eSENTINEL VENTURE CAPITAL II, L.L.C.
By: SENTINEL CAPITAL PARTNERS II, L.P.,
its member
By: SENTINEL PARTNERS II, L.P., its general
partner
By: SENTINEL PARTNERS II, INC., its general
partner
By /s/ Illegible
------------------------------------------
Name:
Title:
FRANK E. RICHARDSON
/s/ Frank E. Richardson
--------------------------------------------
MICHAEL J. MYERS
/s/ Michael J. Myers
--------------------------------------------
<PAGE> 17
SAP INVESTMENTS, INC.
By /s/ Kevin S. McKay
--------------------------------------------
Name: Kevin S. McKay
Title: Chief Executive Officer
ADAM SOLOMON
/s/ Adam Solomon
-----------------------------------------------
THE ROMAN ARCH FUND L.P.
By /s/ Robert Willard
--------------------------------------------
Robert Willard, its E.V.P.
THE ROMAN ARCH FUND II L.P.
By /s/ Robert Willard
--------------------------------------------
Robert Willard, its E.V.P.
CHELSEY CAPITAL CORP.
By /s/ Stuart Feldman
--------------------------------------------
Name: Stuart Feldman
Title: President
<PAGE> 18
RRE VENTURES II L.P.
By /s/ Andrew L. Zalasin
--------------------------------------------
Andrew L. Zalasin, its General Partner
RRE VENTURES FUND II L.P.
By /s/ Andrew L. Zalasin
--------------------------------------------
Andrew L. Zalasin, its General Partner
<PAGE> 19
MANAGEMENT STOCKHOLDERS
TONY BANSAL
/s/ Tony Bansal
----------------------------------------------
WILLIAM H. SEIPPEL
/s/ William H. Seippel
----------------------------------------------
ATOCHA, L.P.
By /s/ Thomas Cirrito
--------------------------------------------
Thomas Cirrito, general partner
<PAGE> 20
SCHEDULE A TO REGISTRATION
RIGHTS AGREEMENT
Investors
<TABLE>
<CAPTION>
Number of Common
Name and Address Shares at Closing
(assuming conversion of
Series D Preferred)
<S> <C>
Weston Presidio Capital III, L.P. 2,448,907
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Weston Presidio Entrepreneur Fund, L.P. 121,902
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Highland Capital Partners V 1,814,991
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Capital Partners V -B 467,887
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Entrepreneurs' Fund V 287,931
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
eSentinel Venture Capital, L.L.C. 51,373
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
eSentinel Venture Capital II, L.L.C. 856,945
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
Michael J. Myers 17,156
First Century Partners
29 Airpark Road
Princeton, New Jersey 08540
Telephone: (609) 683-8848
Telecopy: (609) 683-8123
Frank E. Richardson 17,156
F.E. Richardson & Co., Inc.
245 Park Avenue
New York, New York 10167
Telephone: (212) 490-9271
Telecopy: (212) 490-0015
SAP Investments, Inc. 856,937
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Telephone: (610) 661-1811
Telecopy: (610) 661-3260
</TABLE>
-2-
<PAGE> 22
<TABLE>
<S> <C>
Adam Solomon 514,162
Shaker Investments
237 Park Avenue - Suite 801
New York, New York 10017
Telephone: (212) 692-3662
Telecopy: (212) 692-3609
The Roman Arch Fund L.P. 64,270
One New York Plaza, 18th Floor
New York, NY 10021
The Roman Arch Fund II L.P. 64,270
One New York Plaza, 18th Floor
New York, NY 10021
Chelsey Capital Corp. 42,847
1370 Avenue of the Americas
26th Floor
New York, NY 10019
Telephone: (212) 586-6479
Telecopy: (212) 765-3112
RRE Ventures II L.P. 434,182
126 East 56th Street
New York, NY 10022
Telephone: (212) 418-5105
Telecopy: (212) 758-8369
RRE Ventures Fund II L.P. 79,980
126 East 56th Street
New York, NY 10022
Telephone: (212) 418-5105
Telecopy: (212) 758-8369
---------
Total 8,140,896
</TABLE>
-3-
<PAGE> 23
SCHEDULE B TO REGISTRATION
RIGHTS AGREEMENT
Other Preferred Holders
<TABLE>
<CAPTION>
Name and Address Number of Common Shares
at Closing (assuming
conversion of Series B and
Series C Preferred)
<S> <C>
Atocha, L.P 11,032,515
7716 Carleton Place
McLean, Virginia 22102
----------
Total 11,032,515
</TABLE>
<PAGE> 24
SCHEDULE C TO REGISTRATION
RIGHTS AGREEMENT
Management Stockholders
<TABLE>
<CAPTION>
Number of
Stockholders and Address Shares of Common Stock
held at Closing
<S> <C>
Tony Bansal 25,000
Digital Commerce Corporation
11180 Sunrise Valley Drive - Suite 400
Reston, Virginia 20191
Telephone: (703) 391-6300
Telecopy: (703) 391-9589
William H. Seippel 1,573,427
Digital Commerce Corporation
11180 Sunrise Valley Drive - Suite 400
Reston, Virginia 20191
Telephone: (703) 391-6300
Telecopy: (703) 391-9589
---------
TOTAL 1,598,427
</TABLE>
<PAGE> 1
EXHIBIT 10.27
EXECUTION COPY
DIGITAL COMMERCE CORPORATION
STOCKHOLDERS AGREEMENT
This Agreement, dated as of March 13, 2000, is among Digital Commerce
Corporation, a Delaware corporation (the "Company"), Weston Presidio Capital
III, L.P., a Delaware limited partnership, Highland Capital Partners V Limited
Partnership, a Delaware limited partnership, and the other Investors listed in
Schedule A (collectively, and together with their permitted successors and
assigns, the "Investors"), the other holders of Preferred Stock listed on
Schedule A hereto (collectively, together with their permitted successors and
assigns and the Investors, the "Preferred Holders"), and the other stockholders
of the Company listed from time to time in Schedule A. The parties agree as
follows:
1. DEFINITIONS. Except as the context otherwise explicitly requires, (a) the
capitalized term "Section" refers to sections of this Agreement, (b) the
capitalized term "Exhibit" refers to exhibits to this Agreement, (c) references
to a particular Section include all subsections thereof and (d) the word
"including" shall be construed as "including without limitation". Accounting
terms used in this Agreement and not otherwise defined herein shall have the
meanings provided in GAAP. Certain capitalized terms are used in this Agreement
as specifically defined in this Section 1 as follows:
1.1. "Common Stock" means the Company's Common Stock, $0.01 par value.
1.2. "Community Property" is defined in Section 6.12.
1.3. "Company" is defined in the preamble.
1.4. "Co-Sale Notice" is defined in Section 3.1.
1.5. "Co-Sale Percentage" is defined in Section 3.2
1.6. "Convertible Securities" shall mean any indebtedness, shares or other
securities convertible into or exchangeable for Common Stock.
1.7. "Fair Market Value" shall mean the fair market value of the Common
Stock or Preferred Stock, as applicable, on the trading day immediately
preceding the event triggering the determination of Fair Market Value,
determined as follows: (i) if such stock is listed or admitted to trade on a
national securities exchange, the closing price of such stock on such national
securities exchange, (ii) if such stock is not listed on a national securities
exchange, then the closing price of such stock quoted on the National Market
System of the National Association of Securities Dealers, Inc., (iii) if such
stock is not listed to trade on the National Market System, the mean between the
bid and asked price for such stock on any electronic quotation system, or
<PAGE> 2
(iv) if such stock is not listed or admitted to trade on a national securities
exchange, the National Market System or any electronic quotation system, the
Board of Directors of the Company shall establish the Fair Market Value of such
stock.
1.8. "Investor" is defined in the preamble.
1.9. "Members of the Immediate Family", as applied to any individual, means
each parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust or family limited partnership created
for the benefit of one or more of such persons.
1.10. "Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
1.11. "Outside Offer" is defined in Section 2.1.1.
1.12. "Person" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, business trust,
limited liability company and any governmental department or agency or political
subdivision.
1.13. "Preferred Directors" is defined in Section 4.
1.14. "Preferred Holders" is defined in the Preamble.
1.15. "Preferred Stock" means the Company's Series B Redeemable Convertible
Preferred Stock, par value $0.01 per share, Series C Redeemable Convertible
Preferred Stock, par value $0.01 per share and Series D Redeemable Convertible
Preferred Stock, par value $0.01 per share.
1.16. "Proportionate Share" means, as of any date, a fraction, the
numerator of which is the number of shares of Common Stock (assuming the
conversion of all Convertible Securities held by such Stockholder) owned by the
subject Stockholder and the denominator of which is the aggregate number of
shares of all outstanding Common Stock (assuming the conversion of all
outstanding Convertible Securities and the exercise of all outstanding Options).
1.17. "Proposed Shares" has the meaning ascribed to it in Section 3.1(a).
1.18. "Proposed Buyer" is defined in Section 3.
1.19. "Proposed Sale" is defined in Section 3.1(a).
1.20. "Purchase Agreement" means the Securities Purchase Agreement dated as
of the date hereof, as from time to time in effect, among the Company and the
Investors.
1.21. "Required Holders" means those Investors who own at least a majority
of the Series D Preferred Stock then outstanding (on an as converted basis).
-2-
<PAGE> 3
1.22. "Selling Stockholder" means a Stockholder selling Shares under
Sections 2 or 3.
1.23. "Shares" means all shares of any class of capital stock, including
Options and Convertible Securities, of the Company owned by any Stockholder, and
all shares of capital stock issued with respect to, in exchange for or upon
conversion of any such shares, Options or Convertible Securities; provided,
however, that (a) for purposes of the purchase rights contained in Section 2 and
the co-sale rights contained in Section 3, Shares shall not include Options and
(b) once any such shares have been sold in a sale which complies with Sections
2.1, 2.2 or 2.3 they shall cease to be Shares.
1.24. "Stockholders" means all stockholders and option holders of the
Company listed from time to time as Stockholders in Schedule A and all other
persons who become party to this Agreement pursuant to Section 2.3, and their
permitted successors and assigns.
1.25. "Transfer" means sell, assign, encumber, pledge, hypothecate, give
away or dispose of or transfer in any other manner, whether voluntarily,
involuntarily, by operation of law, pursuant to judicial process, divorce
decree, property settlement, bankruptcy or otherwise.
2. TRANSFER RESTRICTIONS AND PURCHASE RIGHTS.
2.1. Transfers of Shares. Each Stockholder agrees that such Stockholder
will not Transfer any Shares owned by such Stockholder or allow the power to
vote Shares owned by such Stockholder to be exercised by anyone other than such
Stockholder (except through ordinary proxies, revocable at the option of such
Stockholder) except that such Stockholder may (a) Transfer Shares in the manner
permitted by Sections 2.2 or 2.3 or (b) Transfer Shares pursuant to this Section
2 in compliance with the co-sale rights provisions in Section 3:
2.1.1. Outside Offer. A Selling Stockholder wishing to
Transfer Shares shall prepare an offer (the "Outside Offer") that sets
forth the number of Shares proposed to be sold, the minimum purchase
price, the proposed method of sale and the proposed purchaser or type of
purchaser.
2.1.2. Company Purchase Offer. The Selling Stockholder shall
offer to sell all or any portion of the Shares described in the Outside
Offer to the Company by delivering to the Company, with a copy to the
other Stockholders, a copy of the Outside Offer and a written offer to
sell to the Company all of such Shares on the terms contained in the
Outside Offer. If the Company elects to purchase such Shares, it shall
purchase such Shares in accordance with Section 2.4.
2.1.3. Other Stockholders Purchase Offer. If, within 10 days
after receipt by the Company of the Outside Offer from the Selling
Stockholder, the Company does not elect to purchase all of the Shares
described in the Outside Offer, then the Selling Stockholder shall
-3-
<PAGE> 4
offer to sell the Shares not chosen for purchase by the Company to the
other Stockholders pro rata according to their Proportionate Shares by
delivering to each such other Stockholder a written offer to sell to such
other Stockholder such other Stockholder's Proportionate Share on the
terms contained in the Outside Offer. If any other Stockholders elect to
purchase Shares, they shall purchase such Shares in accordance with
Section 2.4.
2.1.4. Remaining Shares. If, within 10 days after receipt by the
other Stockholders of the written offer described in Section 2.1.3 from
the Selling Stockholder, the other Stockholders do not elect to purchase
all Shares not chosen for purchase by the Company, then the Selling
Stockholder may Transfer any remaining Shares in accordance with the terms
of the Outside Offer during the 90-day period immediately following the
10- day notice period referred to above in Section 2.1.3, subject,
however, to the co-sale rights provided in Section 3 in favor of each
Stockholder who has notified the Selling Stockholder in writing within
such 10-day notice period of its interest in exercising its co-sale rights
with respect to any such sale. If such shares are not so purchased during
such 90-day period, they shall again become subject to this Section 2.1.
2.2. Transfers by Operation of Law or in Violation of Agreement. Subject
to Section 2.3.1, if Shares owned by a Stockholder are subject to Transfer
pursuant to any bankruptcy or insolvency law or proceeding, any divorce
proceeding, any probate proceeding after the Stockholder's death or otherwise by
operation of law or court order or decree, or if any Transfer of Shares is made
or attempted contrary to this Agreement, or if an offer to sell Shares is not
delivered to the Company and the other Stockholders as and when required by this
Agreement, the Company and the other Stockholders shall have the right to
purchase any or all of such Shares from such Stockholder, such Stockholder's
legal representative or such Stockholder's transferees at any time before or
after the Transfer, at (a) the Fair Market Value of such Shares in connection
with any Transfer made or to be made pursuant to bankruptcy or insolvency law or
proceeding, divorce proceeding, probate proceeding or otherwise by operation of
law or court order or decree and (b) at the lesser of the Fair Market Value of
such Shares or the price paid by the Transferee(s) in connection with any
Transfer not made in compliance with the requirements of this Agreement.
2.3. Certain Permitted Transfers. The following Transfers may be made
without complying with the provisions of Section 2.1 or Section 3.
2.3.1. Transfers to Immediate Family. Any Stockholder may transfer
any of such Stockholder's Shares to Members of the Immediate Family of
such Stockholder so long as (a) each transferee executes a counterpart of
this Agreement agreeing to be bound as a Stockholder, and (b) Shares are
not held by more than Members of the Immediate Family of such Stockholder.
2.3.2. Public Offering. A Stockholder may sell any Shares in a
public offering registered under the federal Securities Act of 1933, as
amended, or in a transaction permitted by Rule 144 thereunder, whereupon
such shares shall no longer be Shares.
-4-
<PAGE> 5
2.3.3. Fund Investors. Any Stockholder that constitutes an
investment fund may transfer Shares to its limited partners, members,
stockholders or other investors so long as such transferee executes a
counterpart of this Agreement as a Stockholder.
2.3.4. Solomon Transfer. Adam Solomon may transfer any Shares to a
limited liability company, limited partnership, corporation or other
entity of which he has at least a majority of the voting and total equity
interests.
2.3.5. Corporations, etc. Any Stockholder that constitutes a
corporation, limited liability company, limited partnership or similar
entity may transfer Shares to its affiliates that control, or are under
common control with, or that are controlled by, such Stockholder.
2.4. Purchases of Stock.
2.4.1. Election by Company and Stockholders. In the event of Outside
Offers under Section 2.1 or in the event the Company has the right to
purchase Shares under Section 2.2, the Company shall have the right to
determine whether to purchase any or all of the Shares available for
purchase by delivering written notice of the number of Shares to be
purchased to the Selling Stockholder and the other Stockholders within 10
days after receipt of the Outside Offer by the Company or the date upon
which the Company first has knowledge of its purchase right under Section
2.2. If the Selling Stockholder is a director or has a representative
serving as a director, such director shall not vote on the question of
whether the Company should purchase such Selling Stockholder's Shares or
any matter relating thereto, but for purposes of establishing a quorum
such director shall attend any directors meetings at which such question
or matter is considered. The other Stockholders may purchase any remaining
Shares not purchased by the Company pro rata based on the respective
Proportionate Shares of Stockholders wishing to purchase Shares, or as
they may otherwise agree. In the event that one or more Stockholders do
not elect to purchase all of the shares offered to such Stockholders
pursuant to this Section 2, each Stockholder electing to purchase Shares
pursuant to this Section 2 may purchase any remaining Shares offered under
this Section 2 not purchased by the other Stockholders pro rata based on
the respective Proportionate Shares of such Stockholders wishing to
purchase additional Shares, or as they may otherwise agree.
2.4.2. Closing on Stock Sales. The acceptance of any offer or
exercise of any right to purchase hereunder shall be by notice given in
accordance with Section 7.2 and shall specify a date of closing not
earlier than 10 business days nor later than 15 business days after the
delivery (or deemed delivery) of such notice. At the closing, the
purchaser shall pay the purchase price by certified or bank check drawn on
immediately available funds and payable to the order of the Selling
Stockholder. Certificates for the Shares to be purchased, duly endorsed or
accompanied by duly executed stock powers, in each case with signatures
guaranteed, if reasonably requested by the purchaser, shall be delivered
at the closing by the Selling Stockholder. In addition, the purchaser may
reasonably request waivers of any tax
-5-
<PAGE> 6
liens and evidence of good title and authority of any representative
before tendering payment.
3. CO-SALE RESTRICTIONS. A Stockholder may sell any Shares in accordance with
Section 2.1 to a Person (the "Proposed Buyer") only if the Stockholders who
notified the Selling Stockholder of their interest in exercising co-sale rights
as contemplated by Section 2.1.4 are offered the chance to participate in such
sale in the manner and on the terms set forth in this Section 3.
3.1. Offer. An Outside Offer delivered pursuant to Section 2.1.3 will also
be deemed to be a notice (the "Co-Sale Notice") to the recipient Stockholders of
the opportunity to exercise their rights under this Section 3.
(a) The complete terms of the proposed sale described in the Outside
Offer (the "Proposed Sale"), including the number of Shares (the "Proposed
Shares") proposed to be sold, will be effective with respect to both
Section 2 and this Section 3; and
(b) The Co-Sale Notice will be deemed to be an offer by the Selling
Stockholder to include in the Proposed Sale to the Proposed Buyer, at the
option of such Stockholders, that number of the Stockholders' Shares as is
determined in accordance with Section 3.2, on the same terms and
conditions as the Selling Stockholder shall sell the Shares to be sold by
the Selling Stockholder.
3.2. Time and Manner of Exercise. If any of the Stockholders desires to
accept the offer contained in the Co-Sale Notice, such Stockholder shall notify
the Selling Stockholder in writing within 10 days after receipt of the Co-Sale
Notice. If none of the Stockholders has so accepted such offer in writing, they
shall be deemed to have waived all of their rights with respect to the Proposed
Sale, and the Selling Stockholder shall thereafter be free to sell the Shares
specified in the Co-Sale Notice pursuant to the Proposed Sale. Any acceptance by
any Stockholder of the offer contained in the Co-Sale Notice shall be
irrevocable except as hereinafter provided. Each Stockholder who has elected to
participate in such Proposed Sale shall be entitled to sell in the Proposed
Sale, on the same terms and conditions as the Selling Stockholder, the Co-Sale
Percentage of the aggregate number of Shares then held by it. The "Co-Sale
Percentage" shall mean the fraction, expressed as a percentage, the numerator of
which is the total number of Proposed Shares contained in the Co-Sale Notice
that are not being purchased pursuant to Sections 2.1.2 or 2.1.3 and the
denominator of which is aggregate number of Shares held by the Selling
Stockholder immediately before delivery of the Co-Sale Notice; provided,
however, that in the event one or more Stockholders do not elect to sell in the
Proposed Sale, each Stockholder electing to sell in the Proposed Sale may
include additional Shares in such Proposed Sale pro rata based on the respective
Proportionate Shares of such Stockholders wishing to sell in such Proposed Sale,
or as they may otherwise agree.
3.3. Time and Manner of Closing. Each of the Stockholders participating in
any Proposed Sale shall take such actions and execute such documents and
instruments as shall be reasonably
-6-
<PAGE> 7
necessary in order to consummate the Proposed Sale expeditiously on the same
terms as the Selling Stockholder. If at the end of 90 days following the date on
which the Co-Sale Notice was given the Selling Stockholder has not completed the
Proposed Sale in accordance with the terms hereof, the Stockholders shall be
released from their obligations hereunder. All costs and expenses incurred by
the Selling Stockholder in connection with any sale, including without
limitation all attorneys' fees and disbursements and any finders' or brokerage
fees or commissions, shall be allocated pro rata among the Selling Stockholder
and the Stockholders according to the number of shares sold by each. The portion
of such costs and expenses allocable to each Stockholder shall be remitted to
the Selling Stockholder promptly after notice thereof demonstrating reasonable
supporting calculations. At the closing of any sale under this Section 3.3, each
Stockholder shall deliver certificates representing the Shares to be sold by it
pursuant to this Section 3, duly endorsed for transfer and (if requested in
writing by the Proposed Buyer) with signature guaranteed, and with any stock
transfer tax stamps affixed, against delivery of the applicable purchase price.
As a condition to the Transfer of Shares pursuant to this Section 3.3, the
Proposed Buyer shall execute a joinder to this Agreement and any shares sold to
the Proposed Buyer in accordance with this Section 3.3 shall continue to be
subject to this Agreement.
4. VOTING AGREEMENT. Each party hereto agrees (a) to vote all Shares owned by
such party to cause the Board of Directors of the Company to consist of seven
directors and (b) to vote all shares of the Company's capital stock owned by
such party, as the case may be, (i) to refrain from violating the rights of the
Investors as set forth in the Purchase Agreement, the Investor Agreements, the
Material Agreements (each as defined in the Purchase Agreement) and (ii) to
elect as directors (A) so long as WPC holds at least 50% of the number of Shares
held by it as of the date hereof, one person nominated by a majority of the WPC
Holders (as defined in the Purchase Agreement) and reasonably acceptable to the
Company; (B) so long as Highland holds at least 50% of the number of Shares held
by it as of the date hereof, one person nominated by a majority of the Highland
Holders (as defined in the Purchase Agreement) and reasonably acceptable to the
Company (the persons serving a directors pursuant to clause (A) and (B) shall be
referred to herein as the "Preferred Directors"); (C) four individuals nominated
by a majority of the then-existing Board of Directors, other than the Preferred
Directors; and (D) one individual who is not an officer or employee of the
Company nominated by all of the then existing directors, including the Preferred
Directors; provided, however, that the foregoing clause (b) shall not prevent
any party from voting on any other matter that may properly be taken up by the
stockholders of the Company, including the election of directors that are not
the subject of this Agreement. In the event either WPC or Highland are no longer
entitled to nominate a Preferred Director, such Preferred Director shall be
nominated by the Required Holders.
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<PAGE> 8
5. LEGEND. Each certificate evidencing Shares shall contain the following
legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS AS SET FORTH IN A STOCKHOLDERS
AGREEMENT DATED AS OF MARCH 13, 2000, A COPY OF WHICH IS ON FILE
IN THE OFFICES OF THE COMPANY AND WILL BE FURNISHED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
6. GENERAL.
6.1. Remedies. The parties shall have all remedies for breach of this
Agreement available to them provided by law or equity. Without limiting the
generality of the foregoing, in addition to all other rights and remedies
available at law or in equity, the parties shall be entitled to obtain specific
performance of the obligations of each party to this Agreement and immediate
injunctive relief. In the event any action or proceeding is brought in equity to
enforce the same, neither the Company nor any party will urge, as a defense,
that an adequate remedy at law exists.
6.2. Notices. Any notice or other communication in connection with this
Agreement or the Investor Securities shall be deemed to be delivered if in
writing addressed as provided below and if either (a) actually delivered at such
address, whether by telecopy, overnight or two-day courier (b) in the case of a
letter, seven business days shall have elapsed after the same shall have been
deposited in the United States mails, postage prepaid and registered or
certified, return receipt requested or (c) transmitted to any address outside of
the United States, by telecopy and confirmed by overnight or two-day courier:
If to the Company, to it at 11180 Sunrise Valley Drive, Suite 400, Reston,
Virginia 20191, telecopy: (703) 391-9589, telephone: (703) 391-6300, or at such
other address as the Company shall have specified by notice actually received by
the Principal Holders.
If to the Investors, to the Investors' respective addresses set forth on
Schedule A or B, or at such other address as the Investors shall have specified
by notice actually received by the Company, in each case with a copy to WPC and
Highland.
If to any other Stockholder, to it at its address set forth in the
securities registers of the Company.
6.3. Amendments, Waiver and Consents. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only by written agreement signed by (a) the Company, (b) the
Required Holders so long as any shares of the Series D Preferred Stock are
outstanding, and (c) Stockholders holding an aggregate of at least a majority of
the Shares held by all Stockholders (assuming the exercise of all Options and
conversion of all Convertible Securities held by such Stockholders) and if, in
each such case, copies of such
-8-
<PAGE> 9
modification are delivered to any parties who did not execute the same;
provided, however, that any such modification adversely affecting the
Stockholders in a manner distinct from the effect of such modification on the
Investors shall require the written consent of the affected Stockholders holding
a majority of the Shares of such affected Stockholders (assuming the exercise of
all Options and conversion of all Convertible Securities held by the Investors).
6.4. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the personal representatives, successors and assigns of
the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of the Required Holders and the other Stockholders holding
an aggregate of at least a majority of such other Shares (assuming the exercise
of all Options and conversion of all Convertible Securities held by all
Stockholders). The Stockholders may assign or transfer their rights under this
Agreement to the extent permitted herein and by the other agreements between the
respective parties and the Company.
6.5. Termination. This Agreement shall terminate at the time immediately
prior to the consummation of a Qualified Public Offering (as defined in the
Certificate of Designation for the Preferred Stock).
6.6. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, such
provision shall, to the maximum extent allowable by law, be modified by such
court so that it becomes enforceable and, as modified, shall be enforced as any
other provision hereof, all the other provisions hereof continuing in full force
and effect.
6.7. Headings. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
6.8. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous understandings, whether written or oral.
6.9. Joinder of Additional Parties. Future holders of the Company's
capital stock (or of options, warrants, conversion rights or other rights to
acquire such capital stock) may become party hereto as a Stockholder by
executing a joinder hereto in a form reasonably satisfactory to the Company.
6.10. Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute the same instrument.
6.11. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of the State of
Delaware.
-9-
<PAGE> 10
6.12. Joinder of Spouses. The Company shall require that the spouse of
each Stockholder who is a natural person consent and agree to the terms of this
Agreement by executing and delivering a Consent and Agreement of Spouse to
Stockholders Agreement substantially in the form of Exhibit A. It is
acknowledged that certain Stockholders and other individuals who may acquire
Shares after the date hereof and are bound as Stockholders by the terms hereof
may be married or may become married during the term of this Agreement and that
their respective spouses may have an interest in any or all of the Shares held
by such Stockholders to the extent such Shares constitute or become community
property, or are or may be held in joint tenancy or as tenants by the entireties
(collectively, "Community Property") by reason of their respective spouses'
rights to acquire, manage, control or dispose of Community Property. If any
married Stockholder is required to sell his or her Shares pursuant to the terms
of this Agreement, the spouse of each Stockholder agrees, by executing the
Consent and Agreement of Spouse to Stockholders Agreement, to cause any and all
rights to and interest in such Shares that such spouse may then have (or claim
to have) to be sold, in like manner and upon the same terms and conditions, as
set forth in this Agreement.
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<PAGE> 11
The parties hereto have executed this Agreement under seal as of the date
first above written.
DIGITAL COMMERCE CORPORATION
By /s/ Tony Bansal
--------------------------------
Title: President
WESTON PRESIDIO CAPITAL III, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P.
By /s/ Carlo A. von Schroeter
--------------------------------
Title:
WESTON PRESIDIO ENTREPRENEUR FUND, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT III, L.P.
By /s/ Carlo A. von Schroeter
--------------------------------
Title:
HIGHLAND CAPITAL PARTNERS V LIMITED
PARTNERSHIP
BY: HIGHLAND MANAGEMENT PARTNERS V
LIMITED PARTNERSHIP, its
General Partner
BY: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
-------------------------
Authorized Officer
-11-
<PAGE> 12
HIGHLAND CAPITAL PARTNERS V-B LIMITED
PARTNERSHIP
By: HIGHLAND MANAGEMENT PARTNERS V
LIMITED PARTNERSHIP, its
General Partner
By: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
-------------------------
Authorized Officer
HIGHLAND ENTREPRENEURS' FUND V LIMITED
PARTNERSHIP
By: HEF V LIMITED PARTNERSHIP, its
General Partner
By: HIGHLAND MANAGEMENT PARTNERS V,
INC., its General Partner
By: /s/ Illegible
-------------------------
Authorized Officer
eSENTINEL VENTURE CAPITAL, L.L.C.
By: SENTINEL CAPITAL PARTNERS, L.P.,
its member
By: SENTINEL PARTNERS, L.P., its
general partner
By: SENTINEL PARTNERS, INC., its
general partner
By: /s/ Illegible
--------------------------------
Name:
Title:
-12-
<PAGE> 13
eSENTINEL VENTURE CAPITAL II, L.L.C.
By: SENTINEL CAPITAL PARTNERS II, L.P.,
its member
By: SENTINEL PARTNERS II, L.P., its
general partner
By: SENTINEL PARTNERS II, INC., its
general partner
By: /s/ Illegible
-----------------------------------
Name:
Title:
FRANK E. RICHARDSON
/s/ Frank E. Richardson
----------------------------------------
MICHAEL J. MYERS
/s/ Michael J. Myers
----------------------------------------
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<PAGE> 14
SAP INVESTMENTS, INC.
By /s/ Kevin S. McKay
-----------------------------------
Name: Kevin S. McKay
Title: Chief Executive Officer
ADAM SOLOMON
/s/ Adam Solomon
----------------------------------------
TONY BANSAL
/s/ Tony Bansal
-----------------------------------
WILLIAM H. SEIPPEL
/s/ William H. Seippel
-----------------------------------
ATOCHA, L.P.
By: /s/ Thomas Cirrito
------------------------------
Thomas Cirrito, general partner
-14-
<PAGE> 15
THE ROMAN ARCH FUND L.P.
By /s/ Robert Willard
-------------------------------------
Robert Willard, its E.V.P.
THE ROMAN ARCH FUND II L.P.
By /s/ Robert Willard
-------------------------------------
Robert Willard, its E.V.P.
-15-
<PAGE> 16
CHELSEY CAPITAL CORP.
By /s/ Stuart Feldman
------------------------------------
Name: Stuart Feldman
Title: President
-16-
<PAGE> 17
RRE VENTURES II L.P.
By /s/ Andrew L. Zalasin
--------------------------------------
Andrew L. Zalasin, its General Partner
RRE VENTURES FUND II L.P.
By /s/ Andrew L. Zalasin
--------------------------------------
Andrew L. Zalasin, its General Partner
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<PAGE> 18
SCHEDULE A TO STOCKHOLDER AGREEMENT
<TABLE>
<CAPTION>
Number and Type of Shares
Stockholders and Address Held on Date Hereof
- ------------------------ -------------------------
<S> <C>
Weston Presidio Capital III, L.P. 2,448,907 shares of Series D Preferred Stock
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Weston Presidio Entrepreneur Fund, L.P. 121,902 shares of Series D Preferred Stock
One Federal Street
Boston, MA 02210
Telephone: (617) 988-2500
Telecopy: (617) 988-2515
Highland Capital Partners V 1,814,991 shares of Series D Preferred Stock
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Capital Partners V-B 467,887 shares of Series D Preferred Stock
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
Highland Entrepreneurs' Fund V 287,931 shares of Series D Preferred Stock
Limited Partnership
Two International Place
Boston, MA 02110
Telephone: (617) 531-1500
Telecopy: (617) 531-1550
eSentinel Venture Capital, L.L.C. 51,373 shares of Series D Preferred Stock
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
eSentinel Venture Capital II, L.L.C. 856,945 shares of Series D Preferred Stock
777 Third Avenue -- 32nd floor
New York, New York 10017
Telephone: (212) 688-3100
Telecopy: (212) 688-6513
Michael J. Myers 17,156 shares of Series D Preferred Stock
First Century Partners
29 Airpark Road
Princeton, New Jersey 08540
Telephone: (609) 683-8848
Telecopy: (609) 683-8123
Frank E. Richardson 17,156 shares of Series D Preferred Stock
F.E. Richardson & Co., Inc.
245 Park Avenue
New York, New York 10167
Telephone: (212) 490-9271
Telecopy: (212) 490-0015
SAP Investments, Inc. 856,937 shares of Series D Preferred Stock
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Telephone: (610) 661-1811
Telecopy: (610) 661-3260
Adam Solomon 514,162 shares of Series D Preferred Stock
Shaker Investments
237 Park Avenue - Suite 801
New York, New York 10017
Telephone: (212) 692-3662
Telecopy: (212) 692-3609
The Roman Arch Fund L.P. 64,270 shares of Series D Preferred Stock
One New York Plaza, 18th Floor
New York, NY 10021
The Roman Arch Fund II L.P. 64,270 shares of Series D Preferred Stock
One New York Plaza, 18th Floor
New York, NY 10021
</TABLE>
-2-
<PAGE> 20
<TABLE>
<S> <C>
Chelsey Capital Corp. 42,847 shares of Series D Preferred Stock
1370 Avenue of the Americas
26th Floor
New York, NY 10019
Telephone: (212) 586-6479
Telecopy: (212) 765-3112
RRE Ventures II L.P. 434,182 shares of Series D Preferred Stock
126 East 56th Street
New York, NY 10022
Telephone: (212) 418-5105
Telecopy: (212) 758-8369
RRE Ventures Fund II L.P. 79,980 shares of Series D Preferred Stock
126 East 56th Street
New York, NY 10022
Telephone: (212) 418-5105
Telecopy: (212) 758-8369
Tony Bansal 25,000 shares of common stock
Digital Commerce Corporation 1,756,739 options
11180 Sunrise Valley Drive - Suite 400
Reston, Virginia 20191
Telephone: (703) 391-6300
Telecopy: (703) 391-9589
William H. Seippel 1,573,427 shares of common stock
Digital Commerce Corporation 925,000 options
11180 Sunrise Valley Drive - Suite 400
Reston, Virginia 20191
Telephone: (703) 391-6300
Telecopy: (703) 391-9589
Atocha, L.P. 3,018,286 shares of common stock
7716 Carleton Place 66,816 options
McLean, Virginia 22102 5,463,764 shares of Series B Preferred Stock
2,550,465 shares of Series C Preferred Stock
</TABLE>
-3-
<PAGE> 21
EXHIBIT A
DIGITAL COMMERCE CORPORATION
STOCKHOLDERS AGREEMENT
CONSENT AND AGREEMENT OF SPOUSE
TO STOCKHOLDERS AGREEMENT
The undersigned, __________________, the spouse of ________________ (the
"Stockholder"), hereby consents to and agrees to be bound by the provisions of
that certain Stockholders Agreement dated as of March , 2000 among Digital
Commerce corporation, Weston Presidio Capital III, L.P., Highland Capital
Partners V Limited Partnership and the other Investors listed on Schedule A to
the Stockholders Agreement.
---------------------------
Signature
Dated:
--------------------
-4-
<PAGE> 1
EXHIBIT 16.1
May 2, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We have read the statements made by Digital Commerce Corporation (copy
attached), which we understand will be filed with the Commission, pursuant to
Item 304 of Regulation S-K as part of the Company's Form S-1 dated May 2, 2000.
We agree with the statements in the "Changes in Accountants -- Previous
independent accountants" section of such Form S-1 concerning our Firm.
Very truly yours,
PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
FedCenter, Inc., a Delaware corporation
PowerTrust.com, Inc., a Virginia corporation
FilmStuff.com, LLC, a Delaware limited liability company
<PAGE> 1
EXHIBIT 23.1
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 31, 2000, (except Note x, as to which the date
is ), in the Registration Statement (Form S-1 No. 333-00000) and
related Prospectus of Digital Commerce Corporation for the registration of its
common stock.
Ernst & Young LLP
McLean, Virginia
, 2000
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion of
the distribution of PowerTrust, Inc. as described in Note 1 to the financial
statements.
/s/ Ernst & Young LLP
April 26, 2000
<PAGE> 1
EXHIBIT 23.2
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 31, 2000 in the Registration Statement (Form S-1
No. 333-00000) and related Prospectus of Digital Commerce Corporation for the
registration of its common stock.
/s/ Ernst & Young LLP
McLean, Virginia
April 26, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated September 21, 1999, relating to the consolidated financial
statements of Digital Commerce Corporation, which appears in such Registration
Statement. We also consent to the reference to us under the heading Experts in
such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Washington D.C.
May 1, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> DEC-31-1999 MAR-31-2000
<CASH> 3,713 41,455
<SECURITIES> 0 0
<RECEIVABLES> 566 1,691
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,636 43,895
<PP&E> 1,729 3,181
<DEPRECIATION> 511 723
<TOTAL-ASSETS> 7,020 48,104
<CURRENT-LIABILITIES> 11,856 11,094
<BONDS> 12,290 1,465
0 47,762
0 80
<COMMON> 77 78
<OTHER-SE> (10,883) (10,752)
<TOTAL-LIABILITY-AND-EQUITY> 7,020 48,104
<SALES> 1,437 1,599
<TOTAL-REVENUES> 1,437 1,599
<CGS> 970 630
<TOTAL-COSTS> 970 630
<OTHER-EXPENSES> 15,850 10,158
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,560 422
<INCOME-PRETAX> (16,264) (9,490)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (16,264) (9,490)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 171 0
<CHANGES> 0 0
<NET-INCOME> (16,093) (9,490)
<EPS-BASIC> (3.31) (1.23)
<EPS-DILUTED> (3.31) (1.23)
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