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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number: 000-21729
THE VIALINK COMPANY
(Formerly APPLIED INTELLIGENCE GROUP, INC.)
(Name of Small Business Issuer in its Charter)
Oklahoma 73-1247666
(State of Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Indemnification No.)
13800 Benson Road
Edmond, Oklahoma 73013-6417
(Address of Principal Executive Offices) (Zip Code)
(405) 936-2500
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
None N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
(Title of Class)
Redeemable Common Stock Purchase Warrants
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ending December 31, 1998 were
$8,230,628.
As of February 26, 1999, the aggregate market value of the voting common
stock of the registrant held by non-affiliates of the registrant (affiliates for
these purposes being Registrant's directors, executive officers and holders of
more than 5% of Registrant's common stock on such date) computed by reference to
the price at which the common equity was sold, or the average bid and asked
price of such common equity on that date was $25,604,588.
As of February 26, 1999, the issuer had 2,874,246 outstanding shares of
Common Stock.
Transitional Small Business Disclosure Format: Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for issuer's 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Annual Report
on Form 10-KSB
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PART I
ITEM 1. BUSINESS
General
Overview
The viaLink Company provides a set of subscription-based electronic
commerce services, designed specifically for the food and consumer packaged
goods industries. The viaLink Item Catalog service provides a secure, low-cost,
consistent way for the participants in the retail supply chain -- manufacturers,
wholesalers distributors and retailers -- to communicate item and pricing
information. Item Catalog manages all of the complexity of the trading
relationship, including new and deleted items, costs and promotions. On-network
data translations allow seamless electronic connections directly into the
subscribers' systems.
Our viaLink services allow subscribers to more efficiently manage
information flows to and from their trading partners through a single interface.
Instead of making many electronic data interchange, or EDI, connections to reach
many trading partners, each participant only makes one electronic connection to
the viaLink services, in EDI or some other convenient format. Retailers can
reduce costs by avoiding time-intensive, error-prone manual entry of item and
cost data. Wholesalers avoid the cost of creating multiple interfaces to
retailer systems. Distributors are assured of timely and accurate flow of new
and updated product information. Manufacturers have a consistent and cost-
effective way of communicating with their entire supply chain.
Company Background and Development
The viaLink Company was formed in 1985 as Applied Intelligence Group, Inc.
From inception until the sale of our consulting business in 1998, our operations
consisted primarily of consulting services related to the planning, designing,
building and installation of computerized information management systems and
computerized checkout or point-of-sale systems in the retail and distribution
industry.
In 1993, we began the design and development of viaLink, an Internet-based
subscription service. We introduced the viaLink Item Catalog service in January
1997. Since the introduction of Item Catalog and the related viaLink services,
we have made the strategic decision to shed all other non-core assets in order
to permit us to focus exclusively on the development, marketing and
implementation of our viaLink services.
We sold our consulting business to The Netplex Group, Inc. in September
1998, and changed our name to The viaLink Company in October 1998. In December
1998, we sold our ijob, Inc. subsidiary to a company controlled by David
Mitchell, the President of ijob.
Historically, our consulting business had provided substantially all of our
revenues. As a result of the sale of these assets, we should be viewed as a
development stage company since our planned principal operations are underway,
but have not yet generated significant revenues. This fundamental change in our
business is extremely risky, and there can be no assurance that our strategic
decision to shift our focus from our historical businesses to the viaLink
services ultimately will be successful. For more information on our development
and the sale of our consulting business and ijob, please see "Purchase and Sale
of Significant Assets" below.
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How To Contact Us
Our principal executive offices and headquarters are located at 13800
Benson Road, Edmond, Oklahoma 73013-6417, and our telephone number is (405) 936-
2500. Our World Wide Web home page is located at http://www.vialink.com.
Information contained in, or linked to, our Website does not constitute part of
this Form 10-KSB.
Recent Developments
On February 4, 1999, we entered into a financing agreement with Hewlett-
Packard Company. Hewlett-Packard loaned us $6.0 million pursuant to a
Subordinated Secured Promissory Note bearing interest at a rate of 11.5% per
annum. No principal or interest payments are due on the Hewlett-Packard Note
until February 2004. This Note is secured by a lien on our viaLink services,
including the underlying source code. Upon receipt of shareholder approval,
which we intend to seek at our 1999 Annual Meeting of Shareholders, this initial
Note would be exchanged for a substantially similar note which would be
convertible beginning in August 2000 into our Common Stock at a price of $7 per
share. In connection with the financing, Hewlett-Packard has agreed to provide
us with the database platform on which to host our viaLink services, and may
from time to time provide us with co-marketing and consulting support. The
Hewlett-Packard loan agreement also provides that up to 50% of the loan proceeds
are intended to be used to purchase Hewlett-Packard products and services. For
further information, please see "Strategic Relationships" below.
On January 12, 1999, we announced that we have entered into a non-binding
letter of understanding with Ernst & Young LLP regarding a potential equity
investment in viaLink and the provision by Ernst & Young of sales and marketing
support, and certain consulting and integration services. While we have
commenced preliminary co-marketing efforts with Ernst & Young, this letter of
understanding remains subject to the negotiation of definitive documentation.
Therefore it is possible that the relationship contemplated by the letter of
understanding may change considerably, or that we may not consummate this
relationship at all. For further information, please see "Strategic
Relationships" below.
Industry Background and Limitations of Historical Approaches
The food and consumer packaged goods industries are among the last
industries to become fully automated, and have only begun to take advantage of
the Internet. These industries are looking for ways to support a greater number
of services and increase margins and turnover. Currently there is no
established universal, low-cost method for manufacturers, wholesalers, and other
suppliers serving the food and consumer packaged goods industries to share data
easily and efficiently with their retail customers, or for retail headquarters
to share this data with their stores.
Retailers in both the food and consumer packaged goods industries,
consisting primarily of convenience and grocery stores, order their inventory
from a large number of manufacturers, wholesalers and direct store delivery
companies. For example, a convenience store may have up to 5,000 items in
inventory supplied by up to 50 suppliers, and a grocery store may have up to
50,000 items in inventory supplied by up to 75 suppliers. Despite each
retailer's large number of suppliers, and the large number of inventory items
each store has on hand, retail organizations have generally continued to utilize
a paper-based order and supply chain. The inefficiencies of the paper system
are time consuming and often result in operational and administrative errors,
increasing cost for all parties in the supply chain. This provides a
significant challenge to paper intensive and data challenged industries in which
better, faster and more accurate information sharing could help to reduce costs,
and increase margins and turnover.
One of the most significant challenges facing a retail organization is
maintenance of its "pricebook." The pricebook typically contains descriptions
of each item in a store's inventory, along with the item's universal product
code (UPC), purchase cost, retail sales price and any discounts to be received
from the item supplier. Because many retail organizations do not communicate
electronically with their supply chain, managers operating retail stores must
maintain their pricebook by manually
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keying item and price information from suppliers' reports, catalogs, e-mails and
faxes into their pricebook. A retail organization may have hundreds of
suppliers, and each supplier may have different prices on the items it supplies
to different stores operated by the same retail organization, depending upon the
location of the store. For instance, an item supplied to a store in New York
City may have a higher price than the same item supplied to a store in Macon,
Georgia, even though the two stores are operated by the same organization. The
large number of items and variability of pricing makes pricebook maintenance
extremely difficult, and manual pricebook maintenance produces a high number of
errors. According to the National Association of Convenience Stores, pricebook
maintenance often poses the most significant challenge to computerization of the
retail store's purchases and sales.
Although electronic data interchange, or EDI, technology has been
available, many retail organizations have found it technologically and
financially unreasonable to create hundreds of point-to-point EDI connections to
their numerous distributors and suppliers. In the traditional EDI model, each
participant creates, or "maps", an EDI conversation with every one of its supply
chain partners. The result of this is that a tiny fraction of the core business
interactions are conducted electronically, and virtually all advanced supply
chain applications have been inaccessible to these organizations. Furthermore,
even if retail organizations found it feasible to electronically link to each of
their suppliers, many of their suppliers are not electronically linked to their
manufacturers. Therefore, communication among manufacturers, suppliers and
retailers have remained paper intensive.
Moreover, the unavailability of basic electronic commerce capabilities,
such as timely electronic distribution of product and pricing information, has
impeded the deployment of more advanced supply chain concepts, such as CPFR
(Collaborative Planning, Forecasting and Replenishment) and SBT (Scan-Based-
Trading). For example, while each store may and often does have automatic
scanning capabilities at check-out, the data from the check-out is usually
deleted, and the communication among the manufacturers, suppliers and retailers
remains largely paper driven. Only a small percentage of the information
captured from a retail sale in a grocery store ever finds its way back up the
supply chain to the manufacturers.
As a result, retailers desiring to implement point-of-sale, in-store
technologies and other inventory, pricing and purchasing applications generally
are confronted with:
. The need for substantial additional investments in computer hardware,
software, training and technological obsolescence;
. The challenge of managing information related to up to tens of
thousands of product items from hundreds of suppliers and
distributors;
. Technological and system operation complexities, demanding additional
personnel resources, training, skills and technical expertise;
. The lack of industry standards for information sharing among retailers
and their suppliers and distributors;
. The difficulty in obtaining information from suppliers and
distributors and maintaining such information on a current basis; and
. The lack of a scalable shared industry network.
The viaLink Solution
viaLink offers a set of subscription-based electronic commerce services
designed specifically for the food and consumer packaged goods industries. The
viaLink Item Catalog Service provides a secure, low-cost, consistent way for
participants in the retail supply chain to communicate about items and costs.
The service allows subscribers to efficiently manage information flows to and
from their trading partners through a single interface. Instead of making many
EDI connections to reach many trading partners,
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each participant only makes one electronic connection to the viaLink services,
in EDI or some other convenient format. The viaLink Item Catalog Service manages
all of the complexity of the trading relationship, including new and deleted
items, costs and promotions. On-network data translations allow seamless
electronic connections directly into the subscribers' systems.
We believe that our services offer significant benefits to every
participant in the grocery supply chain. With the use of a personal computer,
commonly available software and a Web browser, viaLink enables its subscribers
to improve management of information flow, reduce errors and invoice
discrepancies, enhance the accounts receivable collection process and reduce
redundant information processing. Retailers avoid the cost and hassle of manual
entry of item and cost data. Wholesalers avoid the cost of creating multiple
interfaces to retailer systems. Distributors receive a timely and accurate flow
of new and updated product information. Manufacturers have a consistent and
cost-effective way of communicating with their entire supply chain.
Our viaLink services have the following key features and benefits:
Key Features
. Subscription-Based. Through our partner Hewlett-Packard, we will serve
as the database host and provide the viaLink services on a
subscription basis, so that each subscriber's technology and capital
investments are minimized.
. Single Interface. Allows retailers and suppliers to share and manage
information on a real-time basis through one, easy to learn and use
industry standard Web browser interface.
. EDI Capabilities. For those suppliers who utilize EDI, the viaLink
services can map to whatever format is needed to download into the
existing system, while adhering to EDI standards.
. Secured Network. Information is protected from unauthorized users with
a series of firewalls and passwords.
Benefits
. Reduced Invoice Errors. Having the correct pricing information before
the product arrives alleviates invoice discrepancies.
. More Efficient Promotions. Promotion information can be delivered on a
timely basis.
. Reduced Workload. Moving information electronically eliminates
redundant data entry for all trading partners using the system,
allowing resources to be reallocated.
. Faster Product Introductions. Information on new products is available
to existing systems before the products arrive at the back door
allowing them to be placed on the selling floor immediately upon
receipt.
The viaLink Services
Our viaLink services consist of the following components:
Item Catalog. The viaLink Item Catalog allows retailers and suppliers to
exchange product, price, and promotion information electronically. This Web-
accessible shared database, and multiple interface formats, make real electronic
commerce available to the grocery supply chain.
The viaLink Item Catalog service offers subscribers the following key
advantages:
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. Shared Database. Shared database provides more accurate data. Because
product description, UPC and case make-up is stored in our database,
all users share the same copy of the item data. This reduces the
number of in-store and delivery errors caused by incorrect or
incomplete product information.
. Single Interface. Allows retailers and suppliers to exchange product
information through a single interface. Suppliers can use EDI or
proprietary batch files, or simply log on to our Web site and key in
the information. Retailers can choose one of several output formats,
including direct interfaces to many of the most popular retail
software systems. All data is transferred in a single format,
regardless of the formats chosen by trading partners. This eliminates
the time required to establish specific formats with each trading
partner.
. Cost Maintenance. Provides flexibility to simplify the task of
delivering and receiving cost and promotion information. This reduces
time spent correcting delivery and receiving errors, researching
disputed invoices and locating late or missing promotion information.
ItemXpress. The viaLink ItemXpress can provide subscribers with the
foundation for a strong pricebook in less than a week. viaLink ItemXpress
dramatically reduces the time and cost associated with the initial item setup of
a retailer's pricebook, while increasing data accuracy. Item information can be
extracted from our extensive database to create a custom load for each
retailer's system.
The principal advantages the viaLink ItemXpress service offers subscribers
are:
. Shorter Set-up Time. Enables retailers to begin using their pricebooks
as early as one week after implementation. Traditional approaches to
building item files often take six months or longer and require
several cycles of requesting information, researching and correcting
errors.
. Fewer Staff Hours. Allows retailers to load thousands of items into
their pricebook, often in 50 or fewer staff hours. Retailers currently
typically spend thousands of hours of their staff's valuable time
compiling item information and entering it into their pricebook.
. Increased Accuracy. Allows retailers to use an extensive database of
pre-verified item data to produce a custom download of items. This
product information is accurate and ready-to-use.
Exchange Manager. The viaLink Exchange Manager allows companies to
exchange order and invoice transactions through a single interface, regardless
of the number of trading partners. Built on the viaLink Item Catalog, Exchange
Manager verifies order and invoice information against the Item Catalog and
creates exception reports.
Exchange Manager offers the following principal advantages over the
traditional method of exchanging electronic orders and invoices:
. Exception Reporting. Identifies items that are not authorized in the
catalog, as well as costs that are different from those already in the
catalog. These exception reports allow retailers and suppliers to take
corrective action before the order or shipment is processed,
eliminating operational problems.
. Retrieval and Reporting. Stores orders and invoices in the viaLink
database for easy retrieval and reporting. This shared database gives
retailers and suppliers a similar view of the information.
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. Historical Reporting. Allows retailers and suppliers to access a
history of previous purchases. This common-view feature aids joint
projects and refines merchandising and operational programs.
. On-line Interface. Available via the Web, the on-line interface allows
retailers and suppliers to access their order and invoice information
with only a minor investment in technology.
Pricing
We have recently changed our pricing model to begin pricing our services
based on a flat monthly rate with a variable component based on usage. We
calculate the variable portion of each subscriber's monthly service fee based on
the service and amount of service the subscriber uses. For example, for use of
the Item Catalog service, retailers pay based on the number of suppliers from
whom they receive data; suppliers pay based on the number of retailers that
download their data; and manufacturers pay based on the number of retailers that
subscribe to the service. We price our other services based on the number of
stores supported or the amount of data stored and retrieved.
Security
To minimize the security risks associated with a shared network on the
Internet, we have implemented extensive security protocols in our services. The
services provide encryption protection of confidential information as it passes
through the Internet. We also have constructed a double "firewall" between our
services and the Internet, which is intended to restrict unauthorized use and
prevent security breaches. We believe that the relocation of our services to
the Hewlett-Packard database platform will enable us to further improve our
system security and customer data integrity.
Although we have implemented numerous security measures, our service
remains vulnerable to break-ins and similar security breaches that jeopardize
the security of the information stored in and transmitted through the computer
systems of our users, which may result in significant liability to us and also
deter potential customers. Moreover, the security and privacy concerns of
potential customers, as well as concerns related to computer viruses, may
inhibit the marketability of our services. Although we maintain insurance to
protect against these risks, there can be no assurance that such insurance will
remain available to us on commercially reasonable terms or at all, or that any
claims against us would not exceed the coverage.
Strategic Relationships
We believe that forming relationships with significant industry leaders
will be critical to achieving market penetration and acceptance of our services.
We believe that leveraging such relationships will enable us to more quickly
penetrate our target market. To date, we have formed relationships with the
Hewlett-Packard Company and Ernst & Young LLP. In February 1999, we created the
position of Vice President of Strategic Development to further develop the Ernst
& Young and Hewlett-Packard relationships and to pursue additional
relationships.
Hewlett-Packard
In addition to financing in the form of a $6.0 million note, Hewlett-
Packard has agreed to provide us with the database platform to host viaLink's
Item Catalog and other services. To evidence that the viaLink services reside
on a Hewlett-Packard database, we have agreed that our Web-based user interface
will display a "Powered by HP" icon. Hewlett-Packard also may provide us with
co-marketing and consulting support from time to time. The terms of our loan
from Hewlett-Packard contemplates that we will use up to 50% of the loan amount
to purchase Hewlett-Packard products and services. In addition, Hewlett-Packard
may have an advisor present at our Board meetings.
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Ernst & Young LLP
We have executed a letter of understanding with the international
consulting firm Ernst & Young LLP to form a strategic partnership to offer
business-to-business electronic commerce solutions to the food and consumer
packaged goods industries. Under the terms of the letter of understanding,
Ernst & Young may provide equity financing and sales and marketing support, as
well as consulting and integration services. While we have commenced
preliminary co-marketing efforts with Ernst & Young, this letter of
understanding remains subject to the negotiation of definitive documentation.
Therefore it is possible the relationship contemplated by the letter of
understanding may change considerably, or that we may not consummate this
relationship at all.
Customers
Our viaLink services have been operational for over a year, and as of
December 31, 1998 had more than 200 subscribers. The following is a
representative list of the retailer and supplier customers of our viaLink
services as of the date of filing of this Form 10-KSB:
Suppliers Retailers
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Buffalo Rock Pepsi of Newnan Andronico's Market
Charles E. Brown Beverage Co. Baker's Supermarkets
Fleming Companies of Altoona NOCO Express Shops
Frito-Lay, Inc. (Corporate) Store 24 Companies, Inc.
Great Plains Coca-Cola Bottling Co. Texaco Refining & Marketing, Inc.
J. T. Davenport & Sons, Inc.
McKee Foods Corporation
Pepsi Cola Marketing Group
S. J. McCullagh, Inc.
Tom's Foods, Inc.
We also currently provide Web hosting activities unrelated to our viaLink
services. We intend to continue to provide Web hosting for certain of our
customers until such time, if ever, as we can begin to generate substantial
revenue from our viaLink services. After the sale of our consulting business and
ijob, Inc., our Web hosting services for two customers, UROCOR and the National
Association of Convenience Stores, account for approximately 80% of our current
revenues.
Historically, due primarily to our consulting business which we sold in
1998, we had significant customer concentration. In 1998, 1997 and 1996, three
customers individually accounted for 13%, 11% and 11%, 20%, 13% and 10%, and
17%, 14% and 10% of our total revenues, respectively. In 1998, 1997 and 1996,
approximately 49%, 57% and 57%, respectively, of our total revenues were
attributable to five clients. Due to the sale of our consulting business, we
believe that our historic customer concentration levels are no longer relevant
to an understanding of our business. However, we lost 90% of our historical
revenue sources with such sale. We are unable at this time to predict whether
customer concentration in our viaLink services will develop in the future.
Sales and Marketing
We market our services to food and consumer packaged goods manufacturers,
suppliers and retailers directly through our sales and marketing support group
and senior staff members and indirectly through our partners, particularly Ernst
& Young, if such agreement is consummated. As of December 31, 1998, our sales
and marketing support group consisted of only four full-time employees. We
intend to substantially expand our sales and marketing team in 1999 and attempt
to further leverage our relationships with Ernst & Young and Hewlett-Packard.
Our sales and marketing team is responsible for sales-lead generation,
follow-up on customer referrals, and providing input into our ongoing viaLink
services and product development efforts based on
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customer feedback and market data. We generate sales and marketing leads through
trade advertising, customer referrals, public relations, trade shows and
strategic relationships. We also utilize a variety of other consulting and
contractor relationships to help develop and promote our viaLink services. We
believe that forming indirect sales and co-marketing relationships, such as with
Ernst & Young, will allow us to leverage the resources of these parties and more
rapidly penetrate our target market.
We intend to significantly expand our sales and marketing operations in
1999, including a significant increase in staff, and to expend significant
capital resources in doing so. Our failure to locate and hire qualified sales
and marketing personnel or to obtain the funds from internally generated
revenues or financings to support the growth in our sales and marketing
organization would have a material adverse effect on our business, financial
condition and operating results.
Product Development and Enhancement
We initially introduced Item Catalog in 1997 and intend to continue to make
significant investments in product development and enhancement to continue to
improve and extend our viaLink services. Currently, the dynamic nature of the
information technology industry places large research and development demands on
businesses that desire to remain competitive. To compete with larger firms with
substantially greater capital resources, we have devoted significant portions of
available resources to stay abreast of industry developments and to offer
competitive products and services.
In addition to internally developed product developments and enhancements,
we intend to seek acquisition of complementary businesses, products and
technologies, or enter into joint venture or license agreements to broaden our
product offerings and provide more comprehensive solutions to the grocery supply
chain.
During 1999, we intend to expend significant development resources to
reestablish our services in an HP environment, then move our service to the
Hewlett-Packard database hosting facility, where it will be operated and managed
by Hewlett-Packard. In addition, our product development staff will be working
on product enhancements and extensions, including a significant commitment to
Scan-Based Trading initiatives.
As of December 31, 1998, our product development staff and technical
support staff consisted of 14 full-time employees. As a result of the sale of
our consulting business, we do not believe that our past expenditures on
research and development activities are relevant to an understanding of our
current business.
We expect that we will require significant additional resources to fund our
product development and enhancement efforts. A failure to receive such funds
from internally generated revenues or financings could have a material adverse
effect on our business, financial condition and operating results, as well as
the prospects of our viaLink services.
Competition
The environment within which we operate is intensely competitive and
subject to rapid change. We currently compete principally on the basis of the
specialized nature of our services. Due to the unique nature of our service and
the early stage of development of the market for our services, our viaLink
services have encountered little direct competition. However, we believe that
several large groups, possibly including major consulting organizations, are
attempting to develop an electronic commerce utility which, if successful, may
perform functions similar to our services. Many of our potential competitors
have substantially greater resources than we do. Any failure by us to achieve
rapid market penetration or to
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successfully address the risks posed by expected competition would have a
material adverse effect on our business, financial condition and operating
results.
Proprietary Rights
Our success and ability to compete are dependent upon our ability to
develop and maintain the proprietary aspects of our technology and operate
without infringing on the proprietary rights of others. We rely primarily on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our proprietary rights.
Because the software development industry is characterized by rapid
technological change, we believe that factors such as the technological and
creative skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are more
important to establishing and maintaining a technology leadership position than
the various legal protections available for our technology. We have no patents
or patent applications pending. Instead, we attempt to protect our products
through a combination of copyright, trademark and trade secret laws. viaLink(R)
is our registered trademark.
We also require employee and third-party non-disclosure and confidentiality
agreements. We seek to protect our software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. We cannot be certain that others will not develop technologies that
are similar or superior to our technology or design around the copyrights and
trade secrets owned by us. We license our viaLink services primarily under
licenses included as part of our subscription agreements. We believe, however,
that these measures afford only limited protection. Despite these precautions,
it may be possible for unauthorized parties to copy certain portions of our
software products, reverse engineer, or obtain and use information that we
regard as proprietary.
We are not aware that we are infringing any proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by us of their intellectual property rights. We expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays or require us to enter into royalty or licensing agreements. In
the event of a successful claim of product infringement against us, should we
fail or be unable to either license the infringed or similar technology or
develop alternative technology on a timely basis, our business, operating
results and financial condition could be materially adversely affected.
We rely upon certain software that we license from third parties, including
software that is integrated with our internally developed software and is used
in our products to perform key functions. There can be no assurance that these
third-party software licenses will continue to be available to us on
commercially reasonable terms. The loss of or inability to maintain any such
software licenses could result in shipment delays or reductions until equivalent
software could be developed, identified, licensed and integrated which could
materially adversely affect our business, operating results and financial
condition.
Employees
As of December 31, 1998, we had 34 full-time employees. Of the 34
employees, four were employed in sales and marketing, 14 were employed in
product research and development and technical support, eight were employed in
services implementation, operations and customer support, and eight were
employed in human resources, administration and finance. None of our employees
are represented by a labor union. We have not experienced any work stoppages and
consider our relations with our employees to be good.
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Purchase and Sales of Significant Assets
Sale of Consulting Business
From our inception, we had been engaged in the business of providing
management consulting and technology systems integration services. However,
consistent with our effort to focus on the development of our viaLink services,
we sold the assets related to those operations, granted a nonexclusive license
to use, copy and distribute worldwide our CHAINLINK software product, and sold
our rights to use the name "Applied Intelligence Group" to Netplex in September
1998. As consideration for these assets, Netplex paid us $3.0 million in cash
and issued us 643,770 shares of Netplex Class B Preferred Stock, with each share
of preferred stock convertible into one share of Netplex common stock. Prior to
this sale, these consulting assets accounted for substantially all of our
revenues.
In connection with the sale, we entered into an Earn-out Agreement with
Netplex. Pursuant to this Earn-out Agreement, during each of the seven fiscal
quarters beginning with the quarter ending September 30, 1998 and ending with
the quarter ending March 31, 2000, Netplex will pay us the lesser of 50% of the
net profit earned by the consulting business as operated by Netplex or $1.5
million. Additionally, if the aggregate net profit earned by the consulting
business for the ten fiscal quarters beginning with the quarter ending September
30, 1998 and ending with the quarter ending December 31, 2000 exceeds $5.0
million, we would receive up to 643,770 additional shares of Netplex preferred
stock.
The shares of Netplex preferred stock and shares of the common stock
issuable upon conversion thereof constitute restricted shares under the
Securities Act and unless a registration statement is filed which allows for the
sale of these shares, we may only sell the Netplex shares pursuant to Rule 144
of the Securities Act. Rule 144 provides for certain holding periods which
would inhibit our ability to dispose of these shares in the near term. However,
pursuant to the Acquisition Agreement between Netplex and us, Netplex has
agreed, at its sole cost and expense, to file a registration statement with
respect to these shares by no later than September 1, 1999 and to maintain the
effectiveness of the registration statement until the shares may be sold
pursuant to Rule 144.
Effective with this sale, Robert Barcum resigned as our President and Chief
Executive Officer but remains Chairman of the Board. Additionally, David North
resigned as Vice President of Consulting and Larry Davenport resigned as Vice
President of Marketing and Sales upon the closing of this sale. Dr. Lewis
Kilbourne, an outside director, was elected Chief Executive Officer of viaLink.
Robert Baker was elected as our President and Chief Operating Officer.
Sale of ijob, Inc.
On December 31, 1998, we sold our ijob, Inc. subsidiary to DCM Company,
Inc., a corporation wholly owned by David C. Mitchell, the President and a
member of the Board of Directors of ijob at the time of the sale. Our ijob
subsidiary operated our Web-based human resources application asset. The sale
of ijob represents another step in our effort to shed non-core assets and focus
on the development of our viaLink services.
DCM purchased all of the outstanding stock of ijob for a secured, ten-year,
$800,000 promissory note that accrues interest at a rate of 8% per annum. DCM
is obligated to pay the note in full upon the occurrence of certain events,
including, among other things, in the event that Mr. Mitchell ceases to own at
least 51% of DCM. The note is collateralized by principally all of the fixed
assets, contract rights, accounts receivable and general intangibles of ijob.
We organized ijob in April 1997 to operate ijob.com, a human resources
recruiting application. In June 1997, ijob acquired certain assets of Human
Technologies, Inc., including several software programs, in exchange for options
to purchase 50,000 shares of viaLink common stock at an exercise price of $3.50
per share.
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Vantage Capital Resources Inc. Acquisition
On June 12, 1996, Vantage Capital Resources, Inc., a company controlled by
John Simonelli and Larry E. Howell, merged with and into viaLink (then Applied
Intelligence Group, Inc.) pursuant to an Agreement and Plan of Merger dated May
8, 1996. In consummation of the merger, we exchanged 610,000 shares of our
common stock, on a one-for-one basis, for the outstanding common stock of
Vantage. We accounted for the Vantage merger in a manner similar to the pooling
of interests method of accounting. Pursuant to an Exchange Agreement dated
October 14, 1996, Messrs. Simonelli and Howell each exchanged the 180,000 shares
of viaLink Common Stock they received in connection with the Vantage merger for
options to purchase viaLink common stock for $5.00 per share, exercisable before
November 30, 2001.
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ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
You should carefully consider these risk factors, together with all of the
other information included in this Form 10-KSB, in evaluating our business. The
risks set out below may not be exhaustive.
Keep these risks in mind when you read "forward-looking" statements
elsewhere in this Form 10-KSB. These are statements that relate to our
expectations for future events and time periods. Generally, the words
"anticipate," "expect," "intend," and similar expressions identify forward-
looking statements. Forward-looking statements involve risks and uncertainties,
and future events and circumstances could differ significantly from those
anticipated in the forward-looking statements. Please see "Special Cautionary
Note Regarding Forward-Looking Statements" below in this Item 1.
We Have Substantially Changed Our Business and Now Should Be Viewed As a
Development Stage Company
We have historically derived substantially all of our revenues from
providing management consulting services and computer system integration
services to the retail and wholesale distribution industries. In order to
permit us to focus our resources solely on developing and marketing the viaLink
services, we sold the assets underlying our management consulting services and
computer integration services to The Netplex Group, Inc. We had previously
generated approximately 90% of our total revenues from the assets sold to
Netplex. We also sold our ijob, Inc. subsidiary.
As a result of these sales, we are now substantially dependent on revenues
generated from our viaLink services. Our viaLink services have achieved only
limited market acceptance, and to date has accounted for an insubstantial amount
of our historical revenues. Consequently, we should be viewed as a development
stage company and should be expected to face many of the inherent risks and
uncertainties that development stage companies face. These risks include our:
. Need to achieve market acceptance and develop a sustainable revenue
stream;
. Need to expand sales and support and product development
organizations;
. Need to manage rapidly changing operations;
. Dependence upon key personnel;
. Reliance on strategic relationships; and
. Competition.
We cannot assure you that our business strategy will successfully address
these risks, or that our viaLink services will achieve market acceptance. If
our viaLink services fail to achieve market acceptance or if we fail to
recognize significant revenues to replace the revenues lost in the sale to
Netplex, our business, financial condition and operating results would be
materially adversely affected.
We Anticipate Negative Cash Flow and Operating Losses for the Foreseeable Future
By selling our consulting business, we lost the source of 90% of our
historical revenues. To date, revenues from our viaLink services have been
insignificant. Moreover, we expect to expend significant resources in
aggressively developing and marketing these services into an unproven market.
Therefore, we expect to incur negative cash flow and net losses for the
foreseeable future. We may not ever generate sufficient revenues to achieve or
sustain profitability or generate positive cash flow. We have incurred net
operating losses of approximately $1.0 million in 1996, $3.0 million in 1997 and
$1.6 million in 1998. On a pro forma basis giving effect to the sale of our
consulting business, as if sold on January 1,
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1998, we incurred a pre-tax loss of approximately $27,000 for 1998. However,
this $27,000 pro-forma pre-tax loss includes an approximate $3.0 million one-
time gain on sale of assets from the sale of our consulting business. As of
December 31, 1998, we had a retained deficit of approximately $964,000
representing, in large part, the sum of our historical net losses.
Our Future Success Depends on Achieving Market Acceptance of Our viaLink
Services
Virtually all of our revenues for the foreseeable future will be derived
from a single source: subscription sales of our viaLink services. We have only
recently introduced these services. They may not achieve market acceptance. To
date we have received only an insignificant amount of revenues from our viaLink
services. The market acceptance of the Item Catalog service as an industry-wide
shared database will depend upon subscriptions from a large number of industry
manufacturers, suppliers and retailers. A large number of manufacturers,
suppliers and retailers may not subscribe to our service. Furthermore, we
cannot predict the amount of time required for a significant number of
manufacturers, suppliers and retailers to subscribe to our service. If our
services do not achieve market acceptance, or if market acceptance develops more
slowly than expected, our business, operating results and financial condition
will be seriously damaged.
A number of factors will determine whether our services will achieve market
acceptance, including:
. Performance and functionality of our viaLink services;
. Ease of adoption;
. Success of our initial subscribers;
. Success of our marketing efforts;
. Our ability to successfully manage the transition of our database to
the Hewlett-Packard hosting facility;
. Success of our strategic relationships;
. Improvements in and additions to technological performance; and
. Continued acceptance of the Internet for business use.
The markets for business-to-business electronic commerce evolve rapidly.
If new markets evolve, customers in those markets, including our current
customers, may not choose our services.
You Should Expect Our Financial Results to Fluctuate
Our future operating results may vary significantly from quarter to quarter
due to a variety of factors, many of which are outside our control. Our expense
levels are based primarily on our estimates of future revenues and are largely
fixed in the short term. We may be unable to adjust spending rapidly enough to
compensate for any unexpected revenue shortfall, including as a result of
delayed or lack of market acceptance of our viaLink services. Accordingly, any
significant shortfall in revenues in relation to our planned expenditures would
materially adversely affect our business, operating results and financial
conditions.
Due in large part to our uncertainty regarding the success of viaLink
services, we cannot predict with certainty our quarterly revenues and operating
results. Further, we believe that period-to-period comparisons of our operating
results are not necessarily a meaningful indication of future performance,
especially in light of the significant changes in business which we have
undertaken. It is likely that in one
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or more future quarters our results may fall below the expectations of
securities analysts and investors. If this occurs, the trading price of our
common stock would likely decline.
We Depend on Strategic Partners
Our current collaborative relationships may not prove to be beneficial to
us, and they may not be sustained. Further we may not be able to enter into
successful new strategic relationships in the future, which could have a
material adverse effect on our business, operating results and financial
condition. We currently have formed strategic relationships with Ernst & Young
and Hewlett-Packard. Ernst and Young may provide us with sales and marketing
support as well as consulting and integration services. Hewlett-Packard has
agreed to provide us with a technological platform to host our service.
Maintaining these and other relationships will help us to validate our
technology, facilitate broad market acceptance of our services and enhance our
sales and marketing. However, these relationships are informal or, if written,
terminable with little or no notice. We may not be able to enter into new
strategic relationships in the future. If we are unable to develop key
relationships or maintain and enhance existing relationships, we may have
difficulty achieving market acceptance for our viaLink services.
The Hewlett-Packard Note Will Leverage Us Considerably and May Result in
Significant Dilution
As a result of our issuing a $6.0 million Subordinated Secured Promissory
Note to Hewlett-Packard, our principal and interest obligations will increase
substantially when we are required to begin making repayments in February 2004.
The degree to which we are leveraged could materially adversely affect our
ability to obtain future financing and could make us more vulnerable to industry
downturns and competitive pressures. Our ability to meet our debt obligations
will be dependent upon our future performance, which will be subject to
financial, business and other factors affecting our operations, many of which
are beyond our control. Moreover, we intend to seek shareholder approval for
the issuance of shares upon conversion of the Note. Upon shareholder approval,
all principal and interest due under the Note could be converted into shares of
our common stock at $7.00 per share, a substantial discount from our current
stock price, resulting in substantial dilution to our current shareholders.
We May Require Additional Financing
We intend to spend large amounts of capital to fund our growth and develop
a market and market acceptance for our Item Catalog and other viaLink services.
We have incurred operating losses and negative cash flow in the past and expect
to incur operating losses and negative cash flow in the future. We expect that
the cash we received in the Hewlett-Packard financing and cash we may receive
upon exercise of our outstanding Redeemable Common Stock Purchase Warrants
expiring in November 1999 will enable us to meet our working capital and capital
expenditure requirements through 1999. After that time, our ability to fund our
planned working capital and capital expenditures will depend upon our ability to
obtain sufficient equity or debt financing. Our future financing requirements
will depend on a number of factors, including our:
. Achieving and sustaining profitability;
. Growth rate;
. Working capital requirements;
. Market acceptance; and
. Costs of future research and development activities.
We may not be able to obtain the additional financing necessary to satisfy
our cash requirements or to implement our growth strategy successfully.
Moreover, if our stock price drops significantly, the
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warrant holders may choose not to exercise their warrants and purchase the
underlying shares of our common stock, which will adversely affect our 1999 cash
flow. If we cannot obtain adequate additional financing, we will be forced to
curtail our planned business expansion and may be unable to fund our ongoing
operations, including the marketing and development of our Item Catalog service
and our other services. If adequate additional financing is not available, we
may also be required to license our rights to commercialize our proprietary
technologies to third parties, and may not be able to acquire complementary
businesses and technologies.
Pursuant to an agreement with Barron Chase Securities, Inc., the
underwriter of our initial public offering, we have agreed not to issue any
Preferred Stock until November 20, 1999 without their prior written consent.
This could further limit our ability to obtain additional financing.
We May Not Be Able to Compete in the Business-to-Business Electronic Commerce
Market
If we face increased competition, we may not be able to sell our viaLink
services on terms favorable to us. Furthermore, increased competition could
reduce our market share or require us to reduce the price of our services. We
currently compete principally on the basis of the specialized and unique
features and functions of the viaLink services including their:
. Ability to operate with other network products and operating systems;
. Product quality;
. Ease-of-use;
. Reliability; and
. Performance.
To achieve market acceptance and thereafter to increase our market share,
we will need to continually develop additional services and introduce new
features and enhancements. Many of our competitors and potential competitors
have significant advantages that we do not, including:
. Significantly greater financial, technical, and marketing resources;
. Greater name recognition;
. A broader range of products and services; and
. More extensive customer bases.
Consequently, they may be able to respond more quickly than we can to new or
emerging technologies and changes in customer requirements.
Our Services May Become Obsolete
If our competitors introduce new products and services embodying new
technologies, our existing services may become obsolete. Our future success
will depend upon our ability to continue to develop and introduce a variety of
new services and enhancements to address the increasingly sophisticated needs of
our customers. We may experience delays in releasing new services and
enhancements in the future. Material delays in introducing new services and
enhancements may cause customers to forego purchases of our services and
purchase those of our competitors. We have experienced delays in the past in
the release of new products and new product enhancements. We may not be
successful in:
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. Developing and marketing, on a timely and cost-effective basis, new
products or new product enhancements that respond to technological
change, evolving industry standards or customer requirements;
. Avoiding difficulties that could delay or prevent the successful
development, introduction or marketing of these products; or
. Achieving market acceptance for our new products and product
enhancements.
We Rely on the Internet
Our ability to achieve market acceptance depends upon the food and consumer
packaged goods industries' widespread acceptance of the Internet as a vehicle
for business-to-business electronic commerce in the grocery and convenience
store supply chain. There are a number of critical issues concerning commercial
use of the Internet, including security, reliability, cost, quality of service
and ease of use and access. Organizations that have already invested
substantial resources in other means of exchanging information may be reluctant
to implement Internet-based business strategies. There can be no assurance that
Internet-based information management utilizing viaLink, or any other product,
will become widespread. If the Internet fails to become widely accepted by the
food and consumer packaged goods industries, viaLink subscribers may be required
to utilize private communications networks, at comparatively higher cost.
Our Software May Contain Undetected Errors
Errors or defects in our products may result in loss of revenues or delay
in market acceptance, and could materially adversely affect our business,
operating results and financial condition. Software products such as ours may
contain errors or defects, sometimes called "bugs," particularly when first
introduced or when new versions or enhancements are released. In the past, we
have discovered software errors in certain of our new products after their
introduction. Despite our testing, current versions, new versions or
enhancements of our products may still have defects and errors after
commencement of commercial shipments.
We May Become Subject to Product Liability Claims
A product liability claim, whether or not successful, could damage our
reputation and our business, operating results and financial condition. Our
license agreements with our customers typically contain provisions designed to
limit our exposure to potential product liability claims. However, these
contract provisions may not preclude all potential claims. Product liability
claims could require us to spend significant time and money in litigation or to
pay significant damages.
Our Services May Be Vulnerable To Security Breaches
Our Item Catalog and other services contain security protocols. However,
our database and these services may be vulnerable to break-ins and similar
security breaches that jeopardize the security of the information stored in, and
transmitted through, the computer systems of our subscribers. Any security
breach could result in significant liability to us and also deter potential
subscribers. Moreover, the security and privacy concerns of potential
subscribers, as well as concerns related to computer viruses, may inhibit the
marketability of the viaLink services.
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We Must Manage Our Growth
We intend to expand our operations rapidly in the foreseeable future to
pursue existing and potential market opportunities. If this rapid growth
occurs, it will place significant demand on our management and operational
resources. We will need to hire additional sales and marketing, research and
development and technical personnel to increase and support our sales. We will
also need to hire additional support and administrative personnel, expand
customer service capabilities and expand our information management systems. In
order to manage our growth effectively, we must implement and improve our
operational systems, procedures and controls on a timely basis. If we fail to
implement and improve these systems, our business, operating results and
financial condition will be seriously damaged.
We Depend on Key Personnel
The loss of services of our key technical, sales and senior management
personnel would seriously damage our business, results of operations and
financial condition. On October 1, 1998, we entered into employment agreements
with each of Lewis B. Kilbourne, our Chief Executive Officer, and Robert N.
Baker, our President and Chief Operating Officer. Each of these agreements has
a term of three years, with year-to-year renewals. We also maintain a key man
life insurance policy for Mr. Baker.
We Must Hire and Retain Additional Personnel
Our future success depends on our ability to continue to attract, motivate
and retain talented and qualified employees, particularly executive management,
sales and marketing personnel, software engineers and other senior personnel.
From time to time, we have experienced, and we expect to continue to experience,
difficulty in hiring and retaining talented and qualified employees. Our
failure to attract and retain the highly trained technical personnel that are
essential to our product development, marketing, service and support teams may
limit the rate at which we can generate revenue and develop new products or
product enhancements. This could have a material adverse effect on our
business, operating results and financial condition.
We May Make Future Acquisitions or Enter Into Joint Ventures
In the future, we may acquire additional businesses, products and
technologies, or enter into joint venture arrangements, that could complement or
expand our business. Management's negotiations of potential acquisitions or
joint ventures and management's integration of acquired businesses, products or
technologies could divert their time and resources. Any future acquisitions
could require us to issue dilutive equity securities, incur debt or contingent
liabilities, amortize goodwill and other intangibles, or write-off in-process
research and development and other acquisition-related expenses. Further, we
may not be able to successfully integrate any acquired business, products or
technologies with our existing operations. If we are unable to fully integrate
an acquired business, product or technology, we may not receive the intended
benefits of that acquisition.
We Have Limited Protections For Our Proprietary Technology
Our success is in part dependent upon our proprietary software technology.
Companies in the software industry have experienced substantial litigation
regarding intellectual property. We license our products under agreements
containing provisions prohibiting the unauthorized use, copying and transfer of
the licensed program. In addition, we rely on a combination of trade secret,
copyright and trademark laws as well as non-disclosure and confidentiality
agreements to protect our proprietary technology. We own no patents. However,
these measures provide only limited protection, and we may not be able to detect
unauthorized use or take appropriate steps to enforce our intellectual property
rights.
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Any litigation to enforce our intellectual property rights would be
expensive, time-consuming, may divert management resources and may not be
adequate to protect our business. We also could be subject to claims that we
have infringed the intellectual property rights of others. In addition, we may
be required to indemnify our end-users for similar claims made against them.
Any claims against us could require us to spend significant time and money in
litigation, pay damages, develop new intellectual property or acquire licenses
to intellectual property that is the subject of the infringement claims. These
licenses, if required, may not be available on acceptable terms. As a result,
intellectual property claims against us could have a material adverse effect on
our business, operating results and financial condition.
We Depend on Third-Party Technology in Our Products
We rely upon certain software that we license from third parties, including
software that is integrated with our internally developed software and used in
our products to perform key functions. These third-party software licenses may
not continue to be available to us on commercially reasonable terms. The loss
of, or inability to maintain or obtain any of these software licenses, could
result in delays in our ability to provide our services or in reductions in the
services we provide until we develop, identify, license and integrate equivalent
software. Any delay in product development or in providing our services could
damage our business, operating results and financial condition.
Year 2000 Risks
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches and are commonly referred to as the "Year 2000 Problem."
The Year 2000 Problem presents us with several potential risks including,
but not limited to, the following:
Internal infrastructure. The Year 2000 Problem could affect computers,
software and other equipment that we use internally as well as divert
management's attention from ordinary business activities. In addition to
computers and related systems, the operation of our office and facilities
equipment, such as fax machines, photocopiers, telephone switches, security
systems, elevators and other common devices, may be affected by the Year 2000
problem.
Suppliers/third-party relationships. There can be no assurance that our
vendors, customers, suppliers, service providers or other third parties that we
rely upon will resolve any or all Year 2000 Problems with their systems on a
timely basis.
Software/services. We believe that it is not possible to determine with
complete accuracy that all Year 2000 Problems affecting the software used in the
provision of our services have been identified or corrected due to the
complexity of this software.
Consulting services. We may be subject to Year 2000 Problem claims in
connection with software programs developed and previously installed on customer
sites through our recently discontinued consulting services. Under our asset
sale agreement with Netplex, we are responsible, and potentially liable, for
problems with the software installed by us in customer sites prior to September
1, 1998.
We expect to identify and resolve all Year 2000 Problems that could
materially adversely affect our business, financial condition or results of
operations. We are currently developing contingency plans to be implemented as
part of our efforts to identify and correct Year 2000 Problems affecting our
internal systems and expect to complete our contingency plans by the second
quarter of 1999. However, we believe that it is not possible to determine with
complete certainty that all Year 2000 Problems affecting us
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will be identified or corrected in a timely manner. If we fail to identify and
correct all Year 2000 Problems affecting our internal systems, or if we are
forced to implement our contingency plans, our business, financial condition or
results of operations could be materially adversely affected. For additional
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Plan."
Our Stock and Warrant Prices May be Volatile and Fluctuate Significantly
The market prices for our Common Stock and Redeemable Warrants have
fluctuated in the past and are likely to continue to be highly volatile and
subject to wide fluctuations. In addition, the stock market has experienced
extreme price and volume fluctuations. The market prices of the securities of
Internet-related companies have been especially volatile. In the past,
companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If we were to be
the object of securities class action litigation, it could result in substantial
costs and a diversion of management's attention and resources. For further
information, see "Market Prices."
We Have Many Additional Shares Eligible for Future Sale
Sales of a substantial number of shares of Common Stock could adversely
affect the market price of the Common Stock and could impair our ability to
raise capital through the sale of equity securities. If all of our Warrants are
exercised, we will have outstanding 3,926,613 shares of Common Stock, assuming
no exercise of outstanding options after December 31, 1998. Of these shares:
. 2,494,879 shares will be freely tradeable without restriction or
further registration under the Securities Act unless purchased by our
"affiliates."
. 74,861 shares will be freely tradeable without restriction or further
registration under the Securities Act following the termination of the
lock-up arrangement under the Promotional Shares Escrow Agreement
described below;
. 1,425,139 shares held by affiliates will become available for sale
pursuant to the volume and manner of sale provisions of Rule 144
following the termination of the Promotional Share Escrow Agreement
described below; and
. 1,738,003 shares of Common Stock will be "restricted securities" as
defined in Rule 144 of the Securities Act.
An additional 502,372 shares of Common Stock are issuable upon the exercise
of currently exercisable options. Substantially all shares issued following the
exercise of these options will be freely tradeable.
In connection with our initial public offering of Common Stock, our
executive officers, certain former executive officers and certain holders of
stock options entered into a Promotional Shares Escrow Agreement. Under this
Agreement, they have agreed not to sell or otherwise dispose of any shares of
our Common Stock, unless the subsequent holder agrees to take such securities
subject to the Promotional Shares Escrow Agreement, until November 21, 1999.
Our Officers and Directors Have Significant Voting Control
Our executive officers and directors, in the aggregate, beneficially own
approximately 40% of our outstanding Common Stock. As a result, these
shareholders, if they act together, could control all matters submitted to our
shareholders for a vote, including the election of directors and the approval of
mergers and other business combination transactions.
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We Have Anti-Takeover Defenses
Provisions of our Charter and Bylaws as well as the Oklahoma General
Corporation Act could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our shareholders. We are subject to the
business combination provisions of the Oklahoma General Corporation Act which
restrict certain business combinations with interested shareholders. These
provisions may have the effect of inhibiting a non-negotiated merger or other
business combinations.
-----------------------
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this Form 10-KSB contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future operating results of
operations or of our financial condition or state other forward-looking
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or control. The risk factors listed in
this section, as well as any cautionary language in this Form 10-KSB, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our Common Stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
Form 10-KSB could have a material adverse effect on our business, operating
results and financial condition.
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ITEM 2. DESCRIPTION OF PROPERTY
We currently lease approximately 30,000 square feet of space in Edmond,
Oklahoma for our corporate headquarters under a ten-year lease expiring on June
30, 2006. The lease requires monthly rental payments of $24,545 until June
1999, $27,500 June 1999 to June 2001, and $28,750 during the remaining term of
the lease. In connection with the sale of our consulting business, Netplex
subleased from viaLink approximately 18,000 square feet of the office facility
for monthly rental payments of approximately $17,100. We believe that our
existing headquarters facility is adequate for its current needs and that
additional space will be available as needed.
We intend to establish additional sales and marketing and customer support
offices in additional locations in key markets outside of Oklahoma in 1999. We
expect that we will be able to locate space for these additional offices on
commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Value of Common Stock and Warrants
The Common Stock and the Redeemable Common Stock Purchase Warrants have
been quoted on the Nasdaq SmallCap Market under the symbols "IQIQ" and "IQIQW",
respectively, since November 1996. The following table sets forth the high and
low closing bid quotations of the Common Stock and Redeemable Common Stock
Purchase Warrants as reported by the Nasdaq SmallCap Market.
Common Stock Price Redeemable Warrant Price
------------------------ ------------------------
High Low High Low
----------- ----------- ------------ -----------
1997:
First Quarter $ 5.375 $3.625 $1.688 $0.625
Second Quarter 4.500 2.875 1.000 0.375
Third Quarter 5.875 3.000 1.500 0.500
Fourth Quarter 4.500 2.938 1.125 0.500
1998:
First Quarter 4.500 2.875 1.000 0.375
Second Quarter 5.125 2.375 1.188 0.438
Third Quarter 3.688 2.125 1.000 0.375
Fourth Quarter 14.500 2.438 9.250 0.438
We believe there are currently 950 record holders of Common Stock and
approximately 950 record holders of Redeemable Common Stock Purchase Warrants.
On February 26, 1999, the closing sale prices of our Common Stock and Redeemable
Common Stock Purchase Warrants as reported on the Nasdaq SmallCap Market were
$17.75 and $12.75, respectively.
Dividend Policy
We intend to retain any future earnings to finance the expansion of our
business and do not anticipate paying cash dividends for the foreseeable future.
Any future determination as to the payment of dividends will be at the
discretion of our Board of Directors. In addition, the terms of the Secured
Subordinated Promissory Note we issued to Hewlett-Packard prohibit us from
paying any dividends while any amounts remain outstanding under this Note.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that involve
risks and uncertainties. viaLink's actual results could differ materially from
those discussed in the forward-looking statements as a result of certain factors
including those set forth under "Item 1" and elsewhere in this Form 10-KSB. The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this Form 10-KSB.
Overview
viaLink provides a business-to-business electronic commerce solution for
the food and consumer packaged goods industries. We have developed a cost-
effective, Internet-accessible shared database, the Item Catalog, that enables
subscribing manufacturers, suppliers and retailers to exchange product, pricing
and promotional information. Our solution offers a single interface solution
whereby retailers receive product information from all their suppliers,
regardless of the technological capabilities of the retailer or the supplier.
Suppliers and manufacturers are able to efficiently communicate product and
pricing information to their customers, significantly reducing the operational
and administrative costs of supply chain management. We also offer the Exchange
Manager and ItemXpress services to complement our Item Catalog service.
Exchange Manager allows subscribers to exchange order and invoice transactions
through a single interface, regardless of their number of trading partners.
ItemXpress allows subscribers to quickly and accurately create an initial setup
of their pricebook through a custom load for each retailer's system.
We expect that our future revenues will be generated primarily from monthly
subscriptions to the Item Catalog, Exchange Manager and ItemXpress services.
Under our former pricing model, monthly subscription fees collected from
retailers, wholesalers and manufacturers in the food and consumer packaged goods
industries were calculated based on the amount of each service the subscriber
used. Fees were generated when retailers and suppliers would "match"
transactions through the Item Catalog service system. We have recently changed
our pricing model to begin pricing our services based on a flat monthly rate and
a variable component based on usage. The variable portion of each subscriber's
monthly service fee is calculated based on the service and amount of service the
subscriber uses. For example, for use of the Item Catalog service, retailers
pay based on the number of suppliers from whom they receive data; suppliers pay
based on the number of retailers that download their data; and manufacturers pay
based on the number of retailers that subscribe to the service. We price our
other services based on the number of stores supported or the amount of data
stored and retrieved.
Until March 31, 2000, we will also receive quarterly payments up to $1.5
million pursuant to an Earn-out agreement with Netplex. We currently receive
revenues from certain Web hosting services we perform, but expect to reduce our
focus on this service.
In order to achieve market acceptance, we expect to continue our high level
of expenditures for investment in, and sales and marketing of, the viaLink
services. One of our strategies is to invest in new technology to facilitate
deployment and acceptance of the viaLink services. However, in order to
implement this strategy, we believe that we will need significant additional
capital resources, as well as hosting and marketing partners for the viaLink
services. We are currently seeking additional equity or debt financing and
negotiating with potential hosting and marketing partners.
In January 1999, we announced a memorandum of understanding with Hewlett-
Packard Company to provide hosting, co-marketing, consulting and outsourcing
support and other services, including financing in the form of a $6.0 million
convertible debenture. On February 4, 1999, we completed the financing
agreements with Hewlett-Packard and entered into a Note Purchase Agreement
pursuant to which Hewlett-Packard purchased from viaLink a $6.0 million Secured
Subordinated Promissory Note. This Note bears interest at 11.5% per annum.
Subject to approval by the shareholders of viaLink, the Note will be exchanged
for a Subordinated Secured Convertible Promissory Note,
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convertible into our common stock at a conversion price of $7.00 per share. The
purchase of the Note occurred on February 5, 1999, and as of February 24, 1999,
we had cash and cash equivalents totaling $5.8 million.
Also in January 1999, Ernst & Young LLP and viaLink announced signing a
letter of understanding, whereby Ernst & Young would provide sales and marketing
support, consulting, systems integration services and potentially financing to
us to assist in the deployment of the viaLink services at subscriber sites.
Ernst & Young and viaLink are in the process of negotiating the definitive
agreements as of the date of this Form 10-KSB.
We expect to report substantial losses from operations in 1999. The extent
of these losses will depend substantially on the amount of revenues generated
from subscriptions to the viaLink services, which have not yet achieved market
acceptance. To date, revenues from these services have not been significant.
As a result of our high level of expenditures for selling and marketing and
investments in these services, we expect to incur losses in future periods until
such time as the recurring revenues from these services are sufficient to cover
expenses.
We recognize revenue from subscriptions to the Item Catalog, Exchange
Manager and ItemXpress services as the services are performed. Revenue from the
Earn-out agreement with Netplex, which is expected to pay viaLink approximately
$1.5 million over the next 18 months, is recognized quarterly as earned. Actual
payments are rendered to viaLink from Netplex, according to the terms of the
Earn-out Agreement with Netplex. Web site hosting and other miscellaneous
revenues are recognized as services are performed.
Sale of Consulting Business and ijob, Inc.
In order to focus on the development and deployment of our viaLink
services, we recently sold the assets related to our management consulting and
systems integration services (including our proprietary Retail Services
Application ("RSA") software) to Netplex. Historically, approximately 90% of
our revenues were generated from our consulting business. As a result of the
sales, we resemble a development stage company since our planned principal
operations are underway, but have not yet generated significant revenues.
Netplex paid us $3.0 million in cash and issued us 643,770 shares of
Netplex preferred stock, having a then market value of approximately $1.0
million. We used certain of the cash proceeds from the sale to pay (i) $551,062
of long-term debt, (ii) $565,094 of shareholder loans, including interest, and
(iii) expenses attributable to the sale. The net gain from the consulting
assets sale was $2,998,453. In conjunction with the consulting asset sale,
viaLink entered into an Earn-Out Agreement with Netplex. Under the Earn-Out
Agreement, we are entitled to receive a cash payment equal to the lesser of $1.5
million or 50% of any net profits generated from the consulting and systems
integration assets until March 31, 2000. We recorded and received a September
1998 earn-out payment of $132,770, which we recorded as other income. A
receivable for $207,900 for the earn-out payment for the fourth quarter of 1998
is included in Other Receivables on the balance sheet at December 31, 1998. We
also have entered into a Remarketing and Relicensing Agreement with Netplex to
sell CHAINLINK, our proprietary communications software product. Under the
Remarketing and Relicensing Agreement, we have agreed to cease our own marketing
and selling of CHAINLINK.
On December 31, 1998, we sold our wholly-owned subsidiary, ijob, Inc. to
DCM Company, Inc., a corporation wholly-owned by David C. Mitchell, the
President and a member of the Board of Directors of ijob at the time of the
sale. DCM purchased all of the outstanding stock of ijob for a collateralized,
ten-year $800,000 promissory note that accrues interest at 8%. DCM is required
to pay the promissory note in full upon the occurrence of certain events,
including the date upon which David Mitchell owns less than 51% of DCM. The
promissory note is collateralized by principally all of the fixed assets,
contract rights, accounts receivable and general intangibles of ijob. A gain on
the sale of ijob, Inc. of $462,000 has been deferred at December 31, 1998 until
the operating cash flows are sufficient to fund debt service.
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Results of Operations
The following table sets forth, for the periods illustrated, certain
statements of operations data expressed as a percentage of total revenues.
Year Ended December 31,
------------------------------
1998 1997 1996
-------- -------- --------
Revenues................................... 100.0% 100.0% 100.0%
Expenses:
Direct cost of sales..................... 19.0 24.5 27.0
Salaries and benefits.................... 63.9 68.4 54.4
Selling, general and administrative...... 23.9 30.0 21.1
Interest expense, net.................... 2. 0 0.8 2. 3
Depreciation and amortization............ 11.2 9.2 6.2
Total expenses........................ 120.0 132.9 111.0
Gain on sale of assets and other
income................................. (40.6) - -
Other comprehensive loss................. 3.8 - -
Comprehensive income (loss) before
income taxes............................. 16.8% (32.9)% (11.0)%
Fiscal 1998 Compared to Fiscal 1997
The sale of our consulting business was effective September 1, 1998.
Consequently, our results of operations for the year ended December 31, 1998 do
not include the sales, expenses and results of operations related to the
discontinued consulting and systems integration operations for September through
December 1998. Our results of operations for the year ended December 31, 1997
include the sales, expenses and results of operations related to the consulting
and systems integration assets. Therefore, the results of operations for the
year ended December 31, 1998 compared to the year ended December 31, 1997 are
not comparable. Prior to the sale of our consulting business, we were operating
under very restricted cash flow capabilities, and much of the decrease in
expenses was due to this restriction on cash flow.
Revenues. Prior to the sale of our consulting business, revenues consisted
of management consulting and system integration fees as well as sales of
proprietary software licenses and hardware. Revenues decreased 9%, or $792,000,
to $8.2 million in the year ended December 31, 1998, from $9.0 million for the
year ended December 31, 1997. This decrease in gross revenues was primarily
attributable to the reduction in revenues resulting from the consulting business
sale. Hardware and product sales, including commissions received on referral of
such sales, decreased a total of 37%, or $1.1 million, to $1.8 million for the
year ended December 31, 1998, compared to $2.8 million for the year ended
December 31, 1997. These decreases were offset by an overall combined increase
of $271,000 in all other revenue areas.
Direct Cost of Sales. Direct cost of sales consisted of purchased hardware
and certain software for resale, and costs associated with viaLink's proprietary
software products. Direct cost of sales decreased 29%, or $648,000, to $1.6
million for the year ended December 31, 1998, from $2.2 million for the year
ended December 31, 1997. This decrease corresponded with the decrease in
hardware and product sales, offset by the increase in solution sales for the
year ended December 31, 1998. As a result of the consulting business sale, we
will no longer be a reseller of hardware and software and will no longer incur
these expenses.
Salaries and Benefits Expense. Salaries and benefits expense consists of
direct payroll costs of salaries and wages, benefits, and employment taxes as
well as contract programmers. Salaries and benefits expense decreased by 15%,
or $918,000, to $5.3 million in the year ended December 31, 1998, from $6.2
million in the year ended December 31, 1997. These decreased expenses are due
to the consulting business sale.
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Selling, General and Administrative Expense. SG&A decreased 27%, or
$744,000, to $2.0 million in 1998, from $2.7 million in 1997. Virtually every
area of SG&A decreased from 1997 to 1998 as a result of the overall concentrated
effort of management, due to cash flow restrictions, to better control and
reduce these expenses, and to some degree to the consulting business sale.
Travel and training expenses decreased 30%, or $183,000, from 1997 to 1998,
primarily due to the consulting business sale, as the majority of travel related
to the consulting business. Advertising and promotion, primarily as a result of
cash flow restrictions, decreased in 1998 by $129,000 from 1997, as did supplies
and resources, decreasing a total of $148,000 in 1998 for the same reason.
Professional fees decreased $126,000 in 1998 to $373,000, from $499,000 in 1997,
primarily the result of extraordinary level of expenditures in 1997, not
recurring in 1998, and to the cash flow restrictions.
Interest Expense, Net. Interest expense, net, increased 119%, or $88,000,
to $161,000 for the year ended December 31, 1998, from $74,000 for the same
period in 1997. This increase was due to increased borrowing under our line of
credit in 1998. We currently have no line of credit, but expect to incur
interest expense under our $6.0 million Note with Hewlett-Packard, which bears
interest at a rate of 11.5% per annum.
Depreciation and Amortization. Depreciation and amortization expense
increased $98,000, or 12%, to $925,000 for the year ended December 31, 1998,
compared to $827,000 for the same period in 1997. This increase was due to $1.1
million of total capital asset expenditures during 1997, and does not include
depreciation and amortization related to the assets sold in the consulting
business sale from the date of sale.
Gain on Sale of Consulting Business and Other Income. As a result of the
consulting business sale, we incurred a one-time net gain of $3.0 million.
Other income received or accrued under the Earn-out agreement with Netplex
totaled $341,000 for the year ended December 31, 1998.
Tax Provision (Benefit). SFAS 109, Accounting for Income Taxes, requires,
among other things, the separate recognition, measured at currently enacted tax
rates, of deferred tax assets and deferred tax liabilities for the tax effect of
temporary differences between the financial reporting and tax reporting bases of
assets and liabilities, and net operating loss and tax credit carryforwards for
tax purposes. A valuation allowance must be established for deferred tax assets
if it is "more likely than not" that all or a portion will not be realized.
Prior to the third quarter of 1998, we had recorded a tax benefit of $1.0
million related to the pre-tax losses incurred in prior years, and no valuation
allowance had been established prior to the third quarter of 1998. As a result
of the net gain on the consulting business sale in the third quarter of 1998,
the deferred tax assets of $1.0 million was realized and a valuation allowance
of $190,000 was established for the remaining net deferred tax asset as of
September 30, 1998. Losses were recorded in the fourth quarter of 1998, which
no net deferred tax asset was recorded. We will not record any further tax
benefits and deferred tax assets until such time as management believes it is
more likely than not that viaLink will be profitable in the future.
Other Comprehensive Loss. Other comprehensive loss of $316,000 is the
result of the write-down to market value at December 31, 1998 of the Netplex
Preferred Stock received in connection with the consulting business sale to
Netplex. The Netplex preferred stock is carried on the books on December 31,
1998 at a value of $684,000. As of February 26, 1999, the market value of the
643,770 common shares of Netplex underlying the preferred stock owned was $1.8
million. Reporting of comprehensive loss in the current year is a result of the
adoption of SFAS 130.
Fiscal 1997 Compared to Fiscal 1996
Revenues. Revenues decreased 5%, or $485,000, to $9.0 million in 1997,
from $9.5 million in 1996. Solutions and license revenues decreased 87%, or
$866,000, to $132,000 in 1997 from $997,000 in 1996. This decrease was due
primarily to a $898,000 single sale of our RSA product that occurred in 1996.
Management consulting and system integration and customer support fees decreased
$491,000, or 9%, to $5.0 million in 1997 from $5.5 million in 1996. This
decrease was due, in part, to the completion of several large consulting
projects in the first and second quarters of 1997. Revenues from network
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services and network based computer applications increased 439%, or $817,000, to
$1.0 million in 1997 from $186,000 in 1996. Of this increase, $568,000 was
generated from ijob, and the remainder was derived from Web site maintenance and
hosting fees and Item Catalog service fees. Hardware and product sales
decreased 4%, or $120,000, to a total of $2.7 million in 1997, from $2.8 million
in 1996.
Direct Cost of Sales. Direct cost of sales decreased 14%, or $359,000, to
$2.2 million in 1997 from $2.6 million in 1996. This decrease was due to
decreases sales of product and hardware and solutions and licenses in 1997.
Salaries and Benefits. Salaries and benefits increased 19%, or $1.0
million, to $6.2 million in 1997 from $5.2 million in 1996. Direct payroll
costs of salaries, wages, benefits and employment taxes increased 14%, or
$677,000, to $5.6 million in 1997 from $4.9 million in 1996. This increase was
due primarily to the addition of 21 new employees in 1997. Contract labor
expenses totaled $489,000 in 1997 compared to $85,000 in 1996, an increase of
477%, or $404,000. Start-up costs and expenses from ijob accounted for $135,000
of the contract labor expense increase. During 1997, we significantly increased
our use of contract programmers for client engagements. Previously we had
rarely used contract programmers. These cost increases were offset by an
increase of 31%, or $174,000, in capitalized software development costs, which
consist of salaries, wages and benefits expended to further develop and enhance
the viaLink services, to a total of $743,000 in 1997 from $569,000 in 1996.
Selling, General and Administrative. SG&A increased 35%, or $700,000, to
$2.7 million in 1997 from $2.0 million in 1996. Over half of the increase in
SG&A was due to the start-up costs and ongoing operations of ijob. Professional
fees increased 104%, or $254,000, to $499,000 in 1997 from $244,000 in 1996.
ijob accounted for $138,000 of the increase in professional fees and the
remainder was attributable to development of viaLink's Item Catalog service.
Advertising and promotion expenses increased $147,000 to $217,000 in 1997 from
$70,000 in 1996. ijob accounted for $54,000 of the increase in advertising and
promotional expenses and the balance was due to increased sales and marketing
promotion activities of the Item Catalog service. During 1997, viaLink
intensified its marketing and sales activities related to the Item Catalog
service, resulting in increased travel, long distance, advertising and promotion
expenses. Occupancy expenses and insurance increased 25%, or $119,000, to
$599,000 in 1997 from $481,000 in 1996. ijob accounted for $52,000 of this
increase, and the remainder was primarily due to the continued development of
the Item Catalog service. Telecommunications expense increased 68%, or
$106,000, to $261,000 in 1997 from $155,000 for 1996. ijob accounted for
$52,000 of this increase, and the remaining increase was due to the expansion of
communication systems and Web site hosting services related to viaLink's Item
Catalog service.
Interest Expense, Net. Interest expense, net decreased 66%, or $146,000,
to $74,000 in 1997 from $219,000 for 1996. This decrease was generally due to
the repayment of outstanding bank debt in the fourth quarter of 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased 40%, or $236,000, to $827,000 in 1997 from $591,000 in 1996. This
increase was due to capital asset expenditures made during 1997 and 1996
totaling $333,000 and $626,000, respectively, and capitalized software
development costs of $752,000 and $655,000, respectively. Of the total
capitalized costs in 1997, $104,000 of the costs were associated with the
development of ijob.
Provision (Benefit) for Income Taxes. We recorded a tax benefit of $1.1
million related to the pre-tax loss of $3.0 million for the year ended December
31, 1997 and a tax benefit of $367,000 related to the pre-tax loss of $1.0
million for the year ended December 31, 1996. These tax benefits were the
results of net operating loss carryforwards totaling $4.5 million which, if not
utilized, will expire in 2011 and 2012. The cumulative net deferred tax asset
at December 31, 1997 was $1.0 million.
Liquidity and Capital Resources
Due to the sale of our consulting business to Netplex in the third quarter
of 1998, we anticipate that future revenues will be substantially less than
historical revenues and that cash requirements in
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connection with developing, selling and marketing will be substantial. On
February 4, 1999, we completed the financing agreements with Hewlett-Packard,
whereby Hewlett-Packard provided $6.0 million in financing to viaLink through a
collateralized, subordinated Promissory Note, bearing interest at 11.5%. As of
February 24, 1999, we had cash and cash equivalents totaling approximately $5.8
million.
Our working capital position was significantly enhanced as a result of the
consulting business sale. On December 31, 1998, we had $2.2 million in current
assets and $1.1 million in current liabilities, with working capital of
approximately $1.1 million. During the year ended December 31, 1998, net cash
increased $635,000. Net cash used in operating activities in 1998 was $450,000,
compared to net cash used in operating activities in 1997 of $743,000. For the
next six to nine months, we do not expect significant cash flow to be generated
from future operations. Therefore, we must use our current cash, cash
equivalents and collection of accounts receivable to operate the business and/or
obtain additional financing.
During the year ended December 31, 1998, we invested $42,000 in various
fixed assets and $617,000 for software development costs, compared to total
expenditures of $333,000 and $752,000, respectively, for the same items in the
year ended December 31, 1997. As of February 24, 1999, we had no material firm
cash commitments for capital expenditures other than capitalized internal staff
costs for further development of our viaLink services, but expect our cash
requirements for capital expenditures for fiscal 1999 to be substantial.
During the year ended December 31, 1998, financing activities used net cash
of $864,000, which consisted primarily of payments on the shareholder notes in
the principal amount of $482,830, plus the repayment in full of the outstanding
balance on the line of credit. Payments on our capital lease obligations of
$132,000 offset receipts of $265,000 from the exercise of stock options and
purchases under our stock purchase plan and stock bonus plan.
We currently do not have any available working capital borrowing or credit
facility available for additional borrowings. viaLink has borrowed $6.0 million
from Hewlett-Packard, under a five year Secured Subordinated Promissory Note,
bearing interest at 11.5%, with interest and principal payable at maturity in
February 2004. We have incurred operating losses and negative cash flow in the
past and expect to incur operating losses and negative cash flow in the future.
We anticipate that the we will fund our operations for the next 12 months from
the cash we received in the Hewlett-Packard financing and cash we may receive
upon exercise of our outstanding Redeemable Common Stock Purchase Warrants
expiring in November 1999, which will enable us to meet our working capital and
capital expenditure requirements through 1999. After that time, our future
capital requirements will depend on our revenue growth, profitability, working
capital requirements and level of investment in long term assets. Increases in
these capital requirements or a lack of revenue due to delayed or lower market
acceptance of our viaLink services would accelerate our use of our cash and cash
equivalents.
Year 2000 Plan
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These date code fields
will need to accept four-digit entries to distinguish 21st century dates from
20th century dates. This problem could result in system failures or
miscalculations causing disruptions of business operations. As a result, in
approximately one year, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance.
Our vendors, customers, suppliers and service providers are under no
contractual obligation to provide Year 2000 information to us. Generally, we
believe our key internal software systems are either compliant, or the problems
can be corrected by purchasing small amounts of hardware, software or software
upgrades, where necessary. We are also continuing our assessment of the
readiness of external entities, such as subcontractors, suppliers, vendors, and
service providers that interface with us.
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Based on our assessments and current knowledge, we believe we will not, as
a result of the Year 2000 issue, experience any material disruptions in internal
processes, information processing or services from outside relationships. We
presently believe that the Year 2000 issue will not pose significant operational
problems and that we will be able to manage our total Year 2000 transition
without any material effect on our results of operations or financial condition.
The most likely risks to us from Year 2000 issues are external, due to the
difficulty of validating all key third parties' readiness for Year 2000. We
have sought and will continue to seek confirmation of such compliance and seek
relationships which are compliant.
We currently anticipate that all of our internal systems and equipment will
be Year 2000 compliant by the end of the second quarter of 1999 and that the
associated costs will not have a material adverse effect on our results of
operations and financial condition. However, the failure to properly assess or
timely implement a material Year 2000 problem could result in a disruption in
our normal business activities or operations. Such failures, depending on the
extent and nature, could materially and adversely effect our operations and
financial condition. We are currently developing a contingency plan and expect
to have such a plan in place by the end of the second quarter of 1999.
Under the terms of the sale of our consulting business to Netplex, we
retain the liability and responsibility for software programs developed and
installed in customer sites by us prior to September 1, 1998. We are unable to
determine at this time the extent to which potential liability for Year 2000
requirements from those previous installations may exist. We could incur
substantial costs, which would potentially have a material adverse effect on our
business, financial condition and operating results.
We do not believe that the costs of our Year 2000 program have been or are
material to our financial position or results of operations. All expenses have
been charged against earnings as incurred, and we intend to continue to charge
such costs against earnings as the costs are incurred.
In the ordinary course of business we test and evaluate our own software
products on a continuous basis. We believe that our own developed software
products are generally Year 2000 compliant, meaning that the use or occurrence
of dates on or after January 1, 2000 will not materially affect the performance
of our software and network services products with respect to four digit date
dependent data or the ability of such products to correctly create, store,
process and output information related to such date data. Notwithstanding such
belief by management, the products being tested for compliance include all of
the services and systems included in the viaLink services. Since these are
network database systems, there is not an issue of earlier versions which will
require upgrade to be Year 2000 compliant.
The estimates and conclusions set forth herein regarding Year 2000
compliance contain forward-looking statements and are based on management's
estimates of future events and information provided by third parties. There can
be no assurance that such estimates and information provided will prove to be
accurate. Risks to completing the Year 2000 project include the availability of
resources, our ability to discover and correct potential Year 2000 problems and
the ability of suppliers and other third parties to bring their systems into
Year 2000 compliance.
Recently Issued Accounting Pronouncements
In October 1997, the AICPA Accounting Standards Executive Committee issued
Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"), which
supercedes Statement of Position 91-1, Software Revenue Recognition. SOP 97-2
focuses on when and in what amounts revenue should be recognized for licensing,
selling, leasing, or otherwise marketing computer software and is effective for
transactions entered into in fiscal years beginning after December 15, 1997. In
March 1998, the AICPA Accounting Standards Executive Committee issued Statement
of Position 98-4, Deferral of the Effective Date of Provision of SOP 97-2,
Software Revenue Recognition ("SOP 98-4"). SOP 98-4 defers for one year certain
previsions of SOP 97-2. In December of 1998, the AICPA Accounting Standards
Executive Committee issued Statement of Position 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with respect to Certain Transactions ("SOP 98-9").
SOP 98-9, also amends certain provisions of SOP 97-
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2 and extends the deferral of the application of certain provisions of SOP 97-2
as amended by SOP 98-4 through fiscal years beginning on or before March 15,
1999. The Company does not believe that the adoption of SOP 97-2, including the
effects of these amendments, will have a material impact on its financial
position and results of operations.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is included in Part IV Item 13(a)(1)
and (2)
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Certain information required by Part III is omitted from this Form 10-KSB
because viaLink will file a definitive Proxy Statement pursuant to Regulation
14A (the "Proxy Statement") not later than 120 days after the end of the fiscal
year covered by this Form 10-KSB, and certain information to be included therein
is incorporated herein by reference.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16 (a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to the
Proxy Statement under headings "Proposal 1 - Election of Directors," and
"Executive Compensation - Executive Officers" and "- Compliance with Section
16(a) of the Exchange Act."
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Proxy Statement under the heading "Executive Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Proxy Statement under the heading "Executive Compensation - Certain Transactions
with Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Proxy Statement under the heading "Executive Compensation - Certain Transactions
with Management."
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the Form 10-KSB:
1. Consolidated Financial Statements. The following consolidated
financial statements of The viaLink Company are filed as part of
this Form 10-KSB:
Report of Independent Accountants
Covered by Report of Independent Accountants:
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Consolidated Financial Statements Schedules. None
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3. Exhibits.
2.1* Agreement and Plan of Merger by and among Registrant, Vantage
Capital Resources, Inc., John Simonelli, Larry E. Howell,
Robert L. Barcum, Robert N. Baker and David B. North, dated May
8, 1996 (filed as Exhibit 2.1 to Registrant's Registration
Statement on Form SB-2 (Reg. No. 333-5038-D) (the "Form SB-2"))
2.2* Asset Purchase Agreement by and among ijob, Inc., Human
Technologies, Inc., David C. Mitchell and Ron Beasley, dated
June 12, 1997 (filed as Exhibit 2.2 to Registrant's Annual
Report on Form 10-KSB for the year ending December 31, 1997
(the "1997 10-KSB"))
2.3* Asset Acquisition Agreement by and between Registrant and The
Netplex Group, Inc., dated August 31, 1998 (filed as Appendix A
to Definitive 14-C Information Statement dated October 15, 1998
(the "1998 14-C"))
2.4* First Amendment to Asset Acquisition Agreement by and between
Registrant and The Netplex Group, Inc., dated September 9, 1998
(filed as Appendix A-2 to the 1998 14-C)
2.5 Stock Purchase Agreement by and among Registrant, DCM Company,
Inc., David C. Mitchell and ijob, Inc., dated December 31, 1998
3.1* Registrant's Certificate of Incorporation, as amended and
restated (filed as Exhibit 3.1 to Registrant's Registration
Statement on Form S-8 (Reg. No. 333-69203) (the "December 1998
Form S-8"))
3.2* Registrant's Bylaws (filed as Exhibit 3.2 to the Form SB-2)
4.1* Form of Certificate of Common Stock of Registrant (filed as
Exhibit 4.1 to the Form SB-2)
4.2* Form of Underwriter's Warrant Agreement by and between Barron
Chase Securities, Inc. and Registrant (filed as Exhibit 4.2 to
the Form SB-2)
4.3* Form of Warrant Agreement by and between Liberty Bank & Trust
Company of Oklahoma City, N.A. and Registrant (filed as Exhibit
4.3 to the Form SB-2)
4.4* Form of Certificate of Redeemable Common Stock Purchase Warrant
(filed as Exhibit 4.4 to the Form SB-2)
4.5*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Non-Qualified Stock Option Plan (filed as Exhibit 4.5 to
Registrant's Registration Statement on Form S-8 (Reg. No. 333-
47549))
4.6*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Stock Grant Plan (filed as Exhibit 4.4 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-47547))
4.7* Stock Option Agreement by and between David C. Mitchell and
Registrant, dated June 12, 1997 (filed as Exhibit 4.9 to the
1997 10-KSB)
4.8* Stock Option Agreement by and between Ron Beasley and
Registrant, dated June 12, 1997 (filed as Exhibit 4.10 to the
1997 10-KSB)
4.9*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1997 Employee Stock Purchase Plan (filed as Exhibit 4.3 to
Registrant's Registration Statement on Form S-8 (Reg. No. 333-
30073))
4.10*+ The viaLink Company (formerly Applied Intelligence Group, Inc.)
1995 Stock Option Plan, as amended and restated effective
September 1, 1998 (filed as Exhibit 4.7 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-69203)
33
<PAGE>
4.11* Shareholder Agreement by and between Registrant and Hewlett-
Packard Company, dated as of February 4, 1999 (filed as Exhibit
4.1 to Registrant's Current Report on Form 8-K dated February
4, 1999 (the "February 1999 8-K"))
4.12 Promotional Shares Escrow Agreement by and among Registrant,
Liberty Bank & Trust Company of Oklahoma City, N.A., Robert L.
Barcum, Robert N. Baker, Russell L. Reinhardt, David B. North,
John Simonelli and Larry E. Howell, dated November 19, 1996
4.13 Stock Option Agreement by and between Registrant and John
Simonelli, as amended and restated, dated as of December 19,
1998
4.14 Stock Option Agreement by and between Registrant and Larry E.
Howell, as amended and restated, dated as of December 19, 1998
4.15 Stock Option Agreement by and between Registrant and Robert T.
Kirk, dated as of December 19, 1998
4.16 Stock Option Agreement by and between Registrant and Brian
Herman, dated as of December 18, 1998
4.17 Stock Option Agreement by and between Registrant and Eureka
Holdings, Inc., dated as of December 19, 1998
4.18 Stock Option Agreement by and between Registrant and Roger
Lockhart, dated as of December 19, 1998
10.1* Note Purchase Agreement by and between Registrant and Hewlett-
Packard Company, dated as of February 4, 1999 (filed as Exhibit
10.1 to the February 1999 8-K)
10.2* Secured Subordinated Promissory Note in favor of Hewlett-
Packard Company, dated February 4, 1999 (filed as Exhibit 10.2
to the February 1999 8-K)
10.3* Security Agreement by and between Registrant and Hewlett-
Packard Company, dated as of February 4, 1999 (filed as Exhibit
10.3 to the February 1999 8-K)
10.4* Lease by and between Registrant and Oklahoma Christian
Investment Corporation, dated October 3, 1994 (filed as Exhibit
10.2 to the Form SB-2)
10.5* Form of Merger and Acquisition Fee Agreement by and between
Registrant and Barron Chase Securities, Inc. (filed as Exhibit
10.10 to the Form SB-2)
10.6* Exchange Agreement by and among Registrant, Robert L. Barcum,
Robert N. Baker, Russell L. Reinhardt and David B. North, John
Simonelli, and Larry E. Howell, dated October 14, 1996 (filed
as Exhibit 10.36 to the Form SB-2)
10.7* Stock Redemption Agreement by and between Registrant and David
B. North, dated October 15, 1996 (filed as Exhibit 10.38 to the
Form SB-2)
10.8* Asset Purchase Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.44
to Registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997 (the "June 1997 10-QSB"))
10.9* Software License Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.45
to the June 1997 10-QSB)
10.10* Conveyance Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.46
to the June 1997 10-QSB)
10.11* Conveyance Agreement by and between Registrant and ijob, Inc.,
dated June 12, 1997 (filed as Exhibit 10.47 to the June 1997
10-QSB)
34
<PAGE>
10.12* Earn-out Agreement by and between Registrant and The Netplex
Group, Inc., dated September 30, 1998 (filed as Exhibit 10.49
to the 1998 14-C)
10.13* Administrative Services Agreement by and between Registrant and
The Netplex Group, Inc., dated August 31, 1998 (filed as
Exhibit 10.51 to Registrant's Current Report on Form 8-K dated
October 16, 1998 (the "August 1998 8-K"))
10.14* Sublease by and between Applied Intelligence Group, Inc. and
The Netplex Group, Inc. (filed as Exhibit 10.52 to the October
1998 8-K)
10.15* Software Remarketing and Reselling Agreement by and between
Registrant and The Netplex Group, Inc., with an effective date
of September 1, 1998 (filed as Exhibit 10.53 to the October
1998 8-K)
10.16+ Form of Indemnification Agreement by and between Registrant and
Registrant's executive officers, dated February 9, 1998
10.17+ Employment Agreement by and between Registrant and Lewis B.
Kilbourne, dated October 1, 1998
10.18+ Employment Agreement by and between Registrant and Robert N.
Baker, dated October 1, 1998
10.19 Secured Promissory Note entered into by DCM Company, Inc. and
ijob, Inc. in favor of Registrant, dated December 31, 1998
10.20 Security and Pledge Agreement by and among Registrant, DCM
Company and ijob, Inc., dated as of December 31, 1998
21.1 Subsidiaries of Registrant
23.1 Consent of PricewaterhouseCoopers LLP, dated March 4, 1999.
27.1 Financial Data Schedule
--------------------
* Incorporated herein by reference to the indicated filing.
+ Management Contract or Compensation Plan.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1998, viaLink filed a Current Report
on Form 8-K dated October 27, 1998 reporting (Item 2) the sale of our consulting
services assets to The Netplex Group, Inc., (Item 5) the amendment to The
viaLink Company (formerly Applied Intelligence Group, Inc.) 1995 Stock Option
Plan, (Item 5) the amendment to The viaLink Company (formerly Applied
Intelligence Group, Inc.) 1998 Non-Qualified Stock Option Plan, (Item 5) the
change of our name to The via Link Company, and (Item 5) the resignation of
Robert Barcum as President and Chief Executive Officer, the resignation of David
North as Vice President of Consulting and Larry Davenport as Vice President of
Marketing and Sales.
35
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, as of the 4th day of March, 1999.
THE VIALINK COMPANY
(formerly Applied Intelligence Group, Inc.)
(Registrant)
By: /S/Lewis B. Kilbourne
---------------------
Lewis B. Kilbourne
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
By: /S/ Robert L. Barcum Chairman of the Board March 4, 1999
-------------------------
Robert L. Barcum
By: /S/ Lewis B. Kilbourne Chief Executive Officer March 4, 1999
------------------------- And Director (principal
Lewis B. Kilbourne executive officer)
By: /S/ Robert N. Baker President, Chief Operating March 4, 1999
------------------------- Officer and Director
Robert N. Baker
By: /S/ Jimmy M. Wright Director March 4, 1999
-------------------------
Jimmy M. Wright
By: /S/ John M. Duck Vice President, Treasurer and March 4, 1999
-------------------------Chief Financial Officer (principal
John M. Duck financial and accounting officer)
36
<PAGE>
Item 7. Financial Statements
INDEX TO FINANCIAL INFORMATION
Report of Independent Accountants............................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997.... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996............................. F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996....................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996............................. F-6
Notes to Consolidated Financial Statements...................... F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
The viaLink Company (formerly Applied Intelligence Group, Inc.)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of The viaLink
Company (formerly Applied Intelligence Group, Inc.) at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards 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 our opinion.
PRICEWATERHOUSECOOPERS LLP
Oklahoma City, Oklahoma
February 22, 1998
F-2
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
--------------- --------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 715,446 $ 80,769
Accounts receivable - trade, net of allowance for doubtful
accounts of $7,841 in 1998 and $1,724 in 1997 158,117 1,337,322
Other receivables 585,778 44,893
Inventory - 8,707
Current portion of deferred tax asset - 44,502
Prepaid expenses 16,716 51,634
Marketable securities, available-for-sale 684,327 -
---------- ----------
Total current assets 2,160,384 1,567,827
Furniture, equipment and leasehold improvements, net 719,910 1,462,575
Software development costs, net 1,340,230 1,735,420
Deferred tax asset, net - 1,004,938
Note receivable, net of deferred gain on sale 337,958 -
Other assets 38,564 33,393
---------- ----------
Total assets $4,597,046 $5,804,153
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdraft $ - $ 23,619
Accounts payable and accrued liabilities 1,066,273 1,507,018
Deferred revenue - 236,134
Current portion of capital lease obligations 44,194 132,422
---------- ----------
Total current liabilities 1,110,467 1,899,193
Capital lease obligations, net of current portion - 44,194
Long-term debt - 490,000
Notes payable to shareholders - 482,830
---------- ----------
Total liabilities 1,110,467 2,916,217
Commitments (Note 10)
Stockholders' equity:
Common stock, $.001 par value; 30,000,000 shares authorized;
2,826,613 and 2,729,509 shares issued and outstanding
at December 31, 1998 and 1997, respectively 2,827 2,730
Additional paid-in capital 4,763,569 4,498,988
Accumulated deficit (964,144) (1,613,782)
Accumulated other comprehensive loss (315,673) -
---------- ----------
Total stockholders' equity 3,486,579 2,887,936
---------- ----------
Total liabilities and stockholders' equity $4,597,046 $5,804,153
========== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------------- --------------- ---------------
<S> <C> <C> <C>
Revenues $ 8,230,628 $ 9,022,842 $ 9,507,370
Expenses:
Direct cost of sales 1,563,757 2,211,956 2,570,840
Salaries and benefits 5,256,247 6,174,503 5,167,571
Selling, general and administrative 1,964,180 2,708,351 2,007,999
Interest expense, net 161,355 73,581 219,089
Depreciation and amortization 925,134 827,396 591,205
----------- ----------- -----------
Total expenses 9,870,673 11,995,787 10,556,704
----------- ----------- -----------
Loss from operations (1,640,045) (2,972,945) (1,049,334)
Gain on sale of assets 2,998,453 - -
Other income 340,670 - -
----------- ----------- -----------
Income (loss) before income taxes 1,699,078 (2,972,945) (1,049,334)
Provision (benefit) for income taxes 1,049,440 (1,112,127) (366,925)
----------- ----------- -----------
Net income (loss) 649,638 (1,860,818) (682,409)
Other comprehensive loss:
Unrealized loss on securities (315,673) - -
----------- ----------- -----------
Comprehensive income (loss) $ 333,965 $(1,860,818) $ (682,409)
=========== =========== ===========
Weighted average common shares outstanding - Basic 2,741,041 2,727,438 1,838,522
=========== =========== ===========
Net income (loss) per common share - Basic $ .24 $ (.68) $ (.37)
=========== =========== ===========
Weighted average common shares outstanding - Diluted 3,102,443 2,727,438 1,838,522
=========== =========== ===========
Net income (loss) per common share - Diluted $ .21 $ (.68) $ (.37)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated Retained
Common Stock Additional Other Earnings
------------------------- Paid-In Comprehensive (Accumulated
Shares Amounts Capital Loss Deficit)
---------- ----------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 1,500,000 $ 1,500 $ 66,484 $ - $ 929,445
Vantage Capital
Resources, Inc., merger 610,000 610 394,317 - -
Stock redemptions (383,500) (383) (40,742) - -
Initial public offering 1,000,000 1,000 4,071,167 - -
Net loss - - - - (682,409)
---------- ---------- -------------- ----------------- ----------------
Balance,
December 31, 1996 2,726,500 2,727 4,491,226 - 247,036
Exercise of stock options 444 - 279 - -
Stock issued under
Employee Stock
Purchase Plan 2,565 3 7,483 - -
Net loss - - - - (1,860,818)
---------- ---------- -------------- ----------------- ----------------
Balance (Deficit),
December 31, 1997 2,729,509 2,730 4,498,988 - (1,613,782)
Exercise of stock options 88,610 89 240,303 - -
Stock issued under
Employee Stock
Purchase Plan 3,461 3 8,555 - -
Stock issued under
Employee Stock
Bonus Plan 5,033 5 15,723 - -
Net Income - - - - 649,638
Unrealized loss on
securities available for sale - - - (315,673) -
---------- ---------- -------------- ----------------- ----------------
Balance (Deficit),
December 31, 1998 2,826,613 $ 2,827 $ 4,763,569 $ (315,673) $ (964,144)
========== ========== ============== ================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 649,638 $(1,860,818) $ (682,409)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 925,134 827,396 591,205
Deferred income tax provision (benefit) 1,049,440 (1,112,127) (241,730)
Gain on sale of assets (2,998,453) - -
Loss on disposal of fixed assets 12,694 - 5,720
Decrease (increase) in accounts receivable 1,054,162 672,515 363,680
Decrease (increase) in other receivables (540,885) 269,981 (95,995)
Decrease (increase) in inventory 8,707 19,452 (5,767)
Decrease (increase) in prepaid expenses 34,918 24,630 19,974
Decrease (increase) in other assets (11,218) 83,748 (68,698)
Increase (decrease) in accounts payable and accrued liabilities (397,899) 428,512 (184,601)
Increase (decrease) in deferred revenue (236,134) (96,315) 207,986
----------- ----------- -----------
Net cash used in operating activities (449,896) (743,026) (90,635)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets, net of cost 2,607,731 - -
Capital expenditures (41,785) (332,987) (625,893)
Capitalized expenditures for software development (617,180) (752,158) (655,248)
----------- ----------- -----------
Net cash provided by (used in) investing activities 1,948,766 (1,085,145) (1,281,141)
----------- ----------- -----------
Cash flows from financing activities:
Increase (decrease) in book overdraft (23,619) (261,141) 115,294
Proceeds from long-term debt 3,522,639 1,270,000 5,609,000
Proceeds from shareholder notes - 6,455 39,375
Proceeds from exercise of stock options, stock bonus
and stock purchase plan 264,678 7,765 -
Proceeds from sale of stock - - 4,425,969
Payments of capital lease obligations (132,422) (135,153) (111,347)
Payments of shareholder notes (482,830) (20,000) -
Payments on long-term debt (4,012,639) (780,000) (6,904,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities (864,193) 87,926 3,174,291
----------- ----------- -----------
Net increase (decrease) in cash 634,677 (1,740,245) 1,802,515
Cash and cash equivalents at beginning of period 80,769 1,821,014 18,499
----------- ----------- -----------
Cash and cash equivalents at end of period $ 715,446 $ 80,769 $ 1,821,014
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 220,553 $ 123,778 $ 251,967
=========== =========== ===========
Cash paid for income taxes, net of cash received for income taxes $ 26,454 $ 114,852 $ (10,000)
=========== =========== ===========
Supplemental disclosures of noncash investing and financing activities:
Capital lease obligation incurred $ _ $ _ $ 205,938
=========== =========== ===========
Effective December 31, 1998, the Company sold its investment in its whole-
owned subsidiary, ijob, Inc., for a $800,000 note receivable. The net gain on
the sale of $462,042 has been deferred and netted against the note.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General Description of Business The viaLink Company (the "Company")
provides business-to-business electronic commerce solutions for the grocery
and convenience store industries. The Company has developed a cost-
effective, Internet-accessible shared database, the viaLink Item Catalog,
that enables subscribing manufacturers, suppliers and retailers to exchange
product, pricing and promotional information. The Company's solution
offers a single interface solution for retailers to receive product
information from all their suppliers, regardless of the technological
capabilities of the retailer or the supplier. Suppliers and manufacturers
are able to efficiently communicate product and pricing information to
their customers, significantly reducing the operational and administrative
costs of supply chain management. Product, pricing and promotional
information contained in the viaLink database is secured with state-of-the-
art firewalls and password protections. With the use of a personal
computer and commonly available software and a Web browser, viaLink enables
its subscribers to improve management of information flow, reduce errors
and invoice discrepancies, enhance the accounts receivable collection
process and reduce redundant information processing.
The Company's clients and customers range from small, rapidly growing
companies to large corporations and are geographically dispersed throughout
the United States.
Basis of Presentation The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, ijob, Inc., which
was formed June 30, 1997. All material intercompany balances and
transactions have been eliminated. On December 31, 1998 ijob, Inc. was sold
and, therefore, is not included in the Company's December 31, 1998 balance
sheet (see Note 2).
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of
management's estimates and assumptions in determining the carrying values
of certain assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts for certain revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents For purposes of the statement of cash flows,
the Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Marketable Securities The Company classifies its marketable securities as
available-for-sale in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company's securities are
carried at fair market value, with the unrealized gains and losses reported
as a separate component in stockholders' equity until realized.
Risks from Concentrations Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally
of temporary cash investments, notes receivable and accounts receivable.
The Company places its temporary cash investments with high credit quality
financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited due to the size of customers and their
dispersion across different regions. The Company does not believe a
material risk of loss exists with respect to its financial position due to
concentrations of credit risk.
The Company, through the sale of its management consulting and systems
integration services, received 643,770 shares of preferred stock
convertible into common shares of the NetPlex Group, Inc. which are
classified as available-for-sale marketable securities and are subject to
fluctuations in value due to market conditions.
The Company's revenues were in part dependent on large license fees and
systems integration contracts from a limited number of customers. In 1998,
1997 and 1996 three customers individually accounted for 13, 11, and 11
percent, 20, 13, and 10 percent, and 17, 14, and 10 percent of the
Company's total revenues, respectively. In 1998, 1997 and 1996,
approximately 49, 57 and 57 percent, respectively, of the Company's total
revenues were attributable to five clients. During 1998 the Company sold
its wholly owned subsidiary, ijob, Inc., and the assets underlying its
management consulting and systems integration services (see Note 2).
Historically, approximately 90% of the Company's revenues were generated
from assets sold pursuant
F-7
<PAGE>
to these sales. As a result of the sales, the Company resembles a
development stage company since its planned principal operations are
underway, but have not yet generated significant revenues.
Furniture, equipment and leasehold improvements Furniture, equipment and
leasehold improvements are stated at cost. Expenditures for repairs and
maintenance are charged to expense as incurred. Upon disposition, the cost
and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in operations for the period. The
Company depreciates furniture and equipment using the straight-line method
over their estimated useful lives ranging from 5 to 10 years. Leasehold
improvements are amortized over the lease term using the straight-line
method.
Revenue Recognition The Company recognizes revenues as the services are
provided. Revenues collected in advance are deferred and recognized as
earned. Revenues for fixed-price contracts are recognized using the
percentage of completion method. Accounts receivable included unbilled
amounts of $193,355 at December 31, 1997. As of December 31, 1998 there
were no unbilled amounts.
Direct Cost of Sales Direct Cost of sales represents the cost of
hardware and certain point-of-sale software acquired for resale, including
royalty payments required for sale of the Company's proprietary software
products.
Earnings Per Share The Company presents basic and diluted earnings per
share ("EPS") as required under Statement of Accounting Standard No. 128,
"Earnings Per Share," ("SFAS 128"). SFAS 128 simplifies the standards for
computing earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share and by
simplifying the calculation of diluted earnings per share. A reconciliation
of the numerator and the denominator used in the calculation of earnings
per share is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
-----------------------------------------------
Income Shares
(Numerator) (Denominator) Per Share
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
shareholders $649,638 2,741,041 $0.24
=========
Effect of dilutive securities options - 361,402
----------- -------------
Dilutive EPS
Income available to common
shareholders plus assumed
conversions $649,638 3,102,443 $0.21
=========== ============= =========
</TABLE>
At December 31, 1998, options to purchase 360,000 and 30,000 shares of
common stock at $5.00 and $9.00 per share, respectively, and warrants to
purchase 920,000 and 180,000 shares of common stock at $5.00 and $6.00,
respectively, were outstanding, but were not included in the computation of
diluted EPS because the exercise price of the options and warrants was
greater than the average market price of the common shares.
At December 31, 1997, options to purchase 583,078 shares at an average
exercise price of $4.19 and warrants to purchase 920,000 and 180,000 shares
of common stock at $5.00 and $6.00, respectively, were outstanding, but
were not included in the computation of diluted EPS because the exercise
price of the options and warrants was greater than the average market price
of the common shares.
At December 31, 1996, options to purchase 435,208 shares at an average
exercise price of $4.32 and warrants to purchase 920,000 and 180,000 shares
of common stock at $5.00 and $6.00, respectively, were outstanding, but
were not included in the computation of diluted EPS because the exercise
price of the options and warrants was greater than the average market price
of the common shares.
Income Taxes The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires deferred tax liabilities or assets
to be recognized for the anticipated future tax effects of temporary
F-8
<PAGE>
difference that arise as a result of the differences in the carrying
amounts and tax bases of assets and liabilities, and for loss carryforwards
and tax credit carryforwards.
Costs of Product Development The Company incurred costs and expenses of
approximately $1,827,000, $1,875,000, and $1,204,000 for product
development in 1998, 1997, and 1996, respectively. A substantial portion
of these costs relates to development of a network subscription service
that the Company made available to subscribers in January of 1997. Certain
of these costs are capitalized as Software Development Costs (See Note 4).
Comprehensive Income In 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income." SFAS 130 establishes new rules for reporting of
comprehensive income and its components. Comprehensive income consists of
unrealized loss on the fair market value of marketable securities and is
presented as a separate component of stockholders' equity. Prior years'
financial statements have been presented to conform to these requirements.
Recently Issued Accounting Pronouncements In October 1997, the AICPA
Accounting Standards Executive Committee issued Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which supercedes Statement of
Position 91-1, Software Revenue Recognition. SOP 97-2 focuses on when and
in what amounts revenue should be recognized for licensing, selling,
leasing, or otherwise marketing computer software and is effective for
transactions entered into in fiscal years beginning after December 15,
1997. In March 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position 98-4, Deferral of the Effective Date of
Provision of SOP 97-2, Software Revenue Recognition ("SOP 98-4"). SOP 98-4
defers for one year certain provisions of SOP 97-2. In December of 1998,
the AICPA Accounting Standards Executive Committee issued Statement of
Position 98-9, Modification of SOP 97-2, Software Revenue Recognition, with
respect to Certain Transactions ("SOP 98-9"). SOP 98-9, also amends certain
provisions of SOP 97-2 and extends the deferral of the application of
certain provisions of SOP 97-2 as amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. The Company does not believe that
the adoption of SOP 97-2, including the effects of these amendments, will
have a material impact on its financial position and results of operations.
2. DIVESTITURES:
On December 31, 1998, the Company sold its wholly-owned subsidiary, ijob,
Inc. to DCM Company ("DCM"), a corporation wholly-owned by David C.
Mitchell, the President and a member of the Board of Directors of ijob at
the time of the sale. DCM purchased all of the outstanding stock of ijob
for a collateralized, ten-year $800,000 promissory note that accrues
interest at 8%. DCM is required to pay the promissory note in full upon
the occurrence of certain events, including the date upon which David C.
Mitchell owns less than 51% of DCM. The promissory note is collateralized
by principally all of the fixed assets, contract rights, accounts
receivable and general intangibles of ijob. The net gain of $462,042 on
the sale has been deferred and netted against the $800,000 promissory note,
as DCM is considered to be a highly leveraged entity.
Effective September 1, 1998, the Company sold the assets related to its
management consulting and systems integration services (including the
Company's proprietary Retail Services Application ("RSA") software) to
Netplex Group, Inc ("Consulting Asset Sale"). Netplex paid the Company
$3.0 million in cash and issued the Company 643,770 shares of Netplex
preferred stock, with a market value of approximately $1.0 million. The
Company used the cash proceeds from the sale to repay (i) $551,062 of long-
term debt, (ii) $565,094 of shareholder loans including interest and (iii)
expenses attributable to the Consulting Asset Sale. The net gain from the
Consulting Assets Sale was $2,998,453. As of December 31, 1998, the market
value of the 643,770 shares of NetPlex preferred stock was $684,327,
yielding an unrealized loss of $315,673, which has been included in
comprehensive loss. The following represents condensed unaudited results
of operations related to the management consulting and systems integration
services:
August 31, 1998 December 31, 1997
--------------- -----------------
Revenues $6,831,916 $7,544,678
Expenses 5,045,104 7,335,395
--------------- -----------------
Income before Taxes $1,786,812 $ 209,283
=============== =================
F-9
<PAGE>
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements at December 31, 1998 and
1997 consists of the following:
1998 1997
----------- -----------
Furniture and fixtures $ 286,583 $ 482,818
Computer equipment 1,432,776 2,029,864
Computer software 492,790 657,498
Leasehold improvements 49,669 55,779
----------- -----------
2,261,818 3,225,959
Less: accumulated depreciation
and amortization (1,541,908) (1,763,384)
----------- -----------
Furniture, equipment and leasehold
improvements, net $ 719,910 $ 1,462,575
=========== ===========
Included in furniture and fixtures in 1997 was $125,886 of assets under a
capital lease. In 1998 the capital lease was paid in full and the Company
obtained ownership of the related furniture and fixtures. Included in
computer equipment in 1998 and 1997 was $321,840 of assets under capital
leases. The accumulated depreciation for all assets under capital leases at
December 31, 1998 and 1997 was $282,245 and $195,177, respectively.
4. SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes certain costs, including interest, that are
directly related to the development of software. In accordance with
Statement of Financial Accounting Standards No. 86, capitalization of costs
begins when technological feasibility has been established and ends when
the product is available for customers. Capitalized software development
costs are amortized using the straight-line method over the estimated
useful life of five years. Amortization of capitalized software costs for
December 31, 1998, 1997, and 1996 was $466,875, $324,837, and $176,756,
respectively. Accumulated amortization at December 31, 1998 and 1997 was
$763,755 and $841,826, respectively.
The Company continually assesses whether the unamortized capitalized cost
of software development is impaired. This assessment is based on the
future cashflows expected to be generated by the related product. If
impairment is determined, the amount of such impairment is calculated based
on the estimated net realizable value of the related asset. No write-offs
were made in 1998 and 1997.
Total interest costs for the years ended December 31, 1998, 1997, and 1996
were $168,946, $116,183, and $291,089, respectively, of which $54,423 was
capitalized in 1996. No interest was capitalized in 1998 and 1997.
5. LONG-TERM DEBT:
On July 19, 1995, the Company entered into a revolving credit agreement
(the "Agreement") with a bank whereby the Company could borrow, under two
separate notes, up to the lesser of $3,000,000 or the borrowing base as
defined in the agreement. Pursuant to the terms of the revolving credit
agreement, upon successful completion of the Company's initial public
offering, the working capital note of $800,000 was paid in full on November
27, 1996, and in October 1997, and December 1997, the terms of the
remaining note were renegotiated to a credit line of $500,000. Interest on
the note was prime plus 0.5% at December 31, 1997, which was 9%.
During the first quarter of 1998, the Company completed a new credit
facility with a commercial lender that replaced the revolving credit
agreement with the bank. Under the new credit facility the Company could
borrow up to $1,000,000; however, amounts borrowed were limited to 75% of
the Company's accounts receivable as defined by the new facility. The
facility was collateralized by accounts receivable and all tangible assets
of the Company and was guaranteed by three principal officers of the
Company. The interest rate on the new facility was prime plus 3%. The
promissory note under this agreement was paid in full on October 16, 1998.
During the first quarter of 1998, the Company obtained a credit facility
including a large sale financing option with IBM Credit Corp., whereby the
Company could finance directly with IBM Credit Corp. large sales of
hardware or software. As of December 31,1998, there were no amounts
outstanding on
F-10
<PAGE>
this credit facility and in February of 1999, the Company terminated its
arrangement under this credit facility. The Company no longer has any
available working capital borrowings or credit facility available for
borrowings.
On February 4, 1999, the Company entered into a financing agreement with
Hewlett-Packard Company. Hewlett-Packard provided the Company $6.0 million
pursuant to a Subordinated Secured Promissory Note bearing interest at a
rate of 11.5% per annum. The Company received such funds on February 5,
1999. No principal or interest payments are due on the Hewlett-Packard
Note until February 2004. This Note is collateralized by a lien on our
viaLink services, including the underlying source code. Upon receipt of
shareholder approval, which the Company intends to seek at the 1999 Annual
Meeting of Shareholders, this initial Note would be exchanged for a
substantially similar note which would be convertible beginning in August
2000 into the Company's Common Stock at a price of $7 per share. In
connection with the financing, Hewlett-Packard will provide the
technological platform to host the Company's Item Catalog and other
services, co-marketing and consulting services. The Hewlett-Packard loan
agreement also provides that up to 50% of the loan proceeds are intended to
be used to purchase Hewlett-Packard products and services.
The carrying values of financial instruments included in long-term debt
approximate their fair values due to the nature and terms of the
instruments involved.
6. NOTES PAYABLE TO SHAREHOLDERS:
In October 1998, the Company repaid all shareholder notes in the principal
amount of $482,830, plus accrued interest of $82,264. Notes payable to
shareholders at December 31, 1997, totaled $482,830 and included interest
at rates ranging from 8.5% to 11.5%.
Interest expense for 1998 and 1997 related to the notes payable to
shareholders was $38,293 and $46,473, respectively.
7. STOCKHOLDERS' EQUITY:
The Company established The viaLink Company (formerly the Applied
Intelligence Group, Inc.) Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan" or "Plan") in April 1997, which was approved by the
shareholders at the Annual Meeting of Shareholders on June 3, 1997. The
Employee Stock Purchase Plan provides the opportunity for employees to
purchase the Company's stock through payroll deductions, to encourage
participation in the ownership and economic progress of the Company. Plan
participants may contribute up to $20 per pay period into their account to
purchase whole shares of the Common Stock of the Company at pre-determined
calendar quarter grant dates or exercise dates. The price will be 85
percent of the per share fair market value on the granting date or the
exercise date, whichever is the lesser, of the purchase period. The number
of shares of Common Stock authorized and reserved for issuance under the
Plan is 100,000 shares. For each of the years ended December 31, 1998 and
1997, 3,461 and 2,565 shares, respectively, shares of Common Stock have
been purchased by Employees of the Company, and are included in the total
outstanding shares as of December 31, 1998.
8. STOCK OPTION PLANS:
In 1995, the Company created the 1995 Stock Option Plan (the "Plan"). The
Plan provides for incentive stock options and non-incentive stock options
to key management, directors, key professional employees or key
professional non-employee service providers of the Company. In April 1996,
the Company amended the Plan to authorize and reserve up to 300,000 shares
of Common Stock for issuance of options under the Plan, and again amended
the Plan on September 1, 1998 to increase the number of authorized shares
under the Plan to 800,000. The Plan permits the issuance of qualified and
nonqualified stock options. During 1998, the Company issued 670,750
options at an average exercise price of $3.04.
In conjunction with the Company's merger with Vantage Capital Resources,
Inc. in 1996 the Company issued 360,000 options exercisable at $5.00 per
share. Such options become exercisable after 2 years and expire after 5
years from the original grant date.
On February 9, 1998, the Board of Directors of the Company adopted the 1998
Non-Qualified Stock Option Plan (the "Non-Qualified Stock Plan" or "Plan"),
to attract, retain and motivate directors, executive officers,
F-11
<PAGE>
key employees and independent contractors of the Company and its
subsidiaries by way of granting non-qualified stock options with stock
appreciation rights attached. The Non-Qualified Stock Plan, as amended on
September 1, 1998, authorizes and reserves up to 800,000 shares of Common
Stock for issuance and options under the Plan. The option price shall not
be less than 85 percent of the fair market value of the Common Stock on the
date of grant. All options pursuant to the Plan expire after ten years from
the date of grant. The Board of Directors has the discretion to fix the
period and the time at which any options granted under the Plan may be
exercised. During 1998 the Company issued 501,857 options at an average
exercise price of $3.38 pursuant to the Plan.
On February 10, 1998, the Board of Directors of the Company adopted the
1998 Stock Grant Plan (the "Stock Grant Plan" or "Plan") to attract, retain
and motivate consultants, independent contractors and key employees of the
Company and its subsidiaries by way of granting shares of stock in the
Company. The Stock Grant Plan authorizes and reserves up to 150,000 shares
of Common Stock of the Company for issuances under the Plan. Shares of
Common Stock received pursuant to the Stock Grant Plan restrict the sale,
transfer or other disposal of said shares for a period of one year. During
1998, 5,033 shares of common stock have been issued pursuant to the Plan at
an average price of $3.12.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123 and has been determined as if the Company had
accounted for its stock options under the fair value method defined by FAS
No. 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for fiscal year 1998, 1997 and 1996,
respectively: interest rates (zero-coupon U.S. government issued with a
remaining life equal to the expected term of the options) of 4.52%, 6.47%,
and 6.10%; dividend yields of 0.0%; volatility factors of expected market
price of the Company's common stock of 65%; and weighted-average expected
life of the options of 6.7, 5.9, and 3.5 years.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its employee stock
options. APB No. 25 requires compensation expense be recorded for any
difference between the option price and market value on the measurement
date. Accordingly, based on the fact that all option's exercise price
equals the market price at date of grant, no compensation cost has been
recognized in 1998, 1997 and 1996.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's 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
stock options.
The Company's pro forma information is as follows for December 31:
1998 1997 1996
--------- ----------- ---------
Net income (loss), as reported $ 649,638 $(1,860,818) $(682,409)
Pro forma $ 112,172 $(2,393,944) $(780,194)
Earnings (loss) per shares-diluted,
as reported $ .21 $ (.68) $ (.37)
Pro forma $ .04 $ (.88) $ (.42)
F-12
<PAGE>
A summary of the Company's stock option activity and related information
follows as of December 31:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
------------- ------------------
<S> <C> <C>
Outstanding at December 31, 1995 45,513 $0.63
Granted 396,238 4.69
Exercised - -
Canceled (6,543) 0.80
-------------
Outstanding at December 31, 1996 435,208 4.32
Granted 167,500 3.76
Exercised (444) 0.63
Canceled (19,186) 3.31
-------------
Outstanding at December 31, 1997 583,078 4.19
Granted 1,172,607 3.18
Exercised (88,610) 2.71
Canceled (44,453) 3.44
-------------
Outstanding at December 31, 1998 1,622,622 $3.56
=============
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ---------------------------------
Weighted Weighted Weighted
Range Average Average Average
of Exercise Outstanding at Exercise Remaining Exercisable Exercise
Prices 12/31/98 Price Life at 12/31/98 Price
---------------- ------------------ ----------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
$0.63 to $1.80 34,410 $0.92 7 years 34,410 $0.92
$3.00 to $3.88 1,198,212 $3.07 6 years 150,595 $3.45
$5.00 to $9.00 390,000 $5.31 9 years 360,000 $5.00
$0.63 to $9.00 1,622,622 $3.56 6 years 545,005 $4.31
</TABLE>
9. INCOME TAXES:
The components of the provision (benefit) for income taxes for the years
ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ---------------- --------------
<S> <C> <C> <C>
Current $ - $ - $ (125,195)
Deferred 1,049,440 (1,112,127) (241,730)
------------- --------------- -------------
Provision (benefit) for income taxes $ 1,049,440 $ (1,112,127) $ (366,925)
============= =============== =============
</TABLE>
The difference in federal income taxes at the statutory rate and the
provision for income taxes for the years ended December 31, 1998, 1997, and
1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------------- -----------
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory rate $ 577,687 $ (1,010,801) $ (356,773)
State income taxes 67,963 (118,918) (41,973)
Change in valuation allowance 401,302 - -
Revision of prior year estimate - - 14,273
Other 2,488 17,592 17,548
----------- -------------- -----------
Provision (benefit) for income taxes $ 1,049,440 $ (1,112,127) $ (366,925)
=========== ============= ===========
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
Deferred tax assets (liabilities) are comprised of the following:
December 31,
-------------------------
1998 1997
--------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 2,980 $ 655
Compensated absences 17,583 43,847
Tax carryforwards 24,985 24,969
Unrealized loss on marketable securities 119,956 -
Net operating loss carryforward 781,387 1,730,999
--------- ----------
946,891 1,800,470
Deferred tax liabilities:
Intangible assets (508,763) (659,460)
Depreciation and amortization (36,826) (91,570)
--------- ----------
Net deferred tax asset, before valuation allowance 401,302 1,049,440
Valuation allowance (401,302) -
--------- ----------
Net deferred tax asset $ - $1,049,440
========= ==========
</TABLE>
At December 31, 1998, the Company had net operating loss ("NOL")
carryforwards for Federal and State purposes of approximately $2,000,000
and $2,400,000, respectively, and other carryforwards of approximately
$66,000. The Federal and State NOL carryforwards begin to expire in 2011.
SFAS 109 requires that the Company record a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of the deferred tax asset
depends on the Company's ability to generate sufficient taxable income in
the future. If the Company achieves sufficient profitability to utilize
the NOL, the valuation allowance will be reduced resulting in a reduction
of future income tax expense.
The ability of the Company to utilize the NOL carryforward to reduce future
taxable income taxes may be limited upon occurrence of certain capital
stock transactions during any three-year period resulting in an aggregate
ownership change of more than 50%.
10. LEASES:
The Company leases its office and storage space under operating leases.
The terms range from month-to-month up to ten years and include options to
renew. The Company also leases office equipment under various
noncancelable lease agreements. Total rental expense in 1998, 1997 and
1996 for all leases was $410,669, $455,369 and $333,225, respectively.
Future minimum lease payments under noncancelable leases at December 31,
1998 follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------------ -------------
<S> <C> <C>
1999 $ 46,018 $ 445,446
2000 - 402,158
2001 - 332,211
2002 - 330,000
2003 - 330,000
Thereafter - 1,136,000
------------ -------------
Future minimum lease payments 46,018 $ 2,975,815
=============
Less amount representing interest 1,824
------------
Present value of minimum lease payments $ 44,194
============
</TABLE>
Future minimum lease payments have not been reduced by future minimum sub-
lease rentals of approximately $1.4 million under operating leases.
F-14
<PAGE>
11. RETIREMENT PLAN:
The Company has a profit sharing plan (the "Plan") for certain eligible
employees who have attained the age of 18 and completed one year of
service. Under the Plan, employer contributions are made at management's
discretion. Participants may contribute up to 6% of earnings as eligible
contributions and up to 15% of earnings in total for any Plan year. The
Company's discretionary matching percentage is equal to each participant's
share of total eligible contributions for a year. The Company made no
contributions in 1998, 1997, and 1996.
F-15
<PAGE>
Exhibit Index
Exhibit No. Description
- ---------- -----------
2.1* Agreement and Plan of Merger by and among Registrant, Vantage
Capital Resources, Inc., John Simonelli, Larry E. Howell, Robert
L. Barcum, Robert N. Baker and David B. North, dated May 8, 1996
(filed as Exhibit 2.1 to Registrant's Registration Statement on
Form SB-2 (Reg. No. 333-5038-D) (the "Form SB-2"))
2.2* Asset Purchase Agreement by and among ijob, Inc., Human
Technologies, Inc., David C. Mitchell and Ron Beasley, dated June
12, 1997 (filed as Exhibit 2.2 to Registrant's Annual Report on
Form 10-KSB for the year ending December 31, 1997 (the "1997 10-
KSB"))
2.3* Asset Acquisition Agreement by and between Registrant and The
Netplex Group, Inc., dated August 31, 1998 (filed as Appendix A
to Definitive 14-C Information Statement dated October 15, 1998
(the "1998 14-C"))
2.4* First Amendment to Asset Acquisition Agreement by and between
Registrant and The Netplex Group, Inc., dated September 9, 1998
(filed as Appendix A-2 to the 1998 14-C)
2.5 Stock Purchase Agreement by and among Registrant, DCM Company,
Inc., David C. Mitchell and ijob, Inc., dated December 31, 1998
3.1* Registrant's Certificate of Incorporation, as amended and
restated (filed as Exhibit 3.1 to Registrant's Registration
Statement on Form S-8 (Reg. No. 333-69203) (the "December 1998
Form S-8"))
3.2* Registrant's Bylaws (filed as Exhibit 3.2 to the Form SB-2)
4.1* Form of Certificate of Common Stock of Registrant (filed as
Exhibit 4.1 to the Form SB-2)
4.2* Form of Underwriter's Warrant Agreement by and between Barron
Chase Securities, Inc. and Registrant (filed as Exhibit 4.2 to
the Form SB-2)
4.3* Form of Warrant Agreement by and between Liberty Bank & Trust
Company of Oklahoma City, N.A. and Registrant (filed as Exhibit
4.3 to the Form SB-2)
4.4* Form of Certificate of Redeemable Common Stock Purchase Warrant
(filed as Exhibit 4.4 to the Form SB-2)
4.5*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.) 1998
Non-Qualified Stock Option Plan (filed as Exhibit 4.5 to
Registrant's Registration Statement on Form S-8 (Reg. No. 333-
47549))
4.6*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.) 1998
Stock Grant Plan (filed as Exhibit 4.4 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-47547))
4.7* Stock Option Agreement by and between David C. Mitchell and
Registrant, dated June 12, 1997 (filed as Exhibit 4.9 to the 1997
10-KSB)
4.8* Stock Option Agreement by and between Ron Beasley and Registrant,
dated June 12, 1997 (filed as Exhibit 4.10 to the 1997 10-KSB)
4.9*+ The viaLink Company (f/k/a Applied Intelligence Group, Inc.) 1997
Employee Stock Purchase Plan (filed as Exhibit 4.3 to
Registrant's Registration Statement on Form S-8 (Reg. No. 333-
30073))
4.10*+ The viaLink Company (formerly Applied Intelligence Group, Inc.)
1995 Stock Option Plan, as amended and restated effective
September 1, 1998 (filed as Exhibit 4.7 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-69203)
<PAGE>
4.11* Shareholder Agreement by and between Registrant and Hewlett-
Packard Company, dated as of February 4, 1999 (filed as Exhibit
4.1 to Registrant's Current Report on Form 8-K dated February 4,
1999 (the "February 1999 8-K"))
4.12 Promotional Shares Escrow Agreement by and among Registrant,
Liberty Bank & Trust Company of Oklahoma City, N.A., Robert L.
Barcum, Robert N. Baker, Russell L. Reinhardt, David B. North,
John Simonelli and Larry E. Howell, dated November 19, 1996
4.13 Stock Option Agreement by and between Registrant and John
Simonelli, as amended and restated, dated as of December 19, 1998
4.14 Stock Option Agreement by and between Registrant and Larry E.
Howell, as amended and restated, dated as of December 19, 1998
4.15 Stock Option Agreement by and between Registrant and Robert T.
Kirk, dated as of December 19, 1998
4.16 Stock Option Agreement by and between Registrant and Brian
Herman, dated as of December 18, 1998
4.17 Stock Option Agreement by and between Registrant and Eureka
Holdings, Inc., dated as of December 19, 1998
4.18 Stock Option Agreement by and between Registrant and Roger
Lockhart, dated as of December 19, 1998
10.1* Note Purchase Agreement by and between Registrant and Hewlett-
Packard Company, dated as of February 4, 1999 (filed as Exhibit
10.1 to the February 1999 8-K)
10.2* Secured Subordinated Promissory Note in favor of Hewlett-Packard
Company, dated February 4, 1999 (filed as Exhibit 10.2 to the
February 1999 8-K)
10.3* Security Agreement by and between Registrant and Hewlett-Packard
Company, dated as of February 4, 1999 (filed as Exhibit 10.3 to
the February 1999 8-K)
10.4* Lease by and between Registrant and Oklahoma Christian Investment
Corporation, dated October 3, 1994 (filed as Exhibit 10.2 to the
Form SB-2)
10.5* Form of Merger and Acquisition Fee Agreement by and between
Registrant and Barron Chase Securities, Inc. (filed as Exhibit
10.10 to the Form SB-2)
10.6* Exchange Agreement by and among Registrant, Robert L. Barcum,
Robert N. Baker, Russell L. Reinhardt and David B. North, John
Simonelli, and Larry E. Howell, dated October 14, 1996 (filed as
Exhibit 10.36 to the Form SB-2)
10.7* Stock Redemption Agreement by and between Registrant and David B.
North, dated October 15, 1996 (filed as Exhibit 10.38 to the Form
SB-2)
10.8* Asset Purchase Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.44
to Registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997 (the "June 1997 10-QSB"))
10.9* Software License Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.45
to the June 1997 10-QSB)
10.10* Conveyance Agreement by and between ijob, Inc. and Human
Technologies, Inc., dated June 12, 1997 (filed as Exhibit 10.46
to the June 1997 10-QSB)
10.11* Conveyance Agreement by and between Registrant and ijob, Inc.,
dated June 12, 1997 (filed as Exhibit 10.47 to the June 1997 10-
QSB)
<PAGE>
10.12* Earn-out Agreement by and between Registrant and The Netplex
Group, Inc., dated September 30, 1998 (filed as Exhibit 10.49 to
the 1998 14-C)
10.13* Administrative Services Agreement by and between Registrant and
The Netplex Group, Inc., dated August 31, 1998 (filed as Exhibit
10.51 to Registrant's Current Report on Form 8-K dated October
16, 1998 (the "August 1998 8-K"))
10.14* Sublease by and between Applied Intelligence Group, Inc. and The
Netplex Group, Inc. (filed as Exhibit 10.52 to the October 1998
8-K)
10.15* Software Remarketing and Reselling Agreement by and between
Registrant and The Netplex Group, Inc., with an effective date of
September 1, 1998 (filed as Exhibit 10.53 to the October 1998
8-K)
10.16+ Form of Indemnification Agreement by and between Registrant and
Registrant's executive officers, dated February 9, 1998
10.17+ Employment Agreement by and between Registrant and Lewis B.
Kilbourne, dated October 1, 1998
10.18+ Employment Agreement by and between Registrant and Robert N.
Baker, dated October 1, 1998
10.19 Secured Promissory Note entered into by DCM Company, Inc. and
ijob, Inc. in favor of Registrant, dated December 31, 1998
10.20 Security and Pledge Agreement by and among Registrant, DCM
Company and ijob, Inc., dated as of December 31, 1998
21.1 Subsidiaries of Registrant
23.1 Consent of PricewaterhouseCoopers LLP, dated March 4, 1999.
27.1 Financial Data Schedule
- ------------------------------
* Incorporated herein by reference to the indicated filing.
+ Management Contract or Compensation Plan.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1998, viaLink filed a Current Report
on Form 8-K dated October 27, 1998 reporting (Item 2) the sale of our consulting
services assets to The Netplex Group, Inc., (Item 5) the amendment to The
viaLink Company (formerly Applied Intelligence Group, Inc.) 1995 Stock Option
Plan, (Item 5) the amendment to The viaLink Company (formerly Applied
Intelligence Group, Inc.) 1998 Non-Qualified Stock Option Plan, (Item 5) the
change of our name to The via Link Company, and (Item 5) the resignation of
Robert Barcum as President and Chief Executive Officer, the resignation of David
North as Vice President of Consulting and Larry Davenport as Vice President of
Marketing and Sales.
<PAGE>
EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of the 31st day of December, 1998, by and among DCM Company, Inc., an
Oklahoma corporation ("DCM"), David C. Mitchell ("Mitchell"), ijob, Inc., an
Oklahoma corporation ("IJOB"), and The viaLink Company (formerly Applied
Intelligence Group, Inc.), an Oklahoma corporation ("viaLink"), with respect to
the following circumstances:
WHEREAS viaLink is the legal and beneficial owner of all the issued
and outstanding capital stock of IJOB; and
WHEREAS DCM desires to purchase all of said stock of IJOB; and
WHEREAS Mitchell is the sole director and shareholder of DCM and a
director of IJOB; and
WHEREAS viaLink desires to sell all of said stock of IJOB to DCM
pursuant to and subject to the terms and conditions of this Agreement; and
WHEREAS IJOB agrees to pledge all of its assets to secure the purchase
of said stock by DCM; and
WHEREAS, Mitchell, DCM and IJOB agrees to indemnify viaLink as set
forth in this Agreement.
WHEREUPON, in consideration of the above premises and in consideration of other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
Definitions
-----------
Whenever used in this Agreement, the following terms shall have the
meanings assigned to them in this Article I.
(a) "HT Agreement" -- shall mean the Asset Purchase Agreement, dated
as of June 12, 1997, by and among IJOB, Mitchell, HT Technologies, Inc., an
Oklahoma corporation (also known as Human Technologies, Inc.), and Ron Beasley,
a copy of which is attached hereto as Exhibit 1.
(b) "Mitchell Contract" shall mean the agreement setting forth certain
terms and conditions of employment between IJOB and Mitchell dated June 12, 1997
("Mitchell Contract") which is attached hereto marked Exhibit 2.
(c) "Usher Contract" shall mean the agreement setting forth certain
terms
1
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and conditions of employment between IJOB and Millie D. Usher dated January 3,
1997 which is attached hereto marked Exhibit 3.
(d) "Greenhaw Contract" shall mean the agreement setting forth certain
terms and conditions of employment between IJOB and Richard Greenhaw dated July
14, 1997 which is attached hereto marked Exhibit 4.
(e) "Thurman Contract" shall mean the agreement setting forth certain
terms and conditions of employment between IJOB and Barry Thurman dated July 10,
1997 which is attached hereto marked Exhibit 5.
(f) "IJOB Shares" shall mean the 1,000 shares of 0.001 cent per share
par value, voting, common capital stock of IJOB, evidenced by Stock Certificate
No. 1, dated April 25, 1997, issued in the name of Applied Intelligence Group,
Inc. (now known as The viaLink Company).
(g) "Promissory Note" shall mean the promissory note, dated as of
Closing, made by DCM and IJOB in favor of viaLink, in the form of Exhibit 6
attached hereto and incorporated herein by reference.
(h) "Agreement" shall mean (i) this Agreement, (ii) the Agreement
Documents and (iii) the Schedules attached to this Agreement
(i) "Agreement Documents" shall mean this Agreement and the various
Exhibits attached to this Agreement which are to be executed by a party at or
before the Closing and the Schedules attached hereto.
ARTICLE II
Purchase and Sale of IJOB Shares;
Security for Obligation
-----------------------
2.1 Sale and Delivery of IJOB Shares. Subject to the terms,
--------------------------------
covenants and conditions set forth in this Agreement, as of the Closing, DCM
shall purchase from viaLink, and viaLink shall sell to DCM, all of viaLink's
right, title and interest in and to the IJOB Shares on the terms, covenants and
conditions and for the purchase price set forth in this Agreement. The purchase
price for the IJOB Shares shall be $800,000, payable by execution by DCM and
IJOB of said Promissory Note as of the Closing. Upon receipt of the Promissory
Note and compliance by Mitchell, DCM and IJOB with all other terms, covenants
and conditions of this Agreement, viaLink shall deliver to DCM the IJOB Stock
Certificate and a Stock Assignment & Power of Attorney, in the form of Exhibit 7
attached hereto, whereby viaLink assigns the IJOB Shares to DCM as of the
Closing.
2.2 Security for the Promissory Note. As security for the
--------------------------------
obligation evidenced by the Promissory Note, IJOB and DCM shall, as of the
Closing, execute a
2
<PAGE>
Security and Pledge Agreement, in the form of Exhibit 8 attached hereto, and a
Financing Statement in the form of Exhibit 9 attached hereto along with any
other instruments and agreements required therein, all of which are incorporated
herein by reference..
2.3 Closing of Transactions. The closing ("Closing") of the
-----------------------
transactions contemplated hereby shall occur on or before 5:00 p.m. on December
31, 1998, at the offices of IJOB or viaLink, or at a different time and place
established by written agreement of the parties.
ARTICLE III
Representations and Warranties
------------------------------
3.1 Representations and Warranties of DCM. DCM represents and
-------------------------------------
warrants as follows:
(a) That DCM is a corporation duly organized, validly existing and
in good standing under the laws of the State of Oklahoma.
(b) That the execution, delivery and performance of this Agreement
and consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite action on the part of DCM and will not
violate, or be in conflict with, any provisions of any of DCM's governing
documents or any other agreement or document to which DCM is a party or by which
it is bound.
(c) That DCM has not and will not pledge or otherwise grant any
security interest in any of the collateral covered by said the Security and
Pledge Agreement and said Financing Statement which is prior to the interest of
viaLink in said collateral.
(d) That the Security and Pledge Agreement and said Financing
Statement shall constitute a first and prior lien on all of the Collateral
covered by said the Security and Pledge Agreement and said Financing Statement.
3.2 Representations and Warranties of IJOB. IJOB represents and
------------------------------------------------------------
warrants to viaLink as follows:
- -------------------------------
(a) That the execution, delivery and performance of this Agreement
have been duly and validly authorized by all requisite action on the part of
IJOB and the consummation of the transactions contemplated hereby will not
violate, or be in conflict with, any provisions of any of the governing
documents of IJOB or any other agreement or document to which IJOB is a party
or by which it is bound.
(b) That no written employment agreements other than said Mitchell,
Thurman, Greenhaw or Usher Contracts have been executed by IJOB.
3
<PAGE>
(c) That IJOB has not granted any legal or beneficial interest in IJOB
or in the IJOB Shares to anyone except to the extent any such interest may have
been granted in said Mitchell, Thurman, Greenhaw or Usher Contracts or in said
HT Agreement.
(d) That IJOB has not and will not pledge or otherwise grant any
security interest in any of the collateral covered by said Security and Pledge
Agreement and said Financing Statement which is prior to the interest of viaLink
in said collateral.
3.3 Representations and Warranties of Mitchell. Mitchell represents
------------------------------------------
and warrants as follows:
(a) That, prior to consummation of the transactions contemplated by
this Agreement, he has no legal or beneficial ownership or title to the IJOB
Shares except to the extent that any such interest exists as a result of the HT
Agreement.
(b) That as a director of IJOB he consents to the action taken by IJOB
in relation to this transaction.
(c) That he has no right, title or interest in or to the proceeds of
the Promissory Note.
(d) That the execution, delivery and performance of this Agreement
have been duly and validly authorized by all requisite action on the part of
IJOB and the consummation of the transactions contemplated hereby will not
violate, or be in conflict with, any provisions of any of the governing
documents of IJOB or any other agreement or document to which IJOB is a party
or by which it is bound.
(e) That no written employment agreements other than said Mitchell,
Thurman, Greenhaw or Usher Contracts have been executed by Mitchell or by IJOB.
(f) That neither he, IJOB, nor DCM has or will pledge or otherwise
grant any security interest in any of the collateral covered by said Security
and Pledge Agreement and said Financing Statement which is prior to the interest
of viaLink in said collateral.
(g) That neither he nor IJOB has granted any legal or beneficial
interest in IJOB to anyone except to the extent any such interest may have been
granted in said Mitchell, Thurman, Greenhaw or Usher Contracts, except to the
extent that any such interest exists as a result of the HT Agreement.
4
<PAGE>
3.4 Representations and Warranties of viaLink. viaLink represents
-----------------------------------------
and warrants as follows:
(a) That viaLink and IJOB are corporations duly organized, validly
existing and in good standing under the laws of the State of Oklahoma.
(b) That the execution, delivery and performance of this Agreement
have been duly and validly authorized by all requisite action on the part of
viaLink and the consummation of the transactions contemplated hereby will not
violate, or be in conflict with, any provisions of any of the governing
documents of viaLink or or any other agreement or document to which viaLink is a
party or by which it is bound.
(c) That, subject to the terms, covenants and conditions of this
Agreement, including without limitation paragraph 3.3(d) of this Agreement,
viaLink is the record title holder and beneficial owner of all of the IJOB
Shares which consist of only one class, that is voting common capital stock, and
which constitute all the issued and outstanding capital stock of IJOB.
(d) That the IJOB Shares are owned and held by viaLink free and
clear of any encumbrances, pledges, loans, liens, restrictions on transfer,
taxes, security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands, except for and specifically
excluding from such representations and warranties such matters arising from or
relating to any actions taken by any person or entity beyond viaLink's control
and/or without the approval of viaLink's Board of Directors, including, without
limiting the generality of the foregoing, any actions taken by Mitchell, (ii)
any actions taken by or in regard to Human Technologies, Inc. (also known as HT
Technologies, Inc.), Ron Beasley and/or Mitchell in regard to or arising from
the HT Agreement or otherwise, (iii) any interest in the IJOB Shares arising out
of said Mitchell, Greenhaw, Thurman, and/or Usher Contracts.
ARTICLE IV
Covenants of the Parties
------------------------
4.1 Service Agreement. Pursuant to a written service agreement in
-----------------
the form of Exhibit 10 attached hereto and incorporated herein by reference
("Services Agreement"), viaLink shall provide the facilities and services set
forth in said Service Agreement.
4.2 Vacation of Premises. Within 30 days after the Closing, DCM and
--------------------
IJOB shall cause the business, operations, personnel and property of IJOB to be
removed from the premises of viaLink, except to the extent the same are subject
to said Service Agreement executed pursuant to paragraph 4.1 hereof. During
said 30 day period, IJOB's business operations, personnel and property may
remain on viaLink's premises without rent or cost except as set forth in
paragraph 4.1 hereof . During such
5
<PAGE>
thirty day period, IJOB shall carry general liability insurance covering its
activities on the viaLink premises in an amount not less than one million
dollars combined single limit which shall name viaLink as an additional named
insured. A certificate of such insurance shall be delivered to viaLink. During
such thirty day period IJOB shall follow such policies and restrictions on the
use of the premises as are reasonably required by viaLink.
4.3 Intercompany Debt. As of Closing, all money loaned by viaLink
-----------------
to IJOB as of the Closing, except (i) such sums represented by the Promissory
Note, (ii) any accounts payable or taxes incurred by or on behalf of IJOB which
have not been paid by IJOB as of Closing and (iii) any obligations of IJOB
arising out of this Agreement, shall be deemed paid in full and cancelled. The
parties agree and acknowledge that said accounts payable include but are not
limited to the payables shown on Schedule A which is attached hereto and
incorporated herein by reference. Notwithstanding anything to the contrary
herein, viaLink agrees to reimburse IJOB for any payroll related taxes incurred
as a result of payroll paid by IJOB in the ordinary course of business
consistent with past practices prior to Closing.
4.4 Assets. The parties agree and acknowledge that the only assets
------
in whichIJOB claims an interest are those assets identified on Schedule B which
is attached hereto and incorporated herein by reference.
4.5 Waiver of Conflict as to Mitchell. viaLink waives any conflict
---------------------------------
of interest against Mitchell arising in regard to his status as a shareholder,
officer, director and employee of IJOB or DCM in relation to his involvement in
the transaction set forth in this Agreement.
4.6 Confidentiality and Non-Competition. ViaLink agrees and
-----------------------------------
covenants that it will maintain and keep as confidential, and will not disclose
or use the following: (i) software and code owned and/or developed by IJOB; (ii)
intellectual property rights owned by IJOB; (iii) ijob's trade secrets, as
defined by Oklahoma's Uniform Trade Secrets Act; and (iv) ijob's price lists;
provided however, that the foregoing shall not apply to any of such information
which is (a) disclosed by ijob to third parties without restriction on further
disclosure; (b) is public information or in the public domain; (c) is developed
by viaLink without regard to such confidential information of ijob; or (d) is
required to be disclosed by viaLink pursuant to Court order or other operation
of law.
4.7 Indemnification:
---------------
(a) By IJOB and DCM. From and after the Closing, DCM and IJOB shall
indemnify, defend, protect and hold harmless viaLink, from and against all
losses, liabilities, obligations, damages, deprivation of benefits, costs and
expenses (including, without limiting the generality of the foregoing,
reasonable attorneys' fees) (collectively hereinafter "Losses"), which result
from or arise in connection with: (a) any breach of any warranty made by DCM,
Mitchell or IJOB in the Agreement or any representation in any of the Agreement
Documents, not being true when made or when required by this
6
<PAGE>
Agreement to be true in all material respects, or in any certificate or other
instrument delivered by or on behalf of IJOB pursuant thereto not being true
when made or when required by this Agreement to be true in all material
respects; or (b) any breach of any term, covenant, agreement or condition
imposed upon by DCM, Mitchell or IJOB in this Agreement or any of the Agreement
Documents to be performed (prior to or after the Closing) by DCM, Mitchell or
IJOB or (c) the failure of IJOB to pay any obligation(s) of IJOB; (d) any act or
omission of Mitchell while serving as an officer, employee, director or agent of
IJOB; (e) any Losses arising from claims by IJOB employees terminated from any
viaLink benefit plans as a result of the sale of the stock of IJOB pursuant to
this Agreement or for vacation earned but not taken in 1998; (f) and any Losses
arising out of claims made in relation to the Greenhaw, Usher, Mitchell, or
Thurman Contracts or the HT Agreement. The parties anticipate that a claim for
indemnification may be made under any or all of subsections (a) through (f) of
this subparagraph; in any such case, each such clause and sub-clause shall be
independently effective to provide viaLink with a right to indemnification. The
indemnification rights granted viaLink in this paragraph 4.6(a) are in addition
to and not in lieu of the indemnification rights granted viaLink in paragraph
4.6(b) hereof.
(b) By Mitchell. From and after the Closing, Mitchell shall indemnify,
-----------
defend, protect and hold harmless viaLink, from and against all losses,
liabilities, obligations, damages, deprivation of benefits, costs and expenses
(including, without limiting the generality of the foregoing, reasonable
attorneys' fees) (collectively hereinafter "Losses"), which result (i) from any
breach of any warranty made by Mitchell in paragraphs3.3 (a)-(g) inclusive of
this Agreement or (ii) from any acts or omissions of Mitchell while serving as
an officer, employee, director or agent of IJOB or (iii) and any Losses arising
out of claims made in relation to the Greenhaw, Usher, Mitchell, or Thurman
Contracts or the HT Agreement. The parties anticipate that a claim for
indemnification may be made by viaLink under either or both of subsections (a)
and (b) of this subparagraph; in any such case, each such clause and sub-clause
shall be independently effective to provide viaLink with a right to
indemnification. The indemnification rights granted viaLink in this paragraph
4.7(b) are in addition to and not in lieu of the indemnification rights granted
viaLink in paragraph 4.7(a) hereof.
(c) By viaLink. From and after the Closing, viaLink shall indemnify,
----------
defend, protect and hold harmless DCM, Mitchell and IJOB, from and against all
losses, liabilities, obligations, damages, deprivation of benefits, costs and
expenses (including, without limiting the generality of the foregoing,
reasonable attorneys' fees) (collectively hereinafter "Losses"), which result
from any breach of any warranty made by viaLink in paragraph 3.4 of this
Agreement and from any breach of any of viaLink's covenants and representations
in this Agreement
(d) Whenever any claim shall arise for indemnification under this
paragraph 4.6, the party entitled to such indemnification (the "Indemnitee")
shall notify the party from whom indemnification is sought (the "Indemnitor") of
such claim in writing promptly and in no case later than ninety (90) days after
such Indemnitee has received
7
<PAGE>
actual written notice of the facts constituting the basis for such claim; each
Indemnitee shall also so notify the Indemnitor promptly and in no case later
than fifteen (15) days after the commencement of any legal proceedings with
respect to any such claim. The failure to notify the Indemnitor will not relieve
the Indemnitor from any liability which it may have to any Indemnitee to the
extent the Indemnitor is not prejudiced as a proximate result of such failure.
Such notice shall specify, in reasonable detail, the facts known to such
Indemnitee giving rise to the indemnification sought. Such notice shall also
include photocopies of all relevant communications received from third party
claimants and their attorneys. If the facts giving rise to any indemnification
provided for in this Agreement shall involve any actual or threatened claim or
demand by any person other than a party to the Agreement or its successors or
permitted assigns (a "Third Party") against any Indemnitee, the Indemnitor shall
be entitled, upon its election, by written notice given to the Indemnitee as
soon as reasonably practicable and in any case within thirty (30) days after the
date on which notice of the claim or demand is given to the Indemnitor (without
prejudice to the right of such Indemnitee to participate at its expense through
counsel of its own choosing), to assume the defense of such claim and any
litigation resulting therefrom at its expense and through counsel of its own
choosing; provided, however, that if by reason of the claim of such Third Party
a Lien, attachment, garnishment or execution is placed upon any of the property
or assets of such Indemnitee, the Indemnitor, if it desires to exercise its
right to defend such claim or litigation, shall furnish an indemnity bond or
other form of security reasonably satisfactory to the Indemnitee to obtain the
prompt release of such Lien, attachment, garnishment or execution. If the
Indemnitor assumes the defense of any such claim or litigation, it shall take
all steps reasonably necessary in the defense or settlement of such claim or
litigation. In any such suit, action or proceeding, the Indemnitee shall have
the right to control its own defense through its own counsel, but the fees and
expenses of such counsel shall be at its own expense unless (i) the parties
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to such suit, action or proceeding (including any impleaded parties)
shall include an Indemnitee and an Indemnitor and the representation of both
parties by the same counsel would present a conflict of interest as reasonably
determined by counsel to the Indemnitee, in which event the Indemnitor shall pay
such counsel's fees and expenses. If the Indemnitor has timely assumed defense,
the Indemnitor shall not be liable for any settlement effected without its
consent, which consent shall not be unreasonably withheld or delayed. The
Indemnitor may settle any claim without the consent of any Indemnitee, but only
if the sole relief awarded is money damages that are paid in full by the
Indemnitor and either (i) the consent to the entry of any judgment or settlement
includes as an unconditional term thereof the giving to the Indemnitee of a
release from all liability in respect to such claim or litigation or (ii) the
litigation against the Indemnitee is dismissed with prejudice; otherwise, the
Indemnitor may not settle any claim against an Indemnitee without the consent of
the Indemnitee, which consent shall not unreasonably withheld or delayed. The
parties shall cooperate in the defense of any such claim or litigation. If the
Indemnitor does not timely assume the defense of any such claim or litigation,
the Indemnitee may defend against such claim or litigation in such manner as it
may deem appropriate and may settle such claim or litigation, after
8
<PAGE>
giving written notice thereof to the Indemnitor, on such terms as such
Indemnitee may deem appropriate; and the Indemnitor will promptly reimburse such
Indemnitee for the Losses incurred as a result of such settlement. If no
settlement of such claim or litigation is made, the Indemnitor shall promptly
reimburse such Indemnitee for the amount of any judgment rendered with respect
to such claim or such litigation and for all expenses, legal and other, incurred
by such Indemnitee in connection with any such judgment for which the Indemnitee
has been so reimbursed pursuant hereto; provided, however, that if such judgment
is appealable and such Indemnitee notifies the Indemnitor of its intention not
to appeal, the Indemnitor may prosecute such appeal, at its sole cost and
expense and subject to the obligations set forth herein. Each amount determined
to be payable by an Indemnitor to an Indemnitee under the terms hereof
("Indemnity") shall be paid in cash to the Indemnitee within thirty (30) days
after the date on which the Indemnitor is notified in writing of the amount of
such Indemnity, as finally determined in accordance with the terms hereof. Each
such notice shall contain an itemization of the damages, expenses, costs and
liabilities comprising the Indemnity, certified to be true and correct by the
Indemnitee or its legal representative.
4.8 In no event shall any party have a right to recover punitive
damages or incidental, consequential, or special damages in relation to any
claim made against another party to this Agreement.
4.9 For a period of five years from the Closing, viaLink shall not
directly or indirectly engage in or compete with IJOB in the sale of software
which is designed for the hiring or screening of job applicants via the Internet
("Software"). viaLink acknowledges and agrees that the current market for the
Software extends throughout the entire United States, and it is therefore
reasonable to prohibit viaLink from competing with IJOB within such territory.
To the extent any provision of portion of this Section 4.9 shall be held, found,
or deemed to be unreasonable, unlawful or unenforceable, then the parties hereto
expressly covenant and agree that any such provision or portion hereof shall be
modified to the extent necessary in order that any such provision or portion
thereof shall be legally enforeceable to the fullest extent permitted by
applicable law and that any court of competent jurisdiction shall, and the
parties hereto do hereby expressly authorize any court of competent to, enforce
any such provision or portion thereof or to modify any portion thereof in order
that any such provision or portion thereof shall be enforeced by such court to
the fullest extent applicable law. Notwithstanding anything to the contrary in
this Agreement, the provisions of this Section 4.9 do not apply and are not
binding on any successor or assign of viaLink in which viaLink does not own at
least 51% of the voting stock of such successor or assign.
4.10 Upon Closing, viaLink acknowledges that it has no further right
and interest of any type or nature under the HT Agreement.
9
<PAGE>
ARTICLE V
Conditions Precedent to Closing
-------------------------------
5.1 Conditions Precedent to Obligations of DCM and Mitchell. As an
-------------------------------------------------------
absolute condition precedent to any duties and obligations of DCM or Mitchell
hereunder, or under any of the Agreement Documents, at or before the Closing,
DCM and Mitchell shall receive the following signed items from viaLink:
(i) (Left blank intentionally);
(ii) (Left blank intentionally)
(iii) The Assignment of Rights Agreement attached hereto as Exhibit
12.
5.2 Conditions Precedent to viaLink's Obligations. As an absolute
---------------------------------------------
condition precedent to viaLink's duties and obligations under this Agreement, at
Closing viaLink shall receive the following documents:
(i) Executed Release and Subrogation Agreements, in the form of
Exhibits 12-16 attached hereto and incorporated herein be reference, from Human
Technologies, Inc., Mitchell, Ron Beasley, Richard Greenhaw, Barry Thurman, and
Millie D. Usher.
(ii) A resolution of the Board of Directors of IJOB authorizing
Mitchell's execution of this Agreement and the Agreement Documents on behalf of
IJOB.
ARTICLE VI
Miscellaneous
-------------
6.1 Notices. All notices and communications required or permitted
-------
hereunder shall be in writing and may be given either by personal delivery,
facsimile, or certified mail, return receipt requested, addressed as follows:
If to viaLink:
Lewis B. Kilbourne
Chief Executive Officer
The viaLink Company
13800 Benson Road
Edmond, OK 73013
If to IJOB or DCM:
10
<PAGE>
David C. Mitchell, President
c/o The Danley Law Firm, P.C.
3233 East Memorial Road, Suite 101
Edmond, OK 73013
If to Mitchell:
David C. Mitchell
c/o The Danley Law Firm, P.C.
3233 East Memorial Road, Suite 101
Edmond, OK 73013
6.2 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be governed by, performed under, and construed in accordance with
the laws of the State of Oklahoma.
6.3 Amendments. This Agreement may not be amended nor any rights
----------
hereunder be waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver.
6.4 Captions; Meaning of Pronouns. The captions in this Agreement
-----------------------------
are for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof. Unless the context otherwise requires, all
pronouns shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or persons may require.
6.5 Counterparts; Binding Effect. This Agreement may be executed in
----------------------------
any number of counterparts, any of which shall be considered an original. All
counterparts shall be but one agreement, and the Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
estates, personal representatives, successors and assigns.
6.6 Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, is intended to confer upon any person other than the parties hereto any
benefits, rights or remedies.
6.7 Survival. The representations,, warranties, covenants and
--------
agreements contained in this Agreement shall survive the Closing of this
Agreement. Without limiting the generality of the foregoing, the provisions of
Section 2.2 and all of Article III, Article IV, and Article VI shall survive the
Closing.
6.8 Construction. The parties acknowledge that they and their
------------
respective counsel have negotiated and drafted, or have been given the
opportunity to
11
<PAGE>
review, this Agreement and agree that the rule of construction that ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation or construction of the Agreement.
6.10 Assignment. Neither this Agreement nor any rights or
----------
obligations arising hereunder may be assigned in whole or in part by any DCM,
IJOB or Mitchell, without the prior written consent of viaLink, which consent
shall not unreasonably withheld. Any such assignment consented to by viaLink
shall not relieve the assignor of its responsibility to viaLink. viaLink has no
limitations on its rights to assign any of its rights or obligations under this
Agreement.
6.11 Conflicts of Interest. The parties acknowledge and hereby waive
---------------------
any conflicts of interest that may exist because (i) counsel for DCM, McAfee &
Taft A Professional Corporation and The Danley Law Firm, P.C., have performed
prior legal services for IJOB, Mitchell and/or viaLink, and (ii) counsel for
viaLink, Richard M. Klinge & Associates, P.C., has performed prior legal
services for IJOB.
6.12 Costs. In any action to enforce any rights or obligations
-----
hereunder, the prevailing party shall be entitled to receive its costs and
attorneys fees expended in such an action from the other party.
6.13 Entire Agreement. This Agreement is the entire Agreement among
----------------
the parties and, when executed by the parties, supersedes all prior agreements,
understandings and communications, either verbal or in writing, between the
parties with respect to the subject matter contained herein. Without limiting
the generality of the foregoing, the parties acknowledge and agree that the
Letter of Intent executed by viaLink and Mitchell on December 24, 1998, a copy
of which is attached hereto as Exhibit 17, is null and void and of no further
force and effect.
6.14 viaLink shall be entitled to retain any records of ijob which it
requires for the filing of any tax returns for such period of time when IJOB was
a subsidiary of viaLink; provided, however, all such records will be returned
upon the request of IJOB on or after May 1, 1999. After such documents are
returned, viaLink shall have such access to them as is reasonable necessary to
meet the business and accounting needs of viaLink, and viaLink may make such
copies of such documents as is reasonably necessary thereof.
6.15 DCM, ijob and Mitchell acknowledge that viaLink has disclosed
that possible alleged claims may be asserted by or on behalf of Mastermind
Technology, Inc. and/or Kerry Masters against the intellectual property assets
of IJOB.
6.16 Arbitration. Any controversy or claim arising out of or
relating to said Agreement, or its breach, or its validity or interpretation,
except claims for injunctive relief, claims involving necessary third parties
who refuse to participate, and claims by viaLink to enforce any of its rights
under the Promissory Note and/or Security and
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Pledge Agreement and/or Financing Statement shall be settled by final, mandatory
and binding arbitration in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association ("AAA") subject,
however, to the following:
(a) The location for the arbitration shall be at such location as
agreed by the parties in Oklahoma County, Oklahoma or if the parties cannot
agree at such location in Oklahoma County, Oklahoma as designated by the
AAA.
(b) Such arbitration shall be heard and determined by a panel of
three (3) arbitrators in accordance with the then current rules or
regulations of the AAA relating to commercial disputes ("Rules"). All
arbitrators shall be selected pursuant to the then current Rules thereof
within thirty (30) days after the filing of a demand for arbitration. Each
arbitrator shall be a person with experience in handling disputes relating
to the sale of corporate stock and/or assets.
(c) The hearing on the arbitration shall be heard not later than six
(6) months after the demand for arbitration has been made by a party.
(d) The arbitration award shall be final and binding on the parties
and may be enforced in any court of competent jurisdiction.
(e) The prevailing party in such arbitration or other litigation
allowed by this Agreement shall be entitled to recover its reasonable
attorney fees and costs incurred in such arbitration proceeding.
IN WITNESS WHEREOF, this Agreement has been executed to be effective
as of the date first above written.
The viaLINK COMPANY, an Oklahoma corporation
By:/s/ Lewis B. Kilfourne
-------------------------------------------
Lewis B. Kilbourne, Chief Executive Officer
IJOB, INC., an Oklahoma corporation
By:/s/ David C. Mitchell
-------------------------------------------
David C. Mitchell, President
DCM COMPANY, INC., an Oklahoma corporation
13
<PAGE>
By: /s/ David C. Mitchell
----------------------------
David C. Mitchell, President
/s/ David C. Mitchell
- -------------------------------
David C. Mitchell
14
<PAGE>
EXHIBIT 4.12
PROMOTIONAL SHARES ESCROW AGREEMENT
THIS PROMOTIONAL SHARES ESCROW AGREEMENT (this "Agreement") made and
entered into this 19th day of November, 1996, by and between Applied
Intelligence Group, Inc., an Oklahoma corporation (the "Issuer"), whose
principal place of business is located at 13800 Benson Road, Edmond, Oklahoma
73013-6417 and Robert L. Barcum ("Barcum"), Robert N. Baker ("Baker"), Russell
L. Reinhardt ("Reinhardt"), David B. North ("North"), John Simonelli
("Simonelli") and Larry E. Howell ("Howell") (Barcum, Baker, Reinhardt, North,
Simonelli and Howell are collectively referred to as the "Depositors") and
Liberty Bank and Trust Company of Oklahoma City, N.A. (the "Escrow Agent"),
whose principal place of business is located at 100 Broadway, Oklahoma City,
Oklahoma 73102 (all of whom are collectively referred to as "Signatories").
RECITALS
WHEREAS, the Issuer has filed an application with the Securities
Administrator of Oklahoma Department of Securities (the "Administrator") to
register 1,150,000 shares of Common Stock, $.001 par value, and 920,000
Redeemable Common Stock Purchase Warrants (the "Warrants") and the 920,000
shares of Common Stock underlying the Warrants (the "Equity Securities") for
sale to public investors some of whom may be residents of the State of Oklahoma;
WHEREAS, Barcum is the owner of 554,529 shares of Common Stock, Baker is
the owner of 554,529 shares of Common Stock, Reinhardt is the owner of 316,081
shares of Common Stock, North is the owner of 74,861 shares of Common Stock,
Simonelli is the holder of stock options exercisable for the purchase of 180,000
shares of Common Stock, and Howell is the holder of stock options exercisable
for the purchase of 180,000 shares of Common Stock (the "Promotional
Securities");
WHEREAS, as a condition to registering the Issuer's Equity Securities, the
Depositors, who are security holders of the Issuer and who, for the purposes of
this Agreement, are deemed to be Promoters of the Issuer, have agreed to deposit
the Promotional Securities with the Escrow Agent; and
WHEREAS, the Signatories have agreed to be bound by the terms of this
Agreement.
NOW, THEREFORE, the Signatories agree as follows:
1. DEPOSIT OF PROMOTIONAL SHARES. The Depositors' Promotional Securities have
been deposited into an escrow account (the "escrow") with the Escrow Agent, and
the Escrow Agent hereby acknowledges the receipt thereof.
2. EXERCISE OR CONVERSION OF PROMOTIONAL SHARES. To the extent the Promotional
Shares have or represent exercise rights or conversion rights, the Escrow Agent
shall, upon receipt of the Issuer's written request, provide the documents that
evidence and/or which are necessary to cause exercise of the rights or
conversion rights. The shares of Common Stock or other securities of the Issuer
issued upon exercise or conversion of the Promotional Securities shall become
and remain in escrow subject to the terms of this Agreement.
3. TERM. The term of this Agreement and the escrow shall begin on the date
that the public securities offering relating thereto (the "public offering") is
declared effective by the Administrator and shall continue for a period of 36
months thereafter; provided, however, this Agreement shall not terminate until
the Escrow Agent shall have notify the Administrator of termination of this
Agreement in accordance with paragraph 5 of this Agreement. The Promotional
Securities shall be held by the Escrow Agent pursuant to this Agreement until
they are released in accordance with paragraphs 4 and 5 of this Agreement.
<PAGE>
4. RELEASE OF PROMOTIONAL SECURITIES.
(a) In the event of a dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or securities
(including by way of tender offer), or any other transaction or proceeding
with a person who is not a Promoter, which results in the distribution of
the Issuer's assets or securities ("Distribution"), while this Agreement
remains in effect, the Depositors agree that:
(i) All holders of the Issuer's Equity Securities will initially
share on a pro rata, per share basis in the Distribution, in
proportion to the amount of cash or other consideration that they paid
per share for their Equity Securities (provided that the Administrator
has accepted the value of the other consideration), until the
shareholders who purchased the Issuer's Equity Securities pursuant to
the public offering (the "Public Shareholders") have received, or have
had irrevocably set aside for them, an amount that is equal to 100
percent of the public offering's price per share times the number of
shares of Equity Securities that they purchased pursuant to the public
offering and which they still hold at the time of the Distribution,
adjusted for stock splits, stock dividends, recapitalization and the
like; and
(ii) All holders of the Issuer's Equity Securities shall thereafter
participate on an equal, per share basis times the number of shares of
Equity Securities they hold at the time of the Distribution, adjusted
for stock splits, stock dividends, recapitalization and the like.
(b) The Distribution may proceed on lesser terms and conditions than the
terms and conditions in paragraph 4(a) of this Agreement if a majority
of the Equity Securities that are not held by Depositors, officers,
directors, or Promoters of the Issuer, or their associates or
affiliates vote, or consent by consent procedure, to approve the
lesser terms and conditions.
(c) In the event of a dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or securities
(including by way of tender offer), or any other transaction or proceeding
with a person who is a Promoter, which results in a Distribution while this
Agreement remains in effect, the Depositors' Promotional Securities shall
remain in escrow subject to the terms of this Agreement.
(d) Upon expiration of the term of this Agreement and notification of the
Administrator of the expiration in accordance with and pursuant to
paragraph 3 of this Agreement, the Promotional Securities shall be released
to the Depositors and this Agreement shall terminate.
5. DOCUMENTATION REGARDING THE RELEASE OF PROMOTIONAL SECURITIES.
(a) The Administrator may in his or her discretion require such
documentation regarding the release of Promotional Securities.
(b) The Escrow Agent shall terminate this Agreement and/or release the
Promotional Securities from Escrow if its has forwarded the proper
documentation as required by paragraph 5(a) of this Agreement ("proper
documentation") reflecting compliance with the release provisions of
paragraph 4 of this Agreement, to the Administrator, and either it has
received the Administrator's consent to do so or the Administrator has not
disallowed the termination of this Agreement and/or release of the
Promotional Securities from escrow within 10 days after the Administrator's
receipt of the proper documentation, whichever occurs first.
6. RESTRICTIONS ON TRANSFER, SALE OR DISPOSAL OF PROMOTIONAL SECURITIES. While
this Agreement is in effect, no Promotional Securities, any interest therein or
any right or title thereto, may be sold, transferred, pledged, assigned,
hypothecated or otherwise disposed of ("transfer" or "transferred"), except
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as provided below, and the Escrow Agent shall not recognize any transfer that
violates the terms of this Agreement. The Promotional Securities may not be
transferred until the Administrator has received a written statement, signed by
the proposed transferee ("transferee"), which states that the transferee has
full knowledge of the terms of this Agreement, the transferee accepts the
Promotional Securities subject to the terms of this Agreement, and the
transferee realizes that the Promotional Securities shall remain subject to the
terms of the Agreement until they are released pursuant to paragraphs 4 and 5 of
this Agreement. Notwithstanding the foregoing, (a) Promotional Securities may be
transferred by will, the laws of decent and distribution, operation of law, or
by order of any court of competent jurisdiction and having proper venue and (b)
Promotional Securities of a deceased Depositor may be hypothecated to pay the
expenses of the deceased Depositor's estate. The hypothecated Promotional
Securities shall remain subject to the terms of this Agreement. Promotional
Securities may not be pledged to secure any other debt.
7. VOTING POWER. The Promotional Securities shall have the same voting rights
as similar, non-escrowed Equity Securities. If the Promotional Securities are
registered in the Escrow Agent's name, the Escrow Agent shall vote those
Promotional Securities in accordance with the Depositors' written instructions.
8. DIVIDENDS. Cash dividends and stock dividends, that are granted to the
Depositors, shall be promptly deposited with the Escrow Agent subject to the
terms of this Agreement. The Escrow Agent shall place the cash dividends in an
interest bearing account. The Escrow Agent shall treat the stock dividends,
cash dividends and the interest earned thereon as assets of the Issuer which are
available for distribution pursuant to paragraphs 4(a) and (b) of this
Agreement, or as assets of the Issuer available for distribution to the
Depositors, upon release of their Promotional Securities pursuant to paragraphs
4 and 5 of this Agreement, unless they are to be used as compensation to the
Escrow Agent, pursuant to paragraph 10 of this Agreement.
9. STOCK SPLITS AND ADDITIONAL SHARES. Equity Securities received by the
Depositors as a result of stock splits, recapitalization of the Issuer, or the
conversion of the Depositors' convertible securities while their Promotional
Securities are held in escrow, shall be promptly deposited with the Escrow Agent
as Promotional Securities subject to the terms of this Agreement. These
Promotional Securities shall be distributed to the Depositors when their
Promotional Securities are released from escrow pursuant to paragraphs 4 and 5
of this Agreement.
10. RELIANCE BY ESCROW AGENT. The Escrow Agent shall be protected if it acts in
good faith upon any statement, certificate, notice, request, consent, order or
other document which it believes to be genuine, conforms with the provisions of
this Agreement and is signed by the proper party. The Escrow Agent's sole
responsibility shall be to act in accordance with the terms expressly set forth
in this Agreement. The Escrow Agent shall be under no obligation to institute or
defend any action, suit or proceeding in connection with this Agreement unless
it receives reasonable indemnification and advancement of fees and costs. The
Escrow Agent may consult counsel with respect to any question arising under this
Agreement. The Escrow Agent shall not be liable for any action taken or omitted,
in good faith, upon the advice of counsel. In performing its duties hereunder,
the Escrow Agent shall not be liable to anyone for any damage, loss, expense or
liability other than for that which arises from the Escrow Agent's failure to
abide by the terms of this Agreement.
11. ESCROW AGENTS COMPENSATION. The Escrow Agent shall be entitled to receive
reasonable compensation from the Issuer for its services. If the Escrow Agent is
required to render additional services that are not expressly set forth therein,
or if its is made a party to or intervenes in any action, suit or proceeding
pertaining to this Agreement ("Additional Services"), it shall be entitled to
receive reasonable compensation from the Issuer and the Depositors. If
Additional Services are provided, the Escrow Agent may deduct reasonable
compensation from the cash dividends, interest and proceeds being held for
distribution pursuant to this Agreement.
12. ESCROW AGENTS INDEMNIFICATION. The Issuer and the Depositors agree to hold
the Escrow Agent harmless from, and indemnify the Escrow Agent for, any cost or
liability regarding any
3
<PAGE>
administrative proceeding, investigation, litigation, interpretation or
implementation relating to this Agreement, including release of Promotional
Securities, the Distribution, and the disbursement of dividends, interest or
proceeds, unless the cost or liability arises from the Escrow Agent's failure to
abide by the terms of this Agreement.
13. INDEPENDENCE OF THE ESCROW AGENT. The Issuer hereby represents that all of
its officers, directors and Promoters are listed on Exhibit A attached hereto
and made a part hereof. The Escrow Agent hereby represents that it is not
affiliated with the Issuer, the Depositors, or the Issuer's officers, directors
or Promoters who are named in Exhibit A. For purposes of this Agreement, the
Escrow Agent is not disqualified to act as Escrow Agent merely because the
Issuer, its officers, directors and Promoters are customers of the Escrow Agent.
14. SCOPE. This Agreement shall inure to the benefit of and be binding upon
the Depositors, their heirs and assignees, and upon the Issuer, Escrow Agent,
and their successors.
15. SUBSTITUTE ESCROW AGENT. The Escrow Agent may, upon not less than 60 days
prior written notice to the Issuer, Depositors, and the Administrator, resign as
the Escrow Agent. The Issuer and the Depositors shall, before the effective
date of the Escrow Agent's resignation, enter into a new identical Escrow
Agreement with a substitute Escrow Agent. The successor Escrow Agent must be
satisfactory to the Administrator. If the Issuer and the Depositors fail to
enter into a new Escrow Agreement and appoint a successor Escrow Agent within 60
days after the Escrow Agent has given notice of its resignation, the Escrow
Agent then serving under this Agreement shall retain the Promotional Securities
in escrow until a new, identical Escrow Agreement has been executed and a
successor Escrow Agent has been appointed. The Escrow Agent shall not be liable
for retaining the Promotional Securities in escrow.
16. TERMINATION. Except for the compensation and indemnification provisions of
paragraphs 11 and 12, above, which shall survive until they are satisfied, this
Agreement shall terminate in its entirety when all of the Promotional Securities
have been released, or the Issuer's Equity Securities and/or assets have been
distributed pursuant to paragraphs 4 and 5 of this Agreement.
17. MISCELLANEOUS PROVISIONS. Pursuant to the requirements of this Agreement,
the Signatories have entered into this Agreement, which may be executed and
written in multiple counterparts and each of which shall be considered an
original.
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IN WITNESS WHEREOF, the Signatories have executed this Agreement in the
capacities set for and effective as of the date first above written.
"Issuer" APPLIED INTELLIGENCE GROUP, INC.
By: /S/ROBERT L. BARCUM
---------------------------
Robert L. Barcum, President
Attest:
/S/ ROBERT N. BAKER
- --------------------------
Robert N. Baker, Secretary
"Depositors"
/S/ ROBERT L. BARCUM
---------------------------------
Robert L. Barcum
/S/ RUSSELL L. REINHARDT
---------------------------------
Russell L. Reinhardt
/S/ DAVID B. NORTH
---------------------------------
David B. North
/S/ JOHN SIMONELLI
---------------------------------
John Simonelli
/S/ LARRY E. HOWELL
---------------------------------
Larry E. Howell
"Escrow Agent" LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, N.A.
By: /S/JOHN BROWN
----------------
Name: John Brown
--------------
Title: Vice President
--------------
5
<PAGE>
EXHIBIT 4.13
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Date: October 14, 1996
(Amended and Restated Effective
December 19, 1998)
This is to certify that, for value received, John Simonelli or any
subsequent holder or holders of option rights hereunder by virtue of assignment
or transfer (the "Holder") is entitled to purchase, subject to the provisions of
this Stock Option (this "Option"), from The Vialink Company (formerly Applied
Intelligence Group, Inc.), an Oklahoma corporation (the "Company"), up to NINETY
THOUSAND (90,000) shares of Common Stock, $.001 par value, of the Company (the
"Stock") at an exercise price of FIVE AND NO/100 DOLLARS ($5.00) per share (the
"Exercise Price") after giving effect to the transfer and assignment of that
portion of this Option exercisable for the purchase of NINETY THOUSAND (90,000)
shares of Stock to Robert T. Kirk on December 18, 1998 and to Roger Lockhart on
December 19, 1998. With the exception of any adjustments pursuant to Section 4
of this Option, the Stock issuable upon exercise of this Option shall be in all
respects identical to the Common Stock issued and outstanding of the Company as
of the date hereof. The shares of Stock or other securities deliverable upon
such exercise, as adjusted from time to time, are hereinafter sometimes referred
to as the "Option Securities." Unless the context otherwise requires, the term
"Option" or "Options" as used herein includes this Option and any other Option
or Options that may be issued pursuant to the provisions of this Stock Option
Agreement (this "Agreement"), whether upon transfer, assignment, partial
exercise, divisions, combinations, exchange or otherwise, and the term "Holder"
or "Holders" includes any registered transferee or transferees or registered
assignee or assignees of Holder, who in each case shall be subject to the
provisions of this Option, and when used with reference to Option Securities,
means the holder or holders of such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise, Company shall issue to the Holder one or more certificates for the
shares of Stock (or Option Securities), as appropriate.
<PAGE>
If this Option is exercised in part only, Company shall, promptly after
presentation of this Option upon such exercise, execute and deliver a new Option
evidencing the rights of Holder thereof to purchase the balance of the shares of
Stock (or Option Securities) purchasable hereunder upon the same terms and
conditions as herein set forth.
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
2
<PAGE>
SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
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<PAGE>
SECTION 6. Notice of Certain Corporation Action. In case the Company
after the date hereof shall propose to effect any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action, which notice shall specify the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, voluntary or involuntary dissolution
or winding-up shall take place or commence, as the case may be, and which shall
also specify any record date for determination of holders of the capital stock
of the Company entitled to vote thereon or participate therein and shall set
forth such facts with respect thereto as shall be reasonably necessary to
indicate any adjustments in the number or kind of Option Securities purchasable
upon exercise of this Option which will be required as a result of such action,
and the Holder may thereafter exercise this Option. Such notice shall be filed
and mailed in the case of any action covered by this Section 6, at least 20 days
prior to the earlier of (i) the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up is expected to
become effective, (ii) the date on which it is expected that holders of shares
of the capital stock of record on such date shall be entitled to exchange their
shares for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up, or (iii) the
record date for determination of holders of the capital stock of the Company
entitled to vote on such action or participate in such action. Failure of the
Holder to exercise this Option in whole or in part prior to any corporate action
as described in this Section 6 shall not affect or alter the rights of the
Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents and
acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the Company
at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the
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Option Securities so requested to be registered for sale for the account of a
Holder or Holders of Option Securities are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Option Securities pursuant to Section 8.1 hereof), and (iii) the managing
underwriter of such underwritten offering shall inform the Company and the
Holder or Holders of Option Securities requesting such registration in writing
of its belief that the number of securities requested to included in such
registration exceeds the number which can be sold in (or during the time of)
such offering, then the Company may include all securities proposed by the
Company to be sold for its own account and may decrease the number of Option
Securities so proposed to be sold and so requested to be included in such
registration by the Holder (or the Holders on a pro rata on the basis determined
by dividing the number of shares of Option Securities requested to included in
the registration by the Holders of such Option Securities by the total number of
such Option Securities to be included in such registration statement) to the
extent necessary to reduce the number of securities to be included in the
registration to the level recommended by the managing underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required to
used its best efforts to effect the registration of any Option Securities under
the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
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(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and (C) such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion,
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such other legal matters, as such seller or such holder or holders (or the
underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or
upon 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 any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made, and at the request of any such seller or holder promptly prepare and
furnish to such seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statement therein not misleading in the light of the circumstances
under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file
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copies, then in such Holder's possession of the prospectus relating to such
Option Securities current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by any Holder of Option
Securities as provided in Section 8.1 and subject to the provisions of this
Section 8.4, arrange for such underwriters to include all of the Option
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters. In the event that the managing underwriter
of any underwritten offering informs the Company and the Holder or Holders of
Option Securities requesting the inclusion of their securities in such offering
in writing of its belief that the number of securities requested to be sold in
such offering exceeds the number which can be sold in such offering, then the
Company will include in such offering only securities proposed to be sold by
Company for its own account and decrease the number of Option Securities so
proposed to be sold and requested to be included in such offering (pro rata on
the basis of the percentage of the securities, by number of shares, of the
Company requested to be included in the offering by the Holder or Holders of
such Option Securities and all other holders of the Company's securities
proposing to include shares in such offering) to the extent necessary to reduce
the number of securities to be included in such offering to the level
recommended by the managing underwriter. The holder or holders of Option
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such
8
<PAGE>
securities and each other person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director, officer, representative, agent, underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure
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of any indemnified person to give notice as provided herein shall not relieve
the indemnifying party of its obligations under Section 8.6.1 or 8.6.2 hereof,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified person, unless in such indemnified person's reasonable judgment a
conflict of interest between such indemnified person and such indemnifying party
may exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the
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Securities Act) shall be entitled to contribution from any person that is not
guilty of such fraudulent misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will not
effect or permit to occur any combination or subdivision of shares which would
materially adversely affect the ability of the holder of Option Securities to
include such Option Securities in any registration of its securities
contemplated by this Section 8 or the marketability of such Option Securities
under any such registration.
SECTION 9 Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10 Notice. Notices and other communications to be given to Holder
of this Option shall be delivered by hand or by first-class mail, postage
prepaid, to
Mr. John Simonelli
101 Park Avenue, Suite 810
Oklahoma City, Oklahoma 73102
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
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IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
----------------------------------
Lewis B. Kilbourne, CEO
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PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION IF EXERCISED IN WHOLE OR IN PART)
To:THE VIALINK COMPANY
The undersigned (___________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, ___________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , Signature
---------------- ------
----------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on the
face of the Stock Option in every
particular, without alteration,
enlargement or any change whatever.)
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ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________________________________("Assignee") the right
to purchase______________________________________(_________) shares of Common
Stock subject to purchase under the Stock Option (the "Option") to which this
Assignment is attached, and appoints __________________________________________
_____________________________________ Attorney to transfer said Option or
portion thereof on the books of THE VIALINK COMPANY with the full power of
substitution in the premises. In accordance with Section 3 of the Option, the
undersigned requests that the Company execute, issue and deliver a new Stock
Option evidencing the rights of the Assignee to purchase such assigned shares of
Common Stock to Assignee as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , .
--------------- -----
In the presence of:
Signature
Signature Guaranteed:
- ------------------------------ -----------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on the
face of the Stock Option in every
particular, without alteration,
enlargement or any change whatsoever, and
the signature must be guaranteed in the
usual manner.)
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EXHIBIT 4.14
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Date: October 14, 1996
(Amended and Restated Effective
December 19, 1998)
This is to certify that, for value received, Larry E. Howell or any
subsequent holder or holders of option rights hereunder by virtue of assignment
or transfer (the "Holder") is entitled to purchase, subject to the provisions of
this Stock Option (this "Option"), from The Vialink Company (formerly Applied
Intelligence Group, Inc.), an Oklahoma corporation (the "Company"), up to NINETY
THOUSAND (90,000) shares of Common Stock, $.001 par value, of the Company (the
"Stock") at an exercise price of FIVE AND NO/100 DOLLARS ($5.00) per share (the
"Exercise Price") after giving effect to the transfer and assignment of that
portion of this Option exercisable for the purchase of NINETY THOUSAND (90,000)
shares of Stock to Brian Herman on December 18, 1998 and to Eureka Holdings Inc.
on December 19, 1998. With the exception of any adjustments pursuant to Section
4 of this Option, the Stock issuable upon exercise of this Option shall be in
all respects identical to the Common Stock issued and outstanding of the Company
as of the date hereof. The shares of Stock or other securities deliverable upon
such exercise, as adjusted from time to time, are hereinafter sometimes referred
to as the "Option Securities." Unless the context otherwise requires, the term
"Option" or "Options" as used herein includes this Option and any other Option
or Options that may be issued pursuant to the provisions of this Stock Option
Agreement (this "Agreement"), whether upon transfer, assignment, partial
exercise, divisions, combinations, exchange or otherwise, and the term "Holder"
or "Holders" includes any registered transferee or transferees or registered
assignee or assignees of Holder, who in each case shall be subject to the
provisions of this Option, and when used with reference to Option Securities,
means the holder or holders of such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise,
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Company shall issue to the Holder one or more certificates for the shares of
Stock (or Option Securities), as appropriate. If this Option is exercised in
part only, Company shall, promptly after presentation of this Option upon such
exercise, execute and deliver a new Option evidencing the rights of Holder
thereof to purchase the balance of the shares of Stock (or Option Securities)
purchasable hereunder upon the same terms and conditions as herein set forth.
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
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SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
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SECTION 6. Notice of Certain Corporation Action. In case the Company
after the date hereof shall propose to effect any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action, which notice shall specify the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, voluntary or involuntary dissolution
or winding-up shall take place or commence, as the case may be, and which shall
also specify any record date for determination of holders of the capital stock
of the Company entitled to vote thereon or participate therein and shall set
forth such facts with respect thereto as shall be reasonably necessary to
indicate any adjustments in the number or kind of Option Securities purchasable
upon exercise of this Option which will be required as a result of such action,
and the Holder may thereafter exercise this Option. Such notice shall be filed
and mailed in the case of any action covered by this Section 6, at least 20 days
prior to the earlier of (i) the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up is expected to
become effective, (ii) the date on which it is expected that holders of shares
of the capital stock of record on such date shall be entitled to exchange their
shares for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up, or (iii) the
record date for determination of holders of the capital stock of the Company
entitled to vote on such action or participate in such action. Failure of the
Holder to exercise this Option in whole or in part prior to any corporate action
as described in this Section 6 shall not affect or alter the rights of the
Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents
and acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the Company
at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the
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Option Securities so requested to be registered for sale for the account of a
Holder or Holders of Option Securities are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Option Securities pursuant to Section 8.1 hereof), and (iii) the managing
underwriter of such underwritten offering shall inform the Company and the
Holder or Holders of Option Securities requesting such registration in writing
of its belief that the number of securities requested to included in such
registration exceeds the number which can be sold in (or during the time of)
such offering, then the Company may include all securities proposed by the
Company to be sold for its own account and may decrease the number of Option
Securities so proposed to be sold and so requested to be included in such
registration by the Holder (or the Holders on a pro rata on the basis determined
by dividing the number of shares of Option Securities requested to included in
the registration by the Holders of such Option Securities by the total number of
such Option Securities to be included in such registration statement) to the
extent necessary to reduce the number of securities to be included in the
registration to the level recommended by the managing underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required to
used its best efforts to effect the registration of any Option Securities under
the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
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(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and (C) such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion,
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such other legal matters, as such seller or such holder or holders (or the
underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or
upon 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 any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made, and at the request of any such seller or holder promptly prepare and
furnish to such seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statement therein not misleading in the light of the circumstances
under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file
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copies, then in such Holder's possession of the prospectus relating to such
Option Securities current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by any Holder of Option
Securities as provided in Section 8.1 and subject to the provisions of this
Section 8.4, arrange for such underwriters to include all of the Option
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters. In the event that the managing underwriter of
any underwritten offering informs the Company and the Holder or Holders of
Option Securities requesting the inclusion of their securities in such offering
in writing of its belief that the number of securities requested to be sold in
such offering exceeds the number which can be sold in such offering, then the
Company will include in such offering only securities proposed to be sold by
Company for its own account and decrease the number of Option Securities so
proposed to be sold and requested to be included in such offering (pro rata on
the basis of the percentage of the securities, by number of shares, of the
Company requested to be included in the offering by the Holder or Holders of
such Option Securities and all other holders of the Company's securities
proposing to include shares in such offering) to the extent necessary to reduce
the number of securities to be included in such offering to the level
recommended by the managing underwriter. The holder or holders of Option
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such
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securities and each other person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director, officer, representative, agent, underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure
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<PAGE>
of any indemnified person to give notice as provided herein shall not relieve
the indemnifying party of its obligations under Section 8.6.1 or 8.6.2 hereof,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified person, unless in such indemnified person's reasonable judgment a
conflict of interest between such indemnified person and such indemnifying party
may exist in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the
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Securities Act) shall be entitled to contribution from any person that is not
guilty of such fraudulent misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will not
effect or permit to occur any combination or subdivision of shares which would
materially adversely affect the ability of the holder of Option Securities to
include such Option Securities in any registration of its securities
contemplated by this Section 8 or the marketability of such Option Securities
under any such registration.
SECTION 9 Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10 Notice. Notices and other communications to be given to
Holder of this Option shall be delivered by hand or by first-class mail, postage
prepaid, to
Mr. Larry E. Howell
101 Park Avenue, Suite 810
Oklahoma City, Oklahoma 73102
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
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<PAGE>
IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
---------------------------------------
Lewis B. Kilbourne, CEO
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<PAGE>
PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK OPTION
IF EXERCISED IN WHOLE OR IN PART)
To:THE VIALINK COMPANY
The undersigned (______________________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, ___________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , Signature
----------- ------------
---------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on
the face of the Stock Option in every
particular, without alteration,
enlargement or any change whatever.)
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<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
____________________________________________ ("Assignee") the right to purchase
______________________________________________________(_________) shares of
Common Stock subject to purchase under the Stock Option (the "Option") to which
this Assignment is attached, and appoints______________________________________
____________________________________________ Attorney to transfer said Option or
portion thereof on the books of THE VIALINK COMPANY with the full power of
substitution in the premises. In accordance with Section 3 of the Option, the
undersigned requests that the Company execute, issue and deliver a new Stock
Option evidencing the rights of the Assignee to purchase such assigned shares of
Common Stock to Assignee as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , .
------------- -------------
In the presence of:
Signature
Signature Guaranteed:
- ------------------------------- ----------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on
the face of the Stock Option in every
particular, without alteration,
enlargement or any change whatsoever,
and the signature must be guaranteed in
the usual manner.)
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<PAGE>
EXHIBIT 4.15
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Effective Date: December 19, 1998
This is to certify that, for value received, Robert T. Kirk (an assignee of
John Simonelli) or any subsequent holder or holders of option rights hereunder
by virtue of assignment or transfer (the "Holder") is entitled to purchase,
subject to the provisions of this Stock Option (this "Option"), from The Vialink
Company (formerly Applied Intelligence Group, Inc.), an Oklahoma corporation
(the "Company"), up to SIXTY THOUSAND (60,000) shares of Common Stock, $.001 par
value, of the Company (the "Stock") at an exercise price of FIVE AND NO/100
DOLLARS ($5.00) per share (the "Exercise Price"). With the exception of any
adjustments pursuant to Section 4 of this Option, the Stock issuable upon
exercise of this Option shall be in all respects identical to the Common Stock
issued and outstanding of the Company as of the date hereof. The shares of
Stock or other securities deliverable upon such exercise, as adjusted from time
to time, are hereinafter sometimes referred to as the "Option Securities."
Unless the context otherwise requires, the term "Option" or "Options" as used
herein includes this Option and any other Option or Options that may be issued
pursuant to the provisions of this Stock Option Agreement (this "Agreement"),
whether upon transfer, assignment, partial exercise, divisions, combinations,
exchange or otherwise, and the term "Holder" or "Holders" includes any
registered transferee or transferees or registered assignee or assignees of
Holder, who in each case shall be subject to the provisions of this Option, and
when used with reference to Option Securities, means the holder or holders of
such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise, Company shall issue to the Holder one or more certificates for the
shares of Stock (or Option Securities), as appropriate. If this Option is
exercised in part only, Company shall, promptly after presentation of this
Option upon such exercise, execute and deliver a new Option evidencing the
rights of Holder thereof to purchase the balance of the shares of Stock (or
Option Securities) purchasable hereunder upon the same terms and conditions as
herein set forth.
<PAGE>
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
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<PAGE>
SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
SECTION 6. Notice of Certain Corporation Action. In case the Company
after the date hereof shall propose to effect any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action,
3
<PAGE>
which notice shall specify the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of the capital stock of the Company entitled to
vote thereon or participate therein and shall set forth such facts with respect
thereto as shall be reasonably necessary to indicate any adjustments in the
number or kind of Option Securities purchasable upon exercise of this Option
which will be required as a result of such action, and the Holder may thereafter
exercise this Option. Such notice shall be filed and mailed in the case of any
action covered by this Section 6, at least 20 days prior to the earlier of (i)
the date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up is expected to become effective, (ii) the date on
which it is expected that holders of shares of the capital stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up, or (iii) the record date for determination of holders
of the capital stock of the Company entitled to vote on such action or
participate in such action. Failure of the Holder to exercise this Option in
whole or in part prior to any corporate action as described in this Section 6
shall not affect or alter the rights of the Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents and
acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the Company
at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the Option Securities so requested to
be registered for sale for the account of a Holder or Holders of Option
Securities are not also to be included in such underwritten offering (because
the Company has not been requested so to include such Option Securities pursuant
to Section 8.1 hereof), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and the Holder or Holders of Option Securities
requesting such registration in writing of its belief that the number of
securities requested to included in such registration exceeds the number which
can be sold in (or
4
<PAGE>
during the time of) such offering, then the Company may include all securities
proposed by the Company to be sold for its own account and may decrease the
number of Option Securities so proposed to be sold and so requested to be
included in such registration by the Holder (or the Holders on a pro rata on the
basis determined by dividing the number of shares of Option Securities requested
to included in the registration by the Holders of such Option Securities by the
total number of such Option Securities to be included in such registration
statement) to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required to
used its best efforts to effect the registration of any Option Securities under
the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in
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conformity with the requirements of the Securities Act, and (C) such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller or such holder or
holders (or the underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon
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discovery that, or upon 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 any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller or holder
promptly prepare and furnish to such seller or holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Option Securities
current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be
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distributed by or through one or more underwriters, the Company will, if
requested by any Holder of Option Securities as provided in Section 8.1 and
subject to the provisions of this Section 8.4, arrange for such underwriters to
include all of the Option Securities to be offered and sold by such holder among
the securities to be distributed by such underwriters. In the event that the
managing underwriter of any underwritten offering informs the Company and the
Holder or Holders of Option Securities requesting the inclusion of their
securities in such offering in writing of its belief that the number of
securities requested to be sold in such offering exceeds the number which can be
sold in such offering, then the Company will include in such offering only
securities proposed to be sold by Company for its own account and decrease the
number of Option Securities so proposed to be sold and requested to be included
in such offering (pro rata on the basis of the percentage of the securities, by
number of shares, of the Company requested to be included in the offering by the
Holder or Holders of such Option Securities and all other holders of the
Company's securities proposing to include shares in such offering) to the extent
necessary to reduce the number of securities to be included in such offering to
the level recommended by the managing underwriter. The holder or holders of
Option Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such securities and each other person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director, officer, representative,
agent, underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue
8
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statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified person to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 8.6.1 or 8.6.2 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified person, unless in such indemnified
person's reasonable judgment a conflict of interest between such indemnified
person and such indemnifying party may exist in respect of such claim, the
indemnifying party shall be
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entitled to participate in and to assume the defense thereof jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person that is not guilty of such fraudulent
misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will not
effect or permit to occur any combination or subdivision of shares which would
materially adversely affect the ability of the
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holder of Option Securities to include such Option Securities in any
registration of its securities contemplated by this Section 8 or the
marketability of such Option Securities under any such registration.
SECTION 9 Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10 Notice. Notices and other communications to be given to Holder
of this Option shall be delivered by hand or by first-class mail, postage
prepaid, to
Mr. Robert T. Kirk
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
-----------------------------------------------
Lewis B. Kilbourne, CEO
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PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION IF EXERCISED IN WHOLE OR IN PART)
To:THE VIALINK COMPANY
The undersigned (_________________________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, ___________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated:___________, _______ Signature
--------------------------------------------------
(Signature must conform in all respects to the
name of Holder as specified on the face of the
Stock Option in every particular, without
alteration, enlargement or any change whatever.)
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<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
____________________________________________ ("Assignee") the right to purchase
_____________________________________________________ (_________) shares of
Common Stock subject to purchase under the Stock Option (the "Option") to which
this Assignment is attached, and appoints ______________________________________
Attorney to transfer said Option or portion thereof on the books of THE VIALINK
COMPANY with the full power of substitution in the premises. In accordance with
Section 3 of the Option, the undersigned requests that the Company execute,
issue and deliver a new Stock Option evidencing the rights of the Assignee to
purchase such assigned shares of Common Stock to Assignee as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated:___________, _______
In the presence of:
Signature
Signature Guaranteed:
- -------------------------- --------------------------------------------------
(Signature must conform in all respects to the
name of Holder as specified on the face of the
Stock Option in every particular, without
alteration, enlargement or any change whatsoever,
and the signature must be guaranteed in the usual
manner.)
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EXHIBIT 4.16
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Effective Date: December 18, 1998
This is to certify that, for value received, Brian Herman (an assignee of
Larry E. Howell) or any subsequent holder or holders of option rights hereunder
by virtue of assignment or transfer (the "Holder") is entitled to purchase,
subject to the provisions of this Stock Option (this "Option"), from The Vialink
Company (formerly Applied Intelligence Group, Inc.), an Oklahoma corporation
(the "Company"), up to SIXTY THOUSAND (60,000) shares of Common Stock, $.001 par
value, of the Company (the "Stock") at an exercise price of FIVE AND NO/100
DOLLARS ($5.00) per share (the "Exercise Price"). With the exception of any
adjustments pursuant to Section 4 of this Option, the Stock issuable upon
exercise of this Option shall be in all respects identical to the Common Stock
issued and outstanding of the Company as of the date hereof. The shares of
Stock or other securities deliverable upon such exercise, as adjusted from time
to time, are hereinafter sometimes referred to as the "Option Securities."
Unless the context otherwise requires, the term "Option" or "Options" as used
herein includes this Option and any other Option or Options that may be issued
pursuant to the provisions of this Stock Option Agreement (this "Agreement"),
whether upon transfer, assignment, partial exercise, divisions, combinations,
exchange or otherwise, and the term "Holder" or "Holders" includes any
registered transferee or transferees or registered assignee or assignees of
Holder, who in each case shall be subject to the provisions of this Option, and
when used with reference to Option Securities, means the holder or holders of
such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise, Company shall issue to the Holder one or more certificates for the
shares of Stock (or Option Securities), as appropriate. If this Option is
exercised in part only, Company shall, promptly after presentation of this
Option upon such exercise, execute and deliver a new Option evidencing the
rights of Holder thereof to purchase the balance of the shares of Stock (or
Option Securities) purchasable hereunder upon the same terms and conditions as
herein set forth.
<PAGE>
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
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SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
SECTION 6. Notice of Certain Corporation Action. In case the Company
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action,
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which notice shall specify the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of the capital stock of the Company entitled to
vote thereon or participate therein and shall set forth such facts with respect
thereto as shall be reasonably necessary to indicate any adjustments in the
number or kind of Option Securities purchasable upon exercise of this Option
which will be required as a result of such action, and the Holder may thereafter
exercise this Option. Such notice shall be filed and mailed in the case of any
action covered by this Section 6, at least 20 days prior to the earlier of (i)
the date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up is expected to become effective, (ii) the date on
which it is expected that holders of shares of the capital stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up, or (iii) the record date for determination of holders
of the capital stock of the Company entitled to vote on such action or
participate in such action. Failure of the Holder to exercise this Option in
whole or in part prior to any corporate action as described in this Section 6
shall not affect or alter the rights of the Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents
and acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the
Company at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the Option Securities so requested to
be registered for sale for the account of a Holder or Holders of Option
Securities are not also to be included in such underwritten offering (because
the Company has not been requested so to include such Option Securities pursuant
to Section 8.1 hereof), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and the Holder or Holders of Option Securities
requesting such registration in writing of its belief that the number of
securities requested to included in such registration exceeds the number which
can be sold in (or
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during the time of) such offering, then the Company may include all securities
proposed by the Company to be sold for its own account and may decrease the
number of Option Securities so proposed to be sold and so requested to be
included in such registration by the Holder (or the Holders on a pro rata on the
basis determined by dividing the number of shares of Option Securities requested
to included in the registration by the Holders of such Option Securities by the
total number of such Option Securities to be included in such registration
statement) to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required
to used its best efforts to effect the registration of any Option Securities
under the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in
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conformity with the requirements of the Securities Act, and (C) such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller or such holder or
holders (or the underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon
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discovery that, or upon 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 any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller or holder
promptly prepare and furnish to such seller or holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Option Securities
current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be
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distributed by or through one or more underwriters, the Company will, if
requested by any Holder of Option Securities as provided in Section 8.1 and
subject to the provisions of this Section 8.4, arrange for such underwriters to
include all of the Option Securities to be offered and sold by such holder among
the securities to be distributed by such underwriters. In the event that the
managing underwriter of any underwritten offering informs the Company and the
Holder or Holders of Option Securities requesting the inclusion of their
securities in such offering in writing of its belief that the number of
securities requested to be sold in such offering exceeds the number which can be
sold in such offering, then the Company will include in such offering only
securities proposed to be sold by Company for its own account and decrease the
number of Option Securities so proposed to be sold and requested to be included
in such offering (pro rata on the basis of the percentage of the securities, by
number of shares, of the Company requested to be included in the offering by the
Holder or Holders of such Option Securities and all other holders of the
Company's securities proposing to include shares in such offering) to the extent
necessary to reduce the number of securities to be included in such offering to
the level recommended by the managing underwriter. The holder or holders of
Option Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such securities and each other person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director, officer, representative,
agent, underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue
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statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified person to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 8.6.1 or 8.6.2 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified person, unless in such indemnified
person's reasonable judgment a conflict of interest between such indemnified
person and such indemnifying party may exist in respect of such claim, the
indemnifying party shall be
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entitled to participate in and to assume the defense thereof jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person that is not guilty of such fraudulent
misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will
not effect or permit to occur any combination or subdivision of shares which
would materially adversely affect the ability of the
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holder of Option Securities to include such Option Securities in any
registration of its securities contemplated by this Section 8 or the
marketability of such Option Securities under any such registration.
SECTION 9. Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10. Notice. Notices and other communications to be given to
Holders of this Option shall be delivered by hand or by first-class mail,
postage prepaid, to
Mr. Brian Herman
7700 West Camino Real, Suite 100
Boca Raton, Florida 33433
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
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<PAGE>
IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
--------------------------------------------
Lewis B. Kilbourne, CEO
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<PAGE>
PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK OPTION
IF EXERCISED IN WHOLE OR IN PART)
To: THE VIALINK COMPANY
The undersigned (_______________________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, _________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Deliver to:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Deliver to:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Dated: , Signature
------------------- ----
(Signature must conform in all respects
to the name of Holder as specified on the
face of the Stock Option in every
particular, without alteration,
enlargement or any change whatever.)
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<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
__________________________________ ____________________________________________
("Assignee") the right to purchase ____________________________________________
(______________) shares of Common Stock subject to purchase under the Stock
Option (the "Option") to which this Assignment is attached, and appoints
___________________________________________________________________ Attorney to
transfer said Option or portion thereof on the books of THE VIALINK COMPANY
with the full power of substitution in the premises. In accordance with
Section 3 of the Option, the undersigned requests that the Company execute,
issue and deliver a new Stock Option evidencing the rights of the Assignee to
purchase such assigned shares of Common Stock to Assignee as follows:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Deliver to:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Deliver to:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Dated: , .
-------------------- --------
In the presence of:
Signature
Signature Guaranteed:
- ---------------------------------- ---------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on
the face of the Stock Option in every
particular, without alteration,
enlargement or any change whatsoever,
and the signature must be guaranteed in
the usual manner.)
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<PAGE>
EXHIBIT 4.17
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Effective Date: December 19, 1998
This is to certify that, for value received, Eureka Holdings, Inc. (an
assignee of Larry E. Howell) or any subsequent holder or holders of option
rights hereunder by virtue of assignment or transfer (the "Holder") is entitled
to purchase, subject to the provisions of this Stock Option (this "Option"),
from The Vialink Company (formerly Applied Intelligence Group, Inc.), an
Oklahoma corporation (the "Company"), up to THIRTY THOUSAND (30,000) shares of
Common Stock, $.001 par value, of the Company (the "Stock") at an exercise price
of FIVE AND NO/100 DOLLARS ($5.00) per share (the "Exercise Price"). With the
exception of any adjustments pursuant to Section 4 of this Option, the Stock
issuable upon exercise of this Option shall be in all respects identical to the
Common Stock issued and outstanding of the Company as of the date hereof. The
shares of Stock or other securities deliverable upon such exercise, as adjusted
from time to time, are hereinafter sometimes referred to as the "Option
Securities." Unless the context otherwise requires, the term "Option" or
"Options" as used herein includes this Option and any other Option or Options
that may be issued pursuant to the provisions of this Stock Option Agreement
(this "Agreement"), whether upon transfer, assignment, partial exercise,
divisions, combinations, exchange or otherwise, and the term "Holder" or
"Holders" includes any registered transferee or transferees or registered
assignee or assignees of Holder, who in each case shall be subject to the
provisions of this Option, and when used with reference to Option Securities,
means the holder or holders of such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise, Company shall issue to the Holder one or more certificates for the
shares of Stock (or Option Securities), as appropriate. If this Option is
exercised in part only, Company shall, promptly after presentation of this
Option upon such exercise, execute and deliver a new Option evidencing the
rights of Holder thereof to purchase the balance of the shares of Stock (or
Option Securities) purchasable hereunder upon the same terms and conditions as
herein set forth.
<PAGE>
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
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<PAGE>
SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
SECTION 6. Notice of Certain Corporation Action. In case the Company
after the date hereof shall propose to effect any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action,
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<PAGE>
which notice shall specify the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of the capital stock of the Company entitled to
vote thereon or participate therein and shall set forth such facts with respect
thereto as shall be reasonably necessary to indicate any adjustments in the
number or kind of Option Securities purchasable upon exercise of this Option
which will be required as a result of such action, and the Holder may thereafter
exercise this Option. Such notice shall be filed and mailed in the case of any
action covered by this Section 6, at least 20 days prior to the earlier of (i)
the date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up is expected to become effective, (ii) the date on
which it is expected that holders of shares of the capital stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up, or (iii) the record date for determination of holders
of the capital stock of the Company entitled to vote on such action or
participate in such action. Failure of the Holder to exercise this Option in
whole or in part prior to any corporate action as described in this Section 6
shall not affect or alter the rights of the Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents and
acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the Company
at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the Option Securities so requested to
be registered for sale for the account of a Holder or Holders of Option
Securities are not also to be included in such underwritten offering (because
the Company has not been requested so to include such Option Securities pursuant
to Section 8.1 hereof), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and the Holder or Holders of Option Securities
requesting such registration in writing of its belief that the number of
securities requested to included in such registration exceeds the number which
can be sold in (or
4
<PAGE>
during the time of) such offering, then the Company may include all securities
proposed by the Company to be sold for its own account and may decrease the
number of Option Securities so proposed to be sold and so requested to be
included in such registration by the Holder (or the Holders on a pro rata on the
basis determined by dividing the number of shares of Option Securities requested
to included in the registration by the Holders of such Option Securities by the
total number of such Option Securities to be included in such registration
statement) to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required to
used its best efforts to effect the registration of any Option Securities under
the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in
5
<PAGE>
conformity with the requirements of the Securities Act, and (C) such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller or such holder or
holders (or the underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon
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<PAGE>
discovery that, or upon 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 any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller or holder
promptly prepare and furnish to such seller or holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Option Securities
current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be
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distributed by or through one or more underwriters, the Company will, if
requested by any Holder of Option Securities as provided in Section 8.1 and
subject to the provisions of this Section 8.4, arrange for such underwriters to
include all of the Option Securities to be offered and sold by such holder among
the securities to be distributed by such underwriters. In the event that the
managing underwriter of any underwritten offering informs the Company and the
Holder or Holders of Option Securities requesting the inclusion of their
securities in such offering in writing of its belief that the number of
securities requested to be sold in such offering exceeds the number which can be
sold in such offering, then the Company will include in such offering only
securities proposed to be sold by Company for its own account and decrease the
number of Option Securities so proposed to be sold and requested to be included
in such offering (pro rata on the basis of the percentage of the securities, by
number of shares, of the Company requested to be included in the offering by the
Holder or Holders of such Option Securities and all other holders of the
Company's securities proposing to include shares in such offering) to the extent
necessary to reduce the number of securities to be included in such offering to
the level recommended by the managing underwriter. The holder or holders of
Option Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such securities and each other person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director, officer, representative,
agent, underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue
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statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified person to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 8.6.1 or 8.6.2 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified person, unless in such indemnified
person's reasonable judgment a conflict of interest between such indemnified
person and such indemnifying party may exist in respect of such claim, the
indemnifying party shall be
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<PAGE>
entitled to participate in and to assume the defense thereof jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person that is not guilty of such fraudulent
misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will not
effect or permit to occur any combination or subdivision of shares which would
materially adversely affect the ability of the
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holder of Option Securities to include such Option Securities in any
registration of its securities contemplated by this Section 8 or the
marketability of such Option Securities under any such registration.
SECTION 9 Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10 Notice. Notices and other communications to be given to Holder
of this Option shall be delivered by hand or by first-class mail, postage
prepaid, to
Mr. Roger Lockhart
Eureka Holdings, Inc.
Post Office Box 10
Beaver, Arkansas 72613
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
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<PAGE>
IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
------------------------------------
Lewis B. Kilbourne, CEO
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<PAGE>
PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION IF EXERCISED IN WHOLE OR IN PART)
To:THE VIALINK COMPANY
The undersigned (_____________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, __________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , Signature
--------------- -----
-----------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on the
face of the Stock Option in every
particular, without alteration,
enlargement or any change whatever.)
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<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_________________________________________________________("Assignee") the right
to purchase _______________________________________(_________) shares of Common
Stock subject to purchase under the Stock Option (the "Option") to which this
Assignment is attached, and appoints __________________________________________
_____________________________________ Attorney to transfer said Option or
portion thereof on the books of THE VIALINK COMPANY with the full power of
substitution in the premises. In accordance with Section 3 of the Option, the
undersigned requests that the Company execute, issue and deliver a new Stock
Option evidencing the rights of the Assignee to purchase such assigned shares of
Common Stock to Assignee as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated: , .
---------------- -------
In the presence of:
Signature
Signature Guaranteed:
- --------------------------------- ----------------------------------------
(Signature must conform in all respects
to the name of Holder as specified on the
face of the Stock Option in every
particular, without alteration,
enlargement or any change whatsoever, and
the signature must be guaranteed in the
usual manner.)
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<PAGE>
EXHIBIT 4.18
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, THE OKLAHOMA SECURITIES ACT OR THE
SECURITIES LAWS OF ANY OTHER STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND/OR THE SECURITIES LAWS OF ANY OTHER STATE OR AN OPINION OF COUNSEL OR OTHER
DOCUMENTATION SATISFACTORY TO APPLIED INTELLIGENCE GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
STOCK OPTION AGREEMENT
OPTIONS TO PURCHASE COMMON STOCK
OF
THE VIALINK COMPANY
(FORMERLY APPLIED INTELLIGENCE GROUP, INC.)
Effective Date: December 19, 1998
This is to certify that, for value received, Roger Lockhart (an assignee of
John Simonelli) or any subsequent holder or holders of option rights hereunder
by virtue of assignment or transfer (the "Holder") is entitled to purchase,
subject to the provisions of this Stock Option (this "Option"), from The Vialink
Company (formerly Applied Intelligence Group, Inc.), an Oklahoma corporation
(the "Company"), up to THIRTY THOUSAND (30,000) shares of Common Stock, $.001
par value, of the Company (the "Stock") at an exercise price of FIVE AND NO/100
DOLLARS ($5.00) per share (the "Exercise Price"). With the exception of any
adjustments pursuant to Section 4 of this Option, the Stock issuable upon
exercise of this Option shall be in all respects identical to the Common Stock
issued and outstanding of the Company as of the date hereof. The shares of
Stock or other securities deliverable upon such exercise, as adjusted from time
to time, are hereinafter sometimes referred to as the "Option Securities."
Unless the context otherwise requires, the term "Option" or "Options" as used
herein includes this Option and any other Option or Options that may be issued
pursuant to the provisions of this Stock Option Agreement (this "Agreement"),
whether upon transfer, assignment, partial exercise, divisions, combinations,
exchange or otherwise, and the term "Holder" or "Holders" includes any
registered transferee or transferees or registered assignee or assignees of
Holder, who in each case shall be subject to the provisions of this Option, and
when used with reference to Option Securities, means the holder or holders of
such Option Securities.
SECTION 1. Exercise of Option. Subject to the provisions of this
Agreement, the Holder shall be eligible to exercise that portion of this Option
for purchase of the number of Option Securities on or before the Expiration Date
(as defined below). This Option may be exercised in whole or in part at any time
or from time to time during the period commencing two years following completion
by the Company's the initial public offering of common stock and redeemable
common stock purchase warrants and then only in the event the initial public
offering is completed on or before December 31, 1996 (the "Commencement Date"),
and ending 5:00 P.M., Central Daylight-Savings Time, on November 30, 2001 (the
"Expiration Date"), by presentation and surrender to Company at its principal
office of this Option and the Purchase Form annexed hereto, duly executed and
accompanied by payment, in cash, certified or official bank check payable to the
order of Company in the amount of the Exercise Price for the number of shares of
Stock (or Option Securities) specified in such Form. In the event Company fails
to complete the initial public offering of its common stock on or before
December 31, 1996, this Agreement and this Option shall terminate. Upon such
exercise, Company shall issue to the Holder one or more certificates for the
shares of Stock (or Option Securities), as appropriate. If this Option is
exercised in part only, Company shall, promptly after presentation of this
Option upon such exercise, execute and deliver a new Option evidencing the
rights of Holder thereof to purchase the balance of the shares of Stock (or
Option Securities) purchasable hereunder upon the same terms and conditions as
herein set forth.
<PAGE>
SECTION 2. Reservation of Shares. Company shall at all times after the
date hereof and until expiration or full exercise of this Option reserve for
issuance and delivery upon exercise of this Option the number of Option
Securities as shall be required for issuance and delivery upon exercise of this
Option.
SECTION 3. Transfer, Exchange, Assignment or Loss of Option.
SECTION 3.1 Transferability. This Option may be assigned or transferred,
in whole or in part, as provided herein so long as such assignment or transfer
is in accordance with and subject to the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (said Act
and such rules and Regulations being hereinafter collectively referred to as the
"Securities Act"). Any purported transfer or assignment made other than in
accordance with this Section 3 shall be null and void and of no force and
effect.
SECTION 3.2 Transfer Procedure. Any assignment permitted hereunder shall
be made by surrender of this Option to Company at its principal office with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax. In such event Company shall, without charge, execute and deliver
a new Option in the name of the assignee named in such instrument of assignment
and designate the assignee as the registered holder on the Company's records and
this Option shall promptly be canceled. This Option may be divided or combined
with other Options which carry the same rights upon presentation thereof at the
principal office of Company together with a written notice signed by Holder
hereof, specifying the names and denominations in which new Options are to be
issued.
SECTION 3.3 Loss or Destruction of this Agreement. Upon receipt by
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Option, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to Company or (in the case of
mutilation) presentation of this Option for surrender and cancellation, Company
will execute and deliver a new Option of like tenor and date and any such lost,
stolen, destroyed or mutilated Option shall thereupon become void. This Option
may be exchanged at the option of the Holder for another Option or Options of
different denominations, of like tenor and evidencing in the aggregate the
number of shares of Stock or Option Securities purchasable pursuant to this
Option, upon surrender of this Option, with the Assignment Form duly filled in
and executed, to the Company at its principal office, at any time or from time
to time after the close of business on the date hereof and prior to the close of
business on the Expiration Date. The Company shall promptly cancel the
surrendered Option and deliver the new Option or Options pursuant to the
provisions of this Section.
SECTION 4. Adjustment in the Number, Kind and Price of Option Securities.
The number and kind of Option Securities purchasable upon exercise of this
Option shall be subject to adjustment from time to time upon the occurrence,
after the date hereof, of the following events:
SECTION 4.1 Stock Dividends and Splits. In the event Company shall (i)
pay a dividend in, or make a distribution of, shares of Stock or of capital
stock convertible into Stock on its outstanding Stock, (ii) subdivide (forward
split) its outstanding shares of Stock into a greater number of such shares, or
(iii) combine (reverse split) its outstanding shares of Stock into a smaller
number of such shares, the total number of shares of Stock purchasable upon the
exercise of this Option immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive at the same Exercise Price the number of
shares of Stock and the number of shares of capital stock convertible into Stock
which such Holder would have owned or have been entitled to receive immediately
following the happening of such event, assuming and giving effect to the
exercise of this Option by such Holder. Any adjustment made pursuant to this
Subsection shall, in the case of a stock dividend or distribution or a stock
issuance, become effective as of the record date therefor and, in the case of a
subdivision or combination, be made as of the effective date thereof.
SECTION 4.2 Adjustment of Option Securities. In the event of any
adjustment of the total number of shares of Stock purchasable upon the exercise
of this Option pursuant to Subsection 4.1, the Exercise Price shall remain
unchanged, but the number of shares of capital stock or Option Securities
obtainable on exercise of this Option shall be adjusted as provided in
Subsection 4.1.
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<PAGE>
SECTION 4.3 Reorganization, Recapitalization, etc. In the event of a
capital reorganization or a reclassification of the Stock (except as provided in
Subsection 4.1 or Subsection 4.4), the holder of this Option, upon exercise
thereof, shall be entitled to receive, in lieu of the Stock to which he would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other Option
Securities or property of the Company (or cash) that the Holder would have been
entitled to receive at the same Exercise Price upon such reorganization or
reclassification if this Option had been exercised immediately prior thereto;
and in any such case, appropriate provision shall be made for the application of
this Section 4 with respect to the rights and interests thereafter of the Holder
of this Option (including, but not limited to, the allocation of the Exercise
Price between or among the Option Securities), to the end that this Section 4
(including the adjustments of the number of shares of Stock or other Option
Securities purchasable) shall thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of this Option for any shares or other
Option Securities or other property (or cash) thereafter deliverable upon the
exercise of this Option.
SECTION 4.4 Consolidation, Merger, etc. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the corporation formed by such
consolidation or merger or the corporation which shall have acquired such
assets, as the case may be, shall execute and deliver to the Holder a supplement
to this Option or a new option providing that the Holder of this Option shall
have the right thereafter (until the Expiration Date) to receive, upon exercise
of this Option or any new option, at the same Exercise Price, solely the kind
and amount of shares of Option Securities and property (or cash) receivable upon
such consolidation, merger, sale or transfer by the Holder of this Option for
the number and kind of Option Securities for which this Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental option or new option shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided in
this Section. The above provision of this Subsection 4.4 shall similarly apply
to successive consolidations, mergers, sales or transfers.
SECTION 4.5 Notification of Adjustment. Whenever the Option Securities
purchasable upon exercise of this Option are modified as provided in Section 4.1
or 4.4, the Company will promptly deliver to the Holder a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of Option Securities purchasable and the other property (including cash)
receivable by the Holder upon exercise of this Option or any supplemental or new
option. Such certificate will state that such adjustments in the kind of
purchasable Option Securities and other property (including cash) receivable by
the Holder upon exercise of this Option conform to the requirements of this
Section 4, and setting forth a brief statement of the facts accounting for such
adjustments. In the event, the Holder of this Option does not agree with such
determination of the Board of Directors of the Company as set forth in the
certificate, the Company shall retain a firm of independent public accountants
acceptable to the Holder to make any computation required under this Section 4,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 4.
SECTION 5. Redemption and Dividend Consent Requirements. This Option may
not be redeemed by Company. During the period from the date hereof until
exercise of this Option in full or through the Expiration Date, the Company
shall not declare any dividends payable in cash or property (other than in
liquidation, voluntary or involuntary dissolution or winding-up of the Company)
without the prior written consent of the Holder of this Option.
SECTION 6. Notice of Certain Corporation Action. In case the Company
after the date hereof shall propose to effect any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or any sale, transfer or other disposition of its property
and assets substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in each such case,
the Company shall mail (by first-class, postage prepaid mail) to the Holder of
this Option notice of such proposed action,
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which notice shall specify the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of the capital stock of the Company entitled to
vote thereon or participate therein and shall set forth such facts with respect
thereto as shall be reasonably necessary to indicate any adjustments in the
number or kind of Option Securities purchasable upon exercise of this Option
which will be required as a result of such action, and the Holder may thereafter
exercise this Option. Such notice shall be filed and mailed in the case of any
action covered by this Section 6, at least 20 days prior to the earlier of (i)
the date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up is expected to become effective, (ii) the date on
which it is expected that holders of shares of the capital stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up, or (iii) the record date for determination of holders
of the capital stock of the Company entitled to vote on such action or
participate in such action. Failure of the Holder to exercise this Option in
whole or in part prior to any corporate action as described in this Section 6
shall not affect or alter the rights of the Holder as set forth in this Option.
SECTION 7. Acquisition for Investment Purposes. The Holder represents and
acknowledges to the Company and its officers and directors that the Option
Securities at the time of issuance to the Holder upon exercise of this Option
(i) will be acquired by the Holder for investment purposes only without the
intent to resell such Option Securities, (ii) will be issued pursuant to
exemption from registration under the Securities Act and any applicable state
securities act, (iii) will not be transferred except pursuant to registration
under the Securities Act and any applicable state securities act unless pursuant
to exemption from registration under such acts, and (iv) the certificates
evidencing the Option Securities will bear appropriate restrictive transfer
legends as required pursuant to the Securities Act and any applicable state
securities act.
SECTION 8. Registration under Securities Act.
SECTION 8.1 Right to Include Option Securities. In the event the Company
at any time amends a registration statement pursuant to a post-effective
amendment under the Securities Act of 1933, as amended (the "Securities Act"),
proposes to registered any of its securities under the Securities Act (other
than by registration on Form S-8 or Form S-4 or any successor or similar form),
whether or not for sale for the Company's own account, each such time the
Company will give prompt written notice (the "Registration Notice") to all
Holders of Option Securities of the Company's intention to register its
securities under the Securities Act, of the intended method of disposition of
such securities, and of such Holder's or Holders' rights under this Section 8.1.
Upon the written request of any such Holder made within 15 days after the
receipt of such Registration Notice (which request shall specify the Option
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof, which can be by an underwritten offering, even if such was
not intended by the Company), subject to the provisions of this Agreement, the
Company will use its best efforts to effect the registration under the
Securities Act which the Company has been requested to register by a Holder or
Holders of Option Securities to the extent necessary to permit the disposition
in accordance the intended method or methods of the Option Securities to be
registered.
SECTION 8.2 Priorities of Underwriter or Company.
SECTION 8.2.1 Underwritten Registration. In the event (i) a registration
pursuant to Section 8 involves an underwritten offering of securities so being
registered, whether or not for sale for the account of the Company, to be
distributed by or through one or more underwriters under underwriting terms
appropriate for such a transaction, (ii) the Option Securities so requested to
be registered for sale for the account of a Holder or Holders of Option
Securities are not also to be included in such underwritten offering (because
the Company has not been requested so to include such Option Securities pursuant
to Section 8.1 hereof), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and the Holder or Holders of Option Securities
requesting such registration in writing of its belief that the number of
securities requested to included in such registration exceeds the number which
can be sold in (or
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<PAGE>
during the time of) such offering, then the Company may include all securities
proposed by the Company to be sold for its own account and may decrease the
number of Option Securities so proposed to be sold and so requested to be
included in such registration by the Holder (or the Holders on a pro rata on the
basis determined by dividing the number of shares of Option Securities requested
to included in the registration by the Holders of such Option Securities by the
total number of such Option Securities to be included in such registration
statement) to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter.
SECTION 8.2.2 Company's Right to Delay Registration. In the event, at any
time after giving the applicable Registration Notice pursuant to Section 8.1 and
prior to the effective date of the registration statement or amendment thereto
under the Securities Act is filed in connection with such registration, the
Company shall determine for any reason, after consultation with the Holder or
Holders of Option Securities which have requested inclusion in such
registration, not to register or to delay registration of such Option
Securities, the Company may, at its election, give written notice of such
determination to each such Holder of Option Securities and, thereupon, (i) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Option Securities in connection with such
registration; provided, however, that such determination by the Company shall be
without prejudice to the rights of any Holder or Holders of Option Securities
pursuant to Section 8 hereof to include such Holder's or Holders' Option
Securities in a subsequent registration by the Company, and (ii) in the case of
a determination by the Company to delay registering, the Company shall be
permitted to delay registering any Option Securities for the same period as the
delay in registering such other securities. The Company will pay all
registration expenses in connection with each registration of Option Securities
requested pursuant to Section 8 hereof.
SECTION 8.3 Registration Procedures. Whenever the Company is required to
used its best efforts to effect the registration of any Option Securities under
the Securities Act as provided in Section 8 hereof, the Company, as
expeditiously as possible, will undertake and perform the following:
(i) with respect to the registration of Option Securities under the
Securities Act prepare and (as soon thereafter as possible) file with the
United States Securities and Exchange Commission (the "Commission") the
requisite registration statement or amendment to effect such registration
and, thereafter, use its best efforts to cause such registration or
amendment to become effective; provided however, that the Company may
discontinue any registration of its securities which are not Option
Securities at any time prior to the effective date of the registration
statement or amendment under the Securities Act or under any state
securities or blue sky laws relating thereto;
(ii) prepare and file with the Commission which amendments and
supplements to the requisite registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time that all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in such registration statement,
but in no event for a period which would exceed 180 days from the date on
which the registration statement or amendment became effective under the
Securities Act;
(iii) furnish to each seller of Option Securities covered by such
registration statement (A) such number of conformed copies of such
registration statement and such number of each amendment and supplement
thereto (in each case including all exhibits), (B) such number of copies of
the prospectus contained in such registration statement (including
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in
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conformity with the requirements of the Securities Act, and (C) such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Option
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of each state that each Holder
of Option Securities shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect (subject to Section 8.3(ii)), and take any other action which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition in such states of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
either qualify generally to do business as a foreign corporation, or
subject itself to taxation in any jurisdiction wherein it would not, but
for the requirements of this subsection (iv), be obligated to be so
qualified or subject to taxation or to any material restrictions on the
conduct of the Company's business, or any restrictions on payments to any
of the Company's shareholders, or require the escrow, "lockup" or placing
of any restrictions on the sale and disposition of securities of the
Company (other than as may have been previously imposed or existed
immediately before the effective date of the registration statement under
the Securities Act) held of record by any of the Company's officers,
directors or controlling persons that is not a Holder of Option Securities;
(v) use its best efforts to cause all Option Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Option Securities;
(vi) furnish to each Holder of Option Securities covered by the
registration statement a signed counterpart, addressed to each Holder (and
the underwriters, if any) of
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under
the underwriting agreement) reasonably satisfactory in form and
substance to such seller, and
(B) in the event the offering is underwritten, a "comfort"
letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date
of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to the events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller or such holder or
holders (or the underwriters, if any) may reasonably request;
(vii) notify each Holder of Option Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon
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discovery that, or upon 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 any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such seller or holder
promptly prepare and furnish to such seller or holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, a historical earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month of the first full fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
will furnish to each such Holder at least five business days prior to the
filing hereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any amendment or supplement to
the registration statement to which any such Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Option Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(x) uses its best efforts to list all Option Securities covered by
such registration statement on any securities exchange on which any of the
Common Stock is then listed or quoted on a recognized quotation service
which also provides quotations of the Common Stock.
The Company may require each Holder of Option Securities covered by the
registration statement to furnish the Company such information regarding such
Holder and the distribution of such Option Securities as the Company may from
time to time reasonably request in writing.
Each Holder of Option Securities agrees, as a condition of this Agreement,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 8.3(vii) hereof, (i) such Holder will forthwith
discontinue such Holder's disposition of Option Securities pursuant to the
registration statement covering such Option Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(vii), (ii) such Holder will promptly deliver copies of such
supplemented or amended prospectus to each purchaser or potential purchaser to
whom such Holder had delivered the prospectus prior to such supplementation or
amendment, and (iii) if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Option Securities
current at the time of receipt of such notice.
SECTION 8.4 Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act, as contemplated by
Section 8 hereof, and such securities are to be
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distributed by or through one or more underwriters, the Company will, if
requested by any Holder of Option Securities as provided in Section 8.1 and
subject to the provisions of this Section 8.4, arrange for such underwriters to
include all of the Option Securities to be offered and sold by such holder among
the securities to be distributed by such underwriters. In the event that the
managing underwriter of any underwritten offering informs the Company and the
Holder or Holders of Option Securities requesting the inclusion of their
securities in such offering in writing of its belief that the number of
securities requested to be sold in such offering exceeds the number which can be
sold in such offering, then the Company will include in such offering only
securities proposed to be sold by Company for its own account and decrease the
number of Option Securities so proposed to be sold and requested to be included
in such offering (pro rata on the basis of the percentage of the securities, by
number of shares, of the Company requested to be included in the offering by the
Holder or Holders of such Option Securities and all other holders of the
Company's securities proposing to include shares in such offering) to the extent
necessary to reduce the number of securities to be included in such offering to
the level recommended by the managing underwriter. The holder or holders of
Option Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and any
necessary or appropriate customary agreements, shall execute appropriate powers
of attorney, and may at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder or Holders of Option Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
Holder or Holders of Option Securities. Any such Holder of Option Securities
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representatives, warranties and
agreements regarding such Holder, such Holder's Option Securities and such
holder's intended method of distribution and any other representation required
by law.
SECTION 8.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
covering Option Securities, the Company will give the Holder or Holders of
Option Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment or supplement thereto, and will give each of them such access to the
Company's books and records and such opportunities to discuss the business of
the Company with its offices and independent public accounts who have certified
its financial statements as shall be necessary, in the opinion of such Holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8.6 Indemnification.
SECTION 8.6.1 Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company hereby agrees and will indemnify and hold harmless the Holder of any
Option Securities covered by such registration statement, it directors,
officers, representatives and agents, each other person who participates as an
underwriter in the offering or sale of such securities and each other person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director, officer, representative,
agent, underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue
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statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will indemnify such Holder and each such director, officer,
representative, agent, underwriter and controlling person for any legal or there
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished to the Company by such Holder specifically stating
that it is for use in the preparation thereof; and provided further, that the
Company shall not be liable to any person who participates as an underwriter in
the offering or sale of Option Securities or any person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Option Securities to such person if such statement or mission was
contained in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, representative, agent, underwriter or controlling
person shall survive the transfer of such securities by such seller.
SECTION 8.6.2 Indemnification by the Sellers. The Company may require, as
a condition to including any Option Securities in any registration statement
filed pursuant to Section 8.3 hereof, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8.6.1 hereof) the Company, each director,
officer, representative and agent of the Company and each other person, if any,
who controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished to the Company by
such seller for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, representative, agent, or controlling person and shall survive the
transfer of such securities by such seller.
SECTION 8.6.3 Notices of Claims and Procedure. Promptly after receipt by
an indemnified person of notice of the commencement of any action or proceeding
involving a claim referred to in Section 8.6.1 or 8.6.2 hereof, such indemnified
person will, if a claim in respect thereof is to be made against an indemnified
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified person to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 8.6.1 or 8.6.2 hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified person, unless in such indemnified
person's reasonable judgment a conflict of interest between such indemnified
person and such indemnifying party may exist in respect of such claim, the
indemnifying party shall be
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entitled to participate in and to assume the defense thereof jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified person, and after notice
from the indemnifying party to such indemnified person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified person for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. If, in such indemnified person's reasonable judgment a conflict
of interest does or may exist in respect of such claim, the indemnified person
or persons shall the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified person or persons, in which
case the indemnifying party shall bear the costs of such defense. No
indemnifying party shall, without the consent of the indemnified person, consent
to the entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified person of a release from all liability with respect so such claim or
litigation and otherwise in form and substance satisfactory to the indemnified
person. The indemnifying party shall not be required to indemnify any
indemnified person against any settlement or judgment which is consented to by
an indemnified person without the consent of the indemnified party.
SECTION 8.6.4 Other Indemnification. Indemnification similar to that
specified in Sections 8.6.1, 8.6.2 and 8.6.3 hereof (with appropriate
modifications) shall be given by the Company and each Holder of Option
Securities covered by a registration statement with respect to any required
registration or other qualification of securities under federal or sate law or
regulation of any governmental authority other than the Securities Act.
SECTION 8.6.5 Indemnification Payments. The indemnification required by
this Section 8.6 shall be made by prompt payments of the amounts thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
SECTION 8.6.6 Contribution. If any of the indemnification provisions
provided for in this Section 8.6 are determined to be unenforceable or
unavailable to an indemnified person in respect of any claim or action, then
each indemnifying party, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such claims in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified person
from the registration statement, but also the relative fault of the indemnified
person and the indemnifying party in connection with the statements or omissions
which resulted in such claim or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the
indemnified person 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 the information
supplied by the indemnifying party or by the indemnified person and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection with
investigation or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person that is not guilty of such fraudulent
misrepresentation.
SECTION 8.7 Adjustments Affecting Option Securities. The Company will not
effect or permit to occur any combination or subdivision of shares which would
materially adversely affect the ability of the
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holder of Option Securities to include such Option Securities in any
registration of its securities contemplated by this Section 8 or the
marketability of such Option Securities under any such registration.
SECTION 9 Governing Law. This Option shall be construed in accordance
with the laws of the State of Oklahoma applicable to contracts executed and to
be performed wholly within such state.
SECTION 10 Notice. Notices and other communications to be given to Holder
of this Option shall be delivered by hand or by first-class mail, postage
prepaid, to
Mr. Roger Lockhart
Post Office Box 10
Beaver, Arkansas 72613
(until another address is filed in writing by the Holder with the Company).
Notices or other communications to Company shall be deemed to have been
sufficiently given if delivered by hand or by first-class mail, postage prepaid
to Company at
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Lewis B. Kilbourne
or such other address as the Company shall have designated by written notice to
such registered owner is herein provided. Notice by mail shall be deemed given
when deposited in the United States mail, postage prepaid, as herein provided.
SECTION 11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder, and all covenants and
provisions of this Agreement by or for the benefit of the Holder of this
Agreement shall bind and inure to the benefit of the Holder of this Agreement.
SECTION 12. Termination. This Agreement shall terminate as of the close
of business on the earlier of (i) December 31, 1996, in the event Company does
not complete the initial public offering of its common stock, (ii) the
Expiration Date, or (iii) such earlier date upon which the Options evidenced by
this Agreement shall have been exercised in full. However, Section 8 and with
respect to the Holders representations set forth in Section 7, such Section and
representations shall continue on and after the Expiration Date if this Option
is fully or partially exercised on or before the Expiration Date.
SECTION 13. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
its respective successors and assigns hereunder and the registered Holder of
this Agreement and the Option hereunder any legal or equitable right, remedy or
claim under this Agreement, but this Agreement shall be for the sole and
exclusive benefit of the Company and its respective successors and assigns
hereunder and the registered Holder of this Agreement and Option hereunder.
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IN WITNESS WHEREOF, Company has executed this Agreement on January 29,
1999.
THE VIALINK COMPANY
By: /s/ Lewis B. Kilbourne
-----------------------------------------------
Lewis B. Kilbourne, CEO
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PURCHASE FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK
OPTION IF EXERCISED IN WHOLE OR IN PART)
To:THE VIALINK COMPANY
The undersigned (_________________________________________________________)
Please insert Social Security or other number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
Stock Option (the "Option") to which this Purchase Form is attached, for, and to
purchase thereunder, ___________________________________________________________
(________________) shares of Common Stock provided for therein and tenders
payment herewith to the order of THE VIALINK COMPANY in the amount of
$________________. In accordance with Section 1 of the Option, the undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable thereunder, that a new Stock Option for the balance
remaining of shares of Common Stock purchasable under the Option be registered
in the name of, and delivered to the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated:___________, _______ Signature
--------------------------------------------------
(Signature must conform in all respects to the
name of Holder as specified on the face of the
Stock Option in every particular, without
alteration, enlargement or any change whatever.)
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ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER OF THE STOCK OPTION ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
___________________________________________________________________ ("Assignee")
the right to purchase _______________________________________________(_________)
shares of Common Stock subject to purchase under the Stock Option (the "Option")
to which this Assignment is attached, and appoints _____________________________
Attorney to transfer said Option or portion thereof on the books of THE VIALINK
COMPANY with the full power of substitution in the premises. In accordance with
Section 3 of the Option, the undersigned requests that the Company execute,
issue and deliver a new Stock Option evidencing the rights of the Assignee to
purchase such assigned shares of Common Stock to Assignee as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable under the Option, that the Company execute, issue and
deliver a new Stock Option for the balance remaining of shares of Common Stock
purchasable under the Option to be registered in the name of, and delivered to
the undersigned at the address stated below:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Dated:___________, _______
In the presence of:
Signature
Signature Guaranteed:
- --------------------------- --------------------------------------------------
(Signature must conform in all respects to the
name of Holder as specified on the face of the
Stock Option in every particular, without
alteration, enlargement or any change whatsoever,
and the signature must be guaranteed in the usual
manner.)
14
<PAGE>
EXHIBIT 10.16
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this __day of February 1998
("Agreement"), by and between Applied Intelligence Group, Inc., an Oklahoma
Corporation ("Corporation"), and __________"Indemnitee"):
WHEREAS, recently highly competent persons have become more reluctant to
serve publicly-held corporations as directors, officers, or in other capacities,
unless they are provided with better protection from the risk of claims and
actions against them arising out of their service to and activities on behalf of
such corporations; and
WHEREAS, the current impracticability of obtaining adequate insurance and
uncertainties related to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that the inability to attract and retain such persons is detrimental
to the best interests of the Corporation's shareholders and that such persons
should be assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation to
obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law, so that such persons will serve or continue to
serve the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of Article VI
of the By-laws of the Corporation, any rights granted under the certificate of
incorporation of the Corporation and any resolutions adopted pursuant thereto
shall not be deemed to be a substitute therefor nor to diminish or abrogate any
rights of Indemnitee thereunder; and
WHEREAS Indemnitee is willing to serve, continue to serve and to take on
additional service for or behalf of the Corporation on the condition that he be
indemnified according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the convenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
Section 1. Definitions. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A-of Regulation 14A (or
in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Corporation is then subject to
such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in rule 1 3d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20%
or more of the combined voting power of
<PAGE>
the Corporation's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such
percentage interest; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization,
or a proxy contest, as a consequence of which members of the
Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or
(iii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or
nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority
of the Board.
(b) "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the
Corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which
such person is or was serving at the request of the
Corporation.
(c) "Disinterested Director" means a director of the Corporation
who is not and was not a party to the Proceeding in respect of
which indemnification is sought by Indemnitee.
(d) "Expenses" means all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, and all
other disbursements or expenses of types customarily incurred
in connection with prosecuting, defer-ding, preparing to
prosecute or defend, investigating, or being or preparing to be
a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law
firm, that is for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action
to determine Indemnitee's rights under this Agreement.
(f) "Proceeding" means any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any
other proceeding, whether civil, criminal, administrative or
investigative, except one initiated by an Indemnitee pursuant to
Section 11 of this Agreement to enforce his rights under this
Agreement.
Section 2. Services by Indemnitee. Indemnitee agrees to continue to serve
as an officer or director of the Corporation. Indemnitee may at any time and for
any reason resign from such position (subject to any other contractual
obligation or any obligation unposed by operation of law).
<PAGE>
Section 3. Indemnification - General. The Corporation shall indemnify, and
advance Expenses to, Indemnitee as provided in this Agreement to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time permit. The
rights of Indemnitee provided under the preceding sentence shall include, but
shall not be limited to, the rights set forth in the other Sections of this
Agreement.
Section 4. Proceedings Other Than Proceedings by or in the Right of the
Corporation. Indemnitee shall be entitled to the rights of indemnification
provided in this Section if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding, other than a Proceeding by or in the right of the Corporation.
Pursuant to this Section, Indemnitee shall be indemnified against Expenses,
judgments, penalities, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 5. Proceedings by or in the Right of the Corporation. Indemnitee
shall be entitled to the rights of indemnification provided in this Section if,
by reason of his Corporate status, he is, or is threatened to be made a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Corporation to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses actually and reasonably
incurred by him or on his behalf in connection with any such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Notwithstanding the foregoing,
no indemnification against such Expenses shall be made in respect of any claim,
issue or matter in any such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Corporation if applicable law prohibits such
indemnification unless the District Court of Oklahoma County of the State of
Oklahoma, or the court in which such Proceeding shall have been brought or is
pending, shall determine that indemnification against Expenses may nevertheless
be made by the Corporation.
Section 6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section 7. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 8. Advancement of Expenses. The Corporation shall advance all
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances
<PAGE>
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses.
Section 9. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement in connection with any
Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee
is entitled to indemnification. The Secretary of the Corporation shall,
promptly upon receipt of any such request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 9(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in such case: (i)
if a Change in Control shall have occurred, by Independent Counsel (unless
Indemnitee shall request that such determination be made by the Board or
the shareholders, in which case in the manner provided for in clauses (ii)
or (iii) of this Section 9(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change in Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors, or (B) if a quorum of the Board
consisting of Disinterested Directors is not obtainable, or even if such
quorum is obtainable, if such quorum of Disinterested Directors so directs,
either (x) by Independent Counsel in a written opinion to the Board, a copy
of which shall be delivered to Indemnitee, or ((y)) by the shareholders of
the Corporation as determined by such quorum of Disinterested Directors, or
a quorum of the Board, as the case may be; or (iii) as provided in Section
10(b)) of this Agreement. If it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected for
disclosure-and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
with the person, persons or entity making such determination shall be borne
by the Corporation (irrespective of the indemnification) and the
Corporation hereby indemnifies and agrees to hold Indemnitee harmless
therefrom.
(c) If required, Independent Counsel shall be selected as follows: (i) if a
Change in Control shall not have occurred, Independent Counsel shall be
selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected;
or (ii) if a Change in Control shall have occurred, Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board, in which event (I) shall apply), and
Indemnitee shall give written notice to the Corporation advising it of the
identity of Independent Counsel so selected. In either event, Indemnitee or
the Corporation, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the
Corporation or to Indemnitee,, as the case may be, a written objection to
such
<PAGE>
selection. Such objection may be asserted only on the ground that
Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant
to Section 9(a) hereof, no Independent Counsel shall have been selected and
not objected to, either the Corporation of Indemnitee may petition the
District Court of Oklahoma County of the State of Oklahoma, or other court
of competent jurisdiction, for resolution of any objection which shall have
been made by the Corporation or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by such court or by such other person a such court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
9(b) hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its action pursuant to this Agreement, and the Corporation
shall pay all reasonable fees~and expenses incident to the procedures of
this Section 9(c), regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement date of any
judicial proceeding or arbitration pursuant to Section l I (a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 10. Presumptions and Effects of Certain Proceedings.
(a) If a Change in Control shall have occurred, in making a determination
with respect to entitlement to indemnification hereunder, the person or
persons or entity making such determination shall presume that Indemnitee
is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9(a) of
this Agreement, and the Corporation shall have the burden of proof to
overcome that presumption in connection with the making by any person,
persons or entity of any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under Section 9
of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days
after receipt by the Corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law; provided,
however, that such sixty-day (60-day) period may be extended for a
reasonable time, not to exceed an additional thirty (30) days, if the
person, persons or entity making the determination with respect to
entitlement to indemnification in good faith require(s) such additional
time for the obtaining or evaluating of documentation and/or information
relating thereto; and provided, further, that the foregoing provisions of
this Section 10(b) shall not apply (i) if the determination of entitlement
to indemnification is to be made by the shareholders pursuant to Section
9(b) of
<PAGE>
this Agreement and if (A) within fifteen (15) days after receipt by the
Corporation of the request for such determination the Board has resolved to
submit such determination to the shareholders for their consideration at an
annual meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is-made thereat, or (B) a special meeting of
shareholders is called within fifteen ((15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination
is made thereat, or (ii) if the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
9(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation or, with respect to
any criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 11. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 9 of
this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
9(b) of this Agreement and such determination shall not have been made and
delivered in a written opinion within ninety (90) days after receipt by the
Corporation of the request for indemnification, (iv) payment of
indemnification is not made pursuant to section 7 of this Agreement within
ten (10) days after receipt by the Corporation of a written request
therefor, or (v) payment of indemnification is not made within ten (10)
days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant
to Section 9 or 10 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Oklahoma, or in any
other court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at
his option, may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an adjudication or an
award in arbitration within one hundred and eighty (180) days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 1 l(a). The Corporation shall not oppose
Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 11 shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change in Control shall have occurred
in any judicial proceeding or arbitration commenced pursuant to this
Section 11, the Corporation shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses,
as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Corporation shall be bound by such determination in
any judicial proceeding or arbitration commenced pursuant
<PAGE>
to this Section 11, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) prohibition of such indemnification under
applicable law.
(d) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 11 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.
(f) In the event that Indemnitee, pursuant to this Section 11,
seeks judicial adjudication of, or an award in arbitration to
enforce, his rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation
against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by him
in such judicial adjudication or arbitration, but only if he
prevails therein. If it shall be determined in such judicial
adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement
of expenses sought, the Expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall
be appropriately prorated.
Section 12. Non-Exclusivity; Survival of Rights: Insurance: Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may at any time be entitled under applicable
law, the certificate of incorporation or By-laws of the Corporation, any
agreement, a vote of shareholders or a resolution of directors, or
otherwise. No amendment, alteration or repeal of this Agreement or any
provision hereof shall be effective as to any Indemnitee with respect to
any action taken or omitted by such Indemnitee with respect to any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alternation or repeal.
(b) To the extent that the Corporation maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the Corporation,
Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any
such director, officer, employee, agent or fiduciary under such policy or
policies.
(c) In the event of any payment under the Agreement, the Corporation shall
be subrogate to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Corporation to bring
suit to enforce such rights.
(d) The Corporation shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment
under any insurnace policy, contract, agreement or otherwise.
Section 13. Duration of Agreement. This Agreement shall continue until and
terminate under the later of:
(a) Ten (10) years after the date that Indemnitee shall have ceased to
serve as a director,
<PAGE>
officer, employee, agent or fiduciary of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which Indemnitee served at the request of the Corporation;
or
(b) (b) the final termination of all pending Proceedings in respect of
which Indemnitee is granted rights of indemnification or advancement of
Expenses hereunder and of any proceeding commenced by Indemnitee pursuant
to Section 11 of this Agreement.
This Agreement shall be binding upon the Corporation and its successors and
assigns and shall inure to the benefit of Indemnitee and his heirs; executors
and administrators.
Section 14. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or Advancement of
Expenses. Except as provided in Section 1 1 (e), Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Corporation.
Section 16. Identical Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 17. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
Section 18. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Corporation in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or-matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
Section 20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by party to whom such
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
<PAGE>
(a) If to Indemnitee, to:
-----------------------------------
-----------------------------------
(b) If to Corporation, to:
13800 Benson Road
Edmond, OK 73013
Attn:
---------------------------------------------
Or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Oklahoma.
Section 22. Miscellaneous. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
ATTEST:
By: By:
-------------------------------- --------------------------------
Robert N. Baker, Corporate Secretary Robert L. Barcum, President, CEO
and Chairman
INDEMNITEE
---------------------------------
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") made as of this 1st day of October,
1998 ("Effective Date") by and between The viaLink Company, an Oklahoma
corporation with its principal place of business at 13800 Benson Road, Edmond,
Oklahoma, 73013 ("viaLink"), and Lewis B. Kilbourne ("Kilbourne").
WHEREAS, viaLink desires to hire Kilbourne as its chief executive officer,
and
WHEREAS the Board of Directors of viaLink has determined that the
employment of Kilbourne is material to the success of viaLink, and
WHEREAS, the parties hereto wish to set forth certain terms and conditions
of Kilbourne's employment with viaLink.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Employment. viaLink hereby employs Kilbourne, and Kilbourne hereby accepts
such employment, as the Chief Executive Officer of viaLink upon the terms
and subject to the conditions contained herein.
2. Duties. During the term ("Term") of this Agreement (as defined in Section
6.1 of this Agreement), but subject to all terms, covenants and conditions
of this Agreement:
2.1. As Chief Executive Officer, Kilbourne shall have the following duties
and responsibilities:
2.1.1. Kilbourne shall be responsible for viaLink's meeting of the
reasonable financial goals established by the Board for viaLink;
2.1.2. Kilbourne shall be responsible for and have the overall
supervision of the business of viaLink, including without
limitation both its management and financial operations, and
shall direct the affairs and policies of viaLink, subject to any
directions which may be given by viaLink's Board of Directors
("Board") relating thereto;
2.1.3. Kilbourne shall faithfully, diligently and to the best of his
ability perform all of said duties;
2.1.4. Kilbourne shall devote his full time, attention, knowledge and
skills during normal business hours in furtherance of the
business of viaLink and the performance of said duties and
responsibilities as Chief Executive Officer of viaLink; provided
however and notwithstanding anything to the contrary in this
Agreement, Kilbourne's part time work with or on behalf of
Kilbourne and
1
<PAGE>
Associates or part time teaching at Oklahoma City University or
elsewhere shall not be deemed a violation of this Agreement or of
any of the terms or conditions thereof;
2.1.5. Kilbourne shall observe and carry out all state, federal and
local laws, rules and regulations to the extent applicable to
him;
2.1.6. Kilbourne shall at all times be subject to, observe and carry out
such reasonable rules, regulations, policies, directions and
restrictions promulgated by viaLink' Board, as viaLink's Board
may from time to time establish, to the extent they are
consistent with Kilbourne's duties and responsibilities under
this Agreement;
2.2. In carrying out his duties as Chief Executive Officer:
2.2.1. Kilbourne shall have the authority to designate the duties and
powers of the officers of viaLink and delegate special powers and
duties to specified officers, so long as such delegation or
designations are not inconsistent with any applicable laws, rules
or regulations or with the Articles of Incorporation or Bylaws of
viaLink or with any action(s) of the Board regarding the same;
and
2.2.2. Kilbourne shall have such other powers and duties as may be
prescribed by the Board from time to time regarding his duties
and responsibilities; and
2.2.3. Kilbourne shall have such other powers and duties as may be
reasonably necessary to carry out his duties and responsibilities
set forth in this Agreement.
3. Covenants. In order to induce viaLink to enter into this Agreement,
Kilbourne hereby agrees as follows:
3.1. Except when he is directed to do otherwise by viaLink's Board, and
except as may be required by law, court order or subpoena, Kilbourne
shall keep confidential and shall not divulge to any other person or
entity, during the Term of Kilbourne's employment or thereafter, any
of the business secrets or other confidential Information of or
regarding viaLink and/or its subsidiaries (i) which have not otherwise
become public knowledge, (ii) which were not already known to
Kilbourne as of the Effective Date of this Agreement or (iii) which
have not been disclosed by viaLink to others without substantial
restriction on further disclosure. The obligations of this Subsection
shall survive the termination or expiration of this Agreement.
3.2. All papers, books and records of every kind and description relating
to the business and affairs of viaLink, whether or not prepared by
Kilbourne, shall be the sole and exclusive property of viaLink, and
Kilbourne shall surrender them to viaLink at any time upon request by
viaLink's Board.
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The obligations of this Subsection shall survive the termination or
expiration of this Agreement.
3.3. Kilbourne agrees that any and all inventions, developments,
discoveries, copyrightable works, or contributions thereto, including,
without limitation, any written works, software products or code,
images, designs, and/or instructions created in whole or part by
Kilbourne during his employment with viaLink hereunder or otherwise or
relating in any way to the business of viaLink (hereinafter "Work
Product") are and shall be the sole and exclusive property of vial
ink. Kilbourne conveys, transfers and assigns all rights, title and
interest in and to any Work Product to viaLink, and further agrees to
execute any written assignment or other agreement viaLink deems
necessary at any time to effect the foregoing and to obtain or uphold,
for viaLink's benefit, all copyright, patent, and/or other rights of
viaLink in such Work Product. The obligations of this Subsection shall
survive the termination or expiration of this Agreement.
4. Compensation. As full compensation for Kilbourne's services hereunder and
in exchange for his promises contained herein, viaLink shall compensate
Kilbourne in the manner set forth below. The amounts set forth below shall
be subject to any withholding or other deductions required by law.
4.1. Beginning on October 1, 1998 Kilbourne shall receive a biweekly salary
of $2884.62 ($75,000 per year), paid two weeks in arrears. Beginning
on December 15, 1998 and continuing throughout the Term of this
Agreement, such salary shall be increased to a biweekly salary of
$5769.23 ($150,000 per year). viaLink may increase Kilbourne's salary
during the Term of this Agreement in viaLink's sole discretion.
Kilbourne's salary may not be decreased during the Term of this
Agreement without the prior written consent of Kilbourne.
4.2. Beginning with first quarter of quarter of 1999 and for each quarter
of the Term of this Agreement, but subject to the terms and conditions
of this Section 4.2 and all of its Subsections, Kilbourne shall be
eligible to receive a quarterly bonus equal to one/eighth of his then
current annual salary ("Bonus"). Notwithstanding anything to the
contrary in this Agreement, to be eligible to receive a Bonus for any
given quarter, Kilbourne must fully meet the criteria for such Bonus
as is established by viaLink's Board for that quarter. The Bonus
criteria for the first quarter of 1999 is set forth in Subsection
4.2.1 of this Agreement. The Bonus criteria for quarters subsequent
thereto shall be established pursuant to the procedure as set forth in
Subsection 4.2.2.
4.2.1. The Bonus criteria for the first quarter of 1999 is that
viaLink's Board must approve and viaLink must execute the
documents required by a transaction(s) which have will bring,
investment(s)
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and/or financing into viaLink of at least five million dollars
($5,000,000).
4.2.2. The Bonus criteria for each quarter of the Term of this Agreement
after the first quarter of 1999 shall be determined as follows:
4.2.2.1. At least forty-five (45) days, but not earlier than sixty
(60) days, prior to the beginning of each such quarter,
Kilbourne shall submit to viaLink's Board his
recommendations for the eligibility criteria for such Bonus
for the upcoming quarter; and
4.2.2.2. At least fifteen (15) days prior to the beginning of each
such quarter, after receipt of Kilbourne's recommendations
pursuant to Subsection 4.2.2.1, viaLink's Board shall
establish such criteria as it, in its sole discretion deems
appropriate for Kilbourne's eligibility for the Bonus for
that quarter and advise Kilbourne of the same.
4.2.2.3. If Kilbourne fails to meet his obligations under Subsection
4.2.2.1 of this Agreement, no Bonus shall be due to
Kilbourne for that quarter.
4.2.2.4. If Kilbourne has met his obligations under Subsection
4.2.2.1 of this Agreement, and if viaLink's Board fails to
meet its obligations under Subsection 4.2.2 of this
Agreement. Kilbourne shall be automatically eligible to
receive his Bonus for that quarter.
4.2.3. Notwithstanding anything to the contrary in this Agreement, to be
eligible for a Bonus for a given quarter, Kilbourne, except as
otherwise stated in Section 6 of this Agreement, must be an
employee of viaLink as of the end of such quarter.
4.2.4. Each quarterly Bonus, if any, shall be calculated and paid
quarterly; provided, however, the payment due hereunder for any
quarter for which a Quarter has been earned shall be paid not
later than the next regular payroll after the sixtieth (60th) day
following the end of each quarter for which the Bonus is earned
if Kilbourne fails to earn a Bonus for any given quarter, the
Bonus which otherwise could have been earned for that quarter is
not carried forward to the next or any subsequent quarter.
4.3. Kilbourne shall be entitled to four (4) weeks vacation during each
calendar year of the Term of this Agreement.
4.4. Kilbourne shall be eligible for all viaLink group benefits programs
provided to other viaLink employees.
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4.5. As additional consideration, viaLink has granted to Kilbourne options
to purchase one hundred and fifty thousand (150,000) shares of viaLink
common stock in accordance with the Stock Option Agreement(s) attached
hereto as Exhibits 1 and 2.
4.6. In the event that Kilbourne becomes subject to any excise tax imposed
pursuant to Section 280(G) of the Internal Revenue Code or any
amendment thereto, as a result of the payments made to Kilbourne under
this Agreement or as a result of the acceleration of any of the stock
options granted under this Agreement, viaLink shall reimburse
Kilbourne for such portion of any such tax which is attributable
thereto. Upon request by viaLink, Kilbourne shall provide to viaLink
such documentation as viaLink reasonably requests to support the
demand of Kilbourne for such reimbursement.
5. Non-competition.
5.1. If viaLink terminates this Agreement for cause (as defined in Section
6 of this Agreement) or if Kilbourne terminates this Agreement for
other than cause, for a period of one (1) year after the termination
of this Agreement, Kilbourne shall not, directly or indirectly, alone,
or as a partner, officer, director, employee, stockholder, consultant
or agent of any other corporation, partnership or other business
organization, knowingly solicit the employment of, or hire, any
employee of viaLink, or any viaLink subsidiary, or cause any such
employee to terminate such employee's relationship with viaLink or any
viaLink subsidiary, without the prior written approval of viaLink.
5.2. If viaLink terminates Kilbourne's employment without Cause, the
provisions of Section 5.1 of this Agreement shall be enforceable
against Kilbourne only as long as Kilbourne is receiving the
compensation set forth in Section 4.1 of this Agreement.
5.3. If viaLink terminates this Agreement for cause (as defined in Section
6 of this Agreement) or it Kilbourne terminates this Agreement for the
uncured breach of this Agreement by viaLink, for a period of one (1)
year after the termination of this Agreement, Kilbourne shall not,
directly or indirectly, alone, or as a partner, officer, director,
employee, stockholder, consultant or agent of any other corporation,
partnership or other business organization, knowingly solicit any of
the accounts of viaLink which were customers of viaLink during, the
Term of this Agreement unless such solicitation is undertaken on
behalf of a business venture which does not compete directly with the
products or services owned, sold, manufactured, marketed, provided or
developed by viaLink. For the purposes of this Subsection, a business
shall be deemed to be in competition with viaLink only if the products
or services of such business are substantially similar in
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purpose, function or capability to the products or services then being
developed, manufactured, marketed, provided or sold by viaLink.
5.4. If viaLink terminates Kilbourne's employment without Cause, the
provisions of Section 5.3 of this Agreement shall be enforeable
against Kilbourne only as long as Kilbourne is receiving the
compensation set forth in Section 4.1 of this Agreement.
5.5. The parties agree that Kilbourne's services are unique and that any
breach or threatened breach of the provisions of this Agreement will
cause irreparable injury to viaLink and that money damages will not
provide an adequate remedy. Accordingly, viaLink shall, in addition to
other remedies provided by law, but subject nonetheless to the terms
and conditions of this Agreement, be entitled to such equitable and
injunctive relief as may be necessary to enforce the provisions of
this Agreement against Kilbourne or any person or entity participating
in such breach or threatened breach. Nothing contained herein shall be
construed as prohibiting viaLink from pursuing any additional remedies
available to it, at law or in equity, for such breach or threatened
breach including any recovery of damages from Kilbourne and the
immediate termination of his employment.
5.6. During the term of this Agreement, Kilbourne shall not knowingly
engage in, and shall not knowingly solicit any employees of viaLink or
its subsidiaries or other affiliates to engage in any commercial,
activities which are in any way in competition with the activities of
viaLink, or which in any way materially interfere with the performance
of his or any such other employee's duties or responsibilities to
viaLink.
5.7. Sections 5.1 through 5.5 of this Agreement shall survive the
expiration or termination of this Agreeemnt.
6. Duration and Termination.
6.1. Unless earlier terminated pursuant to the provisions hereof, the
Initial Term ("Initial Term") of this Agreement shall commence on
October 1, 1998 and shall continue through September 30, 2001, and the
same shall be automatically renewed on a year to year basis thereafter
("Extended Term") unless one party hereto notifies the other party
hereto in writing at least six (6) months prior to the end of the then
current Initial Term or Extended Term, as the case may be, that such
party giving the notice will terminate this Agreement at the end
thereof. For purposes of this Agreement, unless otherwise indicated by
the context of the reference, the word "Term" shall refer collectively
to both the Initial Term to any Extended Term.
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6.2. This Agreement shall immediately terminate, and all rights, benefits
and obligations hereunder shall cease, in the event of Kilbourne's
death, except such rights of Kilbourne which have accrued as of the
date of death.
6.3. In the event that a physician, mutually acceptable to both viaLink and
Kilbourne, determines that Kilbourne is unable to substantially
perform his usual and customary duties under this Agreement for more
than three (3) months in any calendar year, this Agreement shall
immediately terminate and all rights, benefits and obligations
hereunder shall cease, except such rights of Kilbourne which have
accrued as of date of disability.
6.4. If, and only if, Kilbourne has fully met the Bonus criteria for the
first quarter of 1999 established by viaLink's Board for him as set
forth in Subsection 4.2.1 of this Agreement, and subject to all of the
terms and conditions of this Agreement, upon the termination of this
Agreement, unless such termination is (i) by viaLink for cause as
defined in this Agreement, (ii) by Kilbourne other than for the
uncured breach of this Agreement by viaLink or (iii) pursuant to
either Section 6.2 or 6.3 of this Agreement or (iv) as a result of the
rejection of this Agreement by a Bankruptcy Court, Kilbourne shall be
entitled to the following payments:
6.4.1. The continuation of his then current salary as of the effective
date of the termination (without duty to mitigate) for the
remaining portion of the then current Term of this Agreement; and
6.4.2. The continuation of the group employee benefits Kilbourne
available to Kilbourne immediately prior to his termination to
the extent that the applicable plan(s) allow for the continuation
of the same or, to the extent that such plan(s) do not allow for
the continuation of the same, a payment equal to the cost of
Cobra benefits for Kilbourne only, if Kilbourne elects such Cobra
option. Such reimbursement, if any, shall be due within thirty
(30) days after Kilbournc presents proof of payment for the same
to viaLink; and
6.4.3. A one-time payment, which shall by made by viaLink not later than
sixty (60) days following the quarter in which the termination
occurs, and which payment shall be equal to the greater of (i)
the Bonus due pursuant to the applicable Subsection of Section
4.2 of this Agreement or (ii) fifteen percent (15%) of his the
salary as of the effective date of the termination; and
6.4.4. A one-time lump sum payment of four hundred thousand dollars
($400,000) to be paid by viaLink not later than sixty (60) days
following the date of Kilbourne's termination.
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6.5. viaLink shall have the right to terminate this Agreement in any of the
following events, each of which shall constitute "Cause":
6.5.1. Kilbourne fails to earn the Bonus first quarter of 1999 as set
forth in Section 4.2.1 of this Agreement.
6.5.2. Kilbourne's breach in respect of his duties under this Agreement
if such breach constitutes unremedied for thirty (30) days after
receipt of written notice thereof to Kilbourne specifying in
detail the acts constituting the alleged breach and requesting
that the same be remedied; or
6.5.3. a conviction, plea of nolo contendere, plea to a lesser charge in
lieu of a felony, of a felony, a crime involving fraud or
misrepresentation, or any other crime, the effect of which is
likely to materially adversely affect viaLink; or
6.5.4. intentional violation of any Law which results in material
liability to viaLink; or
6.5.5. abuse of alcohol or other drugs, or the illegal use of drugs,
which materially interferes with the performance by Kilbourne of
his duties hereunder.
6.5.6. Notwithstanding anything to the contrary herein, no notice or
cure period is required to be given to Kilbourne if the
termination is as a result of a violation of said Subsections
6.6.3, 6.6.4, or 6.6.5 of this Agreement.
6.6. Kilbourne shall have the right to terminate this Agreement in the
event of the following:
6.6.1. viaLink's breach in respect of its duties under this Agreement if
such breach continues unremedied for thirty (30) days after
receipt of written notice thereof directed to the Chairman of
viaLink's Board specifying in detail the acts constituting the
alleged breach and requesting that the same by remedied.
7. Successors and Assigns. The rights and obligations of viaLink hereunder
shall run in favor of and shall be binding upon viaLink, its successors,
assigns, nominees or other legal representatives. Termination of
Kilbourne's employment shall not operate to relieve him of any remaining
obligations hereunder. Kilbourne may not assign his rights and obligations
hereunder.
8. Notices. All notices, requests, demands and other communications hereunder
must be in writing and shall be given (i) by hand delivery, (ii) by
telecopier, (iii) by overnight courier such as Federal Express, or (iv) by
certified mail, return
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receipt requested, postage prepaid, to the other party. The Notice in each
case shall be addressed as follows:
8.1. if to viaLink: The viaLink Company, 13800 Benson Road, Edmond,
Oklahoma 73013 Attention to viaLink's then current Chairman of the
Board; and
8.2. if to Kilbourne: Lewis B. Kilbourne, 3408 Hickory Stick Road, Oklahoma
City, Oklahoma 73120.
The address at which a party wants Notice under this Agreement to be
sent may be changed by that party by giving Notice thereof to the
other party pursuant to this Section 8.
9. Severability. If any provision of this Agreement shall be adjudged by any
court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder
of this Agreement.
10. Entire Understanding. This Agreement embodies the entire understanding of
the parties hereto, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter. No change
alteration or modification hereof may be made except in a writing, signed
by both parties hereto.
11. Captions. The headings in this Agreement are for convenience and reference
only and shall not be construed as part of this Agreement or to limit or
otherwise affect the meaning hereof.
12. Execution in Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed to be original, but
all such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
13. Choice of Law. Jurisdiction over disputes with regard to this Agreement
shall be exclusively in the courts of the State of Oklahoma, and this
Agreement shall be construed in accordance with and governed by the laws of
the State of Oklahoma without giving effect to principles of conflicts of
law hereunder.
14. Attorney Fees. In the event of any litigation between the parties hereto,
the prevailing shall be entitled to all of its costs incurred in such
litigation, including reasonable attorneys' fees.
15. Nonwaiver. The waiver of any violation of breach of this Agreement by
either party hereto shall not be deemed to be a waiver of any continuing
violation or breach or a waiver of any other violation or breach of this
Agreement.
16. Arbitration. Notwithstanding anything to the contrary in this Agreement,
any controversy or claim arising out of or relating to this Agreement, or
its breach, or
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its validity or interpretation, except claims for injunctive relief and
claims involving necessary third parties who refuse to participate shall be
settled by binding arbitration in accordance the then current Commercial
Arbitration Rules of the American Arbitration Association ("AAA") subject,
however, to the following:
16.1. The location for the arbitration shall be at such location as by the
parties in Oklahoma County, Oklahoma or if the parties cannot agree at
such location in Oklahoma County, Oklahoma as designate by the AAA.
16.2. Such arbitration shall be heard and determined by a panel (3)
arbitrators in accordance with the then current rules or regulations
of the AAA relating to commercial disputes ("Rules"). All Arbitrators
shall be selected pursuant to the then current Rules thereof within
thirty (30) days after the filing of a demand for arbitration. Each
arbitrator shall be a person with experience in handling disputes
relating to employment disputes regarding management or executive
personnel.
16.3. The hearing on the arbitration shall be heard not later than six (6)
months after the demand for arbitration have been made by a party.
16.4. The arbitration award shall be binding on the parties and may be
enforced in any court of competent jurisdiction.
16.5. The prevailing party in such arbitration shall be entitled to recover
its reasonable attorney fees and costs incurred in such arbitration
proceeding.
17. Exclusivity. Unless specifically otherwise stated in this Agreement, the
rights and remedies granted to the parties in this Agreement are exclusive.
18. Limitation of Actions. No arbitration or action, regardless of form,
relating to or arising out of this Agreement may be brought by either party
more than three (3) years after such party knew or should have known of the
occurrence of the event(s) which gave rise to any claim, demand or cause of
action.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE viaLink Company Kilbourne
By:
-------------------------- -----------------------------
Lewis B. Kilbourne
Its:
-------------------------
Date: Date:
------------------------ ------------------------
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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") made as of this 1st day of October,
1998 ("Effective Date") by and between The viaLink Company, an Oklahoma
corporation with its principal place of business at 13800 Benson Road, Edmond,
Oklahoma, 73013 ("viaLink"), and Robert N. Baker ("Baker").
WHEREAS, viaLink desires to hire Baker as its President and Chief Operating
Officer, and
WHEREAS the Board of Directors of viaLink has determined that the
employment of Baker as its President and Chief Operating Officer is material to
the success of viaLink, and
WHEREAS, the parties hereto wish to set forth certain terms and conditions
of Baker's employment with viaLink.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Employment. viaLink hereby employs Baker, and Baker hereby accepts such
employment, as the President and Chief Operating Officer of viaLink upon
the terms and subject to the conditions contained herein.
2. Duties. During the term ("Term") of this Agreement (as defined in Section
6.1 of this Agreement), but subject to all terms, covenants and conditions
of this Agreement:
2.1 As President and Chief Operating Officer, Baker shall have the
following duties and responsibilities:
2.1.1. Baker shall report to the Chief Executive Officer of
viaLink;
2.1.2. Baker shall perform such duties and functions as are assigned
to him by viaLink's Chief Executive Officer and/or its Board
of Directors ("Board") to accomplish the operational
objectives set for viaLink by its Board and/or its Chief
Executive Officer in conjunction with and in reference to the
duties and responsibilities of the Chief Executive Officer of
viaLink;
2.1.3. Baker shall faithfully, diligently and to the best of his
ability perform such duties as are assigned to him by
viaLink's Board or its Chief Executive Officer;
2.1.4. Baker shall devote his full time, attention, knowledge and
skills during normal business hours in furtherance of the
business of viaLink;
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2.1.5. Baker shall observe and carry out all state, federal and local
laws, rules and regulations to the extent applicable to him.
2.1.6. Baker shall at all times be subject to, observe and carry out
such reasonable rules, regulations, policies, directions and
restrictions promulgated by viaLink's Board and/or its Chief
Executive Officer, as viaLink's Board may from time to time
establish, to the extent they are consistent with Baker's
duties and responsibilities under this Agreement;
2.2 In carrying out his duties as President and Chief Operating Officer:
2.2.1. Baker shall have the authority to delegate special powers and
duties to other officers and/or employees, so long as such
delegation is not inconsistent with (i) any applicable laws,
rules or regulations, (ii) viaLink's Articles of Incorporation
or Bylaws or (iv) any action(s) of the Board or the Chief
Executive Officer regarding the same; and
2.2.2. Baker shall have the power to execute and shall execute bonds,
deeds, mortgages extensions agreements, modifications of
mortgage agreements, leases and contracts or other instruments
of viaLink except where required by law to be otherwise signed
and executed and except where the signing and execution
thereof shall be expressly delegated by the viaLink's Board or
by its Chief Executive Officer to some other person(s); and
2.2.3. Baker shall have such other powers and duties as may be
prescribed by the Board from time to time regarding his duties
and responsibilities; and
2.2.4. Baker shall have such other powers and duties as may be
reasonably necessary to carry out his duties and
responsibilities set forth in this Agreement.
3. Covenants. In order to induce viaLink to enter into this Agreement, Baker
hereby agrees as follows:
3.1. Except when he is directed to do otherwise by viaLink's Board, and
except as may be required by law, court order or subpoena, Baker shall
keep confidential and shall not divulge to any other person or entity,
during the Term of Baker's employment or thereafter, any of the
business secrets or other confidential information of or regarding
viaLink and/or its subsidiaries (i) which have not otherwise become
public knowledge, (ii) which were not already known to Baker as of the
Effective Date of this Agreement or (iii) which have not been
disclosed by viaLink to others without substantial restriction on
further disclosure. The obligations of this Subsection shall survive
the termination or expiration of this Agreement.
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3.2. All papers, books and records of every kind and description relating
to the business and affairs of viaLink, whether or not prepared by
Baker, shall be the sole and exclusive property of viaLink, and Baker
shall surrender them to viaLink at any time upon request by viaLink's
Board. The obligations of this Subsection shall survive the
termination or expiration of this Agreement.
3.3. Baker agrees that any and all inventions, developments, discoveries,
copyrightable works, or contributions thereto, including, without
limitation, any written works, software products or code, images,
designs, and/or instructions created in whole or part by Baker during
his employment with viaLink hereunder or otherwise or relating in any
way to the business of viaLink (hereinafter "Work Product") are and
shall be the sole and exclusive property of viaLink. Baker conveys,
transfers and assigns all rights, title and interest in and to any
Work Product to viaLink, and further agrees to execute any written
assignment or other agreement viaLink deems necessary at any time to
effect the foregoing and to obtain or uphold, for viaLink's benefit,
all copyright, patent, and/or other rights of viaLink in such Work
Product. The obligations of this Subsection shall survive the
termination or expiration of this Agreement.
4. Compensation. As full compensation for Baker's services hereunder and in
exchange for his promises contained herein, viaLink shall compensate Baker
in the manner set forth below. The amounts set forth below shall be subject
to any withholding or other deductions required by law.
4.1. Beginning on October 1, 1998 Baker shall receive a biweekly salary of
$6,735.65 ($175,127 per year), paid two weeks in arrears. Baker's
salary may not be decreased during the Term of this Agreement without
the prior, written consent of Baker.
4.2. Beginning with first quarter of quarter of 1999 and for each quarter
of the Term of this Agreement, but subject to the terms and conditions
of this Section 4.2 and all of its Subsections, Baker shall be
eligible to receive a quarterly bonus equal to one/eighth of his then
current annual salary ("Bonus"). Notwithstanding anything to the
contrary in this Agreement, to be eligible to receive a Bonus for any
given quarter, Baker must fully meet the criteria for such Bonus as is
established by viaLink's Board for that quarter. The Bonus criteria
for the first quarter of 1999 is set forth in Subsection 4.2.1 of this
Agreement. The Bonus criteria for quarters subsequent thereto shall be
established pursuant to the procedure as set forth in Subsection
4.2.2.
4.2.1. The Bonus criteria for the first quarter of 1999 is that
viaLink's Board must approve and viaLink must execute the
documents required by a transaction(s) which have will bring
investment(s)
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and/or financing into viaLink of at least five million dollars
($5,000,000).
4.2.2. The Bonus criteria for each quarter of the Term of this
Agreement after the first quarter of 1999 shall be determined
as follows:
4.2.2.1. At least forty five (45) days, but not earlier than
sixty (60) days, prior to the beginning of each such
quarter, the officer to whom Baker reports or such
other designee of the Board shall submit to
viaLink's Board his recommendations for Baker's
eligibility criteria for such Bonus for the upcoming
quarter. The Board, at its discretion, may direct
Baker to make such recommendations.
4.2.2.2. At least fifteen (15) days prior to the beginning of
each such quarter, after receipt of such
recommendations pursuant to Subsection 4.2.2. 1,
viaLink's Board shall establish such criteria as it,
in its sole discretion, deems appropriate for
Baker's eligibility for the Bonus for that quarter
and advise Baker of the same.
4.2.2.3. If the Board directs Baker to make the
recommendations required by Subsection 4.2.2.1
hereof and Baker fails to meet his obligations under
Subsection 4.2.2.1 of this Agreement, no Bonus shall
be due to Baker for that quarter.
4.2.2.4. If Baker has met his obligations under Subsection
4.2.2.1 of this Agreement, and if viaLink's Board
fails to meet its obligations under Subsection 4.2.2
of this Agreement, Baker shall be automatically
eligible to receive his Bonus for that quarter.
4.2.3. Notwithstanding anything to the contrary in this Agreement, to
be eligible for a Bonus for a given quarter, Baker, except as
otherwise stated in Section 6 of this Agreement, must be an
employee of viaLink as of the end of such quarter.
4.2.4. Each quarterly Bonus, if any, shall be calculated and paid
quarterly; provided, however, the payment due hereunder for
any quarter for which a Quarter has been earned shall be paid
not later than the next regular payroll after the sixtieth
(60th) day following the end of each quarter for which the
Bonus is earned. If Baker fails to earn a Bonus for any given
quarter, the Bonus which otherwise could have been earned for
that quarter is not carried forward to the next or any
subsequent quarter.
4.3 Baker shall be entitled to four (4) weeks vacation during each
calendar year of the Term of this Agreement.
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4.4 Baker shall be eligible for all viaLink group benefits programs
provided to other viaLink employees.
4.5 As additional consideration, viaLink shall grant to Baker options to
purchase one hundred and fifty thousand (150, 000) shares of viaLink
common stock in accordance with the Stock Option Agreement(s) attached
hereto as Exhibits 1 and 2.
4.6. In the event that Baker becomes subject to any excise tax imposed
pursuant to Section 280(G) of the Internal Revenue Code or any
amendment thereto, as a result of the payments made to Baker under
this Agreement or as a result of the acceleration of any of the stork
options granted under this Agreement, viaLink shall reimburse Baker
for such portion of any such tax which is attributable thereto. Upon
request by viaLink, Baker shall provide to viaLink such documentation
as viaLink reasonably requests to support the demand of Baker for such
reimbursement.
5. Noncompetition.
5.1 If viaLink terminates this Agreement for cause (as defined in Section
6 of this Agreement) or if Baker terminates this Agreement for other
than cause, for a period of one (1) year after the termination of this
Agreement, Baker shall not, directly or indirectly, alone, or as a
partner, officer, director, employee, stockholder, consultant or agent
of any other corporation, partnership or other business organization,
knowingly solicit the employment of, or hire, any employee of viaLink,
or any viaLink subsidiary, or cause any such employee to terminate
such employee's relationship with viaLink or any viaLink subsidiary,
without the prior written approval of viaLink.
5.2. If viaLink terminates Baker's employment without Cause, the provisions
of Section 5.1 of this Agreement shall be enforceable against Baker
only as long as Baker is receiving the compensation set forth in
Section 4.1 of this Agreement.
5.3. If viaLink terminates this Agreement for cause (as defined in Section
6 of this Agreement) or it Baker terminates this Agreement for the
uncured breach of this Agreement by viaLink, for a period of one (1)
year after the termination of this Agreement, Baker shall not,
directly or indirectly, alone, or as a partner, officer, director,
employee, stockholder, consultant or agent of any other corporation,
partnership or other business organization, knowingly solicit any of
the accounts of viaLink which were customers of viaLink during the
Term of this Agreement unless such solicitation is undertaken on
behalf of a business venture which does not compete directly with the
products or services owned, sold, manufactured, marketed, provided or
developed by viaLink. For the purposes of this
5
<PAGE>
Subsection, a business shall be deemed to be in competition with
viaLink only if the products or services of such business are
substantially similar in purpose, function or capability to the
products or services then being developed, manufactured, marketed,
provided or sold by viaLink.
5.4. If viaLink terminates Baker's employment without Cause, the provisions
of Section 5.3 of this Agreement shall be enforceable against Baker
only as long as Baker is receiving the compensation set forth in
Section 4.1 of this Agreement.
5.5. The parties agree that Baker's services are unique and that any breach
or threatened breach of the provisions of this Agreement will cause
irreparable injury to viaLink and that money damages will not provide
an adequate remedy. Accordingly, viaLink shall, in addition to other
remedies provided by law, but subject nonetheless to the terms and
conditions of this Agreement, be entitled to such equitable and
injunctive relief as may be necessary to enforce the provisions of
this Agreement against Baker or any person or entity participating in
such breach or threatened breach. Nothing contained herein shall be
construed as prohibiting viaLink from pursuing any additional remedies
available to it, at law or in equity, for such breach or threatened
breach including any recovery of damages from Baker and the immediate
termination of his employment.
5.6. During the Term of this Agreement, Baker shall not knowingly engage
in, and shall not knowingly solicit any employees of viaLink or its
subsidiaries or other affiliates to engage in any commercial
activities which are in any way in competition with the activities of
viaLink, or which in any way materially interfere with the performance
of his or any such other employee's duties or responsibilities to
viaLink.
5.7. Sections 5.1 through 5.5 of this Agreement shall survive the
expiration or termination of this Agreement.
6. Duration and Termination.
6.1. Unless earlier terminated pursuant to the provisions hereof, the
initial Term ("Initial Term") of this Agreement shall commence on
October 1, 1998 and shall continue through September 30, 2001, and the
same shall be automatically renewed on a year to year basis thereafter
("Extended Term") unless one party hereto notifies the other party
hereto in writing, at least six (6) months prior to the end of the
then current Initial Term or Extended Term, as the case may be, that
such party giving the notice will terminate this Agreement at the end
thereof. For purposes of this Agreement, unless otherwise indicated by
the context of the reference, the word "Term" shall refer collectively
to both the Initial Term and to any Extended Term.
6
<PAGE>
6.2. This Agreement shall immediately terminate, and all rights, benefits
and obligations hereunder shall cease, in the event of Baker's death,
except such rights of Baker which have accrued as of the date of
death.
6.3. In the event that a physician, mutually acceptable to both viaLink and
Baker, determines that Baker is unable to substantially perform his
usual and customary duties under this Agreement for more than three
(3) months in any calendar year, this Agreement shall immediately
terminate and all rights, benefits and obligations hereunder shall
cease, except such rights of Baker which have accrued as of the date
of disability.
6.4. If, and only if, Baker has fully met the Bonus criteria for the first
quarter of 1999 established by viaLink's Board for him as set forth in
Subsection 4.2.1 of this Agreement, and subject to all of the terms
and conditions of this Agreement, upon the termination of this
Agreement, unless such termination is (i) by viaLink for cause as
defined in this Agreement, (ii) by Baker other than for the uncured
breach of this Agreement by viaLink or (iii) pursuant to either
Section 6.2 or 6.3 of this Agreement or (iv) as a result of the
rejection of this Agreement by a Bankruptcy Court, Baker shall be
entitled to the following payments:
6.4.1. The continuation of his then current salary as of the
effective date of the termination (without duty to mitigate)
for the remaining portion of the then current Term of this
Agreement; and
6.4.2. The continuation of the group employee benefits available to
Baker immediately prior to his termination to the extent that
the applicable plan(s) allow for the continuation of the same
or, to the extent that such plan(s) do not allow for the
continuation of the same, a payment equal to the cost of Cobra
benefits for Baker only, if Baker elects such Cobra option.
Such reimbursement, if any, shall be due within thirty (30)
days after Baker presents proof of payment for the same to
viaLink; and
6.4.3. A one time payment, which shall by made by viaLink not later
than sixty (60) days following the quarter in which the
termination occurs, and which payment shall be equal to the
greater of (i) the Bonus due pursuant to the applicable
Subsection of Section 4.2 of this Agreement or (ii) fifteen
percent (15%) of his the salary as of the effective date of
the termination;
6.4.4. A one time lump sum payment of four hundred thousand dollars
($400,000) to be paid by viaLink not later than sixty (60)
days following the date of Baker's termination.
6.5. viaLink shall have the right to terminate this Agreement in any of the
following events, each of which shall constitute "Cause":
7
<PAGE>
6.5.1. Baker fails to earn the Bonus for the first quarter of 1999 as
set forth in Section 4.2.1 of this Agreement.
6.5.2. Baker's breach in respect of his duties under this Agreement
if such breach continues unremedied for thirty (30) days after
receipt of written notice thereof to Baker specifying in
detail the acts constituting the alleged breach and requesting
that the same be remedied; or
6.5.3. a conviction, plea of nolo contendere, plea to a lesser charge
in lieu of a felony, of a felony, a crime involving fraud or
misrepresentation, or any other crime, the effect of which is
likely to materially adversely affect viaLink, or
6.5.4. intentional violation of any Law which results in material
liability to viaLink.
6.5.5. abuse of alcohol or other drugs, or the illegal use of drugs,
which materially interferes with the performance by Baker of
his duties hereunder.
6.5.6. Notwithstanding anything to the contrary herein, no notice or
cure period is required to be given to Baker if the
termination is as a result of a violation of said Subsections
6.63, 6.6.4 or 6.6.5 of this Agreement.
6.6. Baker shall have the right to terminate this Agreement in the event of
the following:
6.6.1. viaLink's breach in respect of its duties under this Agreement
if such breach continues unremedied for thirty (30) days after
receipt of written notice thereof directed to the Chairman of
viaLink's Board specifying in detail the acts constituting the
alleged breach and requesting that the same by remedied.
7. Successors and Assigns. The rights and obligations of viaLink hereunder
shall run in favor of and shall be binding upon viaLink, its successors,
assigns, nominees or other legal representatives. Termination of Baker's
employment shall not operate to relieve him of any remaining obligations
hereunder. Baker may not assign his rights and obligations hereunder.
8. Notices. All notices, requests, demands and other communications hereunder
must be in writing and shall be given (i) by hand delivery, (ii) by
telecopier, (iii) by overnight courier such as Federal Express, or (iv) by
certified mail, return receipt requested, postage prepaid, to the other
party. The Notice in each case shall be addressed as follows:
8
<PAGE>
8.1. if to viaLink: The viaLink Company, 13800 Benson Road, Edmond,
Oklahoma 73013 Attention to viaLink's then current Chairman of its
Board; and
8.2. if to Baker: Robert N. Baker, 3209 Adobe, Edmond, Oklahoma 73013.
The address at which a party wants Notice under this Agreement to be sent
may be changed by that party by giving Notice thereof to the other party
pursuant to this Section 8.
9. Severabili1y. If any provision of this Agreement shall be adjudged by any
court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder
of this Agreement.
10. Entire Understanding . This Agreement embodies the entire understating of
the parties hereto, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter. No change,
alteration or modification hereof may be made except in a writing, signed
by both parties hereto.
11. Captions. The headings in this Agreement are for convenience and reference
only and shall not be construed as part of this Agreement or to limit or
otherwise affect the meaning hereof.
12. Execution in Counterparts . This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed to be original, but
all such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
13. Choice of Law. Jurisdiction over disputes with regard to this Agreement
shall be exclusively in the courts of the State of Oklahoma, and this
Agreement shall be construed in accordance with and governed by the laws of
the state of Oklahoma without giving effect to principles of conflicts of
law hereunder.
14. Attorney Fees. In the event of any litigation between the parties hereto,
the prevailing shall be entitled to all of its costs incurred in such
litigation, including reasonable attorneys' fees.
15. Nonwaiver. The waiver of any violation or breach of this Agreement by
either party hereto shall not be deemed to be a waiver of any continuing
violation or breach or a waiver of any other violation or breach of this
Agreement.
16. Arbitration. Notwithstanding anything to the contrary in this Agreement,
any controversy or claim arising out of or relating to this Agreement, or
its breach, or its validity or interpretation, except claims for injunctive
relief and claims involving necessary third parties who refuse to
participate shall be settled by binding arbitration in accordance the then
current Commercial Arbitration Rules
9
<PAGE>
of the American Arbitration Association ("AAA") subject, however, to the
following:
16.1. The location for the arbitration shall be at such location as agreed
by the parties in Oklahoma County, Oklahoma or if the parties cannot
agree at such location in Oklahoma County, Oklahoma as designate by
the AAA.
16.2. Such arbitration shall be heard and determined by a panel of three
(3) arbitrators in accordance with the then current rules or
regulations of the AAA relating to commercial disputes ("Rules"). All
arbitrators shall be selected pursuant to the then current Rules
thereof within thirty (30) days after the filing of a demand for
arbitration. Each arbitrator shall be a person with experience in
handling disputes relating to employment disputes regarding
management or executive personnel.
16.3. The hearing on the arbitration shall be heard not later than six (6)
months after the demand for arbitration has been made by a party.
16.4. The arbitration award shall be binding on the parties and may be
enforced in any court of competent jurisdiction.
16.5. The prevailing party in such arbitration shall be entitled to recover
its reasonable attorney fees and costs incurred in such arbitration
proceeding.
17. Exclusivity. Unless specifically otherwise stated in this Agreement, the
rights and remedies granted to the parties in this Agreement are exclusive.
18. Limitation of Actions. No arbitration or action, regardless of form,
relating to or arising out of this Agreement may be brought by either party
more than three (3) years after such party knew or should have known of the
occurrence of the event(s) which gave rise to any claim, demand or cause of
action.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE viaLink Company Baker
By:
------------------------------ ------------------------------
Robert N. Baker
Its:
-----------------------------
Date: Date:
---------------------------- -------------------------
10
<PAGE>
EXHIBIT 10.19
SECURED PROMISSORY NOTE
-----------------------
FOR VALUE RECEIVED, DCM Company, Inc. an Oklahoma corporation with an
address of c/o The Danley Law Firm, P.C., 3233 E. Memorial Rd, Suite 101,
Edmond, Oklahoma, 73013 ("DCM") and ijob, Inc., an Oklahoma corporation with an
address of c/o The Danley Law Firm, P.C., 3233 E. Memorial Rd, Suite 101,
Edmond, Oklahoma, 73013 (`IJOB") (hereinafter sometimes jointly referred to as
the "Makers") do hereby unconditionally promise to pay to the order of The
viaLink Company, an Oklahoma corporation, at 13800 Benson Road, Edmond,
Oklahoma, 73013-6417 ("viaLink"), or at such other place as may be designated in
writing by the holder of this Secured Promissory Note ("Note"), the principal
sum of Eight Hundred Thousand and No/100's Dollars ($800,000) together with
interest accrued thereon at the rate of eight percent (8%) simple interest per
annum.
The indebtedness evidenced by this Note shall be repaid on earlier of the
following events:
A. December 31, 2008; or
B. The date upon which David Mitchell owns less than fifty-one
percent (51%) of the voting stock and/or voting rights in DCM; or
C. The material breach by DCM or IJOB of any of the material terms,
covenants, conditions or obligations of the Stock Purchase Agreement, a
copy of which is attached hereto as Exhibit 1; or
D. The material breach by DCM or IJOB of any of the material terms,
covenants, conditions or obligations of the Security And Pledge Agreement,
a copy of which is attached hereto as Exhibit 2; or
E. The making of any post-judgment levy against or seizure,
garnishment or attachment of any material portion of the collateral
securing this Note; or
F. The dissolution or termination of existence of either DCM or IJOB
or the merger or combination thereof with any other entity that results in
David Mitchell owning less than 51% of the voting stock and/or voting
rights in the successor or resulting entity; or
G. The appointment of a receiver over any material part of the
property of either DCM or IJOB; or
H. The assignment of property of DCM or IJOB for the benefit of
creditors; or
I. The commencement of any proceedings under any bankruptcy or
insolvency laws by or against IJOB or DCM and, in the event any such
appointment or proceedings are
<PAGE>
commenced involuntarily, the failure within thirty (30) days to have such
appointment or proceedings discharged.
J. The sale of all or substantially all of the assets of IJOB that
results in David Mitchell owning less than 51% of the voting stock and/or
voting rights of the purchaser of said assets.
Makers, or either of them, have the right to prepay the principal balance
of this Note at any time, in whole or in part.
The undersigned Makers agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or enforce any of
viaLink's rights hereunder or under any instrument securing payment of this
Note, DCM and IJOB will pay to viaLink its reasonable attorney's fees and all
court costs and other expenses incurred in connection therewith.
This Note is given by DCM and IJOB and accepted by viaLink pursuant to a
transaction contracted, negotiated, consummated and to be performed in Oklahoma
County, Oklahoma and described in said Stock Purchase Agreement. This Note
evidences the indebtedness of DCM and IJOB to viaLink as described in said Stock
Purchase Agreement. The payment of this Note is to be secured by certain
collateral as defined in the Stock Purchase Agreement and the Security and
Pledge Agreement executed pursuant thereto. This Note is to be construed
according to the laws of the State of Oklahoma.
DCM, IJOB, endorsers, sureties, guarantors and all other persons who may
become liable for all or any part of this obligation severally waive presentment
for payment, protest and notice of nonpayment. Said parties consent to any
extension of time (whether one or more) of payment hereof, any renewal (whether
one or more) hereof, release of all or any part of the security for the payment
hereof, release of any party liable for payment of this obligation or any
amendment or modification thereto. Any such extension, renewal, release,
amendment or modification may be made without notice to any such party and
without discharging said party's liability hereunder.
IN WITNESS WHEREOF, DCM and IJOB have executed this instrument to be
effective as of December 31/st/, 1998.
DCM Company, Inc. IJOB, Inc.
By: /s/ David C. Mitchell By: /s/ David C. Mitchell
------------------------- ---------------------------
David C. Mitchell David C. Mitchell
Its: President Its: President
<PAGE>
EXHIBIT 10.20
SECURITY AND PLEDGE AGREEMENT
-----------------------------
This Security and Pledge Agreement ("Agreement") is made effective as of
the 31st day of December, 1998, by and between , DCM Company, Inc. an Oklahoma
corporation with an address of c/o The Danley Law Firm, P.C., 3233 E. Memorial
Rd, Suite 101, Edmond, Oklahoma 73013, ("DCM") and ijob, Inc., an Oklahoma
corporation with an address of c/o The Danley Law Firm, P.C., 3233 E. Memorial
Rd, Suite 101, Edmond, Oklahoma 73013, (`IJOB") (hereinafter sometimes jointly
referred to as the "Debtors"), for the benefit of The viaLink Company, an
Oklahoma corporation, at 13800 Benson Road, Edmond, Oklahoma, 73013-6417
("viaLink")(hereinafter also referred to as the "Secured Party").
FOR VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby
acknowledged, Debtors hereby jointly and severally covenant and agree with
Secured Party as follows:
1. Recitations. Of even date herewith, the Debtors have entered into a certain
Stock Purchase Agreement with the Secured Party (the "Stock Purchase
Agreement"), and have made, executed and delivered to the Secured Party their
written promissory note (the "Note") in the stated principal amount of $800,000.
This Agreement is intended to provide additional Collateral security for the
repayment of all of the Debtors obligations evidenced by the Note.
2. Definitions. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in the Uniform Commercial Code as enacted by the
State of Oklahoma (the "UCC") is used in this agreement with the same meaning;
provided that if any definition given a term in Chapter 9 of the UCC conflicts
with the definition given that term in any other chapter of the UCC, the Chapter
9 definition shall prevail. As used herein the following terms shall have the
meanings defined below:
2.1 Collateral: The property subject to a security interest in favor of the
Secured Party including, but not limited to, the items set forth in Section 3
hereof.
2.2 Default: As set forth in Section 7 hereof.
2.3 left blank intentionally
2.4 Indebtedness: All indebtedness, obligations and liabilities arising
from or pursuant to the Stock Purchase Agreement or the Note, or this Agreement,
and all present and future amendments thereto and restatements thereof, together
with all interest accruing thereon and costs, expenses, and attorney's fees
incurred in the enforcement thereof or collection of amounts due thereunder.
2.5 Laws: All statutes, laws, ordinances, regulations, orders, writs,
injunctions or decrees of the United States or of any state, commonwealth,
nation, territory, possession, county, parish, municipality or Tribunal.
2.6 Liens: Any lien, mortgage, security interest, charge or encumbrance of any
kind, including, without limitation, the right of a vendor, lessor, or similar
party under any conditional sales agreement or other title retention agreement
or lease substantially equivalent thereto, any production payment,
1
<PAGE>
and any other right of, or arrangement with, any creditor to have his claim
satisfied out of any property or assets, or the Proceeds therefrom, prior to the
general creditors of the owner thereof.
2.7 Documents: The term "Documents" means this Agreement, the Stock Purchase
Agreement, the Note, all promissory notes, security agreements, deeds of trust,
mortgages, guaranties, and other agreements, documents and instruments,
delivered in connection herewith or therewith, together with any other documents
evidencing, assuring, or securing all or any part of the Indebtedness and all
amendments to, and renewals and extensions of, any of the foregoing.
2.8 Material Adverse Effect: The term "Material Adverse Effect" means any set
of circumstances or events which (i) will or could reasonably be expected to
have any adverse and material effect whatsoever upon the validity, performance,
or enforceability of any Documents, (ii) is or could reasonably be expected to
be material and adverse to the financial condition or business operations of
Debtors, as represented to the Secured Party in the Debtors current financial
statements, or to the prospects of Debtors, (iii) will or could reasonably be
expected to impair Debtors ability to materially fulfill its obligations under
the terms and conditions of the Documents, or (iv) will or could reasonably be
expected to cause a Default.
2.9 Note: That certain Promissory Note made payable by Debtors in favor of the
Secured Party in an amount in the amount of $800,000 together with any and all
renewals, extensions, modifications and restatements thereof.
2.10 Person: The term "Person" means any individual, firm, corporation,
assocpartnership, joint venture, Tribunal or other entity.
2.11 Proceeds: The term "Proceeds" means whatever is received upon the sale,
exchange, collection or other disposition of Collateral or Proceeds. An
instrument payable by reason of loss or damage to Collateral is Proceeds, except
to the extent that it is payable to a person other than a party to this security
agreement. Money, checks, deposit accounts and the like are "Cash Proceeds." All
other Proceeds are "Non-cash Proceeds."
2.12 Rights: The term "Rights" means rights, remedies, powers and privileges.
2.13 Security Interest: The term "Security Interest" means the Security
Interest granted and the pledge and assignment made under Section 4 hereof.
2.14 Taxes: The term "Taxes" means all taxes, assessments, fees, levies,
imposts, duties, deductions, withholdings, or other charges of any nature
whatsoever from time to time or at any time imposed by any Law or Tribunal.
2.15 Tribunal: The term "Tribunal" means any court or governmental departments,
commission, board, bureau, agency or instrumentality of the United States or any
state, commonwealth, nation, territory, possession, county, parish or
municipality, whether now or hereafter constituted and/or existing.
3. Collateral. As used herein, the term "Collateral" shall mean the following
property of the Debtors, whether now owned or hereafter acquired:
2
<PAGE>
3.1 All furniture, fixtures, Equipment (as such term is used on the UCC),
contract rights, accounts receivable, license and sublicense fees, General
Intangibles (as such term is used on the UCC), software in both executable and
source code formats, hardware and Accounts (as such term is used on the UCC),
now owned or hereafter acquired by the Debtors; and
3.2 All present and future increases, profits, combinations, reclassifications,
improvements, and products of, accessions, attachments, and other additions to,
and substitutes and replacements for, all or any part of the Collateral
heretofore described; provided, however, in no event is any restriction
hereunder intended to prevent distributions by the Debtors to their shareholders
in amounts necessary to pay federal and state income taxes on their allocable
share of taxable income; and
3.3 All present and future cash and noncash Proceeds, and other Rights arising
from or by virtue of, or from the voluntary or involuntary sale or other
disposition of, or collections with respect to, or insurance Proceeds payable
with respect to, or Proceeds payable by virtue of warranty or other claims
against manufacturers of, or claims against any other Persons with respect to,
all or any part of the Collateral; and
3.4 All present and future security for the payment to Debtors of any of the
Collateral heretofore described and goods which gave or will give rise to any of
such Collateral or are evidenced, identified or represented therein or thereby.
The description of Collateral contained herein shall not be deemed to permit any
action prohibited by this Agreement or by terms incorporated in this Agreement.
4. Security Interest. In order to secure the full and complete payment and
-------------------
performance of the Indebtedness when due, Debtors hereby jointly and severally
grant to Secured Party and agree to maintain a first, prior and perfected
Security Interest in the Collateral and pledge and assign the Collateral to
Secured Party, all upon and subject to the terms and conditions of this
Agreement. Such Security Interest is granted and pledge and assignment are made
as security only and shall not subject Secured Party to, or transfer or in any
way affect or modify, any obligation of Debtors with respect to any of the
Collateral or any transaction involving or giving rise thereto.
5. Representations and Warranties. Debtors represent and warrant to Secured
--------------------------------
Party that Debtors principal place of business is c/o The Danley Law Firm,
P.C., 3233 E. Memorial Rd, Suite 101, Edmond, Oklahoma 73013, the present and
foreseeable location of Debtors books and records concerning any of the
Collateral and where Debtors are entitled to receive notices hereunder, and all
such books, records and Collateral are in Debtors possession; and (ii) Debtor
own all presently existing Collateral, and will acquire all hereafter-acquired
Collateral, free and clear of all Liens except permitted liens.
The delivery at any time by Debtors to Secured Party of Collateral or of
additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Debtors to Secured Party hereunder that the
representations and warranties of this Section 5 are true and correct with
respect to each item of such additional Collateral and each items of Collateral
described in such additional descriptions.
3
<PAGE>
6. Certain Covenants. Until the Indebtedness is paid and performed in full,
-------------------
unless Debtors receives a prior written notification from Secured Party that
Secured Party does not object to a deviation, Debtors covenant and agree with
Secured Party that Debtors will:
6.1 Deliver to Secured Party quarterly unaudited financial statements within 45
days after the end of each respective quarter and other information from
time to time and at any time as the Stock Purchase Agreement provides,
containing such information as
Secured Party may deem necessary or appropriate in its sole discretion.
6.2 Allow Secured Party to inspect any of the properties of Debtors and to
discuss any of the affairs, conditions and finances of Debtors with Debtors
or any employee of Debtors, from time to time during reasonable business
hours.
6.3 Pay when due all Taxes, debts, and other obligations of Debtors, unless the
payment thereof is being contested in good faith by appropriate legal
proceedings and any enforcement of any Liens or security interests securing
same have been effectively stayed.
6.4 Pay, upon demand by Secured Party, all costs, fees, and expenses paid or
incurred by Secured Party incident to the Documents (including, but not
limited to, the reasonable fees and expenses of counsel to Secured Party in
connection with the the enforcement of the obligation of Debtors or
exercise of any Rights (including, but not limited to, reasonable
attorney's fees and court costs), all of which shall be part of the
Indebtedness.
6.5 Promptly notify Secured Party of any change in any fact or circumstances
represented or warranted by Debtors with respect to any of the Collateral,
the Indebtedness or otherwise.
6.6 Promptly notify Secured Party of any claim, action or proceeding affecting
title to all or any of the Collateral or the Security Interest or which
could, in the event of an unfavorable outcome have a Material Adverse
Effect on the financial condition, business, or prospects of Debtors, and,
at the request of Secured Party, appear in and defend, at Debtors expense,
any such action or proceeding.
6.7 From time to time promptly execute and deliver to Secured Party all such
other assignments, certificates, supplemental documents, and financing
statements, and do all other acts or things as Secured Party may reasonably
request in order to more fully create, evidence, perfect, continue, and
preserve the first priority and perfection of the Security Interest.
6.8 Not use any of the Collateral, or permit the same to be used, for any
unlawful purpose or in any manner inconsistent with the provisions or
requirements of any policy of insurance thereon.
6.9 On a quarterly basis deliver to Secured Party within 45 days after the end
of each respective quarter a certificate signed by an officer(s) of each of
the Debtors warranting that the Debtors
4
<PAGE>
are in compliance with the terms and conditions of the Note and this
Agreement in the form attached hereto.
7. Default. As used herein "Default" means the occurrence of any one or more
of the following:
7.1 The failure or refusal of Debtors to pay principal of or interest on the
Indebtedness, or any part thereof, as the same becomes due;
7.2 The failure or refusal of Debtors to punctually and properly perform,
observe and comply with any material covenant, agreement or condition
contained in the Promissory Note or the Stock Purchase Agreement or this
Agreement which the Debtors do not cure before the date the certificate
defined in Section 6.9 is to be delivered to Secured Party;
7.3 The discovery by Secured Party that any statement, representation or
warranty in the Stock Purchase Agreement or any document pursuant to this
Agreement is false, misleading or erroneous in any material respect;
7.4 Notwithstanding anything herein to the contrary, the following shall not
constitute a Default hereunder and the Debtors shall be able to do the
following without the prior consent of the Secured Party:
(a) make distributions for the payment of income taxes as referenced in
paragraph 3.2 herein;
(b) pay reasonable and fair compensation to officers and employees of the
Debtors;
(c) obtain and maintain a reasonable line of credit and other loans for
the operation of the business of the debtors;
(d) expend funds of the Debtors for the reasonable operation of the
business of the Debtors;
(e) expend funds of the Debtors for the growth of the Debtors' business at
a rate customary or reasonable for the nature of Debtors' business;
(f) expend funds of the Debtors for premiums for life insurance on the
lives of key officers and employees, provided however any such
insurance purchased on the life of David Mitchell shall name the
Secured Party as the primary beneficiary on such policy(s) up to an
amount covering the Indebtedness.
8. Default, Remedies; Application of Proceeds. Should a Default occur and be
--------------------------------------------
continuing, Secured Party may do any one or more of the following:
8.1 Declare the entire unpaid balance of the Indebtedness, or any part thereof,
immediately due and payable, whereupon it shall be due and payable;
8.2 Reduce any claim to judgment;
8.3 Foreclose any of all Liens held by Secured Party and/or otherwise realize
upon any and all of the Rights Secured Party may have in and to the
Collateral, or any part thereof; and
8.4 Exercise any and all other legal or equitable Rights afforded by the Stock
Purchase Agreement, the Promissory Note, the UCC, the Laws of the State of
Oklahoma, or any other
5
<PAGE>
jurisdiction as Secured Party shall deem appropriate, or otherwise,
including, but not limited to (i) the Right to bring suit or other
proceedings before any Tribunal either for specific performance of any
covenant or condition contained in any of the Documents or in aid of the
exercise of any covenant or condition contained in any of the Documents or
in aid of the exercise of any Right granted to Secured Party in any of the
Loan Documents; (ii) the Right to require Debtors to assemble all or part
of the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to Debtors and
Secured Party; (iii) the right to surrender any policies of insurance on
all or part of the Collateral and to receive and to apply the unearned
Indebtedness; (iv) the Right to apply by appropriate judicial proceedings
for appointment of a receiver for all or part of the Collateral (and
Debtors hereby consents to any such appointment); and (v) the Right to
apply to the Indebtedness any cash held by Secured Party under this
Agreement.
9. Notice. Reasonable notification of the time and place of any public sale of
------
the Collateral, or reasonable notification of the time after which any private
sale or other intended disposition of the Collateral is to be made, shall be
sent to Debtors and to any other Person entitled to notice under the UCC and in
accordance with the requirements of the UCC. It is agreed that notice sent or
given not less than ten (10) calendar days prior to the taking of the action to
which the notice relates is reasonable notification and notice for the purposes
of this Section.
10. Application of Proceeds In the event of a sale or other disposition of the
------------------------
Collateral pursuant to Section 8, Secured Party shall apply Proceeds in the
following order: (i) First, to the payment of all its expenses incurred in
retaking, holding and preparing any of the Collateral for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in actually
selling or disposing of the same (all of which are part of the Indebtedness) and
(ii) Second, toward payment of the balance of the Indebtedness in such order and
manner as Secured Party may direct. If the Proceeds are insufficient to pay the
Indebtedness in full, Debtors shall remain liable for any deficiency.
11. Other Rights of Secured Party
-----------------------------
11.1 Collateral Protection. In the event Debtors shall fail to pay when due all
-----------------------
Taxes on any of the Collateral, or to preserve the priority and perfection
of the Security Interest in any of the Collateral, or to keep the
Collateral insured as required by the Stock Purchase Agreement, or
otherwise fail to perform any of its obligations under the Documents with
respect to the Collateral, then Secured Party may, at its option, but
without being required to do so, pay such Taxes, prosecute or defend any
suits in relation to the Collateral, and/or insure and keep insured the
Collateral in any amount deemed appropriate by Secured Party, and/or take
all other action which Debtors is required, but have failed or refused, to
take under the Documents. Any sum which may be expended or paid by Secured
Party under this sub-section (including, without limitation, court costs
and attorney's fees) shall bear interest from the dates of expenditure or
payment at a rate per annum. equal to the Default Rate until fully paid,
and together with such interest, shall be payable by Debtors to Secured
Party upon demand and shall be part of the Indebtedness.
11.2 Use and Operation of Collateral. Should any Collateral come into the
-------------------------------
possession of Secured Party pursuant to Section 8 hereof, Secured Party may
use or operate such Collateral for the
6
<PAGE>
purpose of preserving it or its value pursuant to the order of a court of
appropriate jurisdiction or in accordance with any other Rights held by
Secured Party in respect of such Collateral. Debtors covenants to promptly
reimburse and pay to Secured Party, at Secured Party's request, the amount
of all reasonable expenses (including, without limitation, the cost of any
insurance and payment of taxes or other charges) incurred by Secured Party
in connection with its custody and preservation of Collateral, and all such
expenses, costs, taxes, and other charges shall bear interest until repaid
at a rate per annum. equal to the Default Rate, and together with such
interest, shall be payable by Debtors to Secured Party upon demand and
shall become part of the Indebtedness. However, the risk of accidental loss
or damage, to, or diminution of value of, Collateral is on Debtors, and
Secured Party shall have no liability whatever for failure to obtain or
maintain insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to the risks insured. With respect to
Collateral that is in the possession of Secured Party, Secured Party shall
have no duty to fix or preserve Rights against prior parties to such
Collateral and shall never be liable for any failure to use diligence to
collect any amount payable in respect of such Collateral, but shall be
liable only to account to Debtors for what it may actually collect or
receive thereon.
11.3 Purchase Money Collateral. To the extent that Secured Party has advanced or
-------------------------
will advance funds to or for the account of Debtors to enable Debtors to
purchase or otherwise acquire rights in Collateral, Secured Party, at its
option, may pay such funds (i) directly to the Person from whom Debtors
will make such purchase or acquire such Rights, or (ii) to Debtors, in
which case Debtors covenants to promptly pay the same to such Person, and
forthwith furnish to Secured Party evidence satisfactory to Secured Party
that such payment has been made from the funds so provided by Secured Party
for such payment.
11.4 Subrogation. If any of the Indebtedness is given in renewal or extension or
-----------
applied toward the payment of indebtedness secured by any Lien, Secured
Party shall be, and is hereby, subrogated to all of the Rights, titles,
interests, and Liens securing the indebtedness so renewed, extended or
paid.
11.5 Indemnification. Debtors hereby assume all liability for the Collateral,
-----------------
for the Security Interest, and for any use, possession, maintenance and
management of, all or any of the Collateral, including, without limitation,
any Taxes arising as a result of, or in connection with, the transactions
contemplated herein, and agrees to assume liability for, and to indemnify
and hold Secured Party harmless from and against, any and all claims,
causes of action, or liability, for injuries to or deaths of persons and
damage to property, howsoever arising from or incident to such use,
possession, maintenance and management, whether such Persons be agents or
employees of Debtors or of third parties, or such damage be to property of
Debtors or of others. Debtors agrees to indemnify, save and hold Secured
Party harmless from and against, and covenant to defend Secured Party
against, any and all losses, damages, claims, costs, penalties, liabilities
and expenses, including, without limitation, court costs and attorney's
fees, howsoever arising or incurred because of, incident to, or with
respect to Collateral or any use, possession, maintenance or management
thereof.
11.6 Cumulative Rights, Waivers. The acceptance by Secured Party of part payment
----------------------------
on the Indebtedness and/or any delay by Secured Party in exercising any
Right available to it shall not be deemed to be a waiver of any Default
then existing, and no waiver by Secured Party of
7
<PAGE>
any Default shall be deemed to be a waiver of any other then existing or
subsequent Default. All Rights available to Secured Party under the
Documents shall be cumulative of, and in addition to, all other Rights
granted to Secured Party at law or in equity, whether or not the
Indebtedness be due and payable and whether or not Secured Party has
instituted any suit for collection or other action in connection with the
Documents, any sums spent by Secured Party pursuant to the exercise of any
Right provided herein shall become part of the Indebtedness and shall bear
interest at a rate per annurn equal to the Default Rate.
12. Miscellaneous.
--------------
12.1 Heading. The headings, captions and arrangements used herein are, unless
-------
specified otherwise, for convenience only and shall not be deemed to limit,
amplify or modify the terms of the Documents, nor affect the meaning
thereof.
12.2 Communications. Unless specifically otherwise provided, whenever any of the
--------------
Documents requires or permits any consent, approval, notice, request or
demand from one party to another, such communication must be in writing to
be effective and shall be deemed to have been given on the day actually
delivered or, if mailed, on the second business day after it is enclosed in
an envelope, addressed to the party to be notified at the mailing address
stated below to the attention of the officer executing this Agreement (or
to such other address and to the attention of such other officer as may
have been designated by written notice), properly stamped, sealed and
deposited in the appropriate official postal service.
If to viaLink:
Lewis B. Kilbourne
Chief Executive Officer
The viaLink Company
13800 Benson Road
Edmond, OK 73013
If to IJOB or DCM:
David C. Mitchell, President
c/o The Danley Law Firm, P.C.
3233 East Memorial Road, Suite 101
Edmond, OK 73013
12.3 Survival. All covenants, agreements, undertakings, representations and
--------
warranties made in any of the Documents shall survive all closings under
the Documents and, except as otherwise indicated, shall not be affected by
any investigation made by any party.
12.4 Governing Law. The Documents are being executed and delivered, and are
-------------
intended to be performed, in Oklahoma County, State of Oklahoma, and the
Laws of such state and of the United States of America shall govern the
Rights and duties of the parties hereto and the
8
<PAGE>
validity, construction, enforcement and interpretation of the Documents,
except to the extent otherwise specified in any of the Documents.
12.5 Invalid Provisions. If any provision of any of the Documents is held to be
------------------
illegal, invalid or unenforceable under present or future Laws effective
during the term thereof, such provision shall be fully severable; the
appropriate Loan shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part thereof, and
the remaining provisions thereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or
by its severance therefrom. Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as a part of
such Documents a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
12.6 Term. Upon full and final payment and performance of the Indebtedness, this
----
Agreement shall thereafter terminate upon receipt by Secured Party of
Debtors written notice of such termination; provided that no obligor, if
any, on any of the Collateral shall ever be obligated to make inquiry as to
the termination of this Agreement, but shall be fully protected in making
payment directly to Secured Party.
12.7 Actions Not Releases. The Security Interest and Debtors obligations and
--------------------
Secured Party's Rights hereunder shall not be released, diminished,
impaired or adversely affected by the occurrence of any one or more of the
following events: (i) the taking or accepting of any other security or
assurance for any of all of the Indebtedness; (ii) any release, surrender,
exchange, subordination or loss of any security or assurance at any time
existing in connection with any or all of the Indebtedness; (iii) the
modification of, amendment to, or waiver of compliance with any terms of
any of the other Documents without the notification or consent of Debtors,
except as required therein (the right to such notification and/or consent
being herein specifically waived by Debtors); (iv) the insolvency,
bankruptcy or lack of corporate or trust power of any party at any time
liable for the payment of any or all of the Indebtedness, whether now
existing or hereafter occurring; (v) any renewal, extension and/or
rearrangement of the payment of any or all of the Indebtedness, either with
or without notice to or consent of Debtors, or any adjustment, indulgence,
forbearance or compromise that may be granted or given by Secured Party to
Debtors; (vi) any neglect, delay, omission, failure or refusal of Secured
Party to take or prosecute any action in connection with any other
agreement, document, guaranty or instrument evidencing, securing or
assuring the payment of all or any of the Indebtedness; (vii) any failure
of Secured Party to notify Debtors of any renewal, extension or assignment
of the Indebtedness or any part thereof, or the release of any security, or
of any other action taken or refrained from being taken by Secured Party
against Debtors or any new agreement between Secured Party and Debtors, it
being understood that Secured Party shall not be required to give Debtors
any notice of any kind under circumstances whatsoever with respect to or in
connection with the Indebtedness, including, without limitation, notice of
acceptance of this Agreement and/or any Collateral ever delivered to or for
the Accounts of Secured Party hereunder; (viii) the illegality, invalidity
or unenforceability of all of any part of the Indebtedness against any
party obligated with respect thereto by reason of the fact that the
Indebtedness, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Law, the act of creating the Indebtedness,
or any part thereof, is ultra vires, or the officers, partners or trustees
creating same acted in excess of their authority, or for any other reason;
9
<PAGE>
and (ix) if any payment by any party obligated with respect thereto is
held to constitute a preference under applicable Laws or for any other
reason Secured Party is required to refund such payment or pay the amount
thereof to someone else.
12.8 Financing Statements. Debtors shall execute financing statements in such
--------------------
form and number of counterparts as Secured Party may from time to time
request but which are reasonable and consistent with this Agreement;
provided that in the event Debtors shall fail or refuse to execute any
such financing statement, Secured Party shall be entitled to file this
Agreement or a carbon, photographic or other reproduction of this
Agreement, as a financing statement; but the failure of Secured Party to
file this Agreement or any such financing statement shall not affect the
validity and enforceability of this Agreement.
12.9 Waivers. Except to the extent expressly otherwise provided herein or in
-------
other Documents, Debtors waives (i) any right to require Secured Party to
proceed against any other Person, to exhaust its Rights in Collateral, or
to pursue any other Right which Secured Party may have; (ii) with respect
to the Indebtedness, presentment and demand for payment, protest, notice
of protest and nonpayment, and notice of the intention to accelerate; and
(iii) all Rights of marshaling in respect of any and all of the
Collateral.
12.10 Amendments. This instrument may be amended only by an instrument in
----------
writing executed jointly by Debtors and Secured Party, and supplemented
only by documents delivered or to be delivered in accordance with the
express terms hereof.
12.11 Multiple Counterparts. This Agreement may be executed in a number of
---------------------
identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
12.12 Parties Bound; Assignment. This Agreement shall be binding on Debtors and
-------------------------
Debtors successors and assigns, and shall inure to the benefit of Secured
Party and its successors and assigns. Debtors may not, without the prior
written consent of Secured Party, assign any Rights, duties or obligations
hereunder. In the event of an assignment of all or part of the
Indebtedness, the Security Interest and other Rights and benefits
hereunder, to the extent applicable to the part of the Indebtedness so
assigned, may be transferred therewith.
EXECUTED as of the day and year first herein set forth.
"Debtors":
DCM, Inc. IJOB, Inc.
By: /s/ David C. Mitchell By: /s/ David C. Mitchell
--------------------------- --------------------------
David C. Mitchell David C. Mitchell
Its: President Its: President
10
<PAGE>
The viaLink Company
By: /s/ Lewis B. Kilbourne
-----------------------------
Lewis B. Kilbourne
Its: Chief Executive Officer
11
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
None.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
The viaLink Company (formerly Applied Intelligence Group, Inc.) ("Company") on
Form S-8's (File No. 333-30073, 333-47547, 333-22227, and 333-47549) of our
report dated February 22, 1999, on our audits of the consolidated financial
statements of the Company as of December 31, 1998 and 1997, and for the years
ended December 31, 1998, 1997, and 1996, which report is included in this Annual
Report on Form 10-KSB.
PRICEWATERHOUSECOOPERS LLP
Oklahoma City, Oklahoma
March 4, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF DECEMBER 31, 1998 AND THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 715,446
<SECURITIES> 684,327
<RECEIVABLES> 165,958
<ALLOWANCES> 7,841
<INVENTORY> 0
<CURRENT-ASSETS> 2,160,384
<PP&E> 2,261,818
<DEPRECIATION> 1,541,908
<TOTAL-ASSETS> 4,597,046
<CURRENT-LIABILITIES> 1,110,467
<BONDS> 0
0
0
<COMMON> 2,827
<OTHER-SE> 3,483,752
<TOTAL-LIABILITY-AND-EQUITY> 4,597,046
<SALES> 0
<TOTAL-REVENUES> 8,230,628
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,709,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,355
<INCOME-PRETAX> 1,699,078
<INCOME-TAX> 1,049,440
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 649,638
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.21
</TABLE>
