<PAGE> 1
As filed with the Securities and Exchange Commission on September 18, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------------
HOMECOM COMMUNICATIONS, INC.
(Exact name of issuer as specified in its charter)
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<S> <C> <C>
DELAWARE 7371 58-2153309
(State of Incorporation) (Primary Standard (I.R.S. Employer Identification Number)
Industrial
Classification Code
Number)
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BUILDING 14, SUITE 100
3535 PIEDMONT ROAD
ATLANTA, GEORGIA 30305
(404) 237-4646
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------------
HARVEY W. SAX
CHIEF EXECUTIVE OFFICER
BUILDING 14, SUITE 100
3535 PIEDMONT ROAD
ATLANTA, GEORGIA 30305
(404) 237-4646
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
OBY T. BREWER III, ESQ. NEIL NOVIKOFF, ESQ.
RANDALL W. JOHNSON, ESQ. WILLKIE FARR & GALLAGHER
MORRIS, MANNING & MARTIN, L.L.P. ONE CITICORP CENTER
1600 ATLANTA FINANCIAL CENTER 153 EAST 53RD STREET
3343 PEACHTREE ROAD, N.E. NEW YORK, NEW YORK 10022-4669
ATLANTA, GEORGIA 30326 (212) 821-8000
(404) 233-7000
--------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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================================================================================================================
Amount Proposed maximum Proposed maximum Amount of
Title of each class of being offering price per aggregate offering registration
securities being registered registered (1) share (2) price (2) fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.0001 par value 1,437,500 $7.00 $10,062,500.00 $3,469.83
================================================================================================================
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(1) Includes 187,500 shares which may be purchased by the Underwriters to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE> 2
SUBJECT TO COMPLETION
, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
1,250,000 SHARES
[LOGO]
HOMECOM COMMUNICATIONS, INC.
COMMON STOCK
---------------------
All of the shares of Common Stock offered hereby are being issued and
sold by HomeCom Communications, Inc. (the "Company"). It is anticipated that
the initial public offering price will be between $6.00 and $7.00 per share.
Prior to this offering, there has been no public market for the Common Stock
of the Company. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. An application
has been filed to list the Company's Common Stock on the Nasdaq SmallCap
Market(TM) under the trading symbol "HMCM."
SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................... $ $ $
Total (3)...................... $ $ $
================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters by the
Company and certain compensation payable to the Representative of the
Underwriters, see "Underwriting."
(2) Before deducting expenses of the offering estimated at $450,000, all of
which will be paid by the Company.
(3) The Underwriters have been granted a 30-day option to purchase up to an
additional 187,500 shares of Common Stock from the Company, solely to
cover over-allotments, if any, on the same terms and conditions as the
shares offered hereby. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $__________, $__________ and $__________,
respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the Underwriters when, as and
if delivered to and accepted by the Underwriters, subject to their right to
reject orders in whole or in part and to certain other conditions. It is
expected that delivery of the certificates representing the shares of Common
Stock will be made on or about _____________, 1996 at the offices of
Ladenburg, Thalmann & Co. Inc., New York, New York.
---------------------
LADENBURG, THALMANN & CO. INC.
THE DATE OF THIS PROSPECTUS IS ________________, 1996.
<PAGE> 3
[Outside Flap of Foldout]
HomeCom's logo appears across the top of the page, consisting of the word
"HomeCom" in reverse bold print with the word "Communications" spelled out in
normal text underneath. Adjacent to the Company's name is a sphere with a line
that increases in thickness and wraps around the sphere ending in an arrowhead
across the front of the sphere.
The page is divided into three parts, (i) the top three-quarters of the left
two-thirds of the page, (ii) the bottom one-quarter of the left two-thirds, and
(iii) the right one-third.
In the center of the first section are the captions "Software products" and
"HomeCom's Post-On-The-Fly Conference Highlights."
DESCRIPTION OF PHOTOGRAPH:
To the left and above the caption are three computer screens showing examples
of HomeCom's Post-on-the-Fly(TM) Conference Web pages, each consisting of a
computer screen window with graphical text and menu buttons appearing
throughout the body of the Web page. The text and menu options offer a variety
information and interactive choices for the Web site user.
Under the illustrations is the following text:
- - HomeCom's Post-On-The-Fly Conference Highlights:
- - Conferences are fully searchable on conference title, conference
description, subject, author, and text.
- - Upload and attach any type of file to any posted text.
- - Conferences can be unmoderated, moderated manually by the conference
administrator, or moderated automatically by the software.
- - Password-protected user accounts.
- - Each user has a fully customizable, searchable home page.
- - The 'private conference' option keeps your sensitive posts secure using
complex Triple DES encryption.
- - Integration with Netscape's Cooltalk(TM) internet phone package allows
real-time conversations free of charge via the Internet.
- - Sub-administrators can administer and moderate each separate
conference.
- - Full web-based administration allows on-line creation, modification,
and deletion of conferences, messages, users, and subadministrators."
At the top of the bottom left portion of the page are the captions "Security
issues" and "HomeCom's Security Division."
Under the headings is the following text:
HomeCom addresses the three essential aspects of security:
- - Privacy - protecting against information "leaks."
- - Integrity - ensuring that stored information has not been and can not
be altered.
- - Availability - ensuring that information is readily accessible by
authorized users.
On the top of the right one-third of the page is the heading "Custom
applications."
DESCRIPTION OF PHOTOGRAPH:
Under the heading is an illustration of a computer screen showing a Web site
for Real Estate Loan Services, consisting of a computer screen window with
various menu options relating to the Real Estate Loan Services Automated Order
and Delivery Service program.
DESCRIPTION OF DIAGRAM:
Immediately beneath the illustration is a schematic drawing of a HomeCom
product ordering application solution using names; circles and arrows to show
the relationship between real estate professionals with customer product
orders, the Company's Web Server application and various service providers.
Under the diagram is the caption "Norwest." Beneath the caption is the
following text: "Using a Sybase database, HomeCom Communications
built a complex Internet-based service called "The Automated Order and Delivery
Service for Real Estate Loan Services." RELS, a national real estate
organization, is a subsidiary of Norwest Corporation, the nation's largest
mortgage origination firm."
DESCRIPTION OF PHOTOGRAPH:
Immediately beneath the text is an illustration of a Web page for Norwest
Insurance Inc. which includes the Norwest logo and the slogan "Leverage Our
Technology And Expertise."
--------------------------
The Company intends to furnish its stockholders with annual reports containing
financial statements audited by an independent accounting firm and quarterly
reports containing unaudited financial information for the first three
quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET(TM), IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
--------------------------
i
[Inside Left Flap of Foldout]
The page is divided vertically into a left two-thirds column and a right
one-third column. In the middle of the left two-thirds of the page is the
large caption "Web site creation." On the top of the left two-thirds of the
page is the caption "Synovus."
Under the caption is the text "Electronic annual reports are only a small
fragment of what has become one of the most interactive financial sites on the
Internet."
DESCRIPTION OF PHOTOGRAPH:
Immediately to the left of the caption "Synovus" is an illustration of a
Synovus Financial Corp. Web page. The Web page includes a field showing a
collage of items including a key, a magnifying glass, a newspaper, and a map of
the Southeastern United States, with the terms "Corporate Profile,"
"Financials," "Request Info.," "Acquisitions," "Locator," "Stock Quote,"
"Shareholder Activity," "Search," and "Analyst Book" throughout the collage.
Beneath the collage is an illustration of a stock quote "Ticker."
DESCRIPTION OF PHOTOGRAPH:
Immediately to the left of the caption "Web site creation" is an illustration
of a Web page with the title "Stock Quotes." Beneath the title is a graph
depicting stock prices over a two hundred day period for a company with the
ticker symbol "SNV."
On the bottom left side of the page is the caption "TH.Q Games."
Beneath the caption is the following text:
- - Online catalog of game software.
- - Interactivity through contests and "game tips."
- - Strong visual display of packaging and game content."
DESCRIPTION OF PHOTOGRAPH:
Immediately to the right of the caption T.HQ Games is an illustration of a Web
site for T.HQ Inc. showing its name and graphic illustrations of the names of
various game software, such as "ROBO PIT," BASS MASTERS," "ALONE IN THE DARK,"
"IN THE HUNT," and "OLYMPIC SUMMER GAMES."
At the top right one-third of the page is the heading "The interactive
environment."
DESCRIPTION OF PHOTOGRAPH:
Under the caption is an illustration of a Web site for the Rainforest Cafe,
showing a variety of wild animals, a menu option entitled "Recipe," and
text describing the features available on the Web site.
Below the photograph is the caption "Rainforest Cafe."
Under the caption is the following text:
- - An online experience of the sites and sounds of the Rainforest Cafe.
- - Creating an audience for a publicly traded restaurant company.
- - A forum for locating restaurants and providing shareholder information.
ii
[Inside Right Flap of Foldout]
The page is divided vertically into a left two-thirds portion and a right
one-third portion. On the top of the left portion of the page is the heading
"Meeting client expectations."
On the left side of the page underneath the above caption is the caption
"SouthTrust."
Underneath the caption "SouthTrust" is the following text:
- - Another example of the broadening base of clients in the financial
services area.
- - A vehicle for distributing shareholder information.
- - Quick access to banking information such as credit, account and trust
services.
DESCRIPTION OF PHOTOGRAPH:
To the right of the text is an illustration of a Web site for SouthTrust Bank
showing a textual description of SouthTrust and services offered by SouthTrust.
At the bottom of the illustration are fields labeled "Home," "Locations,"
"Request Information," "Account Services," "Credit Services," "Business
Services," "Investor Relations," and "Trust Services."
In the middle of the left two-thirds of the page is the caption "Brinker."
Under the caption is the following text: "Utilizing the power of the Internet
to collect Human Resources, create visibility and reinforce brand identity."
DESCRIPTION OF PHOTOGRAPH:
Immediately to the left of the text is an illustration of a Web page for
Brinker International showing the logo for Brinker International and text
describing services available on the Web page.
DESCRIPTION OF PHOTOGRAPH:
Immediately beneath the Brinker International illustration is an illustration
of a Web site for Chili's Grill & Bar. This illustration includes the logo for
Chili's Grill & Bar above the text "Like No Place Else!" and a graphic image of
a baseball cap with the name "Chili's" written across its front.
DESCRIPTION OF PHOTOGRAPH:
At the top of the right one-third of the page is an illustration of a HomeCom
Web site with the caption "Web Hosting" above four photographs of actual
conference rooms.
Beneath the illustration is the heading "Accolades and innovations."
DESCRIPTION OF PHOTOGRAPH:
Immediately beneath the above heading is an illustration of a HomeCom Web site
with the captions "HomeCom Customer Showcase" and "HomeCom's clients have a Web
room full of Awards." This Web site contains images of general industry awards
won by Web sites created by the Company for several of its clients.
Under the illustration is the following text: "HomeCom and its clients have won
several awards for Web sites created by HomeCom, including:"
- - MGM-UA "Top 10"
- - Point "Top 5% of All Web Sites"
- - Magellan "Four Star Site"
iii
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and the related notes thereto appearing
elsewhere in this Prospectus. In this Prospectus, the term "Company" or
"HomeCom" refers to HomeCom Communications, Inc., a Delaware corporation.
Investors should carefully consider the information set forth under the heading
"Risk Factors." Unless otherwise indicated, the information in this Prospectus
gives effect to a 93.07-for-1 stock split and recapitalization of the Company's
Common Stock from no par value to $.0001 par value per share, and assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."
Certain technical terms used in this Prospectus are defined in the Glossary on
Page 42.
THE COMPANY
HomeCom develops and markets specialized software applications and
products and provides services that enable businesses to use the Internet and
Intranets to obtain and communicate important business information, conduct
commercial transactions and improve business productivity. HomeCom provides
Internet/Intranet solutions in five areas: customized software applications
design, development and integration; World Wide Web site development; Internet
outsourcing services; specialized Internet-enabled software products; and
security consulting and integration services. HomeCom's objective is to be a
leading provider of business communications solutions using Internet standard
protocol technologies.
According to International Data Corporation ("IDC"), the number of
Internet users with Web access increased from 1.1 million in 1994 to 8.3
million in 1995 and is expected to reach 31.4 million by the end of 1996. IDC
estimates that the number of individuals worldwide with access to the Internet
will reach approximately 200 million by the end of 1999. The explosive growth
of the Internet and World Wide Web has led to the rapid development of
increasingly sophisticated and advanced TCP/IP-enabled software applications
such as Web browsers and HTML compatible server software. These Internet tools
enable users to obtain and communicate information more efficiently and
effectively.
The Company believes that there is a rapidly growing need for businesses
to expand and integrate their existing information and communications systems
to take advantage of the global communications framework and advanced graphics
capabilities of Internet-enabled systems. The Company also believes that
businesses today face a paradigm shift from proprietary protocol based local
area networks and wide area networks to Internet-enabled global communications
systems. HomeCom intends to capitalize on these changes by providing a suite
of integrated products and services.
HomeCom employs a team of highly trained Internet/Intranet software
developers and multimedia and graphics professionals who design and develop
specialized Internet/Intranet software applications. These applications enable
companies to obtain and communicate vital business information, such as sales
reports, order status systems, employee directories and client account
information. The Company works closely with its customers to analyze and
design Internet-based software solutions that facilitate the interactive
exchange of business information. Through its experience in designing custom
Internet solutions for businesses, HomeCom believes that it has developed and
continues to develop in-depth knowledge concerning industry-specific Internet
applications and requirements. The Company plans to leverage this knowledge to
develop additional Internet-enabled applications for targeted vertical
industries, including banking and financial services, retailing and
entertainment.
The Company believes that it has established a reputation as a provider of
sophisticated interactive Web sites. The Company has developed more than 100
Web sites for clients in many diverse industries, including sites for Synovus,
SouthTrust Bank, Norwest, Rainforest Cafe, Brinker International, Executrain,
THQ and AFLAC. The Company has a highly trained staff able to design Web sites
ranging from basic "inquiry only" sites to complex, interactive sites capable
of providing on-line commerce, database integration and manipulation and
sophisticated graphics, animation, sound and video. The Company uses its
proprietary Post On The Fly(TM) software in designing and developing many of
its Web sites.
HomeCom also provides Internet outsourcing services and presently hosts
more than 700 Web sites for clients in over a dozen countries. HomeCom
establishes and maintains the resources and facilities necessary to create and
support a customer's Internet server. As a provider of Internet outsourcing
services, HomeCom advises its clients as to the appropriate hardware, including
servers and routers, and software necessary to create an Internet server,
coordinates the purchase of this hardware and software, including operating
system and Internet server software, and provides the facilities to house and
maintain the server. HomeCom provides network management, including all
network functions, the maintenance of an environmentally conditioned, secure
facility and access to the Internet.
3
<PAGE> 5
The Company has developed advanced software products that it presently
includes in its custom applications and that it intends to develop further for
retail sale. The Company has developed software, called Post On The Fly(TM),
which enables non-technical users to add, retrieve and update information
through the Internet or an Intranet using standard browser software. Post On
The Fly(TM) Conference permits intuitive and easy conferences among employees,
customers and business partners. The product utilizes database technology to
archive user-inputted data, ideas and innovations for later retrieval and
review. Post On The Fly(TM) Store facilitates the creation and updating of an
on-line store or catalog. Post On The Fly(TM) Q&A is being designed to
facilitate the creation and updating of examinations and training courses in
question and answer format. Post On The Fly(TM) Publisher is being designed to
permit the publisher of a magazine or newsletter to design an electronic
publication layout where reporters, editors and writers can insert articles,
graphics and other content.
HomeCom recently established an Internet security division to provide
security solutions for businesses connecting to the Internet. The Company
plans to develop and integrate advanced value-added security features into its
custom software applications and products and to provide consulting and
integration services to companies seeking to communicate securely and to
transact business over the Internet.
The Company markets its products and services through its direct sales
force, print advertising and its own Web site. The Company also generates
customer leads through its business partner relationships with leading
technology companies such as AT&T, BBN Planet, Oracle, Sybase, Microsoft and
Netscape.
The Company intends to become a leading provider of Internet-standard
business communications solutions by: (i) increasing marketing of
industry-specific Internet-enabled applications; (ii) expanding software
product development and distribution; (iii) developing advanced security
services; and (iv) acquiring Internet-related software and services companies.
The Company's executive offices are located at 3535 Piedmont Road,
Building 14, Suite 100, Atlanta, Georgia 30305. The Company's telephone number
is 404/237-4646 and its Web site is located at http://www.homecom.com
4
<PAGE> 6
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THE OFFERING
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Common Stock offered by the Company .................... 1,250,000 shares.
Common Stock to be outstanding after the offering (1) .. 3,249,977 shares.
Use of proceeds ........................................ For general corporate purposes, principally additions to working
capital, continued product development, repayment of indebtedness and
possible future acquisitions. See "Use of Proceeds."
Proposed Nasdaq SmallCap Market(TM) symbol ............. HMCM
</TABLE>
__________________
(1) Excludes (i) 220,000 shares reserved for issuance under the Company's
Stock Option Plan, of which options to acquire 79,167 shares of Common
Stock are issuable upon the exercise of outstanding options granted at a
weighted average exercise price of $5.92 per share, (ii) 170,000 shares
reserved for issuance under the Company's Non-Employee Directors Plan, of
which options to acquire 30,000 shares of Common Stock are issuable upon
the exercise of outstanding options granted at an exercise price of $6.50
per share, and (iii) 125,000 shares of Common Stock reserved for issuance
upon the exercise of warrants to be granted to the Representative of the
Underwriters and its designees, exercisable at 120% of the public offering
price (the "Representative's Warrants"). See "Management - Incentive
Plans," "Description of Capital Stock" and "Underwriting." Also excludes
shares that may be issued in connection with the Company's August 1996
acquisition of HomeCom Internet Security Services, Inc. See "Certain
Transactions."
5
<PAGE> 7
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The Summary Financial Data below has been taken or derived from the
historical financial statements and other records of the Company, and should be
read in conjunction with the Financial Statements and the Notes thereto included
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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DECEMBER 2 SIX MONTHS ENDED
(INCORPORATION) YEAR ENDED JUNE 30,
TO DECEMBER 31, DECEMBER 31, ------------------------------
1994 1995 1995 1996
--------------- ----------- ----------- -----------
(UNAUDITED)
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STATEMENTS OF OPERATIONS DATA
Net sales........................................... --- $ 327,574 $ 38,961 $ 817,306
Cost of sales....................................... --- 59,871 19,203 196,497
---------- ---------- ---------- ----------
Gross profit........................................ ------ 267,703 19,758 620,809
Operating expenses.................................. $ 17,452 269,527 64,591 659,345
---------- ---------- ---------- ----------
Operating loss...................................... (17,452) (1,824) (44,833) (38,536)
Interest expense, net............................... --- 3,469 2,733 15,576
Other expense....................................... --- 147 --- ---
---------- ---------- ---------- ----------
Loss before income tax benefit...................... (17,452) (5,440) (47,566) (54,112)
Income tax benefit(1) --- --- ---
---------- ---------- ---------- ----------
Net loss............................................ $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
UNAUDITED PRO FORMA NET LOSS DATA
Loss before income tax benefit...................... $ (17,452) $ (5,440) $ (47,566) $ (54,112)
Pro forma adjustment to reflect federal and state
income tax benefit (actual for period subsequent to
February 8, 1996)(1)................................ --- --- --- ---
---------- ---------- ---------- ----------
Pro forma net loss.................................. $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
Pro forma net loss per common and common
equivalent share.................................... $ (.01) $ (.00) $ (.03) $ (.03)
========== ========== ========== ==========
Pro forma weighted average common and common
equivalent shares outstanding....................... 1,866,067 1,866,067 1,866,067 1,866,067
========== ========== ========== ==========
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JUNE 30, 1996
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PRO FORMA
ACTUAL PRO FORMA (2) AS ADJUSTED (3)
-----------------------------------------------------------------------
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BALANCE SHEET DATA
Working capital................................... $ 234,191 $234,195 $7,147,338
Total assets...................................... 966,945 966,949 7,854,626
Long-term obligations............................. 611,761 111,857 ---
Total liabilities................................. 1,016,147 516,243 378,920
Stockholders' equity (deficit).................... (49,202) 450,706 7,475,706
</TABLE>
(1) For the period from December 2, 1994 (date of incorporation) to February
8, 1996, the Company was taxed as an S Corporation under the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and generally
was not subject to corporate income taxes. Effective February 9, 1996,
the Company terminated its S Corporation election, subjecting the Company
to corporate income taxes. The pro forma adjustment to reflect federal
and state income tax benefit, pro forma net loss and pro forma net loss
per common share represent the Company's income tax position had the
Company been subject to corporate income taxes for all periods presented.
No income tax benefit has been recorded due to the deferred tax asset
arising from operating loss carryforwards and temporary differences being
fully offset by a valuation allowance.
(2) Pro forma balance sheet data give effect to (a) the issuance immediately
prior to the date of this Prospectus of 76,907 shares of Common Stock
(based upon an assumed initial public offering price of $6.50 per share) in
repayment of $499,904 in outstanding indebtedness, (b) the issuance in
August 1996 of 37,228 shares of Common Stock upon the exercise of
outstanding warrants at an exercise price of $.0001 per share, (c) the
contribution in August 1996 of 3,956 shares of Common Stock to the Company
by its Chief Executive Officer and (d) the sale in August 1996 of 102,855
shares of Common Stock to certain key employees of the Company at a price
of $4.55 per share. See "Capitalization" and "Certain Transactions."
(3) Adjusted to give effect to the sale of 1,250,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $6.50 per
share and the application of the net proceeds therefrom after deduction
of underwriting discounts and commissions and estimated expenses of the
offering. See "Use of Proceeds," "Capitalization" and "Underwriting."
6
<PAGE> 8
RISK FACTORS
In evaluating an investment in the Common Stock, prospective purchasers
should consider carefully the following risk factors in addition to the other
information presented in this Prospectus.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT. The Company was
incorporated in December 1994 and commenced sales in January 1995.
Consequently, the Company has only a limited operating history upon which to
base an evaluation of the Company and its prospects. The Company's prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving industries. To address these risks, the
Company must, among other things, respond to competitive developments, continue
to attract, retain and motivate qualified persons, and continue to upgrade and
commercialize products and services. There can be no assurance that the
Company will be successful in addressing such risks. The Company has incurred
net losses since its incorporation and as of June 30, 1996 had an accumulated
deficit of approximately $77,000. There can be no assurance that the Company
will achieve or sustain profitability.
NEW AND UNCERTAIN MARKET. The market for Internet and Intranet products
and services has only recently developed. Because this market is relatively
new and because current and future competitors are likely to introduce
competing Internet and Intranet products and services, it is difficult to
predict the rate at which the market will grow or at which new or increased
competition will result in market saturation. If the Internet and Intranet
markets fail to grow, grow more slowly than anticipated or become saturated
with competitors, the Company's business, financial condition and operating
results will be materially and adversely affected.
DEPENDENCE ON THE INTERNET. Although a portion of the sales of the
Company's products and services will depend upon growth of private Intranet
networks, sales of the Company's Internet related products and services will
depend in large part upon an adequate infrastructure for providing Internet
access and carrying Internet traffic. The Internet may not prove to be a
viable commercial marketplace because of inadequate development of the
necessary infrastructure or timely development of complementary products such
as high speed modems. Because global commerce and on-line exchange of
information on the Internet and other similar open wide area networks are new
and evolving, it is difficult to predict with any assurance whether the
Internet will prove to be a viable commercial marketplace. There can be no
assurance that the infrastructure or complementary products necessary to make
the Internet a viable commercial marketplace will be developed, or, if
developed, that the Internet will become a viable commercial marketplace. If
the necessary infrastructure or complementary products are not developed, or if
the Internet does not become a viable commercial marketplace, the Company's
business, financial condition and operating results will be materially and
adversely affected.
RISK OF CHANGING TECHNOLOGY. The Internet software and services markets
are characterized by rapid technological change, evolving industry standards,
emerging industry competition and frequent new service, software and other
product introductions. The Company's future success will depend in significant
part on its ability to anticipate industry standards, continue to apply
advances in Internet and Intranet technologies, enhance its current services
and products, and develop and introduce new services and products on a timely
basis. The introduction of services and products embodying new technologies
and the emergence of new industry standards can render existing services and
products obsolete and unmarketable. There can be no assurance that the Company
will be successful in developing and marketing product enhancements or new
services and products that respond to technological change or evolving industry
standards, that the Company will not experience difficulties that could delay
or prevent the successful development, introduction and marketing of these
services or products, or that its new services and products will adequately
meet the requirements of the marketplace and achieve market acceptance. If the
Company is unable, for technological or other reasons, to develop and introduce
new services or products in a timely and cost-effective manner or to address
compatibility, inoperability or other issues raised by technological changes or
new industry standards, the Company's business, financial condition and
operating results will be materially and adversely affected. See "Business -
Products and Services."
MANAGEMENT OF A DEVELOPING BUSINESS. The Company has experienced
substantial change and expansion in its business and operations since its
incorporation in 1994 and expects to continue to experience periods of rapid
change. The Company's past expansion has placed, and any future expansion will
place, significant demands on the Company's administrative, operational,
financial and other resources. The Company expects to expend resources in
connection with planned marketing and sales programs, future expansion of its
accounting and internal management systems and implementation of a variety of
new systems and procedures. As a consequence, the Company expects operating
expenses and staffing levels to increase substantially in the future. In
particular, the Company intends to hire a significant number of additional
personnel in 1996 and later years. Competition for such personnel is intense,
and there can be no assurance that the Company will be able to attract,
assimilate or retain additional highly qualified personnel. In addition, the
Company expects that future expansion will continue to challenge the Company's
ability to train, motivate, and manage its employees, and to attract and retain
qualified Internet applications engineers and programmers, graphic artists,
creative directors and security applications specialists. If the Company
cannot generate
7
<PAGE> 9
sufficient revenues to offset its higher operating expenses, the Company's
management and financial systems do not expand to meet increasing demands, the
Company fails to attract, assimilate and retain qualified personnel, or the
Company's management otherwise fails to manage the Company's expansion
effectively, the Company's business, financial condition and operating results
will be materially and adversely affected. See "Business - Employees" and
"Management."
DEPENDENCE ON KEY PERSONNEL. The Company depends to a significant extent
upon its senior management and the loss of any member of senior management
could have a material adverse effect upon the Company's business, financial
condition and operating results. No assurance can be given that the Company
can retain its senior management or other key personnel. Although the Company
has entered into employment agreements with each of its executive officers
which contain non-competition and non-disclosure provisions, the Company's
ability to benefit from them is uncertain because such provisions typically
must be limited in geographic scope to be enforceable. Restrictions limited in
geographic scope may not effectively prohibit competition with the Company
because of the global nature of the Internet. See "Management."
INTENSE COMPETITION. The Company's current and prospective competitors
include many companies that have longer operating histories, longer customer
relationships and substantially greater financial, management, technical,
development, sales, marketing and other resources than the Company. Many
nationally known companies and regional and local companies across the country
are involved in Internet and Intranet applications, including the development
and support of Web sites, and the number of these companies is increasing.
Companies competing directly or indirectly with the Company include Web site
service boutique firms, communications, telephone and telecommunications
companies, computer hardware and software companies, established on-line
services companies, advertising agencies, direct access Internet and
Internet-services and access providers as well as specialized and integrated
marketing communication firms. The Company also competes with the internal
information technology departments of prospective customers who are choosing
whether to outsource design and support. The Company competes on the basis of
creative talent, price, reliability of services and responsiveness. See
"Business - Competition."
PRICE EROSION. The market for Internet and Intranet products and services
is highly competitive and is characterized by pressures to reduce prices,
incorporate new capabilities and accelerate completion schedules. Increased
competition could result in significant price competition, which in turn could
result in significant reductions in the average selling price of the Company's
products and services. There can be no assurance that the Company will be able
to offset the effects of any such price reductions through an increase in the
number of its customers, higher revenue from enhanced services or cost
reductions.
LENGTH OF SALES CYCLE. The development and implementation of interactive
Web sites may require the Company to engage in a lengthy sales cycle. The
pursuit of sales leads typically involves an analysis of the prospective
customer's needs, preparation of a written proposal, one or more presentations
and contract negotiations. The Company often provides significant education to
prospective customers regarding the use and benefits of Internet or Intranet
technologies and products. Extensive Web site development or licensing of the
Company's products may also involve a substantial commitment of capital by
potential customers as well as the attendant delays frequently associated with
approving larger capital expenditures and reviewing new technologies that
affect key operations.
RISK OF DEFECTS. Web site services and other services based on software
and computing systems often encounter development and completion delays and the
underlying software may contain undetected errors or failures when introduced
and, in the case of Web sites, when the volume of traffic on a site increases.
In addition, there can be no assurance that errors found in the software
underlying a Web site or other project will not result in delays in completion,
commercial release or market acceptance of such Web site or other project.
Likewise, there can be no assurance that the Company will not incur
unanticipated costs to cure any defect or be obligated to refund money paid to
the Company or to pay for damages caused by any delay or defect. Software
applications and products as complex as those being developed by the Company
may contain undetected errors or failures when first introduced. If software
errors are discovered after introduction, the Company could experience delays
and lost revenues during the period required to correct these errors. There
can be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found in new applications, products or
releases after commencement of installation or shipment, resulting in loss of
or delay in receiving revenues.
SECURITY RISKS. The Company's software and equipment are vulnerable to
computer viruses or similar disruptive problems caused by customers or other
Internet users. Computer viruses or problems caused by third parties could
lead to interruptions, delays or cessation in service to the Company's
customers. Furthermore, inappropriate use of the Internet by third parties
could also jeopardize the security of customers' confidential information that
is stored in the Company's computer systems. The Company does not have product
liability or other insurance to protect against risks caused by computer
viruses or other misuse of software or equipment by third parties. Although
the Company attempts to limit its liability to customers for these types of
risks through contractual provisions, there can be no assurance that these
limitations will be enforceable.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. The Company relies
primarily on a combination of copyright, patent and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. The
8
<PAGE> 10
Company seeks to protect its software, documentation and other written
materials principally under trade secret and copyright laws, which afford only
limited protection. The Company does not hold any registered trade or service
marks at this time, but has applied for federal registration of the names
"HomeCom," "Post On The Fly(TM)" and the Company's logo. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. There can be no
assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
competing products and services. In distributing its software products, the
Company intends to rely primarily on "shrink wrap" licenses that are not
signed by licensees and, therefore, may be unenforceable under the laws of
certain jurisdictions. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to as great an extent as the laws of
the United States. The Company does not believe that any of its proposed
products infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by the
Company with respect to its products. The Company expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in electronic commerce grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company. In
addition, Web site developers such as the Company face potential liability for
the actions of customers and others using their services, including liability
for infringement of intellectual property rights, rights of publicity,
defamation, libel and criminal activity under the laws of the United States
and foreign jurisdictions. An imposition of liability could have a material
adverse effect on the Company. See "Business - Intellectual Property
Rights."
BROAD DISCRETION IN APPLICATION OF PROCEEDS; UNSPECIFIED ACQUISITIONS.
The Company anticipates that a majority of the estimated net proceeds from this
offering will be used for working capital and other general corporate purposes.
However, such uses are subject to change depending upon a number of factors,
including future revenue growth, the amount of cash generated by the Company's
operations, the length of the sales cycle of the Company's products and
services and the rapidly changing industry in which the Company operates. A
portion of the net proceeds of this offering may be used to acquire later-stage
development or existing products from other companies or to acquire
complementary businesses. Although the Company has not entered into any
agreement or commitment and is not a party to any negotiations for any such
acquisitions, it has explored and plans to continue to evaluate opportunities
to purchase, license or otherwise acquire the right to market products,
services or businesses that complement the Company's business. Acquisitions of
other businesses entails significant risks relating to proper selection and
valuation of targeted businesses, the ability to manage and integrate acquired
businesses with the Company's business and the potential need to fund future
development and operations of acquired businesses. See "Use of Proceeds."
LACK OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE. Prior to
this offering, there has been no public trading market for the Common Stock.
The initial public offering price of the Common Stock will be determined
through negotiations between the Company and the representative of the
Underwriters and will not necessarily be related to the Company's book value,
net worth or any other established criteria of value. Factors to be
considered in determining the initial public offering price may include
prevailing market conditions, the market capitalization and stages of
development of other companies that the Company and the Underwriters believe
to be comparable to the Company, the results of operations of the Company in
recent periods, estimates of the business potential of the Company, the
present stage of the Company's development and other factors deemed relevant.
There can be no assurance that an active trading market will develop or
continue after completion of this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
market price of the Common Stock is likely to be highly volatile. The Company
believes factors such as actual or anticipated quarterly fluctuations in
financial results, changes in earnings estimates by securities analysts and
announcements of material events by the Company, its major customers or its
competitors may cause the market price for the Common Stock to fluctuate,
perhaps substantially. These fluctuations, as well as general economic,
political and market conditions, such as recessions, may have a material
adverse effect on the market price of the Common Stock.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. As a result of the
Company's limited operating history, the Company does not have historical
financial data for a significant number of periods on which to base planned
operating expenses. Accordingly, the Company's expense levels are based in
part on its expectations as to future revenues and to a large extent are
fixed. However, the Company typically operates with no backlog. As a result,
quarterly sales and operating results generally depend on the volume and
timing of and ability to perform services requested within the quarter, and
are difficult to forecast. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenues shortfall.
Accordingly, any significant shortfall of demand for the Company's products
and services in relation to the Company's expectations would result in
fluctuations in future quarterly operating results.
The Company may also experience significant fluctuations in future
quarterly operating results as the result of many factors, including demand
for the Company's products and services, introduction or enhancement of
products by the Company and its competitors, market acceptance of new products
and services, mix of products and services sold and general economic
9
<PAGE> 11
conditions. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance.
CONCENTRATION OF STOCK OWNERSHIP. Upon completion of this offering, the
Company's present directors and executive officers will beneficially own
approximately 30% of the outstanding Common Stock. As a result, these
stockholders, if they act together, will be able to exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions.
Such concentration of ownership may also have the effect of delaying,
preventing or deterring a change in control of the Company. See "Principal
Stockholders."
SENIORITY OF PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS. The Board
of Directors has authority to issue up to 1,000,000 shares of preferred stock
and to fix the rights, preferences, privileges and restrictions, including
voting rights, of the preferred stock without further vote or action by the
Company's stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. While the Company has no
present intention to issue shares of preferred stock, such issuance, while
providing desired flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. See "Description of Capital Stock - Preferred Stock." In addition,
the Company's Restated Certificate of Incorporation provides that the Board of
Directors be divided into three classes of directors, with each class serving
a staggered three-year term. The division of the Board of Directors into
three classes may tend to discourage a third party from making a tender offer
or otherwise attempting to obtain control of the Company and may maintain the
incumbency of the Board of Directors, because such a division generally makes
it more difficult for stockholders to replace a majority of directors. See
"Description of Capital Stock - Certain Certificate of Incorporation and Bylaw
Provisions."
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SMALLCAP MARKET(TM);
DISCLOSURE RELATING TO LOW-PRICED STOCKS. The Company has applied to have the
Common Stock listed on the Nasdaq SmallCap Market(TM). In order to continue to
be included in the Nasdaq SmallCap Market(TM), a company must maintain
$2,000,000 in total assets, a $200,000 public float market value and $1,000,000
in total capital and surplus. In addition, continued inclusion requires two
market-makers and a minimum bid price of $1.00 per share; provided, however,
that if a company falls below such minimum bid price, it will remain eligible
for continued inclusion in the Nasdaq SmallCap Market(TM) if the market value
of the public float is at least $1,000,000 and the company has $2,000,000 in
capital and surplus. Failure to meet these maintenance criteria in the future
may cause the Common Stock to be delisted from in the Nasdaq SmallCap
Market(TM), and trading, if any, in the Common Stock would thereafter be
conducted in the over-the-counter market. As a result, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of the Common Stock. In addition, if the Common Stock were delisted from
trading on the Nasdaq SmallCap Market(TM) and the trading price of the Common
Stock was less than $5.00 per share, trading in the Common Stock would also be
subject to certain rules promulgated under the Securities Exchange Act of 1934,
which require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a "penny stock" (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject
to certain exceptions). Such rules require the delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock market
and the risks associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stock to persons other than
established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transactions prior to sale. The additional burdens imposed upon broker-dealers
by such requirements may discourage broker-dealers from effecting transactions
in the Common Stock, which could severely limit the market liquidity of the
Common Stock and the ability of purchasers in this offering to sell the Common
Stock in the secondary market.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY. The Company's Restated
Certificate of Incorporation provides, as permitted by Delaware law, that its
directors shall have no personal liability for certain breaches of their
fiduciary duties to the Company. In addition, the Company's Restated Bylaws
provide for mandatory indemnification of directors and officers to the fullest
extent permitted by Delaware law. These provisions may reduce the likelihood
of derivative litigation against directors and may discourage stockholders
from bringing a lawsuit against directors for a breach of their fiduciary
duties. See "Description of Capital Stock - Certain Certificate of
Incorporation and Bylaw Provisions."
GOVERNMENT REGULATION. The Telecommunications Act of 1996 (the "1996
Telecommunications Act"), which became effective on February 8, 1996, imposes
criminal liability on persons sending or displaying in a manner available to
minors indecent material on an interactive computer service such as the
Internet. The 1996 Telecommunications Act also imposes criminal liability on
an entity knowingly permitting facilities under its control to be used for
those activities. The constitutionality of these provisions is being
challenged in federal court and, as of the date of this Prospectus,
enforcement of certain provisions has been enjoined. However, this
legislation may decrease demand for Internet access, chill the demand for
Internet content or have other adverse effects on Web site service providers
such as the Company. In addition, in light of the uncertainty of the
interpretation and application of this law, there can be no assurance that the
Company would not have to modify its operations to comply with the statute.
10
<PAGE> 12
Except for the 1996 Telecommunications Act, the Company does not believe
that it is currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally, and believes that
there are currently few laws or regulations directly applicable to Web site
service companies. It is possible that a number of additional laws and
regulations may be adopted with respect to the Internet, covering issues such
as user privacy, pricing and characteristics and quality of products and
services. The adoption of any such laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for the
Company's products and services, increase the Company's cost of doing
business, cause the Company to modify its operations, or otherwise have an
adverse effect on the Company's business, financial condition or operating
results. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, libel and personal privacy is
uncertain. The Company cannot predict the impact, if any, that future
regulation or regulatory changes may have on its business. In addition, Web
site developers such as the Company face potential liability for the actions
of customers and others using their services, including liability for
infringement of intellectual property rights, rights of publicity, defamation,
libel and criminal activity under the laws of the United States and foreign
jurisdictions. Any imposition of liability could have a material adverse
effect on the Company.
The Company's network services are transmitted to its customers over
dedicated and public telephone lines. These transmissions are governed by
regulatory policies establishing charges and terms for communications.
Changes in the regulatory environment relating to the telecommunications and
media industry, including regulatory changes which directly or indirectly
affect use of or access to the Internet or increase the likelihood or scope of
competition from regional telephone companies, could have a material adverse
effect on the Company.
DILUTION. Purchasers of shares of Common Stock in this offering will
experience immediate and substantial dilution in net tangible book value per
share. In addition, the Company may issue a substantial number of additional
shares of Common Stock in the future. The issuance of a material number of
such shares may have the effect of increasing the dilution to new investors in
this offering. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,250,000 shares of
Common Stock offered by the Company hereby (at an assumed initial public
offering price of $6.50 per share and after deducting underwriting discounts
and commissions and estimated offering expenses) are estimated to be
approximately $7,025,000 ($8,146,250 if the Underwriters' over-allotment
option is exercised in full). The Company currently intends to apply the net
proceeds from this offering for general corporate purposes, principally
additions to working capital, continued product development, repayment of
indebtedness (including indebtedness to the Company's Chief Executive Officer)
and possible future acquisitions.
The Company intends to use (i) approximately $58,500 of the net proceeds
of this offering to repay indebtedness to the Company's Chief Executive
Officer pursuant to a promissory note payable on September 12, 2000, with
interest payable annually at the prime rate plus 1% per annum on the unpaid
principal amount, (ii) approximately $65,365 to repay indebtedness to a
financial institution, which is payable in equal monthly installments through
January, 2001, together with interest payable annually at the rate of 10% per
annum, (iii) approximately $45,000 to repay indebtedness to a private investor
pusuant to a promissory note payable in August 1997, with interest payable
annually at the rate of 8% per annum, and (iv) approximately $23,447 to repay
interest owed under 8% per annum interest promissory notes due September 1997
held by two private investors. See "Certain Transactions."
A portion of the net proceeds of this offering may be used to acquire
later-stage development or existing products from other companies or to
acquire complementary businesses. Although the Company has not entered into
any agreement or commitment and is not a party to any negotiations for any
such acquisition, it has explored and plans to continue to evaluate
opportunities to purchase, license or otherwise acquire the right to market
products, services or businesses that complement the Company's business.
The Company has not determined the exact amount it plans to expend on
each of such uses or the timing of such expenditures. The amounts actually
expended for each such use, if any, are at the discretion of the Board of
Directors and may vary significantly depending upon a number of factors,
including future revenue growth, the amount of cash generated by the Company's
operations, the length of the sales cycle and the rapid changes in the
Internet and Intranet marketplaces. To the extent that the net proceeds of
this offering are not used immediately, they will be invested in United States
government and governmental agency securities and other short-term,
investment-grade, interest-bearing instruments.
DIVIDEND POLICY
The Board of Directors intends to retain any of the Company's earnings to
support operations and to finance expansion and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. Any future
determination to pay dividends will be at the discretion of the Board of
Directors, and will depend on the Company's financial condition, results of
operations, capital requirements and such other factors as the Board of
Directors deems relevant.
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<PAGE> 13
DILUTION
At June 30, 1996, the Company had a pro forma net tangible book value of
approximately $450,706 or $.23 per share, after giving effect to (a) the
issuance immediately prior to the date of this Prospectus of 76,907 shares of
Common Stock (based upon an assumed initial public offering price of $6.50 per
share) in repayment of $499,904 in outstanding indebtedness, (b) the issuance
in August 1996 of 37,228 shares of Common Stock upon the exercise of
outstanding warrants at an exercise price of $.0001 per share, (c) the
contribution in August 1996 of 3,956 shares of Common Stock to the Company by
its Chief Executive Officer, and (d) the sale in August 1996 of 102,855 shares
of Common Stock to certain key employees of the Company at a price of $4.55
per share. See "Capitalization" and "Certain Transactions." Pro forma net
tangible book value per share is determined by dividing the pro forma net
tangible book value (tangible assets less liabilities) of the Company by the
number of shares of Common Stock outstanding. After giving effect to the
issuance and sale of the 1,250,000 shares of Common Stock offered hereby (at
an assumed initial public offering price of $6.50 per share) and the
application of the estimated net proceeds therefrom as set forth in "Use of
Proceeds," the adjusted pro forma net tangible book value of the Company at
June 30, 1996 would have been $7,475,706 or $2.30 per share. This represents
an immediate increase in pro forma net tangible book value of $2.07 per share
to the existing stockholders and an immediate dilution of $4.20 per share to
new investors purchasing shares of Common Stock at the assumed initial public
offering price. The following table illustrates this dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ....................... $6.50
Pro forma net tangible book value per share as of June 30, 1996 .... $0.23
Increase in pro forma net tangible book value per share attributable
to new investors ................................................. 2.07
-----
Adjusted pro forma net tangible book value per share after offering ... 2.30
-----
Dilution per share to new investors ................................... $4.20
=====
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996
(giving effect to the items listed above), the number of shares of Common Stock
previously purchased from the Company, the total consideration paid to the
Company and the average price paid per share by the existing stockholders and
new investors, assuming sale by the Company of 1,250,000 shares of Common Stock
at an assumed initial public offering price of $6.50 per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
--------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders 1,999,977 61.5% $ 995,714 10.9% $ .50
New investors........ 1,250,000 38.5% 8,125,000 89.1% 6.50
--------- ------- ----------- ---------
Total............... 3,249,977 100.0% $9,120,714 100.0%
========= ======= =========== =========
</TABLE>
Immediately following completion of this offering, the Company will have
outstanding options to acquire approximately 109,167 shares of Common Stock at
exercise prices ranging from $4.55 to $6.50 per share and a weighted average
exercise price per share of $5.92. In addition, in connection with the
Company's acquisition of HomeCom Internet Security Services, Inc., the Company
may issue shares of Common Stock in the future in payment of all or a portion
of the purchase price. See "Certain Transactions." The issuance of a material
number of shares of Common Stock in the future may have the effect of
increasing the dilution to new investors in this offering.
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<PAGE> 14
CAPITALIZATION
The following table sets forth as of June 30, 1996 (i) the actual
short-term borrowings and capitalization of the Company, (ii) the pro forma
short-term borrowings and capitalization of the Company after giving effect to
(a) the issuance immediately prior to the date of this Prospectus of 76,907
shares of Common Stock (based upon an assumed initial public offering price of
$6.50 per share) in repayment of $499,904 in outstanding indebtedness, (b) the
issuance in August 1996 of 37,228 shares of Common Stock upon the exercise of
outstanding warrants at an exercise price of $.0001 per share, (c) the
contribution in August 1996 of 3,956 shares of Common Stock to the Company by
its Chief Executive Officer, and (d) the sale in August 1996 of 102,855 shares
of Common Stock to certain key employees of the Company at a price of $4.55 per
share, and (iii) the capitalization and short-term borrowings of the Company,
as adjusted, to give effect to the foregoing pro forma adjustments and the
issuance and sale by the Company of the 1,250,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $6.50 per share,
after deducting underwriting discounts and commissions and estimated
offering expenses, and the application of the estimated net proceeds therefrom.
See "Use of Proceeds," "Certain Transactions," and Note 6 to the Financial
Statements. This table should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA ADJUSTED
-------- --------- ----------
<S> <C> <C> <C>
Short-term borrowings......................................... $ 12,019 $ 12,019 $ ---
======== ========= ==========
LONG-TERM DEBT:
Note payable, net of current maturities...................... 53,346 53,346 ---
Notes payable to stockholders................................ 558,415 58,511 ---
-------- --------- ----------
Total long-term debt........................................ 611,761 111,857 ---
-------- --------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding................................ --- --- ---
Common stock, $.0001 par value, 15,000,000 shares authorized,
1,786,943 shares issued and outstanding, actual; 1,999,977
shares issued and outstanding, pro forma; 3,249,977 shares
issued and outstanding, as adjusted(1)...................... 179 200 325
Additional paid-in capital................................... 27,623 995,514 8,020,389
Stock subscriptions.......................................... 0 (468,004) (468,004)
Accumulated deficit.......................................... (77,004) (77,004) (77,004)
-------- --------- ----------
Total stockholders' equity (deficit)......................... (49,202) 450,706 7,475,706
-------- --------- ----------
Total capitalization......................................... $562,559 $ 562,563 $7,475,706
======== ========= ==========
</TABLE>
(1) Excludes (i) 220,000 shares reserved for issuance under the Company's
Stock Option Plan, of which options to acquire 79,167 shares of Common
Stock are issuable upon the exercise of outstanding options granted at a
weighted average exercise price of $5.92 per share, (ii) 170,000 shares
reserved for issuance under the Company's Non-Employee Directors Plan, of
which options to acquire 30,000 shares of Common Stock are issuable upon
the exercise of outstanding options granted at an exercise price of $6.50
per share, and (iii) 125,000 shares of Common Stock reserved for issuance
upon the exercise of warrants to be granted to the Representative of the
Underwriters and its designees, exercisable at 120% of the public offering
price (the "Representative's Warrants"). See "Management - Incentive
Plans," "Description of Capital Stock" and "Underwriting." Also excludes
shares that may be issued in connection with the Company's August 1996
acquisition of HomeCom Internet Security Services, Inc. See "Certain
Transactions."
13
<PAGE> 15
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical and pro forma financial data relating
to the Company has been taken or derived from the historical financial
statements and other records of the Company. The statements of operations and
balance sheets for the period from December 2, 1994 (date of incorporation) to
December 31, 1994, and for the year ended December 31, 1995, have been audited
by Coopers & Lybrand L.L.P., independent public accountants. The statements
of operations and balance sheets for the six month periods ended June 30, 1995
and 1996 have been derived from the unaudited financial statements that have
been prepared on the same basis as the audited financial statements and, in
the opinion of management, include all adjustments, consisting of only normal
recurring entries, necessary for a fair presentation of the financial position
and results of operations of the Company for the unaudited interim period.
The selected historical and pro forma financial data should be read in
conjunction with the Company's historical financial statements and related
notes and other financial information included elsewhere in this Prospectus.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
<TABLE>
DECEMBER 2 SIX MONTHS ENDED
(INCORPORATION) YEAR ENDED JUNE 30,
TO DECEMBER 31, DECEMBER 31, ------------------------------
1994 1995 1995 1996
-------------------- ---------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES:
Service sales................. $ ----- $ 327,574 $ 38,961 $ 695,607
Equipment sales............... ----- ----- ----- 121,699
---------- ---------- ---------- ----------
Total net sales.............. ----- 327,574 38,961 817,306
---------- ---------- ---------- ----------
COST OF SALES:
Cost of services.............. ----- 59,871 19,203 119,021
Cost of equipment sold........ ----- ----- ----- 77,476
---------- ---------- ---------- ----------
Total cost of sales.......... ----- 59,871 19,203 196,497
---------- ---------- ---------- ----------
GROSS PROFIT................... ----- 267,703 19,758 620,809
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing........... 1,045 124,253 27,292 217,535
Product development........... ----- 20,239 ----- 26,581
General and administrative.... 16,407 121,313 37,168 387,281
Depreciation.................. ----- 3,722 131 27,948
---------- ---------- ---------- ----------
Total operating expenses..... 17,452 269,527 64,591 659,345
---------- ---------- ---------- ----------
OPERATING LOSS................. (17,452) (1,824) (44,833) (38,536)
OTHER EXPENSES:
Interest expense, net......... ----- 3,469 2,733 15,576
Other......................... ----- 147 ----- -----
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAX BENEFIT. (17,452) (5,440) (47,566) (54,112)
INCOME TAX BENEFIT............. ----- ----- ----- -----
---------- ---------- ---------- ----------
NET LOSS....................... $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
PRO FORMA NET LOSS (1)........ $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
Pro forma net loss per common
and common equivalent share. $ (.01) $ (.00) $ (.03) $ (.03)
Pro forma weighted average ========== ========== ========== ==========
common and common equivalent
shares outstanding.......... 1,866,067 1,866,067 1,866,067 1,866,067
========== ========== ========== ==========
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------
DECEMBER 31, DECEMBER 31, PRO PRO FORMA
BALANCE SHEET DATA 1994 1995 ACTUAL FORMA(2) AS ADJUSTED(3)
------------ ------------ --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Working capital.......................... $ 8,455 $133,792 $ 234,191 $234,195 $7,147,338
Total assets............................. 10,254 247,382 966,945 966,949 7,854,626
Long-term obligations.................... --- 160,792 611,761 111,857 ---
Total liabilities........................ --- 242,568 1,016,147 516,243 378,920
Stockholders' equity (deficit)........... 10,254 4,814 (49,202) 450,706 7,475,706
</TABLE>
(1) For the period from December 2, 1994 (date of incorporation) to February
8, 1996, the Company was taxed as an S Corporation under the provisions of
the Code and generally was not subject to corporate income taxes.
Effective February 9, 1996, the Company terminated its S Corporation
election, subjecting the Company to corporate income taxes. The pro forma
adjustment to reflect federal and state income tax benefit, pro forma net
loss and pro forma net loss per common share represent the Company's
income tax position had the Company been subject to corporate income taxes
for all periods presented. No income tax benefit has been recorded due to
the deferred tax asset arising from operating loss carryforwards and
temporary differences being fully offset by a valuation allowance.
(2) Pro forma balance sheet data reflect (a) the issuance immediately prior to
the date of this Prospectus of 76,907 shares of Common Stock (based upon
an assumed initial public offering price of $6.50 per share) in repayment
of $499,904 in outstanding indebtedness, (b) the issuance in August 1996
of 37,228 shares of Common Stock upon the exercise of outstanding warrants
at an exercise price of $.0001 per share, (c) the contribution in August
1996 of 3,956 shares of Common Stock to the Company by its Chief Executive
Officer, and (d) the sale in August 1996 of 102,855 shares of Common Stock
to certain key employees of the Company at a price of $4.55 per share.
See "Capitalization" and "Certain Transactions."
(3) Adjusted to give effect to the sale of 1,250,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $6.50 per
share and the application of the net proceeds therefrom. See "Use of
Proceeds," "Capitalization" and "Underwriting."
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated in December 1994 and commenced sales in
January 1995 when it began marketing its Web site development and hosting
services. Revenues from service sales have increased each quarter, through
1995 and 1996. The Company markets its services through a direct sales force,
advertisement, referrals, and active business partner relationships with
organizations such as AT&T Corporation ("AT&T"), BBN Planet Corporation ("BBN
Planet"), Oracle Corporation ("Oracle") and Microsoft Corporation
("Microsoft").
The Company generates revenues through Internet and Intranet customized
software applications, Web site development, Web site hosting services,
computer hardware resales, consulting services and fees charged for the
maintenance of Web sites. Most customized software application projects are
generally completed within six to eight weeks, although certain past, current
and future projects have taken and are expected to take longer to complete.
Revenues on customized application and Web site projects are recognized using
the percentage of completion method. Web site maintenance and hosting
revenues represent recurring annual revenues and are deferred and recognized
ratably over the period. Because the Company will continue to develop and
market new products and services, the results of operations for the fiscal
year ended December 31, 1995 and the six months ended June 30, 1996 are not
necessarily indicative of future operating results.
During the first six months of 1996, custom Internet and Intranet
applications and integration services accounted for approximately 29% of the
Company's revenues, of which sales of computer and communications hardware
represented approximately 15% of the Company's revenues. The Company believes
that custom applications will represent an increasing percentage of its total
revenues as the Company continues to market its custom applications services
to larger businesses.
During the first six months of 1996, Web site design and development
services accounted for approximately 47% of the Company's revenues. The
Company expects that revenues from such services will increase, but believes
that fees for such services will represent a smaller percentage of total
revenue over the foreseeable future.
During the first six months of 1996, Internet outsourcing services
generated approximately 24% of the Company's total revenues. The Company
believes that its total Internet solution marketing focus, together with the
recurring nature of outsourcing fees, will lead to an increase in outsourcing
fees as a percentage of total revenues during the foreseeable future.
During 1995 and the first half of 1996, expenses exceeded net sales as
the Company developed its products and services, instituted its marketing and
sales programs and began implementation of the operational and administrative
support structure necessary to support its business. HomeCom expects to
experience increased operating expenses and capital investments during 1996 as
it continues to expand its infrastructure to support its growth. See "Risk
Factors - Management of a Developing Business."
The Company's revenues and operating results have varied substantially
from quarter to quarter, and should not be relied upon as an indication of
future results. See "Risk Factors - Potential Fluctuations in Quarterly
Results." The Company historically has operated with virtually no backlog
because its services are provided as requested by customers. As a result,
revenues in any quarter are substantially affected by the amount of services
requested by its customers. Because the Company is incurring expenses in
anticipation of future revenue growth and a high percentage of the Company's
expenses are relatively fixed, a small variation in the timing of recognition
of specific revenues could cause significant variations in operating results
from quarter to quarter.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages of net sales by certain items reflected in the Company's
statements of operations.
<TABLE>
DECEMBER 2 SIX MONTHS ENDED
(INCORPORATION) YEAR ENDED JUNE 30,
TO DECEMBER 31, DECEMBER 31, ---------------------------------
1994 1995 1995 1996
-------------------- ---------------------- ------------------ -------------
<S> <C> <C> <C> <C>
NET SALES:
Service sales................ --- 100.0% 100.0% 85.1%
Equipment sales.............. --- --- --- 14.9
-------- -------- -------- -------
Total net sales............ --- 100.0 100.0 100.0
-------- -------- -------- -------
COST OF SALES:
Cost of services............. --- 18.3 49.3 14.6
Cost of equipment sold....... --- --- --- 9.4
-------- -------- -------- -------
Total cost of sales........ --- 18.3 49.3 24.0
-------- -------- -------- -------
GROSS PROFIT.................. --- 81.7 50.7 76.0
-------- -------- -------- -------
OPERATING EXPENSES:
Sales and marketing.......... --- 37.9 70.1 26.6
Product development.......... --- 6.2 ---- 3.3
General and administrative... --- 37.1 95.4 47.4
Depreciation................. --- 1.1 0.3 3.4
-------- -------- -------- -------
Total operating expenses... --- 82.3 165.8 80.7
-------- -------- -------- -------
OPERATING LOSS................ --- (0.6) (115.1) (4.7)
OTHER EXPENSES:
Interest expense, net........ --- 1.1 7.0 1.9
Other expense................ --- 0.0 0.0 0.0
-------- -------- -------- -------
LOSS BEFORE INCOME TAX
BENEFIT..................... --- (1.7) (122.1) (6.6)
INCOME TAX BENEFIT............ --- 0.0 0.0 0.0
-------- -------- -------- -------
NET LOSS...................... --- (1.7%) (122.1%) (6.6%)
======== ======== ======= =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Sales
Net sales increased from $38,961 in the first six months of 1995 to
$817,306 in the first six months of 1996. This increase of $778,345 was due
to increases in hosting revenues of $91,073, Web site development revenues of
$355,186, customized applications revenues of $111,240, consulting and
maintenance revenues of $96,501, equipment sales revenues of $121,699 and
miscellaneous revenues of $2,646.
Cost of Sales
Cost of sales for services includes salaries for programmers and technical
staff, customer support and other direct costs. Cost of sales for services
increased from $19,203 in the first half of 1995 to $119,021 in the first half
of 1996. The increase in cost of sales was a result of the hiring of
additional technical personnel in 1996.
17
<PAGE> 19
Gross Profit
Gross profit increased by $601,051 from $19,758 in the first half of 1995
to $620,809 in the first half of 1996. Gross profit margins increased from
50.7% during the first half of 1995 to 76.0% during the first half of 1996.
This increase was primarily due to higher utilization of technical staff.
Selling and Marketing
Selling and marketing expenses include salaries, variable commissions and
bonuses for the sales force and advertising and marketing materials. Selling
and marketing expenses increased from $27,292 in the first half of 1995 to
$217,535 in the first half of 1996. The increase was primarily due to an
increase in the size of the sales force. As a percentage of net sales, these
expenses decreased from 70.1% in the first six months of 1995 to 26.6% in the
first six months of 1996. The Company intends to increase its marketing
expenditures in the second half of 1996.
Product Development
Product development expenses consist of personnel costs required to
conduct the Company's product development efforts. Management believes that
significant continuing investments in product development are required to
compete effectively in the Company's industry. As a consequence, the Company
has increased expenditures on product development through the employment of
additional development personnel. Total expenditures for product development
were $46,462, or 5.7% of net sales, in the first half of 1996, of which $19,881
were capitalized. No product development expenses were incurred during the
first half of 1995.
General and Administrative
General and administrative expenses include salaries for administrative
personnel, rent, telephone charges, insurance and other administrative
expenses. General and administrative expenses increased from $37,168 in the
first half of 1995 to $387,281 in the first half of 1996. As a percentage of
net sales, these expenses decreased from 95.4% of revenues in the first half
of 1995 to 47.4% of revenues in the first half of 1996. The increase in
general and administrative expenses was primarily due to increased salaries
and related expenses and increased rent expense resulting from the Company's
move to new facilities in March 1996.
Depreciation
Depreciation includes depreciation of computers, network equipment and
office equipment. Depreciation increased from 0.3% of net sales in the first
half of 1995 to 3.4% of net sales in the first half of 1996, as a result of
increased expenditures on capital equipment. The Company expects capital
investments to increase during the remainder of 1996 as it continues to
develop the infrastructure needed to support a higher level of operations.
Interest Expense
Interest expense increased from $2,733 in the first six months of 1995 to
$15,576 in the first six months of 1996, principally due to increased debt
levels associated with notes payable to stockholders entered into in February
1996.
Income Taxes
The Company currently does not pay income taxes as it does not have
taxable income.
YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales
The Company was formed on December 2, 1994, and recognized no revenues
during 1994. During 1995, the Company had net sales of $327,574, with
associated cost of sales of $59,871.
Operating Expenses
For the year ended December 31, 1994, the Company had operating expenses
of $17,452, which consisted of $1,045 in marketing expenses and $16,407 in
general and administrative expenses. Operating expenses during 1995 were
$269,527.
18
<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
The Company's current primary focus is on increasing revenues and
expanding operations. The Company continues to hire additional personnel and
to increase expenses related to administration, production, technical
resources, marketing, customer support and infrastructure to enhance and
expand its operations. The Company may from time to time issue debt or equity
securities and otherwise raise long-term capital to finance the expansion of
its business.
Since its incorporation, the Company has financed its operations through
private debt financing and, beginning in 1996, through cash flows from
operations. Cash used in operating activities was $19,251 and $6,415 for the
years ended December 31, 1994 and 1995, respectively. For the six months
ending June 30, 1996, net cash provided by operating activities was $57,902.
As of June 30, 1996, the Company had working capital of $234,191.
In 1995, the Company generated $163,497 through loans from a private
investor and its Chief Executive Officer. In the first half of 1996, the
Company generated cash from financing activities of $463,084, primarily
through the issuance of promissory notes.
The Company spent $33,737 and $284,042 during the year ended December 31,
1995 and the first six months of 1996, respectively, for the purchase of
capital equipment. These amounts were expended primarily for computer
equipment, communications equipment and software necessary for HomeCom to
increase its presence in the Internet and Intranet applications marketplace.
The Company's commitments as of June 30, 1996 consisted primarily of an
approximately five year lease on its headquarters facility, a promissory note
commitment to Harvey Sax, the Company's Chief Executive Officer, in the
principal amount of approximately $58,511, a loan commitment to a financial
institution in the principal amount of approximately $65,365, and promissory
note commitments to outside investors in the aggregate principal amount of
approximately $499,904. At June 30, 1996, there were no material commitments
for capital expenditures. In connection with the Company's recent acquisition
of HomeCom Internet Security Services, Inc. ("HISS"), the Company is obligated
to pay cash and/or issue shares of Common Stock in the future in payment of
the purchase price. See "Certain Transactions." The Company believes that
its current cash balances, credit line, cash flow from operations and the net
proceeds of this offering will be sufficient to meet its working capital and
capital expenditure needs for the foreseeable future. The Company may from
time to time issue debt or equity securities and otherwise raise long-term
capital to finance the expansion of its business.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of" ("SFAS 121"), was issued. Under SFAS 121, an impairment loss
must be recognized for long-lived assets and certain identifiable intangibles
to be held and used by an entity, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS
121 is effective for financial statements issued for fiscal years beginning
after December 15, 1995, and must be adopted on a prospective basis.
Restatement of previously issued financial statements is not permitted. The
Company adopted SFAS 121 effective January 1, 1996. Such adoption did not
have a material effect on the financial condition or results of operations of
the Company.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued. SFAS 123
requires that an entity account for employee stock compensation under a fair
value based method. However, SFAS 123 also allows an entity to continue to
measure compensation cost for employee stock-based compensation using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing
to continue accounting under Opinion 25 are required to make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting under SFAS 123 had been applied. The Company has elected
to measure compensation cost under Opinion 25 and will adopt the disclosure
requirements of SFAS 123 in its 1996 annual financial statements.
BUSINESS
GENERAL
HomeCom develops and markets specialized software applications and
products and provides services that enable businesses to use the Internet and
Intranets to obtain and communicate important business information, conduct
commercial transactions and improve business productivity. HomeCom provides
Internet/Intranet solutions in five areas: customized software applications
design, development and integration; World Wide Web site development; Internet
outsourcing services;
19
<PAGE> 21
specialized Internet-enabled software products; and security consulting and
integration services. HomeCom's objective is to be a leading provider of
business communications solutions using Internet standard protocol
technologies.
HomeCom employs a team of highly trained Internet/Intranet software
developers and multimedia and graphics professionals who design and develop
specialized Internet/Intranet software applications. These applications
enable companies to obtain and communicate vital business information, such as
sales reports, order status systems, employee directories and client account
information. The Company works closely with its customers to analyze and
design Internet-based software solutions that facilitate the interactive
exchange of business information. Through its experience in designing custom
Internet solutions for businesses, HomeCom believes that it has developed and
continues to develop in-depth knowledge concerning industry-specific Internet
applications and requirements. The Company plans to leverage this knowledge
to develop additional Internet-enabled applications targeted for vertical
industries, including banking and financial services, retailing and
entertainment.
The Company believes that it has established a reputation as a provider
of sophisticated interactive Web sites. The Company has developed more than
100 Web sites for clients in many diverse industries, including sites for
Synovus Financial Corporation ("Synovus"), SouthTrust Bank Corporation
("SouthTrust"), Norwest Corporation ("Norwest"), Rainforest Cafe, Incorporated
("Rainforest"), Brinker International ("Brinker"), Executrain Corporation
("Executrain"), THQ, Inc. ("THQ") and American Family Life Assurance
Corporation ("AFLAC"). The Company has a highly trained staff able to design
Web sites ranging from basic "inquiry only" sites to complex, interactive
sites capable of providing on-line commerce, database integration and
manipulation and sophisticated graphics, animation, sound and video. The
Company uses its proprietary Post On The Fly(TM) software in designing and
developing many of its Web sites.
HomeCom also provides Internet outsourcing services and presently hosts
more than 700 Web sites for clients in over a dozen countries. HomeCom
establishes and maintains the resources and facilities necessary to create and
support a customer's Internet server. As a provider of Internet outsourcing
services, HomeCom advises its clients as to the appropriate hardware,
including servers and routers, and software necessary to create an Internet
server, coordinates the purchase of this hardware and software, including
operating system and Internet server software, and provides the facilities to
house and maintain the server. HomeCom provides network management, including
all network functions, the maintenance of an environmentally conditioned,
secure facility and access to the Internet.
The Company has developed advanced software products that it presently
includes in its custom applications and that it intends to develop further for
retail sale. The Company has developed software, called Post On The Fly(TM),
which enables non-technical users to add, retrieve and update information
through the Internet or an Intranet using standard browser software. Post On
The Fly(TM) Conference permits intuitive and easy conferences among employees,
customers and business partners. The product uses database technology to
archive the user's data, ideas and innovations for later retrieval and review.
Post On The Fly(TM) Store facilitates the creation and updating of an on-line
store or catalog. Post On The Fly(TM) Q&A is being designed to facilitate the
creation and updating of examinations and training courses in question and
answer format. Post On The Fly(TM) Publisher is being designed to permit the
publisher of a magazine or newsletter to design an electronic publication
layout where reporters, editors and writers can insert articles, graphics and
other content.
HomeCom recently established an Internet security division to provide
security solutions for businesses connecting to the Internet. The Company
plans to develop and integrate advanced value-added security features into its
custom software applications and products, and to provide consulting and
integration services to companies seeking to communicate securely and to
transact business over the Internet.
The Company markets its products and services through its direct sales
force, print advertising and its own Web site. The Company also generates
customer leads through its business partner relationships with leading
technology companies such as AT&T, BBN Planet, Oracle, Sybase, Incorporated
("Sybase"), Microsoft and Netscape Communications Corporation ("Netscape").
The Company's staff of 22 full-time software engineers design and develop
custom applications and software products as well as run the Company's
outsourcing services and design Web sites. The Company's software engineers
have experience with various computer operating systems, including Sun
Solaris, SGI's IRIX, Windows NT, Digital's Unix on the Alpha platform, Intel's
Pentium Pro on BSDI Unix, Hewlett Packard's HP 9000 and Apple's Macintosh
operating system. The software engineers write software programs using
various tools and languages, including Perl, JAVA, CGI Programming, C and C++.
The software engineers also have database expertise in Oracle, Informix,
Sybase and SQL, and many software development tools. The Company's multimedia
artists and engineers utilize many of the generally available software
programs and tools such as Adobe Photoshop, MacroMedia Shockwave, RealAudio,
VRML and VDOLive.
20
<PAGE> 22
INDUSTRY OVERVIEW
The Internet and the World Wide Web
The Internet represents a global network of thousands of interconnected
computers and computer networks. By using the Internet, businesses,
individuals, educational institutions and government agencies communicate
electronically to access and share information and conduct business. Open
communications on the Internet are enabled by TCP/IP, an inter-networking
protocol software standard. Advances in microprocessor technology and the
development of Web technologies such as Hypertext Markup Language ("HTML")
technology (which allows users to move directly from one Web site to another)
and advanced graphical user interface browser and search engine software, have
made the Internet easier to navigate and more accessible to a larger number of
users and for a broader range of applications. These recent technological
advances have led to dramatic increases in the use of the Internet by
businesses and individuals.
The fastest growing portion of the Internet is the World Wide Web. The
Web is the worldwide network of computer services that uses a special
communications protocol, Hypertext Transfer Protocol ("HTTP"), that links
different servers throughout the Internet and enables non-technical users to
move from Web site to Web site easily and to access information using browser
software. According to IDC, the number of Internet users with Web access
increased from 1.1 million in 1994 to 8.3 million in 1995 and is expected to
reach 31.4 million by the end of 1996. IDC estimates that the number of
individuals worldwide with access to the Internet will reach approximately 200
million by the end of 1999.
The development of the Web and Internet-based technologies has allowed
fundamental and structural changes in the way information is published,
distributed and retrieved, thereby lowering the cost of publishing information
and expanding its potential reach. By facilitating the publishing and
exchange of information, the Web dramatically increases the amount of
information available to users. Businesses are increasingly recognizing that
the Internet can enhance the delivery and exchange of information, both among
their geographically dispersed locations and employees and with their business
partners and customers. Businesses are also realizing that the Internet can
facilitate relatively inexpensive, standards-based and easy-to-use methods for
accessing and delivering business information, such as sales, marketing and
distribution data. As a result, many businesses are using Web sites as a new
medium for advertising, promotion, conferencing, technical support and
exchange of information.
Web Sites
A Web site is a collection of one or more electronic documents or "Web
pages," which may contain graphics, text, audio and video information which is
available to a visitor accessing the Web site. Web sites can contain from one
to hundreds of pages, and can be searched, retrieved and viewed through the
use of widely available "browsers," such as Netscape Navigator or Microsoft
Internet Explorer. Using Web browser software, computer users can connect to
a Web site by entering the site's unique electronic Web address, known as its
Universal Resource Locator ("URL"). Users can navigate the Web sites by
utilizing hypertext link capabilities contained in Web pages. Hypertext links
are active areas on a Web page which, when selected by a user, automatically
identify and display a specific page, which can be located anywhere else on
the Web, thus enabling users to move from one Web page to another without
specifying the underlying URL address. Web sites can vary significantly in
complexity and interactivity. A simple Web site may display only text, and
more complex sites may display colored text, graphics, pictures, sound,
animation, video and database information.
The Company believes that increased processor speed, higher
telecommunications bandwidth (resulting in increased transmission speed) and
the development of software standards have led to the growing acceptance of
the Internet as a communications tool. As a result, many businesses are
choosing to re-engineer their distribution, logistics, customer service and
marketing functions into "Information Depots" accessible through their Web
sites. Consequently, the Company believes that there is an expanding market
for developers of sophisticated, graphically enhanced, interactive Web sites.
Enterprise Networks and Intranets
As network technology has advanced, business-wide networking has evolved.
Organizations have developed local area networks ("LANs") and have connected
geographically dispersed LANs into wide area networks ("WANs"). Many LANs
employ proprietary communications software, such as Novell NetWare. Today, in
addition to proprietary protocols, an increasing number of businesses are
using the Internet protocol TCP/IP for communications. TCP/IP facilitates
communications over internal networks using Internet software tools and
applications. An Intranet is a TCP/IP network inside a company that links the
company's people and information in a way that makes information more
accessible and facilitates navigation through all the resources and
applications of the company's computing environment.
Enterprise networks have increasingly used high-cost leased data lines to
create private and secure LANs and WANs. Internet protocol network software
now allows organizations to use the Internet for a lower-cost communications
system by
21
<PAGE> 23
reducing long distance and leased line charges. Businesses now can expand the
reach of and access to their internal information systems and enterprise
applications to allow geographically dispersed facilities, remote offices,
mobile employees, customers and business partners to access their networks
through the Internet at lower communications costs. The integration of LANs
and WANs through the Internet, plus the advancement of encryption security
capabilities, has promoted the use of high-speed virtual private networks
("VPNs"), which may be maintained at a fraction of the operating cost of
dedicated, leased line networks. VPNs that facilitate Internet banking, sales
entry and express delivery shipment tracking services are examples of this
fast-growing segment of the computing industry. The rapid growth of Intranets
and VPNs has increased the need for specialized software applications that
facilitate information delivery and communication using TCP/IP protocol.
Internet Security
An integral part of developing Internet based software applications for
businesses is protecting against unauthorized access to enterprise networks
and corporate data. Examples of valuable corporate data include financial
results, medical records, personnel files, research and development projects,
marketing plans and credit information. Businesses are vulnerable to
unauthorized access to this information both by employees and outside persons.
Unauthorized access may go undetected by the computer user or network
administrator. The Company believes that concerns about the security of data
transmitted over the Internet have limited growth in the Internet's commercial
use. As a result, the Company believes that there is a rapidly expanding need
for the services of Internet security specialists.
The Internet-Enabling Products and Services Market
The explosive growth of the Internet and World Wide Web has led to the
rapid development of increasingly sophisticated and advanced TCP/IP-enabled
software applications such as Web browsers and HTML compatible server
software. These Internet tools enable users to obtain and communicate
information more efficiently and effectively. Forrester Research, Inc.
estimates that the combined Internet and Intranet worldwide software market
will increase from $382 million in 1996 to $8.5 billion in 1999.
The Company believes that there is a rapidly growing need for businesses
to expand and integrate their existing information and communications systems
to take advantage of the global communications framework and advanced graphics
capabilities of Internet-enabled systems. The Company also believes that
businesses today face a paradigm shift from proprietary protocol based local
area networks and wide area networks to Internet-enabled global communications
systems. However, the Company believes that there is a need for high quality
software applications designed to support these new systems.
THE HOMECOM SOLUTION
HomeCom was established to provide advanced software applications and
integration services to businesses seeking to take advantage of the Internet.
Integration of existing business operations with new Internet technologies is
a costly and complex undertaking which the Company believes requires a high
level of expertise to complete effectively. HomeCom believes that many
businesses do not have the in-house experience and expertise to establish
effective Internet-based communications in order to increase their
productivity and compete more effectively in the marketplace. Also, HomeCom
believes that the growth of electronic commerce over the Internet has been
impeded by the perceived lack of effective security components. Finally, the
Company believes that there presently is a lack of specialized software
applications to support the growing Internet market. Therefore, the Company
believes that businesses will engage specialized firms like HomeCom to
implement Internet solutions. HomeCom believes it is well positioned to
become a leading Internet solutions provider for the following reasons:
- HomeCom focuses on creating Internet
"Information Depots" for clients, including sophisticated
database integrated software applications and interactive
Web sites, to provide valuable information to business'
customers, prospects, employees, stockholders and business
partners. This is in contrast to the public relations
material that represents much of the content currently on
Web sites.
- The Company has assembled a team of professional programmers,
database experts and graphic artists that is able to create
advanced interactive Web sites with database integration that
function as effective Information Depots. Through developing
specialized Internet applications for clients in vertical
industries, HomeCom's team attains valuable knowledge about
industry specific Internet needs and solutions, which it uses
to provide efficient, value-added services to its customers.
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- HomeCom's recent establishment of its Internet
security division has furthered the Company's knowledge
of, and expertise in, Internet security. As a result, the
Company is able to include advanced security features to
create a complete Internet solution.
- The Company provides businesses with a "one
stop shop" for Internet communications applications. The
Company can provide applications development, Web site
creation, Internet security and Web server outsourcing.
By combining its advanced programming, database and
security expertise with outsourcing capabilities, the
Company intends to create next generation Internet
business solutions.
HOMECOM BUSINESS STRATEGY
The Company's objective is to be a leading provider of business
communications solutions using Internet standard protocol technologies. The
Company intends to achieve this position by implementing the following key
elements of its growth strategy:
Develop and Market Industry-Specific Applications
The Company will develop specialized software applications and market
these applications to large businesses. The Company intends to focus on
industry-specific applications such as insurance and real estate sales force
data systems, financial institution client account access systems, inventory
order entry systems, human resources information directories, and
collaborative and groupware environments. The Company's goal is to develop a
reputation as a leading full-service Internet applications developer for
specific vertical industries, including banking and financial services,
retailing and entertainment.
Expand Software Product Development
By developing specific Internet-based applications, the Company expects
to continue to obtain valuable industry-specific data and knowledge of the
Internet-based software needs in such industries. The Company will seek to
retain the rights to use important elements of specific business applications
in order to develop other custom applications. For example, the Company has
developed software, which it calls Post On The Fly(TM), which enables
non-technical users to add, retrieve and update information through the
Internet or an Intranet using standard browser software. The Company expects
to continue to develop, integrate and offer Post On The Fly(TM) products such
as Post On The Fly(TM) Conference, Post On The Fly(TM) Store, Post On The
Fly(TM) Q&A and Post On The Fly(TM) Publisher.
Develop and Integrate Advanced Security Services
HomeCom's Internet security division will provide advanced security
integration consulting services and develop Internet applications with high
levels of integrated security. HomeCom's Internet security division is
staffed by Internet software and integration security consultants with a broad
range of Internet and Intranet security applications and integration
experience to both commercial and government users. HomeCom intends to market
these advanced services and applications both as part of a total package of
Internet conversion services and as a single service. The Company's objective
is to become a leading provider of integrated security services and
applications to large business enterprises and to government agencies.
Expand by Acquisition
The Internet/Intranet products and services market is highly fragmented.
The Company is one of numerous Internet software applications and advanced
multimedia developers who design, develop and provide Internet software
products and services. In addition, a substantial number of client/server
developers, database systems integrators and resellers provide services to
established clients but do not provide Internet-based solutions for those
clients. The Company will seek to make strategic acquisitions of companies
that have developed specific industry expertise or have existing relationships
with large businesses needing Internet/Intranet solutions. However, the
Company has not entered into any agreement or commitment and is not a party to
any negotiations for any such acquisition.
PRODUCTS AND SERVICES
HomeCom provides Internet/Intranet solutions in five integrated areas:
custom software applications design, development and integration; World Wide
Web site development; Internet outsourcing services; specialized Internet
software products; and security consulting and integration services.
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Customized Software Applications for the Internet
HomeCom designs and develops specialized software applications that
enable companies to obtain and communicate important business information
through Internet standard protocol communications. To date, the Company has
completed custom applications projects for clients such as Data Track Systems,
Inc., Coverdell Insurance, Inc., AFLAC and Vital Integration Solutions, Inc.
The Company works closely with its customers to analyze and design
specifications for Internet standard software applications. To begin a custom
applications project, the Company's customers generally either request a
proposal from the Company or meet with Company personnel to discuss their
Internet/Intranet communications needs. The Company generally analyzes the
customers' present system and provides a recommendation and a quotation. A
typical quotation specifies a fixed fee for significant design and development
activities, a variable fee for maintenance support services, and includes
pricing for equipment, software and communications. Criteria for pricing
these services include the complexity of the project, the amount of custom
programming required, the anticipated usage and traffic and the level of
security required. The Company's custom application projects have generated
fees ranging from approximately $40,000 to approximately $200,000.
Following are examples of how HomeCom uses its integrated services to
create specialized Internet and Intranet based software solutions for large
businesses:
- Sales Force Information System. A Fortune 250 insurance
company hired HomeCom to design and implement a system to allow its
agents across the United States to search and retrieve insurance
product descriptions, prices and other product data and to update the
agents' personal profiles on a continuous basis. To meet the
customer's needs, HomeCom designed and implemented an Internet-based
custom software solution using its Post On The Fly(TM) technology.
The customer advised HomeCom that this new system could increase the
customer's revenues by allowing the public direct access to
information about its products and assisting prospective customers in
locating agents who meet their personal needs. The Company expects
to complete implementation of the first phase of this project in the
fourth quarter of 1996.
- Real-Time Public Viewing System. HomeCom was hired by a
contractor to an international telecommunications company to design
and implement a real-time video of selected 1996 Olympic Games venues
for the telecommunications company's Web site. HomeCom designed and
implemented software which integrated the video feed from various
sites at the Centennial Olympic Games in Atlanta, Georgia to allow
Internet users throughout the world to view specified venues. As
part of this project, the Company supplied computer and
communications hardware to the customer.
- Order Entry System. HomeCom was engaged by a contractor to the
nation's largest mortgage origination firm to create an Intranet
order entry system to allow the customer's geographically disbursed
employees to communicate important information relating to real
estate mortgages. HomeCom presently is developing an Intranet system
for the customer through which employees and business partners will
be able to access a variety of title-related information, including
title insurance, escrow information, public records and flood plain
information. Users will be able to request title policies and
services, report expected delivery dates, update order information
and view order executions by other employees. The system, called
"The Automated Order and Delivery Service for Real Estate Loan
Services," uses a Sybase database to collect and process orders and
Netscape's Commerce Server's Secure Socket Layer to provide secured
transactions. The customer believes that this system will increase
the speed at which its employees can process mortgage information,
and will reduce paperwork, without requiring the customer to incur
the cost of expensive leased phone lines, banks of modems and
cost-prohibitive WAN systems. The first phase of this project was
completed in the third quarter of 1996.
- Interactive Insurance Quotation System. A regional insurance
company approached HomeCom with the need to develop an electronic
commerce system to allow the public to enter personal and financial
information and to obtain competing quotes for life insurance
policies and annuities. HomeCom is presently developing a secure
interactive system, using a Microsoft SQL database and Netscape
Enterprise server software to allow the public to obtain competing
quotes for life insurance policies and annuities through the
Internet. The customer has advised HomeCom that it believes this
system will enhance the customer's marketing presence for its
brokerage services and increase its sales by allowing customers to
obtain quote information without utilizing an agent. The customer
has advised the Company that it plans to market this system to the
banking industry.
During the first six months of 1996, custom Internet and Intranet
applications and integration services (including hardware resales) accounted
for approximately 29% of the Company's revenues. The Company believes that
special applications
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services will represent an increasing percentage of its total revenues as the
Company continues to market its custom applications services to larger
businesses.
Web Site Development and Design
HomeCom is an established provider of advanced Web site design and
implementation services, having developed more than 100 Web sites for clients
in many industries. The Company has a highly trained staff able to design Web
sites ranging from basic "inquiry only" sites to complex, interactive sites
capable of providing on-line commerce, data base integration and manipulation,
sophisticated graphics, animation, sound and other multimedia content.
The Company has developed a standard process for the design and
implementation of Web sites. Initially, the Company's creative director and
project manager meet with the customer to discuss its current methods for
serving its customers, employers and suppliers, as well as its objectives and
marketing needs. Prices for the design of relatively simple Web sites,
without additional software applications, currently range from $5,000 to more
than $50,000.
The Company's staff of 22 full-time software engineers uses a variety of
computer operating systems, tools and language to develop Web sites. In
particular, the Company's software engineers have developed a high level of
expertise using C, C++, Perl, JAVA and CGI programming. These programmers
write complex computer programs to create special features on a Web site. In
addition, they regularly assess new applications and tools that may assist the
Company in providing leading edge Web site services.
The Company's graphics designers create sophisticated Web sites which
include functions such as interactive on-line commerce, 3-D modeling, virtual
reality and audio and video creation and editing. The Company's staff of
professional artists, multimedia programmers and graphic designers develops
Web sites to meet the customers' creative needs. HomeCom and its clients have
won several awards for Web sites created by HomeCom, including the MGM-UA "Top
10," Point "Top 5% of All Web Sites" and Magellan "Four Star Site." The
Company intends to continue to recruit the best available multimedia artistic
talent.
A business' decision to begin marketing and communicating through the
Internet generally involves the expenditure of substantial funds and can
result in major changes to its marketing and communications systems.
Forrester Research, Inc. estimates that the typical annual costs for
establishing and operating a business Web site currently ranges from
approximately $304,000 for a "promotional" site to nearly $3.4 million for a
full transactional site. Consequently, HomeCom believes that businesses
generally prefer companies such as HomeCom that have established track
records, professional staffing and good reputations to provide these services.
During the first six months of 1996, Web site design and development
services accounted for approximately 47% of the Company's revenues. The
Company expects that revenues from such services will increase, but believes
that fees for such services will represent a smaller percentage of total
revenue over the foreseeable future.
Internet Outsourcing Services
HomeCom provides full service Internet network outsourcing services,
consisting of Web site and Internet application hosting and facilities, which
it markets both as an integrated part of its full-service Internet solution
and as a separate service. HomeCom's customers utilize the Company to
maintain the customer's Internet servers and network functions at facilities
located at HomeCom's main office. HomeCom presently hosts approximately 700
Web sites. HomeCom's Internet Network Development Center is housed in Class A
office space with 24-hour manned on-premises security. Access to the NDC
computer room is 24-hour double secured. HomeCom provides its Internet
outsourcing services through multiple leased T1 data lines. See "Facilities."
Because the Company is an established provider of these services,
conducts its operations using sophisticated technologies and operates in Class
A office space, it believes it can compete effectively to provide Internet
outsourcing services for large businesses. At the same time, because the
Company prices its outsourcing services competitively, it believes it can
compete effectively for the hosting services of small business and
individuals.
The Company maintains the file servers for a customer's Web site for a
monthly fee. Presently, the monthly fees range from approximately $25 to
$900. Pricing levels vary depending on the amount of storage used on the file
server. The Company also provides ongoing maintenance, problems correction
and periodic updates, as well as outsourcing services for customers who own
their equipment.
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Following are examples of HomeCom's outsourcing services:
- HomeCom presently maintains the interactive Web site for one of
the nation's largest film processing companies. This Internet-based
customer service system allows customers to review and order pictures
from film which has been developed by the company. This system is
integral to the company's operations, and is maintained and operated
by HomeCom on a 24-hour basis.
- HomeCom presently hosts the interactive Web site for a publicly
traded restaurant chain. This Web site provides up-to-date company
and stockholder information, on-line job resources and employment
information.
- HomeCom is hosting a Web site for a publicly traded insurance
company that provides information about its insurance products and
services, including an on-line agent location and profile system.
- HomeCom is hosting a regional bank's interactive Web site
communications system which enables the public to receive stockholder
information, branch location information and press releases, and to
participate in on-line interviews with the company's chief executive
officer. The customer has advised the Company that it intends to
include all its approximately 34 subsidiary banks in its Web site.
- Prior to and during the recent 1996 Olympic Games in Atlanta,
HomeCom hosted the server for an international telecommunications
company's Web site, which enabled the public to view real-time
pictures of selected venues of the Olympic Games.
During the first six months of 1996, Internet outsourcing services
generated approximately 24% of the Company's total revenues. The Company
believes that its total Internet solution marketing focus, together with the
recurring nature of outsourcing fees, will lead to an increase in outsourcing
fees as a percentage of total revenues during the foreseeable future.
Internet-Enabling Software Products
Post On The Fly(TM) Products. The Company has developed advanced
Internet-enabled software products based on the Company's Post On The Fly(TM)
technology. Post On The Fly(TM) is software which enables non-technical users
to add, retrieve and update information through the Internet or an Intranet
using standard browser software. The Company uses this technology as an
integral part of many of its custom applications services and believes that
there are valuable potential retail applications for this technology. The
Company has used Post On The Fly(TM) technology to create the following
software application products.
Post On The Fly(TM) Conference. In August 1996, the Company began
selling Post On The Fly(TM) Conference ("Conference"), an Internet Web
conferencing software product designed to operate on Web servers. Conference
allows users to create their own conference sessions and allows discussion
groups to be created and administered by non-technical personnel. Conference
utilizes Post On The Fly(TM) technology to store and search all user profiles
and discussions. Each conference participant is required to have only a Web
browser and an Internet connection. Conference operates on a Web server and
allows users of many different types of computers to communicate interactively
in the same conference. Conference stores all responses to a HomeCom created
database, which allows the business and participants to search, locate and
retrieve all posts, replies and user profiles. Conference integrates the user
profiles into the conference so that participants have access to the education
and job experience of each other participant and other historical information
necessary to assess a participant's responses. Conference allows users to add
photos, videos, word processing files and sound bites to conferences and to
their profiles.
Conference may be customized by the user to define the scope and subject
of the conference, the conference participants and the persons who may
administer the conference. Conference administrators are permitted to update
the conference and evaluate persons who apply to participate. Conference also
has powerful administrative features that enable a principal conference
administrator to distribute all or certain administrative functions to
sub-administrators quickly and easily. Conference provides a dynamic business
tool for interactive conference communications, including soliciting employee
comments on business initiatives, proposals, group projects and topics of
mutual interest to participants.
For example, one of the nation's largest film processing companies
presently uses Conference for three distinct types of interactive
communication through its Web site. First, it establishes "open" conferences
for its customers and the general public, soliciting their input on its
present services and products and certain proposed future services and
products. Second, it establishes conferences for its employees to solicit
their input on topics of importance to them. Third, it establishes private
conferences for its store managers to discuss topics relating to store
operations and proposed future services and products. HomeCom's customer
believes that the implementation of the Conference software application has
allowed it to obtain valuable feedback from its employees and managers, as
well as its present and potential customers, and has given it a valuable
marketing tool by increasing the usefulness of its Web site.
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The Company believes that there are presently several other publicly
available software products that offer Internet-based group discussion,
including Lotus Notes and Digital's AltaVista(TM) Forum. The Company believes
Conference will be competitive with these software products because Conference
offers ease of use, a multiplicity of features and an attractive price. The
Company is presently preparing and intends to file a U.S. patent application
covering certain aspects of Conference.
Post On The Fly(TM) Store. In February 1996, the Company completed
development of its first version of Post On The Fly(TM) Store ("Store"), an
Internet Web server database product that enables businesses to sell products
over the Internet in a secure on-line catalog environment. Store also allows
a customer's non-technical employees to create and update the on-line store or
catalog using any Internet World Wide Web connection and standard browser
software. HomeCom's customer, the "store merchant", can enter and later
modify the descriptions and prices of products to be sold in the on-line
store. Product descriptions can include graphics, pictures and product,
shipping and pricing information. The store merchant can add to or delete its
product inventory at any time without any special training or programming
skills. A Post On The Fly(TM) Store can be a simple 12 item store for a small
merchant or a large on-line catalog.
Store customers can purchase products using standard Web browser
software. Store customers also can search for specific types of products
based on description, name, price or product ID number, and retrieve the
relevant product information. After deciding to purchase a product, a
customer can point and click to select the product for purchase and place that
product into the customer's shopping basket list. After selecting all
purchases, the customer can checkout and purchase the products in the shopping
basket list by using a credit card. The order entry system will summarize the
total purchase price for the products purchased and the exact shipping charges
through automatic reference to UPS's rate information system. Store notifies
the merchant of all customer orders by secure Web sites, encrypted e-mail or
facsimile to the merchant. Merchants are also able to access Store's
accounting system to review the purchases of their customers. The Company
believes that Store will be competitive with other existing Internet store
creation products such as Netscape Merchant software because Store is
competitively priced and requires no programming skills once installed.
Post On The Fly(TM) Q&A. The Company is developing Post On The Fly(TM)
Q&A ("Q&A"), a testing and training software application product that will
enable users to create and revise complicated examinations, training courses,
and simple question and answer forms. A customer will be able to use Q&A to
create an examination by typing or pasting a series of questions and answers
into the program using standard Web browser software. The user will be able
to specify the number of questions, the time allowed to answer each question,
the score necessary for a passing grade, and other testing and training
criteria to create a highly customized test or training course. The user also
will be able to determine who should be entitled to see the results of the Q&A
tests or training courses. All user information, scores and examination
answers will be stored in the database for later viewing and analysis. The Q&A
software will allow non-technical persons to create sophisticated training
courses and examinations without any programming experience. Encryption
technology will maintain the confidentiality of the tests and training
courses. HomeCom anticipates that Q&A will be released in the fourth quarter
of 1996.
Post On The Fly(TM) Publisher. The Company is developing Post On The
Fly(TM) Publisher ("Publisher"), a proposed database software product designed
to provide customized publishing templates, including text and graphics
placement, headings, background colors, text colors and font sizes. As
currently designed, this product will allow publishers to design an electronic
publication and to create an Internet Web magazine or other electronic
publication. Publisher will allow reporters, editors, writers and other
non-technical people to utilize the Internet to insert articles, graphics,
video clips, sound clips and other content to create a multimedia publication.
Content will be able to be inserted into the publication simply by typing or
pasting into the proper areas of the template. Reporters and others
submitting content to an electronic magazine from the field will be able to
access a secure section of the Publisher software, using log-in and password
protection, and paste their articles or graphics into the proper sections.
Content submitted in this manner will be converted into HTML format ready for
viewing on the Web without further intervention. Information submitted by a
user will automatically be stored in a database for later use.
Publisher will be designed to provide users with two possible versions of
an electronic publication. One version will contain all of the content. A
second version will be customized "on the fly" to contain only the information
that is of interest to an individual user, based on content placed in the
user's profile. Publisher will determine the content of the custom version
based on its built-in intelligent agent rules that match user interests with
select articles and other content.
Although there are numerous HTML editing products such as Netscape
Navigator Gold and Microsoft Front Page, the Company believes its products
will allow non-technical users to create a customized version of their
publication in real time for each reader. The Company will seek to compete
against other products by offering Publisher as a ready-to-run application
with easy-to-use features at a competitive price.
The Company intends to market its Post On The Fly(TM) software products
by offering a free limited use demonstration license through its Web site,
similar to programs offered by other software developers, and through print
media and reseller agreements. The Company has not conducted market studies
for its Post On The Fly(TM) products and, consequently, cannot
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determine whether there will be a substantial market for such products or
whether such products will compete effectively against present and future
competing products.
During the first six months of 1996, the Company's Post On The Fly(TM)
products were under development and not available for retail sale.
Internet Security Services
In August 1996, HomeCom established an Internet security division to
provide security solutions for businesses connecting to the Internet. See
"Certain Transactions." The Company plans to develop and integrate advanced
value-added security features into its custom software applications and
products, and provide consulting and integration services to companies seeking
to communicate securely and transact business over the Internet.
The Company's objective is to provide its customers with a comprehensive
family of integrated network security solutions. The Internet security
division will assess the customer's needs and recommend and install
"firewalls," encryption and authentication applications, other repudiation
techniques and secured networks. The Company expects to begin generating
revenues from security integration services during the fourth quarter of 1996.
Management of the Internet security division has experience in performing
Internet security services for the federal government.
SALES AND MARKETING
The Company markets its products and services through its direct sales
force, print advertising and its own Web site. The Company also generates
customer leads through its business partner relationships with leading
technology companies such as AT&T, BBN Planet, Oracle, Sybase, Microsoft and
Netscape.
The Company has instituted an in-depth two-week training program for its
sales staff to enable them to market the Company's Internet-based services and
products effectively. During the first week, the Company teaches an overview
of basic Internet and Intranet technology and current and developing hardware
and software. This allows its sales staff to become conversant in the terms
and technology of the Internet industry, and provides in-depth training about
the Company's services and products. During the second week, the Company
teaches its direct sales system, using role playing to teach its staff how to
locate prospective customers, define their needs, overcome obstacles to sales
and finalize sales.
The Company is focusing its marketing on large businesses with
industry-specific applications needs in areas such as insurance and real
estate sales force data systems, financial institution client account access
systems, inventory order entry systems, human resources information
directories, parts databases and collaborative and groupware environments.
The Company also intends to utilize traditional print and media marketing
strategies to enhance Company and product name recognition.
CUSTOMERS
During the first six months of 1996, the Company earned approximately 21%
of its revenues from Modem Media, Inc. and approximately 11% of its revenues
from Vital Integration Systems, Inc. Other than the foregoing, no customer
accounted for more than 10% of the Company's total revenues during the first
six months of 1996.
Because substantially all of the Company's customers have retained the
Company for a single project, customers from whom the Company generated
substantial revenue in one quarter have not been a substantial source of
revenue in a subsequent quarter.
BACKLOG
Because the Company's custom software applications projects have
generally been completed in less than 60 days, the Company has not experienced
significant backlog.
FACILITIES
The Company occupies approximately 10,000 square feet in an office
building in Atlanta, Georgia under a lease expiring in March 2001. The
facility serves as the Company's headquarters and computer center. The
Company also has an office in McLean, Virginia occupying approximately 450
square feet under a lease expiring in July 1997.
The Company's Internet services are maintained in secured,
environmentally conditioned premises at its Internet Network Development
Center ("NDC") at the Company's principal offices. Company personnel monitor
server and network
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functions on a 24-hours per day, 7 days per week basis, and access to the NDC
is 24 hour double secured. Back-up servers replace production services in the
event of failure or down time. Tape back-ups are performed on a weekly basis
and transported for off-site storage. Each server is SNMP managed and utilizes
devices located on a separate network to notify NDC personnel by pager in the
event of problems that are not otherwise detected by HomeCom's own SNMP.
All power supplied to the NDC computer room is supplied by two separate
power substations through American Power Conversion Matrix UPS lines, with
back-up battery power. Telecommunications are provided to the computer room
through multiple leased T1 lines directly connected to the T3 Internet
provided by interexchange carriers. Each T1 line is provisioned on separate
local carrier fiber optics using the latest SONET and FDDI technology.
Telecommunications lines are provided through two physically diverse entrance
facilities. The Company has acquired and installed multiple Cisco routers for
connection to the Internet, which automatically redistribute traffic load in
the event of telecommunications failure.
The Company believes that the properties which it currently has under
lease are adequate to serve the Company's business operations for the
foreseeable future. The Company believes that if it were unable to renew the
lease on either of these facilities, it could find other suitable facilities
with no material adverse effect on the Company's business.
COMPETITION
The market for specialized Internet applications and products is highly
competitive, and the Company expects that this competition will intensify in
the future. In providing specialized software design and development, the
Company competes with numerous businesses that also provide software design
and development services, companies that have developed and market application
specific Internet software products, companies that provide software tools
that enable customers to develop specific Internet-enabled software
applications and companies that choose to develop Internet application
products internally. Andersen Consulting, L.L.P., Electronic Data Systems
Corporation ("EDS"), International Business Machines Corporation ("IBM") and
Cap Gemini America are significant custom software developers, integrators and
resellers whose services include a broad range of Internet and Intranet
software applications design and development services. Companies such as
Broadvision, Inc., Edify Corporation and Security First Network Bank have
developed application specific Internet software products that are broadly
marketed and licensed and perform such functions as interactive one-to-one
marketing, human resources benefits inquiry, enrollment and training and
Internet banking. In addition, companies that offer and sell client/server
based Internet-enabled software products, such as Netscape and Microsoft, may
in the future bundle software capabilities and applications with existing
products in a manner which may limit the need for software capabilities and
application services such as those offered by the Company. The Company also
competes with the information technology departments of significant business
enterprises who may choose to design and develop their Internet applications
internally. The emergence of sophisticated software products and tools that
enable companies to build customized Internet-enabled software applications
internally also may have the effect of encouraging internal development and,
thus, may materially reduce the demand for the Company's custom software
application services.
The Company's Web site development services face competition from a
variety of sources, from small operations to large global competitors like EDS
and Computer Sciences Corporation. The Company believes Web site development
presently is a fragmented market, with no business commanding a dominant
share. HomeCom believes that as Web sites increase in interactivity and
complexity, Web site development companies will increasingly need to maintain
an integrated team of Intranet-enabled software engineers, advanced graphics
programmers, multi-media artists and Internet security experts in order to
compete effectively for large business customers. Consequently, HomeCom
believes that it will need to continue to expand its personnel and work to
maintain leading edge technology capabilities in order to remain competitive.
Although there is likely to be a continuing market for individual Web site
development, the Company intends to continue to focus its Web site development
services on large businesses with complex interactive requirements.
The Company's Internet outsourcing services face competition from
numerous large and small competitors that provide comparable outsourcing
services. Such competition includes BBN Planet, AT&T, MCI Communications
Corporation ("MCI"), IBM, EDS and UUNET Technologies, Inc., as well as numerous
regional Internet outsourcing services providers.
The Company's security services division faces competition from many
sources, including companies that provide security consulting services and
companies that market specific Internet-based security solutions. Such
competitors include Digital Equipment Corporation, IBM, Andersen Consulting,
L.L.P. and EDS. In addition, many companies currently market Internet-based
application-specific software products that incorporate security and
confidentiality features and functions.
The Company believes that the rapid expansion of the market for Internet
software applications will foster the growth of many significant competitors
performing comparable services and offering comparable products to those
offered by the Company. The Company competes on the basis of creative talent,
price, reliability of services and responsiveness. Many of the Company's
current and prospective competitors have substantially greater financial,
technical, marketing and other resources than
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the Company. The Company believes that it presently competes favorably with
respect to each of its various service offerings. There can be no assurance
that the Company's present and proposed products will be able to compete
successfully with current or future competitors or that competitive pressures
faced by the Company will not have a material adverse effect on the Company's
business, financial condition and operating results.
INTELLECTUAL PROPERTY RIGHTS
In accordance with industry practice, the Company relies primarily on a
combination of copyright, patent and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its
proprietary rights. The Company seeks to protect its software, documentation
and other written materials principally under trade secret and copyright laws,
which afford only limited protection. The Company does not hold any
registered trade or service marks at this time, but has applied for federal
registration of the names "HomeCom(TM)," "Post On The Fly(TM)" and the
Company's logo. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. There can be no assurance that the Company's means of protecting
its proprietary rights will be adequate or that the Company's competitors will
not independently develop competing products and services. In distributing
software products, the Company intends to rely primarily on "shrink wrap"
licenses that are not signed by licensees and, therefore, may be unenforceable
under the laws of certain jurisdictions. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to as great
an extent as the laws of the United States. The Company does not believe that
any of its proposed products infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not claim
infringement by the Company with respect to its products. The Company expects
that software product developers will increasingly be subject to infringement
claims as the number of products and competitors in electronic commerce grows
and the functionality of products in different industry segments overlaps.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company. In addition, Web site developers such as the Company face potential
liability for the actions of customers and others using their services,
including liability for infringement of intellectual property rights, rights
of publicity, defamation, libel and criminal activity under the laws of the
United States and foreign jurisdictions. The Company routinely enters into
non-disclosure and confidentiality agreements with employees, vendors,
contractors, consultants and customers. The Company is presently preparing and
intends to file a U.S. patent application as to certain aspects of its Post On
The Fly(TM) Conference software.
There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology. The Company believes that, due to
the rapid pace of Internet innovation and related software industries, factors
such as the technological and creative skills of its personnel are more
important in establishing and maintaining a leadership position within the
industry than are the various legal protections of its technology.
EMPLOYEES
At September 16, 1996, the Company employed 42 full-time employees, of whom
22 were technical personnel engaged in maintaining or developing the Company's
products or performing related services, 15 were marketing and sales personnel
and 5 were involved in administration and finance.
INSURANCE
The Company maintains liability and other insurance that it believes to
be customary and generally consistent with industry practice. The Company
believes that such insurance is adequate to cover potential claims relating to
its existing business activities.
GOVERNMENT REGULATION
The Telecommunications Act of 1996 (the "1996 Telecommunications Act"),
which became effective on February 8, 1996, imposes criminal liability on
persons sending or displaying in a manner available to minors indecent
material on an interactive computer service such as the Internet. The 1996
Telecommunications Act also imposes criminal liability on an entity knowingly
permitting facilities under its control to be used for those activities. The
constitutionality of these provisions is being challenged in federal court
and, as of the date of this Prospectus, enforcement of certain provisions has
been enjoined. However, this legislation may decrease demand for Internet
access, chill the demand for Internet content, or have other adverse effects
on Web site service providers such as the Company. In addition, in light of
the uncertainty of the interpretation and application of this law, there can
be no assurance that the Company would not have to modify its operations to
comply with the statute.
Except for the 1996 Telecommunications Act, the Company does not believe
that it is currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally, and believes that
there are
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currently few laws or regulations directly applicable to Web site service
companies. It is possible that a number of additional laws and regulations
may be adopted with respect to the Internet, covering issues such as user
privacy, pricing and characteristics and quality of products and services.
The adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the demand for the Company's products
and services and increase the Company's cost of doing business or cause the
Company to modify its operations, or otherwise have an adverse effect on the
Company's business, financial condition and operating results. Moreover, the
applicability to the Internet of existing laws governing issues such as
property ownership, libel and personal privacy is uncertain. The Company
cannot predict the impact, if any, that future regulation or regulatory
changes may have on its business. In addition, Web site developers such as
the Company face potential liability for the actions of customers and others
using their services, including liability for infringement of intellectual
property rights, rights of publicity, defamation, libel and criminal activity
under the laws of the U.S. and foreign jurisdictions. Any imposition of
liability could have a material adverse effect on the Company.
In addition, the Company's network services are transmitted to its
customers over dedicated and public telephone lines. These transmissions are
governed by regulatory policies establishing charges and terms for
communications. Changes in the regulatory environment relating to the
telecommunications and media industry could have an effect on the Company's
business, including regulatory changes which directly or indirectly affect use
or access of the Internet or increase the likelihood or scope of competition
from regional telephone companies, could have a material adverse effect on the
Company.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- ----------------------------------------------------------
<S> <C> <C>
Harvey W. Sax.......... 44 President, Chief Executive Officer and Director
Nat Stricklen.......... 53 Senior Vice President, Sales and Marketing, Chief
Operating Officer and Director
Vinod Keni............. 30 Treasurer, Chief Financial Officer, Secretary and Director
Krishan Puri........... 31 Executive Vice President and Director
Gia Bokuchava, Ph.D.... 32 Chief Technical Officer and Director
Roger Nebel............ 42 Vice President and Director
Gregory Abowd, Ph.D(1). 31 Director
R. Douglas MacIntyre(1) 45 Director
Winn Schwartau(1)...... 44 Director
</TABLE>
- -----------------
(1) Member of the Audit and Compensation Committees.
HARVEY W. SAX is a founder of the Company and has served as President and
Chief Executive Officer of the Company since January 1995. He was Secretary
of the Company from December 1994 until January 1995. From October 1994 until
December 1995, Mr. Sax served as a Vice President of Oppenheimer & Co., Inc.
From February 1993 until September 1994, Mr. Sax served as a Senior Vice
President of D. Blech & Co. From July 1992 until February 1993, Mr. Sax was a
Vice President of Paine Webber, Inc. From January 1989 until July 1992, Mr.
Sax was a Vice President of Bear, Stearns & Co. Inc. Mr. Sax received a
Bachelor of Arts degree from Emory University in 1972. Mr. Sax has been a
member of the Board of Directors since December 1994.
NAT STRICKLEN has served as Senior Vice President, Sales and Marketing,
and Chief Operating Officer of the Company since January 1996. Mr. Stricklen
was President of the Company from December 1994 until January 1995, and Vice
President and Secretary of the Company from January 1995 until January 1996.
For more than 25 years prior to joining the Company in December 1994, Mr.
Stricklen was employed by IBM where from 1988 until November 1994 he was the
senior product manager for the IBM Link product used for electronic
communication for IBM employees and business partners. Mr. Stricklen was a
member of the team that developed the original IBM Internet home page. Mr.
Stricklen received a Bachelor of Science degree in Data Processing and
Application Systems Design from Washington University in 1975. Mr. Stricklen
has been a member of the Board of Directors since December 1994.
VINOD KENI has served as Treasurer, Chief Financial Officer and Secretary
of the Company since February 1996. Before joining the Company, Mr. Keni was
a Senior Financial Analyst with Harvard Pilgrim Health Care, an HMO, from
February 1995 until February 1996. From May 1994 until February 1995, he was
a Financial Analyst with Kent County Memorial Hospital in Providence, Rhode
Island. From April 1993 until April 1994, he was a Financial Coordinator with
IVF America, Inc., a healthcare research and products company. From August
1991 until April 1993, Mr. Keni was a student at Johnson & Wales University.
Mr. Keni received a Master of Business Administration degree from Johnson &
Wales University in 1993 and a Master of Science degree in Finance and
Accounting from Bangalore University, India in 1987. Mr. Keni has been a
member of the Board of Directors since September 1996.
KRISHAN PURI has served as Executive Vice President of the Company since
February 1996, and was a member of its former Board of Advisors from May 1995
until August 1996. From March 1994 until January 1996, Mr. Puri was a Senior
Management Consultant with Deloitte & Touche Consulting Group in its
telecommunications practice. From March 1992 until March 1994, Mr. Puri
served as a Senior Engineer for International Communications Network Services
for British Telecom and MCI's Concert joint venture in Atlanta, Georgia. From
March 1990 until March 1992, Mr. Puri was a network analyst with Sprint
Corporation, a long distance telecommunications company. Mr. Puri received a
Bachelor of Science degree in Electrical Engineering from Georgia Institute of
Technology in 1987 and a Master of Business Administration degree from Georgia
State University in 1992. Mr. Puri has been a member of the Board of
Directors since September 1996.
GIA BOKUCHAVA, PH.D., has served as the Company's Chief Technical Officer
since August 1995. Dr. Bokuchava served as a visiting professor at Emory
University from September 1994 until August 1995 and was employed by the
National Library of Medicine, assisting in the development of Internet based
applications, from January 1995 until August 1995. From July 1990 until
September 1994, Dr. Bokuchava was the Director of The Computer Center at the
Institute of Mechanical
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<PAGE> 34
Engineering at Georgia Technical University, Tblisi, Georgia (formerly a part
of the Soviet Union). Dr. Bokuchava has taught computer science as a visiting
associate professor at the Universities of Moscow and China. Dr. Bokuchava
received a doctorate in theoretical physics from Georgia Technical University,
Tblisi, in 1990. Dr. Bokuchava has been a member of the Board of Directors
since September 1996.
ROGER NEBEL has served as Vice President of the Company since August
1996. From May 1991 until July 1996, Mr. Nebel was a Department Manager (May
1991 to February 1993) and Senior Manager - Enterprise Assurance (March 1993
to July 1996) for PRC, Inc., a subsidiary of Litton Industries, Inc., which
provides information technology consulting and systems integration services
for governments and businesses. Mr. Nebel received a Bachelor of Science
degree in Engineering from California Coast University in 1990 and a Master of
Science degree in Management from National-Louis University in 1993. Mr.
Nebel has been a member of the Board of Directors since September 1996.
GREGORY ABOWD, PH.D., has been an assistant professor in the College of
Computing at the Georgia Institute of Technology since August 1994, where he
is a member of the Software Systems Design Group. From October 1989 until
August 1994, Dr. Abowd held post-doctoral positions with the Human Computer
Interaction Group at the University of York in England (October 1989 until
September 1992) and with the Software Engineering Institute and Computer
Science Department at Carnegie Mellon University (September 1992 until August
1994). From October 1989 until September 1992, Dr. Abowd was a student at the
University of Oxford, where he attended as a Rhodes Scholar. Dr. Abowd
received a Bachelor of Science degree in Mathematics from the University of
Notre Dame in 1986 and a Master of Science degree in Computation and a
Doctorate of Philosophy in Computation from the University of Oxford in 1987
and 1991, respectively. Dr. Abowd has been a member of the Board of Directors
since September 1996.
R. DOUGLAS MACINTYRE has been President and Chief Executive Officer of
Dun & Bradstreet Software since June 1994. From April 1993 until June 1994,
Mr. MacIntyre was a private business consultant. From June 1990 until April
1993, Mr. MacIntyre served as President and Chief Operating Officer of
Software 2000, Inc., a business software company. Mr. MacIntyre received a
Bachelor of Science degree from the U.S. Military Academy at West Point in
1973 and a Master of Science in Business Administration degree from Boston
University in 1976. Mr. MacIntyre is President of the American Software
Association, a member of the Board of Directors of the Information Technology
Association of America and the Southeastern Software Association, and is a
member of the advisory board of Georgia Institute of Technology's College of
Computing. Mr. MacIntyre has been a member of the Board of Directors since
September 1996.
WINN SCHWARTAU has been President of Interpact, Inc., a provider of
consulting services for electronic privacy and related issues to industry and
governments, since August 1990. Since August 1990, Mr. Schwartau also has
been an architectural security consultant to Hughes STX, providing services
related to enterprise security network architectures, design and
implementation. Mr. Schwartau has been a member of the Board of Directors
since September 1996.
The Company's Board of Directors is divided into three classes. The
Class I directors (Dr. Abowd and Messrs. MacIntyre and Schwartau) will serve
an initial term until the 1997 Annual Meeting of Stockholders, the Class II
directors (Dr. Bokuchava and Messrs. Puri and Nebel) will serve an initial
term until the 1998 Annual Meeting of Stockholders and the Class III directors
(Messrs. Sax, Stricklen and Keni) will serve an initial term until the 1999
Annual Meeting of Stockholders. Each class will be elected for three-year
terms following its respective initial term. The classification of the Board
of Directors could have the effect of making it more difficult for a third
party to acquire control of the Company. Officers are elected at the first
Board of Directors meeting following the stockholders meeting at which
directors are elected and serve at the discretion of the Board of Directors
Each executive officer of the Company was chosen by the Board of Directors and
serves at the pleasure of the Board of Directors until his or her successor is
appointed or until his or her earlier resignation or removal in accordance
with applicable law. There are no family relationships between any of the
directors or executive officers of the Company.
BOARD COMMITTEES
The Board of Directors has two standing committees: a Compensation
Committee and an Audit Committee. The Compensation Committee provides
recommendations to the Board of Directors concerning salaries and incentive
compensation for officers and employees of the Company. The Audit Committee
recommends the Company's independent auditors and reviews the results and
scope of audit and other accounting-related services provided by such
auditors.
DIRECTOR COMPENSATION
Directors do not receive any cash compensation for their services as
members of the Board of Directors but are reimbursed for their reasonable
travel expenses in attending Board of Directors and committee meetings.
Directors who are not employees of the Company are eligible to receive
automatic grants of stock options under the Company's Non-Employee Directors
Stock Option Plan. See "Stock Option Plan - Non-Employee Directors Stock
Option Plan." The Company may in the
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<PAGE> 35
future establish a policy for compensating members of the Board of Directors
for attending Board of Directors or committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, compensation of executive officers of the Company was
determined by Harvey W. Sax, the Company's President and Chief Executive
Officer. In September 1996, the Company established a Compensation Committee
to review the performance of executive officers, establish overall employee
compensation policies and recommend salaries and incentive compensation for
officers and employees of the Company. No member of the Compensation
Committee is or will be an executive officer of the Company.
EXECUTIVE COMPENSATION
During 1995, the Chief Executive Officer of the Company received no
compensation for his services to the Company. No other executive officer of
the Company received compensation in excess of $100,000 during 1995. As of
August 31, 1996, the annual salaries for the Company's executive officers were
as follows: Harvey W. Sax, President and Chief Executive Officer ($100,000);
Nat Stricklen, Senior Vice President, Sales and Marketing and Chief Operating
Officer ($75,000); Vinod Keni, Treasurer and Chief Financial Officer
($40,000); Krishan Puri, Executive Vice President ($75,000); Gia Bokuchava,
Ph.D., Chief Technical Officer ($40,000); and Roger Nebel, Vice President
($100,000). Pursuant to the employment agreements with Dr. Bokuchava and
Messrs. Keni and Puri, each is eligible to receive cash bonuses to repay
certain promissory notes issued by them to the Company in connection with
their purchase of shares of Common Stock from the Company in August 1996. See
"Certain Transactions." Each of the Company's executive officers also is
eligible to receive cash bonuses to be awarded at the discretion of the
Compensation Committee of the Board of Directors.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Harvey W. Sax,
its President and Chief Executive Officer, which provides a five year term
commencing on January 1, 1996, subject to automatic extension for an
additional one year on each one-year anniversary of the agreement. This
employment agreement is subject to early termination as provided therein,
including termination by the Company "for cause" (as defined in the employment
agreement). The employment agreement provides for an annual base salary of
$100,000 and for bonus compensation to be awarded at the discretion of the
Compensation Committee of the Board of Directors.
STOCK OPTION PLANS
Employee Stock Option Plan. The Company's Stock Option Plan (the "Stock
Option Plan") was adopted by the Company's stockholders in September 1996.
The purpose of the Stock Option Plan is to provide incentives for officers and
key employees to promote the success of the Company, and to enhance the
Company's ability to attract and retain the services of such persons. The
Company has reserved 220,000 shares of Common Stock for issuance under the
Stock Option Plan. Options granted under the Stock Option Plan may be either
(i) options intended to qualify as "incentive stock options" under Section 422
of the Code or (ii) non-qualified stock options. Stock options may be granted
under the Stock Option Plan for all employees of the Company, or of any
present or future subsidiary or parent of the Company. The Stock Option Plan
is administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has the authority to determine exercise prices
applicable to the options, the eligible employees or consultants to whom
options may be granted, the number of shares of Common Stock subject to each
option and the terms upon which options are exercisable. The Compensation
Committee has the authority to interpret the Stock Option Plan and to
prescribe, amend and rescind the rules and regulations pertaining to the Stock
Option Plan. No option is transferable by the optionee other than by will or
the laws of descent and distribution, and each option is exercisable during
the lifetime of the optionee only by such optionee.
Any incentive stock option that is granted under the Stock Option Plan
may not be granted at a price less than the fair market value of the Common
Stock on the date of grant (or less than 110% of fair market value in the case
of holders of 10% or more of the total combined voting power of all classes of
stock of the Company or a subsidiary or parent of the Company). Non-qualified
stock options may be granted at the exercise price established by the
Compensation Committee, which may be less than the fair market value of the
Common Stock on the date of grant.
Each option granted under the Stock Option Plan is exercisable for a
period not to exceed ten years from the date of grant (or five years in the
case of a holder of 10% or more of the total combined voting power of all
classes of stock of the Company or a subsidiary or parent of the Company) and
shall lapse upon expiration of such period, or earlier upon termination of the
recipient's employment with the Company, or as determined by the Compensation
Committee.
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<PAGE> 36
As of September 15, 1996, options to purchase approximately 79,167 shares
of Common Stock were outstanding under the Stock Option Plan, all of which
vest 25% per year from their date of grant. Of such grants, options to
purchase 23,615 shares were granted at an exercise price of $4.55 per share
and options to purchase 55,552 shares were granted at an exercise price of
$6.50 per share.
Non-Employee Directors Stock Option Plan. The Company's Non-Employee
Directors Stock Option Plan (the "Non-Employee Directors Plan") was adopted by
the Company's stockholders in September 1996. The Company has reserved
170,000 shares of Common Stock for issuance under the Non-Employee Directors
Plan.
The Non-Employee Directors Plan provides for the automatic granting of
non-qualified stock options to directors who are not officers or employees of
the Company ("Non-Employee Directors"). Each Non-Employee Director who is
first appointed or elected to the Board of Directors is granted an option to
purchase 10,000 shares of Common Stock (the "Initial Grant"). Also, each
Non-Employee Director automatically receives an option to purchase 5,000
shares of Common Stock on the date of each annual meeting of the Company's
stockholders ("Annual Grant"). All options granted under the Non-Employee
Directors Plan vest 50% per year of service by the Non-Employee Director on
the Board of Directors. No option is transferable by the optionee other than
by will or laws of descent and distribution, and each option is exercisable,
during the lifetime of the optionee, only by such optionee. The exercise
price of all options will be the fair market value of the shares of Common
Stock on the date of grant, and the term of each option may not exceed seven
years. The Non-Employee Directors Plan will continue in effect for a period
of ten years unless sooner terminated by the Board of Directors.
During September 1996, each of Dr. Abowd and Messrs. MacIntyre and
Schwartau was granted an option to purchase 10,000 shares of Common Stock at
an exercise price of $6.50 per share.
AGREEMENTS WITH EMPLOYEES
Principal employees of the Company, including executive officers, are
required to sign an agreement with the Company (i) restricting the ability of
the employee to compete with the Company during his or her employment and for
a period of eighteen months thereafter, (ii) restricting solicitation of
customers and employees following employment with the Company, and (iii)
providing for ownership and assignment of intellectual property rights to the
Company.
CERTAIN TRANSACTIONS
During the period December 1994 through December 1995, Harvey W. Sax, the
Company's President and Chief Executive Officer, loaned a total of
approximately $63,497 to the Company pursuant to a promissory note payable by
the Company on September 12, 2000, which accrues interest at the prime rate
plus 1% per annum. The Company intends to use approximately $58,500 of the
net proceeds of this offering to repay the remaining outstanding amounts owed
under this promissory note.
In February 1996, in connection with a recapitalization of the
Company's Common Stock, the Company issued 707,332 shares of Common Stock to
Harvey W. Sax, its President and Chief Executive Officer and then its sole
stockholder, for $.001 per share. In December 1994, the Company granted Nat
Stricklen, a co-founder and director of the Company, an option to acquire, for
an aggregate exercise price of $10.00, shares which when issued would represent
approximately 10% of the Company's issued and outstanding Common Stock. Mr.
Stricklen exercised this option in February 1996 and received 93,070 shares of
Common Stock.
In a privately negotiated financing transaction, (i) in February 1996,
the Company sold for $.0001 per share 335,052 shares to Margery Germain,
111,684 shares to Sanford Zweifach, 148,912 shares to Esther Blech and 297,824
shares to the Edward Blech Trust, (ii) in February 1996, the Company issued to
Mark Germain for $200,000 an unsecured promissory note due September 1997 in
the principal amount of $200,000 and bearing interest at the rate of 8% per
annum, (iii) in March 1996, the Company issued to the Edward Blech Trust for
$199,904 an unsecured promissory note due September 1997 in the principal
amount of $199,904 and bearing interest at the rate of 8% per annum, and (iv)
in May 1996, the Company issued to Esther Blech for $100,000 an unsecured
promissory note due September 1997 in the principal amount of $100,000 and
bearing interest at the rate of 8% per annum. In September 1996, Esther Blech
transferred her promissory note to the Edward Blech Trust. Pursuant to the
terms of these promissory notes, immediately prior to the date of this
Prospectus the Company will issue an aggregate of 76,907 shares of Common Stock
(based upon an assumed initial public offering price of $6.50 per share) to the
holders of these notes in repayment of their outstanding principal amounts.
The Company intends to use approximately $23,447 of the net proceeds of this
offering to repay the accrued interest under these promissory notes. Margery
Germain is the wife of Mark Germain. Esther Blech is the grandmother of Edward
Blech, the sole beneficiary under the Edward Blech Trust.
In August 1996, Harvey W. Sax, the Company's President and Chief
Executive Officer, contributed 3,956 shares of Common Stock to the Company.
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<PAGE> 37
In August 1996, the Company issued and sold to six of its employees an
aggregate of 102,855 shares of Common Stock for a total of $468,004, payable
through the issuance of promissory notes payable in four equal annual
installments, bearing interest at 8% per annum and secured by the shares of
Common Stock purchased therewith. Also in August 1996, the Company entered
into employment agreements with such persons which provide that for each of
the first four years of employment, the Company will issue a bonus to the
employee in the amount necessary to repay the annual amount due under such
[Apromissory note (plus the taxes due by the employee as a consequences of
receiving such bonus). Pursuant to the terms of the employment agreements,
the Company will continue to make these annual payments if the employee is
terminated other than "for cause," as defined in the employment agreements.
Pursuant to the terms of the subscription agreements for such shares, if the
employee's employment is terminated within such four-year period, the Company
has the right to repurchase that percentage of the shares purchased by the
employee which shall equal the percentage of the promissory note which is not
yet due, payment for such repurchase to be made by canceling the applicable
outstanding amount of the promissory note. Vinod Keni, Treasurer, Chief
Financial Officer, Secretary and a director, Gia Bokuchava, Ph.D., Chief
Technical Officer and a director, and Krishan Puri, Executive Vice President
and a director, purchased 3,956, 39,560 and 29,670 shares of Common Stock,
respectively, in this transaction.
In August, Krishan Puri, Executive Vice President and a director,
exercised a warrant to purchase 9,307 shares of Common Stock for a total
exercise price of $1.00.
In August, 1996, HomeCom acquired all of the outstanding capital stock
of HomeCom Internet Security Services, Inc. ("HISS"), a Delaware corporation
formed in July 1996 to provide Internet and Intranet security system consulting
services. In the transaction, the former holders of HISS's capital stock
received the right to receive their pro rata share of four annual earnout
payments to be paid not later than October 30 of 1997, 1998, 1999 and 2000
(each, an "Annual Earnout"). Each Annual Earnout will be one-fourth of an
amount equal to 30% of HISS's gross revenues for the 12 month period ending
September 30, 1997; provided, however, that (i) the amount of each Annual
Earnout will be limited to the amount of HISS's net profits for the 12-month
period ended September 30 immediately preceding the payment date (the"Profit
Cap"), (ii) amounts not paid in a year as a result of the Profit Cap will be
carried forward to the subsequent year, and (iii) amounts not paid in the
fourth year as a result of the Profit Cap will be forfeited. Each Annual
Earnout can be paid in whole or in part in cash or, at HomeCom's option, in
shares of Common Stock based upon the average trading price of the Common Stock
for the ten trading days immediately preceding payment of the Annual Earnout.
An Annual Earnout will not be paid if the recipient is then in violation of the
non-solicitation and non-competition provisions contained in the Stock Purchase
Agreement to which the former holders of HISS's capital stock are subject.
Roger Nebel, Vice President and a director of the Company, owned 48% of HISS's
outstanding capital stock and will be entitled to receive 48% of the Annual
Earnouts. HISS was merged with and into the Company on September 11, 1996.
In August 1996, HomCom borrowed $45,000 from Esther Blech and issued to
her a promissory note due August 1997, bearing interest at 8% per annum. The
Company intends to repay the principal and interest owed under this note out of
the net proceeds of this offering.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, with respect to (i) each stockholder known
by the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each director, and (iii) all executive officers and directors as a group,
certain information with respect to the beneficial ownership of the Common
Stock as of September 15, 1996 and as adjusted to reflect (a) the issuance
immediately prior to the date of this Prospectus of 76,907 shares of Common
Stock (based on an assumed initial public offering price of $6.50 per share)
in repayment of $499,904 in outstanding indebtedness, and (b) the sale by the
Company of the Common Stock offered hereby.
<TABLE>
<CAPTION>
Percentage of
Number of Shares Percentage of Shares Shares Beneficially
Beneficially Beneficially Owned Owned After
Name and Address of Beneficial Owner(1) Owned(2) Before Offering Offering
- ----------------------------------------------- -------------------- ---------------------- --------------------
<S> <C> <C> <C>
Harvey W. Sax.................................. 796,445 41.4% 24.5%
Nat Stricklen.................................. 93,070 4.8% 2.9%
Vinod Keni..................................... 3,956 * *
Krishan Puri................................... 38,977 2.0% 1.2%
Gia Bokuchava, Ph.D............................ 39,560 2.1% 1.2%
Roger Nebel.................................... 0 * *
Gregory Abowd, Ph.D............................ 0 * *
R. Douglas MacIntyre........................... 0 * *
Winn Schwartau................................. 0 * *
Mark Germain(3)................................ 335,052 17.4% 11.3%
81 Main Street
White Plains, NY 10601
Margery Germain(4)................................ 335,052 17.4% 11.3%
6 Olmstead Road
Scarsdale, NY 10583
Sanford Zweifach............................... 111,684 5.8% 3.4%
2420 Steiner, No. 11
San Francisco, CA 94115
Esther Blech................................... 148,912 7.7% 4.6%
2404 Avenue O
Brooklyn, NY 11210
The Edward Blech Trust(5)...................... 297,824 15.5% 10.6%
c/o Rabbi Mordechai Jofen
418 Avenue I
Brooklyn, NY 11230
All executive officers and directors as a group
(9 persons)................................... 972,008 50.5% 29.9%
</TABLE>
- ------------------------
*Less than 1%.
(1) Except as otherwise noted, the street address of the named beneficial
owner is Building 14, Suite 100, 3535 Piedmont Road, Atlanta, Georgia
30305.
(2) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares of Common Stock beneficially owned, subject to community property
laws where applicable.
37
<PAGE> 39
(3) Includes 335,052 shares of Common Stock owned by Margery Germain, the
wife of Mr. Germain, as to which shares Mr. Germain disclaims beneficial
ownership. Percentage of shares beneficially owned after the offering
gives effect to 30,769 shares of Common Stock to be issued to Mr. Germain
immediately prior to the date of this Prospectus (based upon an assumed
initial offering price of $6.50 per share) in repayment of $200,000 in
outstanding indebtedness. See "Certain Transactions."
(4) Percentage of shares beneficially owned after the offering gives effect to
30,769 shares of Common Stock to be issued to Mark Germain, the husband of
Mrs. Germain, immediately prior to the date of this Prospectus (based upon
an assumed initial offering price of $6.50 per share) in repayment of
$200,000 in outstanding indebtedness, as to which shares Mrs. Germain
disclaims beneficial ownership.
(5) Percentage of shares beneficially owned after the offering gives effect to
46,138 shares of Common Stock to be issued immediately prior to the date
of this Prospectus (based upon an assumed initial public offering price
of $6.50 per share) in repayment of $299,904 in outstanding indebtedness.
See "Certain Transactions."
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 15,000,000 shares of
Common Stock, $.0001 par value, and 1,000,000 shares of preferred stock, $.01
par value. As of September 15, 1996, the Company had issued and outstanding
1,923,070 shares of Common Stock. As of such date, there were 16 holders of
record of shares of Common Stock. No shares of preferred stock have been
issued.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share for
the election of directors and all matters to be submitted to a vote of the
Company's stockholders. Subject to the rights of any holders of preferred
stock which may be issued in the future, the holders of shares of Common Stock
are entitled to share ratably in such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of
dissolution, liquidation or winding up of the Company, holders of shares of
Common Stock are entitled to share ratably in all assets remaining after
payment of all liabilities and the aggregate liquidation preference of
outstanding shares of preferred stock. Holders of shares of Common Stock have
no preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares of Common Stock to be issued by the
Company in this offering will be, duly authorized, validly issued, fully paid
and nonassessable.
PREFERRED STOCK
The Company's Restated Certificate of Incorporation authorizes the
issuance of preferred stock with designations, rights and preferences
determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividends, liquidation, conversion, voting and other
rights that could adversely affect the voting power or other rights of the
holders of Common Stock. In the event of issuance, the preferred stock could
be used, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company.
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The Company's Restated Certificate of Incorporation contains provisions
which eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty, other than liability for a
breach of the duty of loyalty, acts or omissions not in good faith that
constitute a breach of the director's duty to the Company, acts that involve
intentional misconduct or a knowing violation of the law, transactions in
which the director receives an improper benefit and acts or omissions for
which liability is expressly provided by an applicable statute. The Company's
Restated Bylaws contain provisions requiring the indemnification of the
Company's directors and officers, and persons serving at the request of the
Company as a director or officer of another corporation, to the fullest extent
permitted under the Delaware General Corporation Law. The Company believes
that these provisions are necessary to attract and retain qualified persons as
directors and officers of the Company.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person, or affiliate or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved
by the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the same transaction
that makes it an interested stockholder (excluding shares owned by persons who
are both officers and directors of the corporation and shares held by certain
employee stock ownership plans) or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
38
<PAGE> 40
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation that was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action
of its stockholders to exempt itself from coverage, provided that such charter
or bylaw amendment shall not become effective until twelve months after the
date it is adopted. Neither the Restated Certificate of Incorporation nor the
Restated Bylaws of the Company contains any such exclusion, although the Board
of Directors has excluded the stockholders of the Company prior to the
offering from the coverage of Section 203.
LISTING
The Company has applied for listing its Common Stock on the Nasdaq
SmallCap Market(TM) under the trading symbol "HMCM."
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Common Stock is __________.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock, and no assurance can be given that a public market for the Common Stock
will develop or be sustained after the offering. Future sales of substantial
amounts of Common Stock in the public market could have a material effect on
the market price of the Common Stock from time to time.
Upon completion of this offering, the Company will have outstanding
approximately 3,249,977 shares of Common Stock, giving effect to the issuance
immediately prior to the date of this Prospectus of 76,907 shares of Common
Stock (based upon an assumed initial public offering price of $6.50 per share)
in repayment of $499,904 in outstanding indebtedness. See "Certain
Transactions." Of these shares, the 1,250,000 shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless they are
purchased by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act (which sales would be subject to certain limitations
and restrictions described below).
The remaining 1,999,977 shares of Common Stock may be sold in the public
market only if registered under the Securities Act or pursuant to an exemption
from registration such as Rule 144 or 144(k) promulgated thereunder. Certain
shares of Common Stock outstanding after the offering will be subject to
contractual lock-up agreements with the Underwriters. Specifically, all
officers, directors and 5% or greater stockholders have agreed to execute
lock-up agreements providing that they will not, directly or indirectly, offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of,
or agree to dispose of, any shares of Common Stock (other than gifts) until 180
days after the consummation of this offering, at which time their shares will be
released from the lock-up.
In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned shares for a least two years (including
the holding period of any prior owner except an affiliate) is entitled to sell
in "brokers' transactions" or to market makers, within any three-month period,
a number of shares that does not exceed the greater of (a) one percent of the
number of shares of Common Stock then outstanding (approximately 32,500 shares
immediately after this offering) or (b) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the required filing
of a Form 144 with respect to such sale. Sales under Rule 144 are subject to
the availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least three years, is entitled to sell
such shares without having to comply with the manner of sale, public
information, volume limitation or notice filing provisions of Rule 144.
Unless otherwise restricted, "144(k) shares" may therefore be sold immediately
upon the completion of this offering. Under Rule 701 under the Securities
Act, persons who purchase shares upon exercise of options granted prior to
this offering are entitled to sell such shares 90 days after this offering in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the volume limitation or notice filing provisions of Rule 144. In
addition, Rule 144A would permit the resale of restricted securities to
qualified institutional buyers, subject to compliance with conditions of the
Rule. The Company is unable to
39
<PAGE> 41
estimate accurately the number of "restricted" shares that will be sold under
Rule 144 because this will depend in part on the market price for the Common
Stock, the personal circumstances of the seller and other factors.
After the completion of this offering, the Company intends to file a
Registration Statement on Form S-8 under the Securities Act to register the
220,000 shares of Common Stock reserved for issuance under the Company's Stock
Option Plan and the 170,000 shares of Common Stock reserved for issuance under
the Company's Non-Employee Directors Plan. After the date of such filings, if
not otherwise subject to a lock-up agreement, shares purchased pursuant to the
Company's Stock Option Plan and its Non-Employee Directors Plan generally
would be available for resale in the public market. The Company has granted
options under such Plans to purchase an aggregate of 109,167 shares of Common
Stock. See "Management - Stock Option Plans." In addition, in connection
with the Company's acquisition of HISS, the Company may issue additional
shares of Common Stock. See "Certain Transactions."
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, the Underwriters named below (the "Underwriters"),
have severally, and not jointly, agreed through Ladenburg, Thalmann & Co.
Inc., the Representative of the Underwriters, to purchase from the Company,
and the Company has agreed to sell to the Underwriters, the aggregate number
of shares of Common Stock set forth opposite their respective names.
Number of
Underwriters Shares
- ------------ ---------
Ladenburg, Thalmann & Co. Inc. .................................
---------
Total....................................................... 1,250,000
=========
The Underwriters are committed to take and pay for all of the shares of
Common Stock offered hereby, if any are purchased.
The Underwriters have advised the Company that they propose to offer all
or part of the Common Stock offered directly to the public initially at the
price to the public set forth on the cover page of this Prospectus, that they
may offer shares to certain dealers at a price that represents a concession of
not more than $______ per share and that the Underwriters may allow, and such
dealers may re-allow, a concession of not more than $______ per share to
certain other dealers. After the commencement of this offering, the price to
the public and the concessions may be changed.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to 187,500 additional
shares of Common Stock at the initial public offering price, less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option solely to cover over-allotments, if any,
made in connection with the sale of the shares offered hereby. To the extent
the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase the same percentage
thereof as the percentage of the initial shares to be purchased by that
Underwriter.
The Company has agreed to indemnify the Underwriters and certain related
persons against certain liabilities, including certain liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The Company and its officers, directors and 5% or greater stockholders
have agreed that they will not, directly or indirectly, offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of, or agree to
dispose of, any shares of Common Stock (other than gifts) for a period of 180
days after the date of this Prospectus, without the prior written consent of
the Representative of the Underwriters.
40
<PAGE> 42
The Company has agreed to issue to the Representative of the Underwriters
and its designees, for their own accounts, warrants to purchase an aggregate
of 125,000 shares of Common Stock. The warrants will be exercisable during
the four-year period commencing one year after the date of this Prospectus, at
an exercise price per share equal to 120% of the initial public offering
price. The warrants will contain customary anti-dilution provisions and
certain rights to register the shares issuable upon exercise of the warrants
under the Securities Act.
Prior to this offering, there has been no public market for the Common
Stock. The initial offering price will be determined by negotiations between
the Company and the Representative of the Underwriters. Among the factors to
be considered in such negotiations will be the Company's historical results of
operations and financial condition, prospects for the Company and for the
industry in which the Company operates, the Company's capital structure and the
general condition of the securities market.
The Representative of the Underwriters has informed the Company that the
Underwriters do not expect sales to discretionary accounts to exceed 5% of the
total number of shares offered hereby, and the Representative of the
Underwriters does not intend to confirm sales of shares to any account over
which it exercises discretionary authority.
LEGAL MATTERS
The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company by Morris, Manning & Martin,
L.L.P., Atlanta, Georgia. Morris, Manning & Martin, L.L.P. beneficially owns
9,307 shares of Common Stock. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Willkie Farr & Gallagher,
New York, New York.
EXPERTS
The financial statements as of and for the periods ended December 31,
1994 and 1995 included in this Prospectus have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (of which this Prospectus
is a part) under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or any other document referred to herein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including exhibits and schedules thereto, filed by the Company with the
Commission may be inspected, without charge, and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024; 7 World Trade Center, New York, New York
10048, Room 1400; and 500 West Madison Street, Chicago, Illinois 60661, Suite
1400. Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
Room 1024, at prescribed rates. In addition, the Company is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
41
<PAGE> 43
GLOSSARY OF CERTAIN TECHNICAL TERMS
<TABLE>
<S> <C>
FDDI: Fiber distributed data interface. A standard for distributing data on optical fiber cables at a rate of
approximately 100 million bits-per-second.
HTML: Hypertext markup language. The computer language in which electronic information is published on the Web.
HTTP: Hypertext transfer protocol. The standard communications protocol used to retrieve information on the Web.
Hypertext transfer protocol makes browsing possible. The user clicks on hypertext links in a Web document and
moves within that document or to another document that may be located on a different computer.
Hypertext links: Text in a Web site that links to other documents within that Web site or to other unrelated Web sites, allowing
movement through information on the Web.
Internet: An open global network of interconnected commercial, educational and government computer networks that allows any
interconnected computer to communicate with any other interconnected computer utilizing a common communications
protocol, TCP/IP.
Intranet: Network inside a company or organization that employs a TCP/IP network protocol for internal communications rather
than using a proprietary protocol, facilitating communications using Internet tools and applications.
Protocol: The rules two or more machines must follow in order to exchange information.
Server: A computer in a network shared by multiple users (or clients). A high speed computer in a LAN that stores the
programs and data files shared by users on the network.
SNMP: Simple network management protocol. A protocol for managing devices such as servers and routers.
SONET: Synchronous optical network. A circuit transmission technology that allows the building of high speed fault
tolerant networks.
TCP/IP: Transmission Control Protocol/Internet Protocol. A compilation of network and transport-level protocols that
allow computers with different architectures and operating system software to communicate with other computers on
the Internet or an Intranet.
World Wide Web,
or the Web: The world wide network of computer servers that uses a special communications protocol (i.e., HTTP) that links
different servers throughout the Internet and enables non-technical users to access graphic information, including
graphics, video, photographs, audio and text contained therein.
</TABLE>
42
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
HomeCom Communications, Inc.
We have audited the accompanying balance sheets of HomeCom
Communications, Inc. as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity and cash flows for the year
ended December 31, 1995 and for the period from December 2, 1994 (date of
incorporation) to December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of HomeCom
Communications, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the year ended December 31, 1995 and for the
period from December 2, 1994 (date of incorporation) to December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
March 11, 1996
F-1
<PAGE> 45
HOMECOM COMMUNICATIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995 JUNE 30, 1996
------------ --------------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 8,455 $129,095 $ 346,158
Accounts receivable, net............................. ----- 86,325 262,177
Other current assets................................. ----- 148 821
-------- -------- ----------
Total current assets................................ 8,455 215,568 609,156
FURNITURE, FIXTURES AND EQUIPMENT, NET................ ----- 30,015 286,109
SOFTWARE DEVELOPMENT COSTS, NET ----- ----- 19,881
DEPOSITS.............................................. 1,799 1,799 51,799
-------- -------- ----------
Total assets........................................ $ 10,254 $247,382 $ 966,945
======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................ $ ------ $ 14,287 $ 74,001
Accrued salaries and payroll taxes payable........... ----- 25,010 118,625
Accrued vacation..................................... ----- ---- 22,279
Current portion of notes payable..................... ----- ----- 12,019
Unearned revenue..................................... ----- 42,479 148,041
-------- -------- ----------
Total current liabilities........................... ----- 81,776 374,965
NOTE PAYABLE.......................................... ----- ----- 53,346
NOTES PAYABLE TO STOCKHOLDERS......................... ----- 160,792 558,415
OTHER LIABILITIES..................................... ----- ----- 29,421
-------- -------- ----------
Total Liabilities................................... ----- 242,568 1,016,147
-------- -------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value at December 31, 1994 and
1995, $.0001 par value at June 30, 1996; 1,500 shares
authorized and 1,000 shares issued and outstanding at
December 31, 1994 and 1995; 15,000,000 shares
authorized, 1,786,943 shares issued and outstanding
at June 30, 1996................................... 27,706 27,706 179
Additional paid-in capital............................ 27,623
Accumulated deficit................................... (17,452) (22,892) (77,004)
-------- -------- ----------
Total stockholders' equity (deficit)................ 10,254 4,814 (49,202)
-------- -------- ----------
Total liabilities and stockholders' equity
(deficit)......................................... $ 10,254 $247,382 $ 966,945
======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 46
HOMECOM COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 2, 1994 (DATE OF INCORPORATION)
TO DECEMBER 31, 1994, THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 2 TO YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------------------
1994 1995 1995 1996
-------------------- ---------------- --------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES:
Service sales................. $ ----- $ 327,574 $ 38,961 $ 695,607
Equipment sales............... ----- ----- ----- 121,699
---------- ---------- ---------- ----------
Total net sales.............. ----- 327,574 38,961 817,306
---------- ---------- ---------- ----------
COST OF SALES:
Cost of services.............. ----- 59,871 19,203 119,021
Cost of equipment sold........ ----- ----- ----- 77,476
---------- ---------- ---------- ----------
Total cost of sales.......... ----- 59,871 19,203 196,497
---------- ---------- ---------- ----------
GROSS PROFIT................... ----- 267,703 19,758 620,809
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing........... 1,045 124,253 27,292 217,535
Product development........... ----- 20,239 ----- 26,581
General and administrative.... 16,407 121,313 37,168 387,281
Depreciation.................. ----- 3,722 131 27,948
---------- ---------- ---------- ----------
Total operating expenses..... 17,452 269,527 64,591 659,345
---------- ---------- ---------- ----------
OPERATING LOSS................. (17,452) (1,824) (44,833) (38,536)
OTHER EXPENSES:
Interest expense, net......... ----- 3,469 2,733 15,576
Other......................... ----- 147 ----- -----
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAX BENEFIT. (17,452) (5,440) (47,566) (54,112)
INCOME TAX BENEFIT............. ----- ----- ----- -----
---------- ---------- ---------- ----------
NET LOSS....................... $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
UNAUDITED PRO FORMA NET LOSS
DATA:
Loss before income tax benefit $ (17,452) $ (5,440) $ (47,566) $ (54,112)
Pro forma adjustment to
reflect federal and state
income tax benefit (actual for
period subsequent to February
8, 1996)...................... ----- ----- ----- -----
---------- ---------- ---------- ----------
Pro forma net loss............ $ (17,452) $ (5,440) $ (47,566) $ (54,112)
========== ========== ========== ==========
Pro forma net loss per common
and common equivalent share... $ (.01) $ (.00) $ (.03) $ (.03)
========== ========== ========== ==========
Pro forma weighted average
common and common equivalent
shares outstanding............ 1,866,067 1,866,067 1,866,067 1,866,067
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 47
HOMECOM COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 2, 1994 (DATE OF INCORPORATION)
TO DECEMBER 31, 1994, THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
--------- --------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF STOCK,
December 2, 1994................ 1,000 $ 27,706 $ 27,706
NET LOSS........................ $(17,452) (17,452)
--------- -------- -------- --------
BALANCE, December 31, 1994 ..... 1,000 27,706 (17,452) 10,254
NET LOSS........................ (5,440) (5,440)
--------- -------- -------- --------
BALANCE, December 31, 1995...... 1,000 27,706 (22,892) 4,814
ISSUANCE OF STOCK
(unaudited)..................... 18,200 96 96
NET LOSS (unaudited) (54,112) (54,112)
93.07-for-one stock split and
recapitalization (unaudited).... 1,767,743 (27,623) $27,623
--------- -------- ------- -------- --------
BALANCE, June 30, 1996
(unaudited)..................... 1,786,943 $ 179 $27,623 $(77,004) $(49,202)
========= ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 48
HOMECOM COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 2, 1994 (DATE OF INCORPORATION)
TO DECEMBER 31, 1994, THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 2 TO YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------
1994 1995 1995 1996
-------------------- ------------ --------- ----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net loss..................................... $(17,452) $ (5,440) $(47,566) $ (54,112)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation................................ ----- 3,722 131 27,948
Provision for bad debts..................... ----- 2,485 ------ 10,015
Deferred rent expense....................... ----- ----- ------ 29,421
Change in operating assets and liabilities:
Accounts receivable....................... ----- (88,810) (7,253) (185,867)
Other current assets...................... ----- (148) (571) (673)
Deposits.................................. (1,799) ------ ------ (50,000)
Accounts payable and accrued expenses..... ----- 14,287 16,062 59,714
Accrued salaries and payroll taxes payable ----- 25,010 ------ 93,615
Accrued vacation.......................... ----- ----- ------ 22,279
Unearned revenue.......................... ----- 42,479 ------ 105,562
-------- --------- -------- ---------
Net cash (used in) provided by operating
activities................................... (19,251) (6,415) (39,197) 57,902
-------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment ----- (33,737) (5,986) (284,042)
Software development costs................... ----- ----- ----- (19,881)
-------- --------- -------- ---------
Net cash used in investing activities........ ----- (33,737) (5,986) (303,923)
-------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock..................... 27,706 ------ ------ 96
Proceeds from note payable................... ------ ------ ------ 70,000
Repayment of note payable.................... ------ ------ ------ (4,635)
Proceeds of notes payable to stockholders.... ------ 163,497 49,495 399,904
Repayment of notes payable to stockholders... ------ (2,705) ------ (2,281)
-------- --------- -------- ---------
Net cash provided by financing activities.... 27,706 160,792 49,495 463,084
-------- --------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS..... 8,455 120,640 4,312 217,063
CASH AND CASH EQUIVALENTS at beginning of
period....................................... 0 8,455 8,455 129,095
-------- --------- -------- ---------
CASH AND CASH EQUIVALENTS at end of period.... $ 8,455 $ 129,095 $ 12,767 $ 346,158
======== ========= ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest... $ 0 $ 3,469 $ 2,733 $ 3,383
======== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 49
HOMECOM COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
HomeCom Communications, Inc. (the "Company") develops and markets
specialized software applications and products and provides services that
enable businesses to use the Internet and Intranets to obtain and communicate
important business information, conduct commercial transactions and improve
business productivity. HomeCom provides Internet/Intranet services in one
business segment in five integrated areas: customized software applications
design, development and integration; World Wide Web site development; Internet
outsourcing services; specialized Internet-enabled software products; and
security consulting and integration services.
Cash and Cash Equivalents
For purposes of the statement of cash flows, management considers all
highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Accounts Receivable, Net
Accounts receivable are shown net of the allowance for doubtful accounts.
The allowance was $0, $2,485 and $12,500 at December 31, 1994, December 31,
1995 and June 30, 1996, respectively.
Furniture, Fixtures and Equipment, Net
Furniture, fixtures and equipment are recorded at cost less accumulated
depreciation, which is computed using the straight-line method over the
estimated useful lives of the related assets (three to five years).
Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in income.
Income Taxes
Prior to February 9, 1996, the Company qualified as an S Corporation for
federal and state income tax purposes. Accordingly, no provision was made for
income taxes for its operations prior to February 9, 1996. Individual
stockholders report their share of the Company's taxable income or loss on
their respective individual income tax returns. The Company's taxable income
or loss allocated to the stockholders differs from book income primarily due
to the use of accelerated methods for depreciating furniture, fixtures and
equipment for income tax purposes.
Effective February 9, 1996, the Company converted from an S corporation
to a C corporation for income tax purposes and is, therefore, subject to
corporate income taxes. Deferred income tax assets and liabilities will be
recorded to reflect differences between the bases of the Company's assets and
liabilities for financial reporting and income tax purposes. The net deferred
income tax asset of approximately $25,000 at June 30, 1996 is primarily due to
operating loss carryforwards generated since February 9, 1996 and is fully
offset by a valuation allowance. The effect of a change in the valuation
allowance that results from a change in circumstances that causes a change in
judgment about the realizability of the related deferred tax asset in future
years would be included in income in that period. The statements of
operations include a presentation of the unaudited pro forma effects of income
taxes on the Company's operations as if the Company had been subject to
corporate income taxes for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-6
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Software Development Costs, Net
The Company capitalizes internal software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting For Costs
of Computer Software To Be Sold, Leased, or Otherwise Marketed". The
capitalization of these costs begins when a product's technological
feasibility has been established and ends when the product is available for
general release to customers. Amortization is computed on an individual
product basis and is the greater of (a) the ratio of current gross revenues
for a product to the total current and anticipated future gross revenues for
the product or (b) the straight-line method over the estimated economic life
of the product. As of June 30, 1996, amortization had not begun on any of the
Company's products because no products were in general release.
Interim Financial Statements (Unaudited)
The unaudited balance sheet as of June 30, 1996 and the unaudited
statements of operations, stockholders' equity (deficit) and cash flows for
the six months ended June 30, 1995 and 1996, in the opinion of management,
have been prepared on the same basis as the audited financial statements and
include all significant adjustments, consisting only of normal recurring
entries, necessary for a fair presentation of the results of the interim
periods. The data disclosed in these notes to the financial statements for
these periods are also unaudited. Operating results for the six months ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996.
Revenue Recognition
The Company recognizes revenue on web page development and specialized
software application contracts using the percentage-of-completion method.
Revenues related to other services are recognized as the services are
performed. Unearned revenue represents the liability to perform services
related to amounts previously billed by the Company.
Recently Issued Accounting Standards
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of" ("SFAS 121"), was issued. Under SFAS 121, an impairment loss
must be recognized for long-lived assets and certain identifiable intangibles
to be held and used by an entity, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS
121 is effective for financial statements issued for fiscal years beginning
after December 15, 1995, and must be adopted on a prospective basis.
Restatement of previously issued financial statements is not permitted. The
Company adopted SFAS 121 effective January 1, 1996. Such adoption did not
have a material effect on the financial condition or results of operations of
the Company.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued. SFAS 123
requires that an entity account for employee stock compensation under a fair
value based method. However, SFAS 123 also allows an entity to continue to
measure compensation cost for employee stock-based compensation using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing
to continue accounting under Opinion 25 are required to make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting under SFAS 123 had been applied. The Company has elected
to measure compensation cost under Opinion 25 and will adopt the disclosure
requirements of SFAS 123 in its 1996 annual financial statements.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for the Company's
cash, accounts receivable, accounts payable and debt approximate fair value
due to the short-term nature of these instruments.
Advertising Expenses
All advertising costs are expensed when incurred.
F-7
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Loss Per Common Share
Loss per common share is based on the Company's common stock and is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common equivalent
shares consist of stock options and warrants (calculated using the treasury
stock method at the assumed initial public offering price of $6.50 per share).
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common stock issued for consideration below the assumed initial public
offering price per share and stock options issued with exercise prices below
such price during the twelve-month period preceding the proposed date of the
initial filing of the registration statement have been included in the
calculation of common shares, using the treasury stock method, as if they were
outstanding for all periods presented. All per share data has been
retroactively adjusted to reflect the 93.07-for-one stock split approved by
the Board of Directors on September 11, 1996 and effective September 11, 1996.
Basis of Presentation - Going Concern
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplate the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred cumulative losses since its incorporation
through June 30, 1996, and has not established revenues sufficient to cover
its operating costs. Management believes that cash generated through
operations and a public offering of its common stock and the conversion of
debt to equity will generate the required capital necessary to continue as a
going concern.
2. FURNITURE, FIXTURES AND EQUIPMENT, NET:
Furniture, fixtures and equipment, net, are comprised of the following as
of:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures................... $ 3,187 $123,800
Computer equipment....................... 30,550 193,979
------- --------
33,737 317,779
Less: accumulated depreciation.......... (3,722) (31,670)
------- --------
$30,015 $286,109
======= ========
</TABLE>
3. NOTES PAYABLE:
Notes payable are comprised of the following as of:
<TABLE>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Promissory notes payable to stockholders and
affiliates (interest accrues at 8%), payable
September 1997, non-collateralized, payable in
cash and/or through issuance of shares of common
stock at the effectiveness of an initial public
offering at the initial public offering price
per share. The Company intends to issue shares
in payment of the principal amounts payable
under the notes.................................. ------ $100,000 $499,904
</TABLE>
F-8
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
3. NOTES PAYABLE, CONTINUED:
<TABLE>
<S> <C> <C> <C>
Promissory note payable to a stockholder
(interest accrues at the prime rate plus 1%),
payable September 12, 2000....................... ------ 60,792 58,511
Promissory note payable to a bank (interest
accrues at 10%), payable in 60 equal monthly
installments through February, 2001, collateralized
by certain trade receivables and equipment....... ------ ------ 65,365
-------- -------- --------
------ 160,792 623,780
Less current maturities of notes payable......... ------ ------ 12,019
-------- -------- --------
------ $160,792 $611,761
======== ======== ========
</TABLE>
Future principal payments on notes payable at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996....................... $ 0
1997....................... 100,000
1998....................... 0
1999....................... 0
2000....................... 60,792
</TABLE>
Interest expense on the notes payable to stockholders and affiliates during
1995 and the six months ended June 30, 1996 was $3,469 and $14,548,
respectively.
4. COMMITMENTS AND CONTINGENCIES:
The Company leases office space and equipment under noncancelable
operating lease agreements expiring through 1999. Future minimum lease
payments under operating leases are as follows as of December 31, 1995:
<TABLE>
<S> <C>
1996....................... $22,585
1997....................... 22,598
1998....................... 7,389
1999....................... 6,470
</TABLE>
During January 1996, the Company executed a five-year lease for new
office space. Future minimum annual lease payments are approximately $110,000
for the year ending December 31, 1996 and approximately $241,000 per year for
the remainder of the lease term. The total amount of the base rent payments
is being charged to expense on a straight-line method over the term of the
lease. The Company has recorded a deferred credit to reflect the excess of
rent expense over cash payments since inception of the lease.
Rental expense under such operating leases for the period December 2,
1994 to December 31, 1994, the year ended December 31, 1995 and the six months
ended June 30, 1995 and 1996 was $1,299, $22,188, $10,703 and $86,072,
respectively.
Various legal proceedings may arise in the normal course of business.
Management does not believe that there are currently any asserted or
unasserted claims that will have a material adverse effect on the financial
position, results of operations or cash flows of the Company.
F-9
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
5. CONCENTRATION OF CREDIT RISKS:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable.
The Company places its cash and cash equivalents with quality financial
institutions. The Company had deposits in excess of federally insured amounts
of approximately $246,000 at June 30, 1996.
Concentration of credit risk with respect to trade receivables is
monitored by the Company through ongoing credit evaluations of its customers'
financial condition. The Company's sales to its five largest customers
represented approximately 46% and 42% of total revenues for the year ended
December 31, 1995 and the six months ended June 30, 1996, respectively. The
five most significant customer balances represented approximately 73% and 55%
of the accounts receivable balance at December 31, 1995 and June 30, 1996,
respectively. For the period ended June 30, 1996, the Company generated
approximately 21% of its revenues from Modem Media Advertising and
approximately 11% of its revenues from Vital Integration Systems, Inc. No
other company accounted for more than 10% of the revenues of the Company.
6. EQUITY TRANSACTIONS:
All share and per share amounts presented below have been adjusted to
reflect the 93.07-for-one stock split effective September 11, 1996.
During 1995, the Company issued warrants to its Board of Advisors to
purchase 37,228 shares of common stock for total consideration of $4.00. The
warrants were granted at the fair market value of the common stock at the time
of issuance. Accordingly, no discount was recorded. These warrants were
exercised in August 1996.
During February 1996, the Company issued 707,332 additional shares to the
previous sole stockholder, 93,070 shares to an executive officer of the
Company pursuant to the exercise of options granted in connection with the
founding of the Company, and 893,472 shares to four private investors.
In August 1996, the Company sold to certain key employees an aggregate of
102,855 shares of common stock for an aggregate consideration of $468,004,
payable through the issuance of promissory notes payable in four equal
installments, bearing interest at 8% per annum and secured by the shares of
common stock purchased therewith. Also in August 1996, the Company entered
into employment agreements with such persons which provide that, assuming
continued employment with the Company, for each of the first four years of
employment, the Company will issue a bonus to the employee in the amount
necessary to repay the annual amount due under such promissory note (plus the
taxes due by the employee as a consequence of receiving such bonus). For
financial reporting purposes, these notes receivable will be presented as a
separate component of stockholders' equity.
In September 1996, the Company amended and restated its Certificate of
Incorporation (i) to reclassify its common stock from no par value stock to
stock with a par value of $0.0001 per share, (ii) to increase the authorized
shares of common stock to 15,000,000, and (iii) to authorize the issuance of
1,000,000 shares of $0.01 par value preferred stock. No preferred stock has
been issued.
In September 1996, the Board of Directors approved a 93.07-for-one stock
split effected in the form of a stock dividend, whereby each common
stockholder of record as of September 11, 1996 received on September 11, 1996,
92.07 additional shares of common stock for each share owned as of the record
date. As a result of the stock split and the above recapitalization,
1,767,743 shares were issued and $27,623 was transferred from Common Stock to
Paid-In Capital. The stock split and recapitalization have been reflected in
the Balance Sheet and Statement of Stockholders' Equity (Deficit) as of June
30, 1996. Weighted average common shares outstanding and per share amounts
for all periods presented have been restated to reflect the stock split.
In September 1996, the Company established the Company's Stock Option
Plan (the "1996 Plan") whereby the Company may issue to officers, employees,
consultants and other key persons options to purchase up to 220,000 shares of
common stock. The 1996 Plan allows for grant of incentive and nonqualified
stock options. Options granted under the 1996 Plan are granted at an exercise
price which is determined by the Board of Directors. The exercise price of
the incentive stock options shall not be less than the fair market value of
the common stock on the date of grant. Options are exercisable in
installments as designated by the Board of Directors. Incentive options
granted under the 1996 Plan shall expire no later than
F-10
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
6. EQUITY TRANSACTIONS, CONTINUED:
10 years after date of grant. In September 1996, 79,167 options were granted
under the 1996 Plan, of which 23,615 are exercisable at $4.55 per share and
55,552 are exercisable at $6.50 per share. These options vest ratably over a
four-year period.
In September 1996, the Company established the Company's Non-Employee
Director Stock Option Plan (the "Directors' Plan") whereby the Company may
issue to non-employee directors options to purchase up to 170,000 shares of
common stock. Options granted under the Directors' Plan are intended to be
incentive stock options. Consequently, options granted under the Directors'
Plan are granted at an exercise price which is determined by the Board of
Directors which shall not be less than fair market value of the common stock
on the date of grant. Options are exercisable in installments as designated
by the Board of Directors, and shall expire no later than 10 years after the
date of grant. In September 1996, 30,000 options were granted under the
Directors' Plan. These options vest over a two-year period and are
exercisable at $6.50 per share.
Options historically have been granted based on an amount greater than or
equal to the fair value of the shares at the date of grant. Since no quoted
market price was available prior to the Company's proposed initial public
offering, the best estimate of the fair value of the stock was determined by
the Board of Directors.
7. ACQUISITION:
In August, 1996, HomeCom acquired all of the outstanding capital stock
of HomeCom Internet Security Services, Inc. ("HISS"), a Delaware corporation
formed in July 1996 to provide Internet and Intranet security system consulting
services. In the transaction, the former holders of HISS's capital stock
received the right to receive their pro rata share of four annual earnout
payments to be paid not later than October 30 of 1997, 1998, 1999 and 2000
(each, an "Annual Earnout"). Each Annual Earnout will be one-fourth of an
amount equal to 30% of HISS's gross revenues for the 12 month period ending
September 30, 1997; provided, however, that (i) the amount of each Annual
Earnout will be limited to the amount of HISS's net profits for the 12-month
period ended September 30 immediately preceding the payment date (the "Profit
Cap"), (ii) amounts not paid in a year as a result of the Profit Cap will be
carried forward to the subsequent year, and (iii) amounts not paid in the
fourth year as a result of the Profit Cap will be forfeited. Each Annual
Earnout can be paid in whole or in part in cash or, at HomeCom's option, in
shares of Common Stock based upon the average trading price of the Common Stock
for the ten trading days immediately preceding payment of the Annual Earnout.
An Annual Earnout will not be paid if the recipient is then in violation of
the non-solicitation and non-competition provisions contained in the Stock
Purchase Agreement to which the former holders of HISS's capital stock are
subject.
HISS was formed in July 1996 and was in its start-up phase at the date of
acquisition. The purchase consideration is contingent on achieving specified
earnings levels in future periods and is not currently estimable. When such
amounts are determinable, the consideration, if any, will be recognized and
amortized over the remaining life of the intangible assets acquired.
8. RELATED PARTY TRANSACTIONS:
In August 1996, the Company borrowed $45,000 from a stockholder under the
terms of a one year promissory note bearing interest at eight percent per annum.
The Company has entered into an employment agreement with its Chief
Executive Officer and principal stockholder which expires December 31, 2000.
9. PRO FORMA INCOME TAXES (UNAUDITED):
As described in Note 1, the Company previously elected S Corporation
status under the provisions of the Internal Revenue Code. In February 1996,
the Company elected C Corporation status.
The following unaudited pro forma information has been determined based
upon the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". This information reflects income tax expense
that the Company would have incurred had it been subject to Federal and state
income taxes. The Company would not have a Federal and state income tax
provision because of net operating loss carryforwards for all periods
presented.
F-11
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS
UNAUDITED)
9. PRO FORMA INCOME TAXES (UNAUDITED), CONTINUED:
The pro forma income tax benefit differs from the amounts computed by
applying the Federal statutory rate of 34% to loss before taxes as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
DECEMBER 2 TO YEAR ENDED ----------------------------
DECEMBER 31, DECEMBER 31, 1995 1996
1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Tax benefit at the statutory rate $ 5,934 $ 1,850 $ 16,172 $ 18,398
Valuation allowance (5,934) (1,850) (16,172) (18,398)
------- ------- -------- --------
$ 0 $ 0 $ 0 $ 0
======= ======= ======== ========
</TABLE>
F-12
<PAGE> 56
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN SO
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE ANY OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
__________________
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
Prospectus Summary................................................... 3
Risk Factors......................................................... 7
Use of Proceeds...................................................... 11
Dividend Policy...................................................... 11
Dilution............................................................. 12
Capitalization....................................................... 13
Selected Historical and Pro Forma Financial Data..................... 14
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 16
Business............................................................. 19
Management........................................................... 32
Certain Transactions................................................. 35
Principal Stockholders............................................... 37
Description of Capital Stock......................................... 38
Shares Eligible for Future Sale...................................... 39
Underwriting......................................................... 40
Legal Matters........................................................ 41
Experts.............................................................. 41
Additional Information............................................... 41
Glossary of Certain Technical Terms.................................. 42
Index to Financial Statements........................................ F-1
</TABLE>
__________________
Until ________________, 1996 (25 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or
not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
<PAGE> 57
================================================================================
- --------------------------------------------------------------------------------
1,250,000 SHARES
HOMECOM COMMUNICATIONS, INC.
COMMON STOCK
[LOGO]
________________________________
PROSPECTUS
________________________
LADENBURG, THALMANN & CO. INC.
___________________, 1996
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 58
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee... $3,469.83
National Association of Securities Dealers, Inc. fee.. $1,506.25
Nasdaq SmallCap Market(TM) listing fee................ $8,249.98
Accountants' fees and expenses........................ $*
Legal fees and expenses............................... $*
Blue Sky fees and expenses............................ $*
Transfer Agent's fees and expenses.................... $*
Printing and engraving expenses....................... $*
Miscellaneous......................................... $*
Total Expenses........................................ ---------
$*
</TABLE>
- ------------
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law (the "DGCL") permits a corporation
to eliminate or limit the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of duty of care or other
duty as a director, provided that no provision shall eliminate or limit the
liability of a director: (A) for an appropriation, in violation of his
duties, of any business opportunity of the corporation; (B) for acts or
omissions which involve intentional misconduct or a knowing violation of law;
(C) for unlawful corporate distributions; or (D) for any transaction from
which the director received an improper personal benefit. This provision
pertains only to breaches of duty by directors in their capacity as directors
(and not in any other corporate capacity, such as officers) and limits
liability only for breaches of fiduciary duties under Delaware corporate law
(and not for violation of other laws, such as the federal securities laws).
The Company's Restated Certificate of Incorporation (the "Restated
Certificate") exonerates the Company's directors from monetary liability to
the extent permitted by this statutory provision.
The Company's Restated Certificate of Incorporation and Restated Bylaws
(the "Restated Bylaws") also provide that the Company shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Company), by reason of the fact that such person is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees), judgments, fines, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Company (and with respect to any criminal action or proceeding, if such person
had no reasonable cause to believe such person's conduct was unlawful), to the
maximum extent permitted by, and in the manner provided by, the DGCL.
Notwithstanding any provisions of the Company's Restated Certificate of
Incorporation and Restated Bylaws to the contrary, the DGCL provides that the
Company shall not indemnify a director or officer for any liability incurred
in a proceeding in which the director is adjudged liable to the Company or is
subjected to injunctive relief in favor of the Company: (1) for any
appropriation, in violation of his duties, of any business opportunity of the
Company; (2) for acts or omissions which involve intentional misconduct or a
knowing violation of law; (3) for unlawful corporate distributions; or (4) for
any transaction from which the director or officer received an improper
personal benefit.
Section 6 of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following list describes sales by the Registrant of securities in the
past three years which were not registered under the Securities Act of 1933,
as amended (the "Securities Act").
II-1
<PAGE> 59
All share amounts have been adjusted to reflect the Registrant's
September 1996 recapitalization and 93.07-for-1 stock split.
1. In December 1994, in connection with the incorporation of the
Registrant, the Registrant issued and sold to its sole stockholder
93,070 shares of Common Stock for $27,706.
2. In February 1996, in connection with the recapitalization of the
Registrant, the Registrant issued and sold 707,332 shares of Common
Stock to its President, Chief Executive Officer and sole stockholder
for a total purchase price of $760.
3. In February 1996, the Registrant issued and sold 93,070 shares
of Common Stock to its Senior Vice President for a total purchase
price of $10 upon the exercise of stock options granted in
connection with the founding of the Registrant.
4. Pursuant to a privately negotiated transaction with five
investors, the Registrant issued and sold to four of the investors
in February 1996 an aggregate of 893,472 shares of Common Stock for
a total purchase price of $96, and issued and sold to three of the
investors in February, March and May 1996 promissory notes in the
aggregate principal amount of $499,904. Pursuant to the terms of
such promissory notes, immediately preceding the effectiveness of
this Registration Statement, the Registrant intends to issue a total
of 76,907 shares of Common Stock (based on an assumed public
offering price of $6.50 per share) to the holders of such notes in
repayment of the principal amounts owed thereunder.
5. In August 1996, the Company issued an aggregate of 37,228
shares of Common Stock to four members of its former Board of
Advisors upon exercise of warrants, for a total purchase price of
$4.00.
6. In August 1996, the Registrant issued and sold an aggregate of
102,855 shares of Common Stock to six of its employees for a total
purchase price of $468,004.22, paid through delivery of 8%
promissory notes, payable 25% per year, secured by the shares
purchased thereby.
7. In August 1996, in connection with the Registrant's
acquisition of all of the stock of HomeCom Internet Security
Services, Inc., a Delaware corporation ("HISS"), the Registrant and
the stockholders of HISS entered into a Stock Purchase Agreement
which provides that the Registrant may, at its option, issue shares
of its Common Stock as all or part of the earnout payments to be
paid to such former stockholders pursuant to the Stock Purchase
Agreement.
8. In September 1996, the Registrant granted stock options (i) to three
directors under its Non-Employee Directors Stock Option Plan
to purchase an aggregate of up to 30,000 shares of Common Stock
and (ii) to 24 employees under its Stock Option Plan to purchase an
aggregate of up to 79,167 shares of Common Stock.
The sales and issuances of securities listed above were exempt from
registration under the Securities Act pursuant to Sections 4(2) and 3(b)
thereof and regulations promulgated thereunder.
ITEM 16. EXHIBITS
Exhibit
Number Description
- ------- -----------
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 Restated Bylaws of the Registrant.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and Restated Bylaws of the Registrant defining rights of
the holders of Common Stock of the Registrant.
4.2 Specimen Stock Certificate.*
4.3 Form of Warrant.*
II-2
<PAGE> 60
5.1 Opinion of Morris, Manning & Martin, L.L.P., Counsel to the Registrant,
as to the legality of the shares being registered.*
10.1 HomeCom Communications, Inc. Stock Option Plan and form of Stock Option
Certificate.
10.2 HomeCom Communications, Inc. Non-Employee Directors Stock Option Plan
and form of Stock Option Certificate.
10.3 Employment Agreement between the Registrant and Harvey W. Sax, dated
January 1, 1996.*
10.4 Form of Employment Agreement entered into between the Registrant and
each of its executive officers except Harvey W. Sax.
10.5 Lease Agreement between Property Georgia OBJLW One Corporation and the
Registrant, dated January 22, 1996.
10.6 Lease and Services Agreement between Alliance Greensboro, L.P. and the
Registrant, dated June 25, 1996.
10.7 Business Alliance Program Agreement between Oracle Corporation and the
Registrant, dated May 30, 1996, together with the Sublicense Addendum,
Application Specific Sublicense Addendum, Full Use and Deployment
Sublicense Addendum and License Transfer Policy, each dated May 30,
1996.*
10.8 Network Enrollment Agreement between Apple Computer, Inc. and the
Registrant, effective May 1996.
10.9 Member Level Agreement between Microsoft Corporation and the Registrant,
effective May 1996.*
10.10 Master Agreement for Internet Services and Products between BBN Planet
Corporation and the Registrant, dated February 1, 1996.
10.11 Authorized Business Partners Agreement between BBN Planet Corporation
and the Registrant, dated May 14, 1996.
10.12 Stock Purchase Agreement between the Registrant and the stockholders of
HomeCom Internet Security Services, Inc., dated August 31, 1996.
10.13 Form of Promissory Notes issued by the Registrant and held by Mark
Germain and the Edward Blech Trust.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Morris, Manning & Martin, L.L.P. (included in Exhibit 5.1).*
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule. (for SEC use only)
- ---------------
*To be filed by amendment
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling
II-3
<PAGE> 61
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of the Registration Statement as of
the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on the 18th day of September, 1996.
HomeCom Communications, Inc.
By: /s/ Harvey W. Sax
-----------------------------
Harvey W. Sax
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Harvey W. Sax and Nat Stricklen, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorney-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Harvey W. Sax President, Chief Executive Officer September 18, 1996
- ------------------------- and Director (Principal Executive
Harvey W. Sax Officer)
/s/ Nat Stricklen Senior Vice President, Sales and September 18, 1996
- ------------------------- Marketing, Chief Operating Officer
Nat Stricklen and Director
/s/ Vinod Keni Treasurer, Chief Financial Officer, September 18, 1996
- ------------------------- Secretary and Director (Principal
Vinod Keni Financial and Accounting Officer)
/s/ Krishan Puri Executive Vice President and Director September 18, 1996
- -------------------------
Krishan Puri
/s/ Gia Bohuchava, Ph.D. Chief Technical Officer and Director September 18, 1996
- -------------------------
Gia Bokuchava, Ph.D.
/s/ Roger Nebel Vice President and Director September 18, 1996
- -------------------------
Roger Nebel
/s/ Gregory Abowd, Ph.D. Director September 18, 1996
- -------------------------
Gregory Abowd, Ph.D.
/s/ Douglas MacIntyre Director September 18, 1996
- -------------------------
Douglas MacIntyre
/s/ Winn Schwartau Director September 18, 1996
- -------------------------
Winn Schwartau
</TABLE>
<PAGE> 63
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 Restated Bylaws of the Registrant.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and Restated Bylaws of the Registrant defining rights of
the holders of Common Stock of the Registrant.
4.2 Specimen Stock Certificate.*
4.3 Form of Warrant.*
5.1 Opinion of Morris, Manning & Martin, L.L.P., Counsel to the Registrant,
as to the legality of the shares being registered.*
10.1 HomeCom Communications, Inc. Stock Option Plan and form of Stock Option
Certificate.
10.2 HomeCom Communications, Inc. Non-Employee Directors Stock Option Plan
and form of Stock Option Certificate.
10.3 Employment Agreement between the Registrant and Harvey W. Sax, dated
January 1, 1996.*
10.4 Form of Employment Agreement entered into between the Registrant and
each of its executive officers except Harvey W. Sax.
10.5 Lease Agreement between Property Georgia OBJLW One Corporation and the
Registrant, dated January 22, 1996.
10.6 Lease and Services Agreement between Alliance Greensboro, L.P. and the
Registrant, dated June 25, 1996.
10.7 Business Alliance Program Agreement between Oracle Corporation and the
Registrant, dated May 30, 1996, together with the Sublicense Addendum,
Application Specific Sublicense Addendum, Full Use and Deployment
Sublicense Addendum and License Transfer Policy, each dated May 30,
1996.*
10.8 Network Enrollment Agreement between Apple Computer, Inc. and the
Registrant, effective May 1996.
10.9 Member Level Agreement between Microsoft Corporation and the Registrant,
effective May 1996.*
10.10 Master Agreement for Internet Services and Products between BBN Planet
Corporation and the Registrant, dated February 1, 1996.
10.11 Authorized Business Partners Agreement between BBN Planet Corporation
and the Registrant, dated May 14, 1996.
10.12 Stock Purchase Agreement between the Registrant and the stockholders of
HomeCom Internet Security Services, Inc., dated August 31, 1996.
10.13 Form of Promissory Notes issued by the Registrant and held by Mark
Germain and the Edward Blech Trust.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Morris, Manning & Martin, L.L.P. (included in Exhibit 5.1).*
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule. (for SEC use only)
- ---------------
*To be filed by amendment
<PAGE> 1
EXHIBIT 1.1
DRAFT - SUBJECT TO NEGOTIATIONS
1,250,000 Shares
HOMECOM COMMUNICATIONS, INC.
Common Stock ($.0001 Par Value)
UNDERWRITING AGREEMENT
____, 1996
LADENBURG, THALMANN & CO. INC.
As Representative of the several Underwriters
named in Schedule A hereto
540 Madison Avenue
New York, New York 10022
Dear Sirs:
1. Introductory. HomeCom Communications, Inc., a
Delaware corporation (the "Company"), proposes to sell, pursuant to the terms
of this Agreement, to the several underwriters named in Schedule A hereto (the
"Underwriters," or, each, an "Underwriter"), an aggregate of 1,250,000
shares of Common Stock, $.0001 par value (the "Common Stock"), of the Company.
The aggregate of 1,250,000 shares so proposed to be sold is hereinafter
referred to as the "Firm Stock". The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth in Section 3 hereof, up
to an additional 187,500 shares of Common Stock (the "Option Stock"). The Firm
Stock and the Option Stock are hereinafter collectively referred to as the
"Stock". Ladenburg, Thalmann & Co. Inc. ("Ladenburg") is acting as
representative of the several Underwriters and in such capacity is hereinafter
referred to as the "Representative".
2. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the several Underwriters
that:
(i) A registration statement on Form
S-1 (File No. 333-____) in the form in which it
<PAGE> 2
became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become
effective with respect to the Stock, including any
pre-effective prospectuses included as part of the
registration statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to Rule 424
under the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, copies of which have heretofore been
delivered to you, has been carefully prepared by the Company
in conformity with the requirements of the Securities Act and
has been filed with the Commission under the Securities Act;
one or more amendments to such registration statement,
including in each case an amended pre-effective prospectus,
copies of which amendments have heretofore been delivered to
you, have been so prepared and filed. Such registration
statement is referred to hereinafter as the "Registration
Statement". If it is contemplated, at the time this Agreement
is executed, that a post-effective amendment to the
Registration Statement will be filed and must be declared
effective before the offering of the Stock may commence, the
term "Registration Statement" as used in this Agreement means
the Registration Statement as amended by said post-effective
amendment. The term "Registration Statement" as used in this
Agreement shall also include any registration statement
relating to the Stock that is filed and declared effective
pursuant to Rule 462(b) under the Securities Act. The term
"Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement, or, (A) if
the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Securities Act
and such information is included in a prospectus filed with
the Commission pursuant to Rule 424(b) under the Securities
Act, the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement
as supplemented by the addition of the Rule 430A information
contained in the prospectus filed with the Commission pursuant
to Rule 424(b) and (B) if prospectuses that meet the
requirements of Section
-2-
<PAGE> 3
10 (a) of the Securities Act are delivered pursuant to Rule
434 under the Securities Act, then (i) the term "Prospectus"
as used in this Agreement means the "prospectus subject to
completion" (as such term is defined in Rule 434 (g) under the
Securities Act) as supplemented by (a) the addition of Rule
430A information or other information contained in the form of
prospectus delivered pursuant to Rule 434(b)(2) under the
Securities Act or (b) the information contained in the term
sheets described in Rule 434 (b) (3) under the Securities Act,
and (ii) the date of such prospectuses shall be deemed to be
the date of the term sheets. The term "Pre-effective
Prospectus" as used in this Agreement means the prospectus
subject to completion in the form included in the Registration
Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such
prospectus shall have been amended from time to time prior to
the date of the Prospectus.
(ii) The Commission has not issued or
threatened to issue any order preventing or suspending the
use of any Pre-effective Prospectus, and, at its date of
issue, each Pre-effective Prospectus conformed in all material
respects with the requirements of the Securities Act and
did not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and,
when the Registration Statement becomes effective and at all
times subsequent thereto up to and including the Closing
Date[s], the Registration Statement and the Prospectus and any
amendments or supplements thereto contained and will contain
all material statements and information required to be
included therein by the Securities Act and conformed and will
conform in all material respects to the requirements of the
Securities Act and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, included
or will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided,
-3-
<PAGE> 4
however, that the foregoing representations, warranties and
agreements shall not apply to information contained in or
omitted from any Pre-effective Prospectus or the Registration
Statement or the Prospectus or any such amendment or
supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf
of any Underwriter, directly or through you, specifically for
use in the preparation thereof; there is no franchise, lease,
contract, agreement or document required to be described in
the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described
or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents
contained in the Registration Statement are accurate and
complete descriptions of such documents in all material
respects.
(iii) Subsequent to the respective dates as of
which information is given in the Registration
Statement and Prospectus, and except as set forth or
contemplated in the Prospectus, the Company has not incurred
any liabilities or obligations, direct or contingent, nor
entered into any transactions not in the ordinary course of
business, and there has not been any material adverse change
in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of
operations of the Company or any change in the capital stock,
short-term or long-term debt of the Company.
(iv) The financial statements, together with the
related notes and schedules, set forth in the Prospectus and
elsewhere in the Registration Statement fairly present, on the
basis stated in the Registration Statement, the financial
position and the results of operations and changes in
financial position of the Company at the respective dates or
for the respective periods therein specified. Such statements
and related notes and schedules have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis except as may be set forth in
the Prospectus. The selected financial and pro forma financial
data set forth in the Prospectus under the
-4-
<PAGE> 5
caption "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA"
fairly present, on the basis stated in the Registration
Statement, the information set forth therein.
(v) Coopers & Lybrand L.L.P., who have
expressed their opinions on the audited financial statements
and related schedules included in the Registration Statement
and the Prospectus, are independent public accountants as
required by the Securities Act and the Rules and
Regulations.
(vi) The Company has been duly organized and is
validly existing and in good standing as a corporation under
the laws of its jurisdiction of organization, with power and
authority (corporate and other) to own or lease its properties
and to conduct its business as described in the Prospectus;
the Company is in possession of and operating in compliance
with all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders required
for the conduct of its business, all of which are valid and in
full force and effect; and the Company is duly qualified to do
business and in good standing as a foreign corporation in all
other jurisdictions where its ownership or leasing of
properties or the conduct of its business requires such
qualification. The Company has all requisite power and
authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications,
licenses and permits of and from all public regulatory or
governmental agencies and bodies to own, lease and operate its
properties and conduct its business as now being conducted and
as described in the Registration Statement and the Prospectus,
and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a
materially burdensome restriction not adequately disclosed in
the Registration Statement and the Prospectus. The Company
does not own or control, directly or indirectly, any
corporation, association or other entity.
(vii) The Company's authorized and outstanding
capital stock is on the date hereof, and will be on the
Closing Date[s], as set forth under the
-5-
<PAGE> 6
heading "Capitalization" in the Prospectus; the outstanding
shares of Common Stock conform to the description thereof in
the Prospectus and have been duly authorized and validly
issued and are fully paid and nonassessable and have been
issued in compliance with all federal and state securities
laws and were not issued in violation of or subject to any
preemptive rights or similar rights to subscribe for or
purchase securities and conform to the description thereof
contained in the Prospectus. Except as disclosed in and or
contemplated by the Prospectus and the financial statements of
the Company and related notes thereto included in the
Prospectus, the Company does not have outstanding any options
or warrants to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The
description of the Company's stock option and other stock
plans or arrangements, and the options or other rights granted
or exercised thereunder, as set forth in the Prospectus,
accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and
rights.
(viii) The shares of Stock to be issued and sold
by the Company to the Underwriters hereunder have been
duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and
validly issued, fully paid and nonassessable and free of any
preemptive or similar rights and will conform to the
description thereof in the Prospectus. The shares of Common
Stock issuable upon exercise of the Warrants (as hereinafter
defined) have been duly and validly authorized and, when
issued and delivered against payment therefor in accordance
with the terms thereof, will be duly and validly issued, fully
paid and nonassessable and free of any preemptive or similar
rights.
(ix) Except as set forth in the Prospectus,
there are no legal or governmental proceedings pending to
which the Company is a party or of which any property of the
Company is subject, which,
-6-
<PAGE> 7
if determined adversely to the Company, might individually or
in the aggregate (i) prevent or adversely affect the
transactions contemplated by this Agreement, (ii) suspend the
effectiveness of the Registration Statement, (iii) prevent or
suspend the use of the Pre-effective Prospectus in any
jurisdiction or (iv) result in a material adverse change in
the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of
the Company; and to the best of the Company's knowledge, no
such proceedings are threatened or contemplated against the
Company by governmental authorities or others. The Company is
not a party or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory
body or other governmental agency or body. The description of
the Company's litigation under the heading "Business -- Legal
Proceedings" in the Prospectus is true and correct and
complies with the Rules and Regulations.
(x) The execution, delivery and performance of
this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation
of any of the terms or provisions of or constitute a default
under any indenture, mortgage, deed of trust, note agreement
or other agreement or instrument to which the Company is a
party or by which it or any of its properties is or may be
bound, the Certificate of Incorporation, By-laws or other
organizational documents of the Company or any law, order,
rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties
or will result in the creation of a lien.
(xi) No consent, approval, authorization or
order of any court or governmental agency or body is
required for the consummation by the Company of the
transactions contemplated by this Agreement, except such as
may be required by the National Association of Securities
Dealers, Inc. (the "NASD") or under the Securities Act or the
securities or "Blue Sky" laws of any jurisdiction in
connection with the purchase and distribution of the Stock by
the Underwriters.
-7-
<PAGE> 8
(xii) The Company has the full corporate power
and authority to enter into this Agreement and to
perform its obligations hereunder (including to issue, sell
and deliver the Stock), and this Agreement has been duly and
validly authorized, executed and delivered by the Company and
is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to
the extent that rights to indemnity and contribution hereunder
may be limited by federal or state securities laws or the
public policy underlying such laws. The Company has the full
corporate power and authority to execute and deliver the
Warrants on the terms and conditions set forth in this
Agreement and in the Warrants, and such execution and delivery
of the Warrants has been duly and validly authorized, and when
executed and delivered pursuant to this Agreement, the
Warrants will be enforceable against the Company in accordance
with their terms.
(xiii) The Company is in all material respects in
compliance with, and conducts its business in conformity with,
all applicable federal, state, local and foreign laws, rules
and regulations of each court or governmental agency or body
having jurisdiction over the Company; to the knowledge of the
Company, otherwise than as set forth in the Registration
Statement and the Prospectus, no prospective change in any of
such federal or state laws, rules or regulations has been
adopted which, when made effective, would have a material
adverse effect on the operations of the Company.
(xiv) The Company has filed all necessary
federal, state, local and foreign income, payroll,
franchise and other tax returns and has paid all taxes shown
as due thereon or with respect to any of its properties, and
there is no tax deficiency that has been, or to the knowledge
of the Company is likely to be, asserted against the Company
or any of its properties or assets that would adversely affect
the financial position, business or operations of the Company.
-8-
<PAGE> 9
(xv) No person or entity has the right to
require registration of shares of Common Stock or other
securities of the Company because of the filing or
effectiveness of the Registration Statement or otherwise,
except for persons and entities who have expressly waived such
right or who have been given proper notice and have failed to
exercise such right within the time or times required under
the terms and conditions of such right.
(xvi) Neither the Company nor any of its
officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to
stabilize or manipulate the price of any security of the
Company, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any
security of the Company.
(xvii) The Company has provided you with
all financial statements since _____________________,
199_ to the date hereof that are available to the officers of
the Company.
(xviii) The Company owns or possesses all patents,
trademarks, trademark registrations, service marks,
service mark registrations, tradenames, copyrights, licenses,
inventions, trade secrets and rights described in the
Prospectus as being owned by it or necessary for the conduct
of its business, and the Company is not aware of any claim to
the contrary or any challenge by any other person to the
rights of the Company with respect to the foregoing. The
Company's business as now conducted and as proposed to be
conducted does not and will not infringe or conflict with any
patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses or other intellectual property or
franchise right of any person. No claim has been made against
the Company alleging the infringement by the Company of any
patent, trademark, service mark, tradename, copyright, trade
secret, license in or other intellectual property right or
franchise right of any person.
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<PAGE> 10
(xix) The Company has performed all material
obligations required to be performed by it under any
indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which it is a party or by which it
or any of its properties may be bound, and neither the Company
nor any other party to such indenture, mortgage, deed of
trust, note agreement or other agreement or instrument is in
default under or in breach of any such obligations.
(xx) The Company is not involved in any labor
dispute nor is any such dispute threatened. The
Company is not aware that (A) any executive, key employee or
significant group of employees of the Company plans to
terminate employment with the Company or (B) any such
executive or key employee is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or
similar agreement that would be violated by the present or
proposed business activities of the Company. The Company does
not have and does not expect to have any liability for any
prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended (ERISA), to
which the Company makes or ever has made a contribution and in
which any employee of the Company is or has ever been a
participant. With respect to such plans, the Company is in
compliance in all material respects with all applicable
provisions of ERISA.
(xxi) The Company has obtained the written
agreement described in Section 8(i) of this Agreement from
each of its officers, directors and holders of Common Stock
listed on Schedule B hereto.
(xxii) The Company has, and the Company as of the
Closing Date[s] will have, good and marketable title in fee
simple to all real property and good and marketable title to
all personal property owned or proposed to be owned by it
which is material to the business of the Company, in each case
free and clear of all liens, encumbrances and defects, except
such as are described in the Prospectus or such as would not
have a
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<PAGE> 11
material adverse effect on the Company; and any real property
and buildings held under lease by the Company or proposed to
be held after giving effect to the transactions described in
the Prospectus are, or will be as of the Closing Date[s],
held by it under valid, subsisting and enforceable leases with
such exceptions as would not have a material adverse effect on
the Company, in each case except as described in or
contemplated by the Prospectus.
(xxiii) The Company is insured by insurers of
recognized financial responsibility against such losses and
risks and in such amounts as are customary in the business in
which it is engaged or proposes to engage after giving effect
to the transactions described in the Prospectus; and the
Company does not have any reason to believe that it will not
be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business
at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business
or operations of the Company, except as described in or
contemplated by the Prospectus.
(xxiv) Other than as contemplated by this
Agreement, there is no broker, finder or other party that is
entitled to receive from the Company any brokerage or finder's
fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
(xxv) The Company has complied with all
provisions of Section ___ of the Delaware General Corporation
Law.
(xxvi) The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain accountability
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<PAGE> 12
for assets; (iii) access to assets is permitted only in
accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxvii) To the Company's knowledge, neither the
Company nor any employee or agent of the Company has made any
payment of funds of the Company or received or retained any
funds in violation of any law, rule or regulation.
(xxviii) The Company is not an "investment company"
or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940,
as amended.
(xxix) Each certificate signed by any officer of
the Company and delivered to the Underwriters or counsel for
the Underwriters shall be deemed to be a representation and
warranty by the Company as to the matters covered thereby.
3. Purchase by, and Sale and Delivery to,
Underwriters-Closing Date[s]. The Company agrees to sell to the Underwriters
the Firm Stock, and on the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Underwriters agree, severally and not jointly, to purchase the
Firm Stock, the number of shares of Firm Stock to be purchased by each
Underwriter being set opposite its name in Schedule A, subject to adjustment in
accordance with Section 12 hereof.
The purchase price per share to be paid by the Underwriters to
the Company will be $___ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representative
for the respective accounts of the several Underwriters (in the form of
definitive certificates, issued in such names and in such denominations as the
Representative may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York Time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such
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<PAGE> 13
direction is received, in the names of the respective Underwriters or in such
other names as Ladenburg may designate (solely for the purpose of
administrative convenience) and in such denominations as Ladenburg may
determine), against payment of the aggregate Purchase Price therefor by
certified or official bank check or checks in Clearing House funds (next day
funds), payable to the order of the Company, all at the offices of Willkie Farr
& Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
10022. The time and date of the delivery and closing shall be at 10:00 A.M.,
New York Time, on ____, 1996, in accordance with Rule 15c6-1 of the Securities
Exchange Act of 1934 (the "Exchange Act"). The time and date of such payment
and delivery are herein referred to as the "First Closing Date". The First
Closing Date and the location of delivery of, and the form of payment for, the
Firm Stock may be varied by agreement between the Company and Ladenburg. The
First Closing Date may be postponed pursuant to the provisions of Section 12.
The Company shall make the certificates for the Stock
available to the Representative for examination on behalf of the Underwriters
not later than 10:00 A.M., New York Time, on the business day preceding the
First Closing Date at the offices of Ladenburg, 540 Madison Avenue, New York,
New York 10022.
It is understood that Ladenburg, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make payment to the Company on behalf of any Underwriter or Underwriters for
the Stock to be purchased by such Underwriter or Underwriters. Any such
payment by Ladenburg shall not relieve such Underwriter or Underwriters from
any of its or their other obligations hereunder.
The several Underwriters agree to make an initial public
offering of the Firm Stock at the initial public offering price as soon after
the effectiveness of the Registration Statement as in their judgment is
advisable. The Representative shall promptly advise the Company of the making
of the initial public offering.
For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Stock as contemplated by the
Prospectus, the Company hereby grants to the Underwriters an option to
purchase, severally and not jointly, up to an aggregate of 187,500 shares of
Option Stock. The price per share to be paid for the Option Stock shall be the
Purchase Price.
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<PAGE> 14
The option granted hereby may be exercised as to all or any part of the Option
Stock at any time, and from time to time, not more than thirty (30) days
subsequent to the effective date of this Agreement. No Option Stock shall be
sold and delivered unless the Firm Stock previously has been, or simultaneously
is, sold and delivered. The right to purchase the Option Stock or any portion
thereof may be surrendered and terminated at any time upon notice by the
Underwriters to the Company.
The option granted hereby may be exercised by the Underwriters
by giving written notice from Ladenburg to the Company setting forth the number
of shares of the Option Stock to be purchased by them and the date and time for
delivery of and payment for the Option Stock. Each date and time for delivery
of and payment for the Option Stock (which may be the First Closing Date, but
not earlier) is herein called the "Option Closing Date" and shall in no event
be earlier than two (2) business days nor later than ten (10) business days
after written notice is given. (The Option Closing Date and the First Closing
Date are herein called the "Closing Dates".) All purchases of Option Stock from
the Company shall be made on a pro rata basis. Option Stock shall be purchased
for the account of each Underwriter in the same proportion as the number of
shares of Firm Stock set forth opposite such Underwriter's name in Schedule A
hereto bears to the total number of shares of Firm Stock (subject to adjustment
by the Underwriters to eliminate odd lots). Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
shares of Option Stock set forth in the written notice of exercise and the
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such shares determined
as aforesaid.
The Company will deliver the Option Stock to the Underwriters
(in the form of definitive certificates, issued in such names and in such
denominations as the Representative may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York Time, on the second full
business day preceding the Option Closing Date or, if no such direction is
received, in the names of the respective Underwriters or in such other names as
Ladenburg may designate (solely for the purpose of administrative convenience)
and in such denominations as Ladenburg may determine), against payment of the
aggregate Purchase Price therefor by certified or official bank check or checks
in Clearing House funds (next day funds), payable to the order of the Company
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<PAGE> 15
all at the offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East
53rd Street, New York, New York 10022. The Company shall make the
certificate[s] for the Option Stock available to the Underwriters for
examination not later than 10:00 A.M., New York Time, on the business day
preceding the Option Closing Date at the offices of Ladenburg, 540 Madison
Avenue, New York, New York 10022. The Option Closing Date and the location of
delivery of, and the form of payment for, the Option Stock may be varied by
agreement between the Company and Ladenburg. The Option Closing Date may be
postponed pursuant to the provisions of Section 12.
In order to induce you to enter into this Agreement, the
Company, in consideration of the receipt of $___ for each Warrant and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, shall execute and deliver to you, in your individual capacity and
not as Representative, or your assignees, in compliance with the rules of the
NASD, warrants exercisable during the ____- year period commencing____________
(the "Warrants") to purchase an aggregate of 125,000 shares of Common Stock at
an exercise price per share equal to 120% of the initial public offering price
per share set forth on the cover page of the Prospectus. The Warrants shall
be in the form of Exhibit____ to the Registration Statement. Execution and
delivery of Warrants, registered in your name or the names in which you shall
notify the Company in writing, shall be made to you, at your offices at 540
Madison Avenue, New York, New York 10022, at the First Closing Date. The cost
of original issue tax stamps, if any, in connection with the execution and
delivery of the Warrants shall be borne by the Company.
4. Covenants and Agreements of the Company. The
Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) if the Company and
the Representative have determined not to proceed pursuant to
Rule 430A, use its best efforts to cause the Registration
Statement to become effective, (ii) if the Company and the
Representative have determined to proceed pursuant to Rule
430A, use its best efforts to comply with the provisions of
and make all requisite filings with the Commission pursuant to
Rule 430A and Rule 424 of the Rules and Regulations and (iii)
if the Company and the Representative have determined to
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<PAGE> 16
deliver Prospectuses pursuant to Rule 434 of the Rules and
Regulations, to use its best efforts to comply with all the
applicable provisions thereof. The Company will advise the
Representative promptly as to the time at which the
Registration Statement becomes effective, will advise the
Representative promptly of the issuance by the Commission of
any stop order suspending the effectiveness of the
Registration Statement or of the institution of any
proceedings for that purpose, and will use its best efforts to
prevent the issuance of any such stop order and to obtain as
soon as possible the lifting thereof, if issued. The Company
will advise the Representative promptly of the receipt of any
comments of the Commission or any request by the Commission
for any amendment of or supplement to the Registration
Statement or the Prospectus or for additional information and
will not at any time file any amendment to the Registration
Statement or supplement to the Prospectus which shall not
previously have been submitted to the Representative a
reasonable time prior to the proposed filing thereof or to
which the Representative shall reasonably object in writing or
which is not in compliance with the Securities Act and the
Rules and Regulations.
(b) The Company will prepare and file with the
Commission, promptly upon the request of the Representative,
any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representative may
be necessary to enable the several Underwriters to continue
the distribution of the Stock and will use its best efforts
to cause the same to become effective as promptly as possible.
(c) If at any time after the effective date of
the Registration Statement when a prospectus relating to the
Stock is required to be delivered under the Securities Act any
event relating to or affecting the Company occurs as a result
of which the Prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact,
or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, or if it is
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<PAGE> 17
necessary at any time to amend the Prospectus to comply with
the Securities Act, the Company will promptly notify the
Representative thereof and will prepare an amended or
supplemented prospectus which will correct such statement or
omission; and in case any Underwriter is required to deliver a
prospectus relating to the Stock nine (9) months or more after
the effective date of the Registration Statement, the Company
upon the request of the Representative and at the expense of
such Underwriter will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act.
(d) The Company will deliver to the
Representative, at or before the First Closing Date, signed
copies of the Registration Statement, as originally filed with
the Commission, and all amendments thereto, including all
financial statements and exhibits thereto, and will deliver to
the Representative such number of copies of the Registration
Statement, including such financial statements but without
exhibits, and all amendments thereto, as the Representative
may reasonably request. The Company will deliver or mail to
or upon the order of the Representative, from time to time
until the effective date of the Registration Statement, as
many copies of the Pre-effective Prospectus as the
Representative may reasonably request. The Company will
deliver or mail to or upon the order of the Representative on
the date of the initial public offering, and thereafter from
time to time during the period when delivery of a prospectus
relating to the Stock is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter
amended or supplemented, as the Representative may reasonably
request; provided, however, that the expense of the
preparation and delivery of any prospectus required for use
nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters
required to deliver such prospectus.
(e) The Company will make generally available
to its stockholders as soon as practicable,
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<PAGE> 18
but not later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement
which will be in reasonable detail (but which need not be
audited) and which will comply with Section 11(a) of the
Securities Act, covering a period of at least twelve (12)
months beginning after the "effective date" (as defined in
Rule 158 under the Securities Act) of the Registration
Statement.
(f) The Company will cooperate with the
Representative to enable the Stock to be registered or
qualified for offering and sale by the Underwriters and by
dealers under the securities laws of such jurisdictions as the
Representative may designate and at the request of the
Representative will make such applications and furnish such
consents to service of process or other documents as may be
required of it as the issuer of the Stock for that purpose;
provided, however, that the Company shall not be required to
qualify to do business or to file a general consent (other than
that arising out of the offering or sale of the Stock) to
service of process in any such jurisdiction where it is not now
so subject. The Company will, from time to time, prepare and
file such statements and reports as are or may be required of
it as the issuer of the Stock to continue such qualifications
in effect for so long a period as the Representative may
reasonably request for the distribution of the Stock. The
Company will advise the Representative promptly after the
Company becomes aware of the suspension of the qualifications
or registration of (or any such exception relating to) the
Common Stock of the Company for offering, sale or trading in
any jurisdiction or of any initiation or threat of any
proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications,
registration or exception, the Company will, with the
cooperation of the Representative, use its best efforts to
obtain the withdrawal thereof.
(g) The Company will furnish to its stockholders
annual reports containing financial statements certified by
independent public accountants and with quarterly summary
financial information in reasonable detail which may be
unaudited. During the
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<PAGE> 19
period of five (5) years from the date hereof, the Company
will deliver to the Representative and, upon request, to each
of the other Underwriters, as soon as they are available,
copies of each annual report of the Company containing the
balance sheet of the Company as of the close of such fiscal
year and statements of income, stockholders' equity and cash
flows for the year then ended and the opinion thereon of the
Company's independent public accountants and each other report
or communication furnished by the Company to its stockholders
and will deliver to the Representative, (i) as soon as they
are available, copies of any other reports or communication
(financial or other) which the Company shall publish or
otherwise make available to any of its stockholders as such,
(ii) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the
Commission, the NASD or any national securities exchange and
(iii) from time to time such other information concerning the
Company as you may request.
[(h) The Company will use its best efforts to
list the Stock, subject to official notice of issuance,
on the Nasdaq SmallCap Market.]
(i) The Company will maintain a transfer
agent and registrar for the Common Stock.
(j) Prior to filing its quarterly statements
on Form 10-Q, the Company will have its independent
auditors perform a limited quarterly review of its
quarterly numbers.
(k) The Company will not offer, sell, assign,
transfer, encumber, contract to sell, grant an option to
purchase or otherwise dispose of any shares of Common Stock or
securities convertible into or exercisable or exchangeable for
Common Stock during the 180 days following the date on which
the price of the Common Stock to be purchased by the
Underwriters is established, other than the Company's sale of
Common Stock hereunder, the issuance of the Warrants and the
Company's issuance of Common Stock upon the exercise of the
warrants and [upon the exercise stock options which
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<PAGE> 20
are presently outstanding and described in the Prospectus.]
(1) The Company will apply the net proceeds
from the sale of the Stock as set forth in the description
under the heading "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of
Item 504 of Regulation S-K.
(m) The Company will supply you with copies
of all correspondence to and from, and all documents issued to
and by, the Commission in connection with the registration of
the Stock under the Securities Act.
(n) Prior to the Closing Date[s] the
Company will furnish to you, as soon as they have been
prepared, copies of any unaudited interim financial statements
of the Company for any periods subsequent to the periods
covered by the financial statements appearing in the
Registration Statement and the Prospectus.
(o) Prior to the Closing Date[s] the
Company will issue no press release or other communications
directly or indirectly and hold no press conference with
respect to the Company, the financial condition, results of
operation, business, prospects, assets or liabilities of the
Company or the offering of the Stock, without your prior
written consent. For a period of twelve (12) months following
the Option Closing Date, the Company will use its best efforts
to provide to you copies of each press release or other public
communications with respect to the financial condition, results
of operations, business, prospects, assets or liabilities of
the Company at least twenty-four (24) hours prior to the public
issuance thereof or such longer advance period as may
reasonably be practicable.
5. Payment of Expenses. (a) The Company will pay
(directly or by reimbursement) all costs, fees and expenses incurred in
connection with expenses incident to the performance of its obligations under
this Agreement and in connection with the transactions contemplated hereby,
including but not limited to (i) all expenses and taxes incident to the
issuance and delivery of
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<PAGE> 21
the Stock to the Representative; (ii) all expenses incident to the registration
of the Stock under the Securities Act; (iii) the costs of preparing stock
certificates (including printing and engraving costs); (iv) all fees and
expenses of the registrar and transfer agent of the Common Stock; (v) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Stock to the Underwriters; (vi) fees and expenses of the
Company's counsel and the Company's independent accountants; (vii) all costs
and expenses incurred in connection with the preparation, printing filing,
shipping and distribution of the Registration Statement, each Pre-effective
Prospectus and the Prospectus (including all exhibits and financial statements)
and all amendments and supplements provided for herein, the "Agreement Among
Underwriters" between the Representative and the Underwriters, the Master
Selected Dealers' Agreement, the Underwriters' Questionnaire, the Blue Sky
memoranda and this Agreement; (viii) all filing fees, attorneys' fees and
expenses incurred by the Company or the Underwriters in connection with
exemptions from the qualifying or registering (or obtaining qualification or
registration of) all or any part of the Stock for offer and sale under the Blue
Sky or other securities laws of such jurisdictions as the Representative may
designate; (ix) all fees and expenses paid or incurred in connection with
filings made with the NASD; and (x) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 5.
(b) In addition to its other obligations under Section
6(a) hereof, the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding arising out of
or based upon (i) any statement or omission or any alleged statement or omission
or (ii) any breach or inaccuracy in its representations and warranties, it will
reimburse each Underwriter on a quarterly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's obligation to reimburse each Underwriter for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter shall
promptly return it to the Company together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial
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<PAGE> 22
lending rate for borrowers of the highest credit standing) announced from time
to time by _______ , New York, New York (the "Prime Rate"). Any such interim
reimbursement payments which are not made to an Underwriter in a timely manner
as provided below shall bear interest at the Prime Rate from the due date for
such reimbursement. This expense reimbursement agreement will be in addition
to any other liability which the Company may otherwise have. The request for
reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section
6(b) hereof, each Underwriter severally agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in Section 6(b) hereof which relates
to written information furnished to the Company by the Representative on behalf
of the Underwriters specifically for inclusion in the Registration Statement
and the Prospectus, it will reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Underwriters' obligation to reimburse
the Company (and, to the extent applicable, each officer, director or
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Company (and, to the extent applicable, each officer,
director or controlling person) shall promptly return it to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the
Company within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(d) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in paragraph (b)
or (c) of this Section 5, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of
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<PAGE> 23
the Board of Governors of the New York Stock Exchange, Inc. or pursuant to the
Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the
event the party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to
said demand or notice is authorized to do so. Such an arbitration would be
limited to the operation of the interim reimbursement provisions contained in
paragraph (b) or (c) of this Section 5 and would not resolve the ultimate
propriety or enforceability of the obligation to reimburse expenses which is
created by the provisions of Section 6.
6. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls such Underwriter within the meaning of the Securities Act and the
respective officers, directors, partners, employees, representatives and agents
of each of such Underwriter (collectively, the "Underwriter Indemnified
Parties" and, each, an "Underwriter Indemnified Party"), against any losses,
claims, damages, liabilities or expenses (including the reasonable cost of
investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which may be based upon
the Securities Act, or any other statute or at common law, on the ground or
alleged ground that any Pre-effective Prospectus, the Registration Statement or
the Prospectus (or any Pre-effective Prospectus, the Registration Statement or
the Prospectus as from time to time amended or supplemented) includes or
allegedly includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, unless such statement or omission was made in reliance upon,
and in conformity with, written information furnished to the Company by any
Underwriter, directly or through the Representative, specifically for use in
the preparation thereof; provided, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Pre-effective
Prospectus, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Underwriter Indemnified Party from whom the person
asserting any such losses, claims, damages or liabilities purchased the shares
of Stock concerned to the extent that any such loss, claim, damage or liability
of such Underwriter
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<PAGE> 24
Indemnified Party results from the fact that a copy of the Prospectus was not
sent or given to such person at or prior to the written confirmation of the
sale of such shares of Stock to such person as required by the Securities Act
and if the untrue statement or omission concerned has been corrected in the
Prospectus. The Company will be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it. In the event the
Company elects to assume the defense of any such suit and retain such counsel,
any Underwriter Indemnified Parties, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) the Company shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include any such Underwriter
Indemnified Parties and the Company and such Underwriter Indemnified Parties
have been advised by counsel to the Underwriters that one or more legal
defenses may be available to it or them which may not be available to the
Company, in which case the Company shall not be entitled to assume the defense
of such suit notwithstanding its obligation to bear the fees and expenses of
such counsel. This indemnity agreement is not exclusive and will be in
addition to any liability which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any,
who controls the Company within the meaning of the Securities Act
(collectively, the "Company Indemnified Parties"), against any losses, claims,
damages, liabilities or expenses (including, unless the Underwriter or
Underwriters elect to assume the defense, the reasonable cost of investigating
and defending against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which arise out of or are based in
whole or in part upon the Securities Act, the Exchange Act or any other
federal, state, local or foreign statute or regulation, or at common law, on
the ground or alleged ground that any Pre-effective Prospectus, the
Registration Statement or the Prospectus (or any Pre-effective Prospectus, the
Registration Statement or the Prospectus, as from time to time amended and
supplemented) includes an untrue
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<PAGE> 25
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading, but only insofar
as any such statement or omission was made in reliance upon, and in conformity
with, written information furnished to the Company by such Underwriter,
directly or through the Representative, specifically for use in the preparation
thereof; provided, however, that in no case is such Underwriter to be liable
with respect to any claims made against any Company Indemnified Party against
whom the action is brought unless such Company Indemnified Party shall have
notified such Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim
shall have been served upon the Company Indemnified Party, but failure to
notify such Underwriter of such claim shall not relieve it from any liability
which it may have to any Company Indemnified Party otherwise than on account of
its indemnity agreement contained in this paragraph. Such Underwriter shall be
entitled to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, but,
if such Underwriter elects to assume the defense, such defense shall be
conducted by counsel chosen by it. In the event that any Underwriter elects to
assume the defense of any such suit and retain such counsel, the Company
Indemnified Parties and any other Underwriter or Underwriters or controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, respectively. The
Underwriter against whom indemnity may be sought shall not be liable to
indemnify any person for any settlement of any such claim effected without such
Underwriter's consent. This indemnity agreement is not exclusive and will be
in addition to any liability which such Underwriter might otherwise have and
shall not limit any rights or remedies which may otherwise be available at law
or in equity to any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6
is unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits
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<PAGE> 26
received by the Company on the one hand and the Underwriters on the other from
the offering of the Stock. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, defending, settling or compromising any such claim.
Notwithstanding the provisions of this subsection (c), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the shares of the Stock underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be
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<PAGE> 27
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Survival of Indemnities, Representations,
Warranties, etc. The respective indemnities, covenants, agreements,
representations, warranties and other statements of the Company and the several
Underwriters, as set forth in this Agreement or made by them respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter, the Company or
any of its officers or directors or any controlling person, and shall survive
delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The
respective obligations of the several Underwriters hereunder shall be subject
to the accuracy, at and (except as otherwise stated herein) as of the date
hereof and at and as of the Closing Date[s], of the representations and
warranties made herein by the Company, to compliance at and as of the Closing
Date[s] by the Company with its covenants and agreements herein contained and
other provisions hereof to be satisfied at or prior to the Closing Date[s], and
to the following additional conditions:
(a) The Registration Statement shall have
become effective and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the
Company or the Representative, shall be threatened by the
Commission, and any request for additional information on the
part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the
Representative. Any filings of the Prospectus, or any
supplement thereto, required pursuant to Rule 424(b) or Rule
434 of the Rules and Regulations shall have been made in the
manner and within the time period required by Rule 424 (b) and
Rule 434 of the Rules and Regulations, as the case may be.
(b) The Representative shall have been
satisfied that there shall not have occurred any change prior
to the Closing Date [s], in the condition (financial or
otherwise), properties, business, management, prospects, net
worth or results of
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<PAGE> 28
operations of the Company, or any change in the capital stock,
short-term or long-term debt of the Company, such that (i) the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact
which, in the opinion of the Representative, is material, or
omits to state a fact which, in the opinion of the
Representative, is required to be stated therein or is
necessary to make the statements therein not misleading, or
(ii) it is unpracticable in the reasonable judgment of the
Representative to proceed with the public offering or purchase
the Stock as contemplated hereby.
(c) The Representative shall be satisfied
that no legal or governmental action, suit or proceeding
affecting the Company which is material and adverse to the
Company or which affects or may affect the Company's ability to
perform its obligations under this Agreement shall have been
instituted or threatened and there shall have occurred no
material adverse development in any existing such action, suit
or proceeding.
(d) At the time of execution of this
Agreement, the Representative shall have received from Coopers
& Lybrand L.L.P., independent certified public accountants, a
letter, dated the date hereof, in form and substance
satisfactory to the Representative.
(e) The Representative shall have received
from Coopers & Lybrand L.L.P., independent certified public
accountants, letters, dated the Closing Date[s], to the effect
that such accountants reaffirm, as of the Closing Date[s],
and as though made on the Closing Date[s], the statements made
in the letter furnished by such accountants pursuant to
paragraph (d) of this Section 8.
(f) The Representative shall have received
from Morris, Manning & Martin, L.L.P., counsel for the Company,
an opinion, dated the Closing Date [s] , to the effect set
forth in Exhibit I hereto. In rendering such opinion, Morris,
Manning & Martin, L.L.P. may rely as to all matters governed
other than by the laws of
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<PAGE> 29
the State of Georgia, the Delaware General Corporation Law or
federal laws on the opinion of local counsel of good standing
in such jurisdictions, provided that such local counsel is
satisfactory to the counsel to the Underwriters and that in
each case Morris, Manning & Martin, L.L.P. shall state that
they believe that they and the Underwriters are justified in
relying on such other counsel.
(g) The Representative shall have received
from Willkie Farr & Gallagher, counsel for the Underwriters,
their opinion or opinions dated the Closing Date[s] with
respect to the incorporation of the Company, the validity of
the Stock, the Registration Statement and the Prospectus and
such other related matters as it may reasonably request, and
the Company shall have furnished to such counsel such documents
as they may request for the purpose of enabling them to pass
upon such matters. In rendering such opinion, Willkie Farr &
Gallagher may rely as to all matters governed other than by the
laws of the State of New York, the Delaware General Corporation
Law or federal laws on the opinion of counsel referred to in
paragraph (f) of this Section 8.
(h) The Representative shall have received
a certificate, dated the Closing Date[s], of the chief
executive officer or the President and the chief financial or
accounting officer of the Company to the effect that:
(i) No stop order suspending the
effectiveness of the Registration Statement has
been issued, and, to the best of the knowledge of the
signers, no proceedings for that purpose have been
instituted or are pending or contemplated under
the Securities Act;
(ii) Neither any Pre-effective
Prospectus, as of its date, nor the Registration
Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the
Registration Statement became effective and at all
times subsequent thereto up to the delivery of such
certificate, included any untrue statement of
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<PAGE> 30
a material fact or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein, in light of the
circumstances under which they were made, not
misleading;
(iii) Subsequent to the respective
dates as of which information is given in the
Registration Statement and the Prospectus, and except
as set forth or contemplated in the Prospectus, the
Company has not incurred any material liabilities or
obligations, direct or contingent, nor entered into
any material transactions not in the ordinary course
of business and there has not been any material
adverse change in the condition (financial or
otherwise), properties, business, management,
prospects, net worth or results of operations of the
Company, or any change in the capital stock,
short-term or long-term debt of the Company;
(iv) The representations and
warranties of the Company in this Agreement are true
and correct at and as of the Closing Date[s], and
the Company has complied with all the agreements and
performed or satisfied all the conditions on its part
to be performed or satisfied at or prior to the
Closing Date[s]; and
(v) Since the respective dates as of which
information is given in the Registration Statement
and the Prospectus, and except as disclosed in or
contemplated by the Prospectus, (i) there has not
been any material adverse change or a development
involving a material adverse change in the condition
(financial or otherwise), properties, business,
management, prospects, net worth or results of
operations of the Company; (ii) the business
and operations conducted by the Company have not
sustained a loss by strike, fire, flood, accident or
other calamity (whether or not insured) of such a
character as to interfere materially with the conduct
of the business and operations of the Company; (iii)
no legal or governmental action, suit or proceeding
is pending
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<PAGE> 31
or threatened against the Company which is material
to the Company, whether or not arising from
transactions in the ordinary course of business, or
which may materially and adversely affect the
transactions contemplated by this Agreement; (iv)
since such dates and except as so disclosed, the
Company has not incurred any material liability or
obligation, direct, contingent or indirect, made any
change in its capital stock, made any material change
in its short-term or funded debt or repurchased or
otherwise acquired any of the Company's capital
stock; and (v) the Company has not declared or paid
any dividend, or made any other distribution, upon
its outstanding capital stock payable to
stockholders of record on a date prior to the
Closing Date.
(i) The Company shall have furnished
to the Representative such additional certificates as
the Representative may have reasonably requested as to the
accuracy, at and as of the Closing Date[s], of the
representations and warranties made herein by it and as to
compliance at and as of the Closing Date[s] by it with its
covenants and agreements herein contained and other provisions
hereof to be satisfied at or prior to the Closing Date[s], and
as to satisfaction of the other conditions to the obligations
of the Underwriters hereunder.
[(j) Ladenburg shall have received
the written agreements of the officers and directors of the
Company and the holders of securities of the Company listed in
Schedule B that each will not offer, sell, assign, transfer,
encumber, contract to sell, grant an option to purchase or
otherwise dispose of, other than by operation of law, gifts,
pledges or dispositions by estate representatives, any shares
of Common Stock (including, without limitation, Common Stock
which may be deemed to be beneficially owned by such officer,
director or holder in accordance with the Rules and
Regulations) or securities convertible into or exercisable or
exchangeable for Common Stock during the 180 days following
the date of the final Prospectus.]
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<PAGE> 32
[(k) The Nasdaq National Market shall
have approved the Stock for inclusion, subject only to official
notice of issuance.]
All opinions, certificates, letters and other documents will be
in compliance with the provisions hereunder only if they are satisfactory in
form and substance to the Representative. The Company will furnish to the
Representative conformed copies of such opinions, certificates, letters and
other documents as the Representative shall reasonably request. If any of the
conditions hereinabove provided for in this Section shall not have been
satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representative by notifying the Company of such termination
in writing or by telegram at or prior to the Closing Date[s], but Ladenburg
shall be entitled to waive any of such conditions.
9. Effective Date. This Agreement shall become
effective immediately as to Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16, 17, 18
and 19 and, as to all other provisions, at 11:00 a.m. New York City time, on
the first full business day following the effectiveness of the Registration
Statement or at such earlier time after the Registration Statement becomes
effective as the Representative may determine on and by notice to the Company
or by release of any of the Stock for sale to the public. For the purposes of
this Section 9, the Stock shall be deemed to have been so released upon the
release for publication of any newspaper advertisement relating to the Stock or
upon the release by you of telegrams (i) advising Underwriters that the shares
of Stock are released for public offering or (ii) offering the Stock for sale to
securities dealers, whichever may occur first.
10. Termination. This Agreement (except for the
provisions of Section 5) may be terminated by the Company at any time before it
becomes effective in accordance with Section 9 by notice to the Representative
and may be terminated by the Representative at any time before it becomes
effective in accordance with Section 9 by notice to the Company. In the event
of any termination of this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this Agreement to any
other party, other than as provided in Sections 5, 6 and 11 and other than as
provided in Section 12 as to the liability of defaulting Underwriters.
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<PAGE> 33
This Agreement may be terminated after it becomes effective by
the Representative by notice to the Company (i) if at or prior to the First
Closing Date trading in securities on any of the New York Stock Exchange,
American Stock Exchange or Nasdaq National Market shall have been suspended or
minimum or maximum prices shall have been established on any such exchange or
market, or a banking moratorium shall have been declared by New York or United
States authorities; (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market; (iii) if at
or prior to the First Closing Date there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power or of
any other insurrection or armed conflict involving the United States or (B) any
change in financial markets or any calamity or crisis which, in the judgment of
the Representative, makes it impractical or inadvisable to offer or sell the
Firm Stock on the terms contemplated by the Prospectus; (iv) if there shall
have been any development or prospective development involving particularly the
business or properties or securities of the Company or the transactions
contemplated by this Agreement, which, in the judgment of the Representative,
makes it impracticable or inadvisable to offer or deliver the Firm Stock on the
terms contemplated by the Prospectus; (v) if there shall be any litigation or
proceeding, pending or threatened, which, in the judgment of the
Representative, makes it impracticable or inadvisable to offer or deliver the
Firm Stock on the terms contemplated by the Prospectus; or (vi) if there shall
have occurred any of the events specified in the immediately preceding clauses
(i) - (v) together with any other such event that makes it, in the judgment of
the Representative, impractical or inadvisable to offer or deliver the Firm
Stock on the terms contemplated by the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any
other provisions hereof, if this Agreement shall not become effective by reason
of any election of the Company pursuant to the first paragraph of Section 10 or
shall be terminated by the Representative under Section 8 or Section 10, the
Company will bear and pay the expenses specified in Section 5 hereof and, in
addition to its obligations pursuant to Section 6 hereof, the Company will
reimburse the reasonable out-of-pocket expenses of the several Underwriters
(including reasonable fees and disbursements of counsel for the Underwriters)
incurred in connection with this Agreement and the proposed purchase of the
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<PAGE> 34
Stock, and promptly upon demand the Company will pay such amounts to you as
Representative.
12. Substitution of Underwriters. If on the First
Closing Date or the Option Closing Date, as the case may be, any Underwriter or
Underwriters shall default in its or their obligations to purchase shares of
Stock hereunder (otherwise than by reason of default on the part of the
Company), you, as Representative of the Underwriters, shall use your reasonable
efforts to procure within 48 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may
be agreed upon and upon the terms set forth herein, the shares of Stock which
the defaulting Underwriter or Underwriters failed to purchase. If during such
48 hours you, as such Representative, shall not have procured such other
Underwriters, or any others, to purchase the shares of Stock agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed ten percent (l0%) of the total
number of shares underwritten, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the shares of Stock which such defaulting Underwriter or Underwriters agreed
but failed to purchase, or (b) if the aggregate number of shares of Stock with
respect to which such default or defaults occur is more than ten percent (10%)
of the total number of shares underwritten, the Company or you, as the
Representative of the Underwriters, will have the right, by written notice
given within the next 48-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or the Company.
If the remaining Underwriters or substituted Underwriters are
required hereby or agree to take up all or part of the shares of Stock of a
defaulting Underwriter or Underwriters as provided in this Section 12, (i) the
Company shall have the right to postpone the Closing Date[s] for a period of
not more than five (5) full business days in order that the Company may effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made necessary, and (ii) the
respective numbers of shares to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken as the
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<PAGE> 35
basis of their underwriting obligation for all purposes of this Agreement.
Nothing herein contained shall relieve any defaulting Underwriter of its
liability to the Company or the other Underwriters for damages occasioned by
its default hereunder. Any termination of this Agreement pursuant to this
Section 12 shall be without liability on the part of any non-defaulting
Underwriter or the Company, except for expenses to be paid or reimbursed
pursuant to Section 5 and except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in
writing and, if sent to the Underwriters shall be mailed, delivered or
telegraphed and confirmed to you, as their Representative c/o Ladenburg,
Thalmann & Co. Inc. at 540 Madison Avenue, New York, New York 10022,
Attention:_____, except that notices given to an Underwriter pursuant to Section
6 hereof shall be sent to such Underwriter at the address furnished by the
Representative or, if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed c/o HomeCom Communications, Inc., Fourteen Piedmont
Center, Suite 100, 3535 Piedmont Road, Atlanta, Georgia 36305, Attention:
President.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon the several Underwriters, the Company and their
respective successors and legal representatives. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person other than the persons mentioned in the preceding sentence any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of
such persons and for the benefit of no other person; except that the
representations, warranties, covenants, agreements and indemnities of the
Company contained in this Agreement shall also be for the benefit of the person
or persons, if any, who control any Underwriter or Underwriters within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and the indemnities of the several Underwriters shall also be for the benefit
of each director of the Company, each of its officers who has signed the
Registration Statement and the person or persons, if any, who control the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act.
15. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of [New
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<PAGE> 36
York] without giving effect to the choice of law principles thereof.
16. Authority of the Representative. In connection with
this Agreement, you will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by Ladenburg, as Representative, will be
binding on all the Underwriters.
17. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
18. General. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section headings in
this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company and the Representative.
19. Counterparts. This Agreement may be signed in two (2) or
more counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
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<PAGE> 37
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter and your acceptance shall constitute a binding
agreement between us.
Very truly yours,
HOMECOM COMMUNICATIONS, INC.
By:
-------------------------
Title:
Accepted and delivered in
New York, New York as of
the date first above written.
LADENBURG, THALMANN & CO. INC.
Acting on its own behalf
and as Representative of several
Underwriters referred to in the
foregoing Agreement.
By: Ladenburg, Thalmann & Co. Inc.
By:
----------------------------
Title:
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<PAGE> 38
SCHEDULE A
Number of
shares of
Firm Stock
to be
Name Purchased
Ladenburg, Thalmann & Co. Inc .... ---------
1,250,000
=========
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<PAGE> 39
[SCHEDULE B]
<PAGE> 40
EXHIBIT I
Matters to be covered in
opinion of Counsel to the Company(1)
1. The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
organization, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, and has
all power and authority necessary to own or hold its properties and conduct
the business in which it is engaged.
2. The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
non-assessable and all of the shares of Stock to be issued and sold by the
Company to the Underwriters pursuant to the Underwriting Agreement have been
duly and validly authorized and, when issued and delivered against payment
therefor as provided for in the Underwriting Agreement, will be duly and
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; and all of the shares of Common Stock to be issued upon
exercise of the Warrants have been duly and validly authorized and, when
issued and delivered against payment therefor as provided in the Warrants,
will be duly and validly issued, fully paid and nonassessable and free of
all preemptive or similar rights.
3. Except as disclosed in and or contemplated by the Prospectus and
the financial statements of the Company and
- -------------
(1) Capitalized terms used herein but not defined shall have the meanings given
such terms in the Underwriting Agreement.
<PAGE> 41
related notes thereto included in the Prospectus, the Company does not
have outstanding any options or warrants to purchase, or any preemptive
rights or other rights to subscribe for or to purchase any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations, except for options granted subsequent to the
date of information provided in the Prospectus pursuant to the Company's
stock option plans as disclosed in the Prospectus. There are no
restrictions upon the voting or transfer of, any of the Stock pursuant to
the Certificate of Incorporation or By-Laws or any agreement or other
instrument of the Company.
4. To the best of such counsel's knowledge, except as set forth in
the Prospectus, there are no material legal or governmental proceedings
pending to which the Company is a party or of which any property or assets
of the Company is the subject which, if determined adversely to the Company,
could have a material adverse effect on the Company or prevent or adversely
affect the transactions contemplated by the Underwriting Agreement; and, to
the best of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or other third parties. To the
best of such counsel's knowledge, the Company is not a party or subject to
the provisions of any material injunction, judgment, decree or order of any
court, regulatory body or other governmental agency or body.
5. The Company has the full corporate power and authority to
enter into the Underwriting Agreement and to perform its obligations
thereunder (including to issue, sell and deliver the Stock), and the
Underwriting Agreement has been duly and validly authorized, executed and
delivered by the Company. The Company has the full corporate power and
authority to execute and deliver the Warrants on the terms and conditions
set forth in the Underwriting Agreement and in the Warrants, and such
execution and delivery of the Warrants has been duly and validly authorized,
and when executed and delivered pursuant to the Underwriting Agreement, the
Warrants will be enforceable against the Company in accordance with their
terms.
<PAGE> 42
6. The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions therein contemplated will
not result in a breach or violation of any of the terms or provisions of or
constitute a default under the Certificate of Incorporation, By-laws or
other organizational documents of the Company, or any indenture, mortgage,
deed of trust, note agreement or other agreement or instrument known to such
counsel to which the Company is a party or by which it or any of its
properties is or may be bound, or any law, order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or
any of its properties or result in the creation of a lien.
7. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated by the Underwriting Agreement (except such
as may be required by the National Association of Securities Dealers, Inc.
or as required by the securities or "Blue Sky" laws of any jurisdiction as
to which such counsel need express no opinion) in connection with the
purchase and distribution of the Stock by the Underwriters, except such as
have been obtained or made, specifying the same.
8. The Registration Statement was declared effective under the
Securities Act as of _____, 1996, the Prospectus was filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations
on _______, 1996 and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose is pending or threatened by the
Commission.
9. The Registration Statement and the Prospectus and any amendments
or supplements thereto (except for the financial statements and notes
thereto and related schedules as to which such counsel need express no
opinion) comply as to form in all respects with the requirements of the
Securities Act and the Rules and Regulations.
10. To the best of such counsel's knowledge, there are no
franchise, lease, contract, agreement or other
<PAGE> 43
document required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which
is not described or filed therein as required. All descriptions of any such
franchises, leases, contracts, agreements or documents contained in the
Registration Statement are accurate and complete descriptions of such
documents in all material respects.
11. To the best of such counsel's knowledge, no person or entity
has the right to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of the
Registration Statement or otherwise, except for persons and entities who
have expressly waived such right or who have been given proper notice and
have failed to exercise such right within the time or times required under
the terms and conditions of such right.
12. The statements in the Prospectus, to the extent they constitute
a summary of documents referred to therein or they reflect matters of law or
legal conclusions relating to such law, accurately summarize and fairly
present the information called for with respect to such documents and matter
and the legal and regulatory matters described therein.
13. The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement or any
amendment thereto, as of the time it became effective under the Securities Act
(but after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Securities Act) and as of the First Closing Date or the
Option Closing Date, as the case may be, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, or (ii)
that the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the
<PAGE> 44
First Closing Date or the Option Closing Date, as the case may be, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (except that such counsel need express no view as to financial
statements and notes thereto, schedules and statistical information therein).
With respect to such statement, such counsel may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
<PAGE> 1
EXHIBIT 3.1
HOME.COM COMMUNICATIONS, INC.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Home.Com Communications, Inc. (the "Corporation") is a corporation duly
organized and existing under the General Corporation Law of the State of
Delaware. Its original Certificate of Incorporation was filed with the
Secretary of State of Delaware on December 2, 1994.
This Amended and Restated Certificate of Incorporation ("Certificate
of Incorporation") was duly adopted by the stockholders of the Corporation in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
I.
The name of the Corporation is HomeCom Communications, Inc.
II.
The Corporation shall have perpetual duration.
III.
The purposes for which the Corporation is formed are to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware and to possess and exercise
all of the powers and privileges granted by such law.
IV.
The total number of shares of capital stock which the Corporation is
authorized to issue is sixteen million (16,000,000) divided into two classes as
follows:
(1) Fifteen million (15,000,000) shares of common stock, $.0001
par value per share ("Common Stock"); and
(2) One million (1,000,000) shares of preferred stock, $.01 par
value per share ("Preferred Stock").
The holders of Common Stock shall be entitled to one vote for each
share on all matters required or permitted to be voted on by stockholders of
the Corporation.
Effective upon the filing of this Certificate of Incorporation with
the Secretary of State of Delaware, each outstanding share of Common Stock, no
par value per share, shall be reclassified as one share of Common Stock, $.0001
par value per share.
<PAGE> 2
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Certificate of Incorporation, to
provide for the issuance of shares of Preferred Stock in series, and by filing
a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The divided rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or
dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(3) Whether that series shall have voting rights, in addition to
the voting rights provided by law and, if so, the terms of
such voting rights;
(4) Whether that series shall have conversion privileges and, if
so, the terms and conditions of such conversions, including
provision for adjustment of the conversion rate in such events
as the Board of Directors shall determine;
(5) Whether or not the shares of that series shall be redeemable
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions
and at different redemption dates;
(6) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so,
the terms and amounts of such sinking fund;
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series; and
(8) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the
same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are
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<PAGE> 3
entitled, then such assets shall be distributed ratably among the shares of all
series of Preferred Stock in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with respect
thereto.
V.
The Board of Directors of the Corporation is hereby expressly
authorized to make, amend, repeal or otherwise alter the Bylaws of the
Corporation.
VI.
The directors of the Corporation shall not be required to be elected
by written ballots.
VII.
To the fullest extent permitted by the General Corporation Law of the
State of Delaware, as the same presently exists or may hereafter be amended, no
director of the Corporation shall be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director.
VIII.
(a) The business and affairs of the Corporation shall be managed
by, or under the direction of, a Board of Directors comprised as follows:
(1) The initial number of directors shall be such as may be
determined by the incorporator and thereafter the number of
directors of the Corporation shall not be less than three and
not more than nine, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by
resolution of a majority of the Board of Directors or by the
affirmative vote of the holders of at least 75% of all
outstanding shares entitled to be voted in the election of
directors, voting together as a single class.
(2) As soon as practicable following the filing of this
Certificate of Incorporation with the Secretary of State of
Delaware, the Board of Directors shall be divided into three
classes consisting, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board
of Directors. The first class of directors shall be elected
for a term expiring upon the next following Annual Meeting of
Stockholders and upon the election and qualification of their
respective successors; the second class of directors shall be
elected for a term expiring upon the second next Annual
Meeting of Stockholders and upon the election and
qualification of their respective successors; and the third
class of directors shall be elected for a term expiring upon
the third next Annual Meeting of Stockholders and upon the
election and qualification of their respective successors. At
each succeeding Annual Meeting of Stockholders, successors to
the class of directors whose term expires at that Annual
Meeting of Stockholders
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<PAGE> 4
shall be elected for a three-year term. If the number of
directors has changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy
resulting from an increase in such a class shall hold office
for a term that shall coincide with the remaining term of that
class, unless otherwise required by law, but in no case shall
a decrease in the number of directors for a class shorten the
term of an incumbent director.
A director shall hold office until the Annual Meeting of
Stockholders upon which his term expires and until his
successor shall be elected and qualified, subject, however, to
prior death, resignation, retirement, disqualification or
removal from office.
(3) Nominations for the election of directors may be made by the
Board of Directors or a committee appointed by the Board of
Directors, or by any stockholder of record entitled to vote
generally in the election of directors; provided, however,
that any stockholder of record entitled to vote generally in
the election of directors may nominate one or more person for
election as directors at a meeting only if written notice of
such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by
the United States mail, postage prepaid, to the Secretary of
the Corporation not later than (i) with respect to any
election to be held at the Annual Meeting of Stockholders, 90
days in advance of such meeting, and (ii) with respect to any
election for directors to be held at a Special Meeting of
Stockholders, the close of business on the seventh day
following the date on which notice of such meeting is first
given to stockholders. Each such notice shall set forth:
(A) the name and address of the stockholder of record who
intends to make the nomination and of the person or
persons to be nominated;
(B) a representation that the stockholder is a holder of
record of shares of the Corporation entitled to vote
at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or
persons specified in the notice;
(C) a description of all arrangements or undertakings
between the stockholder and each nominee and any
other person or persons (naming such person or
persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(D) such other information regarding each nominee
proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to
the then-current proxy rules of the Securities and
Exchange Commission if the nominees were to be
nominated by the Board of Directors; and
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<PAGE> 5
(E) the consent of each nominee to serve as a director of
the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
(4) Any vacancy on the Board of Directors that results from an
increase in the number of directors or from the prior death,
resignation, retirement, disqualification or removal from
office of a director shall be filled by a majority of the
Board of Directors then in office, though less than a quorum,
or by the sole remaining director. Any director elected to
fill a vacancy resulting from the prior death, resignation,
retirement, disqualification or removal from office of a
director shall have the same remaining term as that of his or
her predecessor.
(5) At any meeting of stockholders with respect to which notice of
such purpose has been given, the entire Board of Directors or
any individual director may be removed, with cause, by the
affirmative vote of the holders of 75% of all outstanding
shares entitled to be voted at an election of directors.
(6) Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class
or series, to elect directors at an Annual or Special Meeting
of Stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by the terms of this Amended and Restated Certificate
of Incorporation or the resolutions of the Board of Directors
creating such class or series, as the case may be, applicable
thereto, and such directors so elected shall not be divided
into Classes, pursuant to Section (a) of this Article VIII
unless expressly provided by such terms.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage for separate class vote for certain actions may be
permitted by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of the holders of not less than 75% of the
votes entitled to be cast by the holders of all the outstanding shares of
capital stock, voting together as a single class, shall be required to make,
alter, amend, change, add to or repeal any provision of this Certificate of
Incorporation or the Bylaws of the Corporation which is or which is proposed to
be inconsistent with this Article VIII; provided, however, that this Section
(b) shall not apply to, and such 75% vote shall not be required to alter,
amend, change, add to or repeal any provisions of the Bylaws relating to this
Article VIII recommended by the affirmative vote of more than 75% of the
members of the Board of Directors.
(c) The invalidity or unenforceability of this Article VIII or any
portion hereof, or of any action taken pursuant to this Article VIII, shall not
affect the validity or enforceability of any other provision of this
Certificate of Incorporation, any action taken pursuant to such other
provision, or any action taken pursuant to this Article VIII.
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<PAGE> 6
IX.
Action required to be taken or which may be taken at any Annual
Meeting or Special Meeting of the Stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
the holders of outstanding stock entitled to vote on such action, and shall be
delivered to the Corporation by delivery to its registered office in Delaware,
to its principal place of business or to an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
X.
Special meetings of stockholders may be called at any time for any
purpose or purposes by the Chairman, a majority of the Board of Directors or
the holder or holders of not less than 40% of all the shares of stock entitled
to vote on the issue proposed to be considered at the meeting if such holder or
holders sign, date and deliver to the Corporation's secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held.
XI.
The address of the Corporation's registered office in the state of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle
19801. The name of its registered agent at such address is The Corporation
Trust Company.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this Amended and Restated Certificate of Incorporation
to be signed by Harvey Sax, its President, and attested by Nat Stricklen, its
Secretary, this 11th day of September, 1996.
By: Home.Com Communications, Inc.
/s/ Harvey Sax, President
-------------------------------------
Harvey Sax, President
Attested:
By: /s/ Nat Stricklen, Secretary
--------------------------------
Nat Stricklen, Secretary
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<PAGE> 1
EXHIBIT 3.2
HOMECOM COMMUNICATIONS, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
HomeCom Communications, Inc. (the "Corporation") shall at all times
maintain a registered office in the State of Delaware and a registered agent at
that address but may have other offices located in or outside of the State of
Delaware as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDERS' MEETINGS
2.1 Places of Meetings. All meetings of stockholders shall be held at
such place or places in or outside of the State of Delaware as the Board of
Directors may from time to time determine or as may be designated in the notice
of meeting or waiver of notice thereof, subject to any provisions of the laws
of the State of Delaware.
2.2 Annual Meetings. The annual meeting of stockholders for the election
of directors and the transaction of such other business as may properly come
before the meeting shall be held on such date within five (5) months after the
end of each fiscal year of the Corporation and at such time as may be
designated from time to time by the Board of Directors. If the annual meeting
is not held on the date designated, it may be held as soon thereafter as
convenient and shall be called the annual meeting. Written notice of the time
and place of the annual meeting shall be given by mail to each stockholder
entitled to vote thereat at the address of such stockholder as it appears on
the records of the Corporation, not less than ten (10) nor more than sixty (60)
days prior to the scheduled date thereof, unless such notice is waived as
provided by Article IX of these Bylaws.
2.3 Special Meetings. Special meetings of stockholders may be called at
any time by the Board of Directors or the Chairman of the Board of Directors
stating the specific purpose or purposes thereof. Written notice of the time,
place and specific purposes of such meeting shall be given by mail to each
stockholder entitled to vote thereat at the address of such stockholder as it
appears on the records of the Corporation, not less than ten (10) nor more than
sixty (60) days prior to the scheduled date thereof, unless such notice is
waived as provided by Article IX of these Bylaws.
2.4 Voting. At all meetings of stockholders, each stockholder entitled to
vote on the record date, as determined under Article VI, Section 6.3 of these
Bylaws or, if not so determined, as prescribed under the General Corporation
Law of the State of Delaware, shall be entitled to one vote for each share of
stock standing of record in the name of such stockholder, subject to
<PAGE> 2
any restrictions or qualifications set forth in the Certificate of
Incorporation or any amendment thereto.
2.5 Quorum. At any meeting of stockholders, a majority of the number of
shares of stock outstanding and entitled to vote thereat, present in person or
by proxy, shall constitute a quorum, but a smaller interest may adjourn any
meeting from time to time, and the meeting may be held as adjourned without
further notice, subject to such limitations as may be imposed under the General
Corporation Law of the State of Delaware. When a quorum is present at any
meeting, a majority of the number of shares of stock entitled to vote present
thereat shall decide any question brought before such meeting unless the
question is one upon which a different vote is required by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation or
these Bylaws, in which case such express provision shall govern.
2.6 List of Stockholders. At least ten (10) days before every meeting, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of and the number of shares
registered in the name of each stockholder, shall be prepared by the Secretary
or the transfer agent in charge of the stock ledger of the Corporation. Such
list shall be open for examination by any stockholder, for any purpose germane
to the meeting, during ordinary business hours, for a period of at least ten
(10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall represent conclusive evidence as to who are
the stockholders entitled to examine such list or the books of the Corporation
or to vote in person or by proxy at such meeting.
2.7 Action Without Meeting. Action required to be taken or which may be
taken at any annual meeting or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
the holders of outstanding stock entitled to vote on such action, and shall be
delivered in the manner specified by law or by the Corporation's Certificate of
Incorporation.
2.8 Stockholder Proposals at Annual Meetings.
(a) Business may be properly brought before an Annual Meeting of
stockholders by a stockholder only upon the stockholder's timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days prior to the meeting
as originally scheduled; provided, however, that in the event that less than
sixty (60) days notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth (10th) day
following the earlier of the day on which such notice of the date of the
meeting was mailed or the date on which such public disclosure was made.
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<PAGE> 3
(b) The stockholder's notice to the Secretary of the Corporation shall set
forth as to each matter the stockholder proposes to bring before the Annual
Meeting: (i) a brief description of the proposal desired to be brought before
the Annual Meeting and the reasons for conducting such business at the Annual
Meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business and any other stockholders known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the Corporation's stock that are beneficially owned by the
stockholder on the date such stockholder gives notice to the Secretary of the
Corporation, and the number of shares of the Corporation's capital stock that
are beneficially owned on such date by any other stockholder known to be
supporting such proposal, and (iv) any financial interest of the stockholder in
such proposal.
(c) The Chairman of the Board of Directors or other presiding officer of
the Annual Meeting shall determine and declare at the Annual Meeting whether
the stockholder proposal was made in accordance with the terms of this Section
2.8. If such Chairman or other presiding officer determines that such
stockholder proposal was not made in accordance with the terms of this Section
2.8, he or she shall so declare at the Annual Meeting and such proposal shall
not be acted upon at such Annual Meeting.
(d) This provision shall not prevent the consideration and approval or
disapproval at the Annual Meeting of reports of officers, directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such Annual Meeting unless stated, filed
and received as herein provided.
(e) For purposes of this Section 2.8, any adjournment(s) or
postponement(s) of the original meeting whereby the meeting will reconvene
within thirty (30) days from the original date shall be deemed for purposes of
notice to be a continuation of the original meeting and no business may be
brought before any such reconvened meeting unless pursuant to a notice of such
business which was timely for the meeting on the date originally scheduled.
Such stockholder's notice to the Secretary shall set forth (i) as to each
matter the stockholder proposed to bring before the Annual Meeting, a brief
description of the business desired to be brought before the meeting, (ii) the
name and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (iv) a
complete and accurate description of any material interest of the stockholder
in such proposed business.
(f) Notwithstanding the foregoing, nothing in this Section 2.8 shall be
interpreted or construed to require the inclusion of information about any such
proposal in any proxy statement distributed by the Corporation at the direction
of or on behalf of the Corporation.
2.9 Notice of Stockholder Nominees.
(a) Nominations of persons for election to the Board of Directors shall be
made only at an Annual or Special Meeting of the stockholders called for that
purpose and only (i) by or at the direction of the Board of Directors or (ii)
by any stockholder entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in Section 2.8 of
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<PAGE> 4
this Article II for Annual Meetings. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days
prior to the meeting; provided, however, that in the event that less than sixty
(60) days notice of the date of the meeting is give or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth (10th) days following the earlier of the day on
which such notice of the date of the meeting was mailed or the date on which
such public disclosure was made.
(b) The stockholder's notice to the Corporation pursuant to this Section
2.9 shall set forth: (i) as to each person that the stockholder proposes to
nominate for election or reelection as a director, (1) the name, age, business
address and residence address of such proposed nominee, (2) the principal
occupation or employment of such proposed nominee, (3) the class and number of
shares of capital stock of the Corporation which are beneficially owned by such
proposed nominee, and (4) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Schedule 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and (ii) as to the stockholder giving such notice, (1)
the name and address, as they appear on the Corporation's books, of such
stockholder, (2) the class and number of shares of the Corporation's stock that
are beneficially owned by the stockholder on the date of such notice. The
Corporation may require any proposed nominee to furnish such other information
as may be reasonably required by the Corporation to determine the eligibility
of such proposed nominee to serve as a director of the Corporation.
(c) The presiding officer of the meeting shall determine and declare at
the meeting whether the nomination was made in accordance with the terms of
this Section 2.9. If the presiding officer determines that a nomination was
not made in accordance with the terms of this Section 2.9, he or she shall so
declare at the meeting that any such defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
3.1 Powers. The business and affairs of the Corporation shall be carried
on by or under the direction of the Board of Directors, which shall have all
the powers authorized by the General Corporation Law of the State of Delaware,
subject to such limitations as may be provided by the Certificate of
Incorporation or these Bylaws.
3.2 Election of Directors. Directors shall be elected at each annual
meeting of stockholders as provided in the Certificate of Incorporation, each
director so elected to serve until the election and qualification of his or her
successor or until his or her earlier death, resignation, retirement,
disqualification or removal from office. Directors need not be stockholders,
nor need they be residents of the State of Delaware.
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<PAGE> 5
3.3 Compensation. The Board of Directors, or a committee thereof, may
from time to time by resolution authorize the payment of fees or other
compensation to the directors for services as such to the Corporation,
including, but not limited to, fees for serving as members of the Board of
Directors or any committee thereof and for attendance at meetings of the Board
of Directors or any committee thereof, and may determine the amount of such
fees and compensation. Directors shall in any event be paid their reasonable
travel and other expenses for attendance at all meetings of the Board or
committees thereof. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor in amounts authorized or otherwise approved from time to
time by the Board of Directors or any committee thereof.
3.4 Meetings and Quorum. Meetings of the Board of Directors may be held
either in or outside of the State of Delaware. A quorum shall be one-half
(1/2) of the then authorized number of directors, but not less than two
directors.
The Board of Directors shall, at the close of each annual meeting of
stockholders and without further notice other than these Bylaws, if a quorum of
directors is then present or as soon thereafter as may be convenient, hold a
regular meeting for the election of officers and the transaction of any other
business. At such meeting they shall elect a President, a Secretary and a
Treasurer, and such other officers as they deem proper, none of whom except the
Chairman of the Board, if elected, need be members of the Board of Directors.
The Board of Directors may from time to time provide for the holding of
regular meetings with or without notice and may fix the times and places at
which such meetings are to be held. Meetings other than regular meetings may
be called at any time by the President or the Chairman of the Board of
Directors and must be called by the President or the Secretary or an Assistant
Secretary upon the request of any director.
Notice of each meeting, other than a regular meeting (unless required by
the Board of Directors), shall be given to each director by mailing the same to
each director at his or her residence or business address at least five
business days before the meeting or by delivering the same to him personally or
by telephone, telegraph or telecopier at least two business days before the
meeting unless, in case of exigency, the Chairman of the Board of Directors,
the President or the Secretary shall prescribe a shorter notice to be given
personally or by telephone, telegraph, telecopier, cable or wireless to all or
any one or more of the directors at their respective residences or places of
business. Notice by mail shall be deemed to be given at the earlier of (a)
receipt thereof, or (b) five (5) days after it is deposited in the United
States mail with first-class postage affixed thereon. Notice to directors may
also be given by telecopier transmission to the director's telecopier
transmission number supplied for the purpose of telecopier transmissions and,
upon actual confirmation of such receipt by the director, such notice shall be
deemed to be given as of the date and time of telephonic confirmation of
receipt. Telephonic notice shall be deemed given at such a time as such notice
is actually provided to the director.
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Notice of any meeting shall state the time and place of such meeting, but
need not state the purposes thereof unless otherwise required by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, the
Bylaws or by the order of the Board of Directors.
3.5 Committees. The Board of Directors may, by resolution passed by a
majority of the entire Board of Directors, provide for committees of two or
more directors and shall elect the members thereof to serve at the pleasure of
the Board of Directors and may designate one of such members to act as chairman
thereof. The Board of Directors may at any time change the membership of any
committee, fill vacancies in it, designate alternate members to replace any
absent or disqualified members at any meeting of such committee, or dissolve
it. During the intervals between the meetings of the Board of Directors, the
Executive Committee (if one shall have been constituted) shall possess and may
exercise any or all of the powers of the Board of Directors in the management
or direction of the business and affairs of the Corporation and under the
Bylaws to the extent authorized by resolution adopted by a majority of the
whole Board of Directors and subject to such limitations as may be imposed by
the General Corporation Law of the State of Delaware.
Each committee may determine its rules of procedure and the notice to be
given of its meetings (although in the absence of any special notice procedure,
the notice provisions of Section 3.4 hereof shall govern), and it may appoint
such other committees and assistants as it shall from time to time deem
necessary. A majority of the members of each committee shall constitute a
quorum.
3.6 Conference Telephone Meetings. Any one or more members of the Board
of Directors or any committee thereof may participate in a meeting by means of
a conference telephone call or other similar communication equipment by means
of which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
3.7 Action Without Meeting. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board of Directors or such committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or such
committee.
ARTICLE IV
OFFICERS
4.1 Titles and Election. The officers of the Corporation shall be the
President, one or more Vice Presidents, the Secretary and the Treasurer, all of
whom shall initially be elected as soon as convenient by the Board of Directors
and thereafter, in the absence of earlier resignations or removals, shall be
elected at the first meeting of the Board of Directors following each annual
meeting of stockholders. Each officer shall hold office at the pleasure of the
Board of Directors except as may otherwise be approved by the Board of
Directors, or until his or her earlier resignation, removal under these Bylaws
or other termination of his or her employment. Any
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person may hold more than one office if the duties can be adequately performed
by the same person and to the extent permitted by the General Corporation Law
of the State of Delaware.
The Board of Directors, in its discretion, may also at any time elect or
appoint a Chairman of the Board of Directors, a Chief Executive Officer, one or
more Senior or Executive Vice Presidents, a Chief Operating Officer, a Chief
Financial Officer, a Treasurer and one or more Assistant Secretaries and
Assistant Treasurers and such other officers as it may deem advisable, each of
whom shall hold office at the pleasure of the Board of Directors, except as may
otherwise be approved by the Board of Directors, or until his or her earlier
death, resignation, retirement, removal or other termination of employment, and
shall have such authority and shall perform such duties as may be prescribed or
determined from time to time by the Board of Directors or in case of officers
other than the Chairman of the Board, if not prescribed or determined by the
Board of Directors, the President or the then senior executive officer may
prescribe or determine. The Board of Directors may require any officer or
other employee or agent to give bond for the faithful performance of his or her
duties in such form and with such sureties as the Board may require.
4.2 Duties. Subject to such extension, limitations and other provisions
as the Board of Directors may from time to time prescribe or determine, the
following officers shall have the following powers and duties:
(a) Chairman of the Board of Directors. The Chairman of the Board of
Directors, if one is elected, shall be a director and, when present, shall
preside at all meetings of the stockholders and of the Board of Directors.
(b) Chief Executive Officer. The Chief Executive Officer shall be
charged with general supervision of the management and policy of the
Corporation and shall have such other powers and perform such other duties as
the Board of Directors may prescribe from time to time. The Chief Executive
Officer shall (subject to the presence of the Chairman of the Board of
Directors, if one exists) preside at all meetings of the stockholders and, if
he is a director of the Board of Directors.
(c) President. The President shall exercise the powers and authority
and perform all of the duties commonly incident to his or her office and shall
perform such other duties as the Board of Directors shall specify from time to
time.
(d) Vice Presidents. The Vice President or Vice Presidents shall
perform such duties as may be assigned to them from time to time by the Board
of Directors or by the President if the Board of Directors does not do so. In
the absence or disability of the President, the Executive Vice Presidents in
order of seniority, or if none, the Senior Vice Presidents in order of
seniority, or if none, the Vice Presidents in order of seniority, may, unless
otherwise determined by the Board of Directors, exercise the powers and perform
the duties pertaining to the office of President, except that if one or more
Vice Presidents has been elected or appointed, the person holding such office
in order of seniority shall exercise the powers and perform the duties of the
office of President.
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(e) Secretary. The Secretary or in his or her absence an Assistant
Secretary shall keep the minutes of all meetings of stockholders and of the
Board of Directors and any committee thereof, give and serve all notices,
attend to such correspondence as may be assigned to him or her, keep in safe
custody the seal of the Corporation, and affix such seal to all such
instruments properly executed as may require it, shall perform all of the
duties commonly incident to his or her office and shall have such other duties
and powers as may be prescribed or determined from time to time by the Board of
Directors or by the President if the Board of Directors does not do so.
(f) Treasurer. The Treasurer or in his or her absence an Assistant
Treasurer, subject to the order of the Board of Directors, shall have the care
and custody of the monies, funds, securities, valuable papers and documents of
the Corporation (other than his or her own bond, if any, which shall be in the
custody of the President), and shall have, under the supervision of the Board
of Directors, all the powers and duties commonly incident to his or her office.
He or she shall deposit all funds of the Corporation in such bank or banks,
trust company or trust companies, or with such firm or firms doing a banking
business as may be designated by the Board of Directors or by the President if
the Board of Directors does not do so. He or she may endorse for deposit or
collection all checks, notes and similar instruments payable to the Corporation
or to its order. He or she shall keep accurate books of account of the
Corporation's transactions, which shall be the property of the Corporation, and
together with all of the property of the Corporation in his or her possession,
shall be subject at all times to the inspection and control of the Board of
Directors. The Treasurer shall be subject in every way to the order of the
Board of Directors, and shall render to the Board of Directors and/or the
President of the Corporation, whenever they may require it, an account of all
his or her transactions and of the financial condition of the Corporation. In
addition to the foregoing, the Treasurer shall have such duties as may be
prescribed or determined from time to time by the Board of Directors or by the
President if the Board of Directors does not do so.
(g) Assistant Secretaries and Treasurers. Assistants to the
Secretaries and Treasurers may be appointed by the President or elected by the
Board of Directors and shall perform such duties and have such powers as shall
be delegated to them by the President or the Board of Directors.
4.3 Delegation of Authority. The Board of Directors may at any time
delegate the powers and duties of any officer for the time being to any other
officer, director or employee.
4.4 Compensation. The compensation of the officers of the Corporation
shall be fixed by the Board of Directors or a committee thereof, and the fact
that any officer is a director shall not preclude such officer from receiving
compensation or from voting upon the resolution providing the same.
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ARTICLE V
RESIGNATIONS, VACANCIES AND REMOVALS
5.1 Resignations. Any director or officer may resign at any time by
giving written notice thereof to the Board of Directors, the Chairman of the
Board of Directors, the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time be not specified,
upon receipt thereof, and unless otherwise specified therein or in these
Bylaws, the acceptance of any resignation shall not be necessary to make it
effective.
5.2 Vacancies.
(a) Directors. Any vacancy in the Board of Directors caused by
reason of death, disqualification, incapacity, resignation, removal, increase
in the authorized number of directors or otherwise, shall be filled in the
manner provided in the Certificate of Incorporation.
(b) Officers. The Board of Directors may at any time or from time
to time fill any vacancy among, the officers of the Corporation.
5.3 Removals.
(a) Directors. Except as may otherwise be provided by the General
Corporation Law of the State of Delaware or the Certificate of Incorporation or
any amendment thereto, any director or the entire Board of Directors may be
removed, with cause, by the affirmative vote of the holders of 75% of all
outstanding shares entitled to be voted at an election of directors.
(b) Officers. Subject to the provisions of any validly existing
agreement, the Board of Directors may at any meeting remove from office any
officer, with or without cause, and may appoint a successor.
ARTICLE VI
CAPITAL STOCK
6.1 Certificates of Stock. Every stockholder shall be entitled to a
certificate or certificates for shares of the capital stock of the Corporation
in such form as may be prescribed or authorized by the Board of Directors, duly
numbered and setting forth the number and kind of shares represented thereby.
Such certificates shall be signed by the President or a Vice President, unless
some other person is hereunto specifically authorized as provided in Section
4.3 of these Bylaws, and by the Treasurer or an Assistant Treasurer or by the
Secretary or an Assistant Secretary. Any or all of such signatures may be in
facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate has ceased to be
such officer, transfer agent or registrar before the certificate has been
issued, such certificate may nevertheless be issued and delivered by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
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6.2 Transfer of Stock. Shares of the capital stock of the Corporation
shall be transferable only upon the books of the Corporation upon the surrender
of the certificate or certificates properly assigned and endorsed for transfer.
If the Corporation has a transfer agent or registrar acting on its behalf, the
signature of any officer or representative thereof may be in facsimile.
The Board of Directors may appoint a transfer agent and one or more
co-transfer agents and a registrar and one or more co-registrars and may make
or authorize such agents to make all such rules and regulations deemed
expedient concerning the issue, transfer and registration of shares of stock
6.3 Record Dates. For the purpose of determining stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend, or to express consent
to corporate action in writing without a meeting, or in order to make a
determination of stockholders for any other proper purposes, the Corporation's
stock transfer books shall not be closed, but a record date shall be set by the
Board of Directors and, upon that date, the Corporation or its transfer agent
shall take a record of the stockholders without actually closing the stock
transfer books. Such record date shall not be more than sixty (60) days, nor
less than ten (10) days, prior to the date on which the particular action
requiring such determination of stockholders is to be taken.
If no such record date is fixed by the Board, the record date shall be
that prescribed by the General Corporation Law of the State of Delaware.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may, in their
discretion, fix a new record date for the adjourned meeting.
6.4 Lost Certificates. In case of loss or mutilation or destruction of
a stock certificate, a duplicate certificate may be issued upon such terms as
may be determined or authorized by the Board of Directors or the Executive
Committee (if one has been appointed), or by the President if the Board of
Directors or the Executive Committee does not do so.
ARTICLE VII
FISCAL YEAR, BANK DEPOSITS, CHECKS, ETC.
7.1 Fiscal Year. The fiscal year of the Corporation shall be the
calendar year, unless otherwise fixed by resolution of the Board of Directors.
7.2 Bank Deposit Checks. The funds of the Corporation shall be
deposited in the name of the Corporation or of any division thereof in such
banks or trust companies in the United States or elsewhere as may be designated
from time to time by the Board of Directors or by such officer or officers as
the Board of Directors may authorize to make such designations.
All checks, drafts or other orders for the withdrawal of funds from any
bank account shall be signed by such person or persons as may be designated
from time to time by the Board of
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Directors. The signatures on checks, drafts or other orders for the withdrawal
of funds may be in facsimile if authorized in the designation.
ARTICLE VIII
BOOKS AND RECORDS
8.1 Place of Keeping Books. The books and records of the Corporation
may be kept within or outside of the State of Delaware.
8.2 Examination of Books. Except as may otherwise be provided by the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the power to
determine from time to time whether and to what extent and at what times and
places and under what conditions any of the accounts, records and books of the
Corporation are to be open to the inspection of any stockholder. No
stockholder shall have any right to inspect any account or book or document of
the Corporation except as prescribed by law or authorized by express resolution
of the stockholders or of the Board of Directors.
ARTICLE IX
NOTICES
9.1 Requirements of Notice. Whenever notice is required to be given by
statute, the Certificate of Incorporation or these Bylaws, except as otherwise
provided in Section 3.4 hereof, it shall not mean personal notice unless so
specified, but such notice may be given in writing by depositing the same in a
post office, letter box or mail chute postage prepaid and addressed to the
person to whom such notice is directed at the address of such person on the
records of the Corporation, and such notice shall be deemed given at the time
when the same shall be thus mailed.
9.2 Waivers. Any stockholder, director or officer may, in writing or
by telegram or cable, at any time waive any notice or other formality required
by law, the Certificate of Incorporation or these Bylaws. Such waiver of
notice, whether given before or after any meeting or action, shall be deemed
equivalent to notice. Presence of a stockholder either in person or by proxy
at any meeting of stockholders and presence of any director at any meeting of
the Board of Directors shall constitute a waiver of such notice as may be
required by law, the Certificate of Incorporation or these Bylaws, unless such
presence is solely for the purpose of objecting to the lack of notice and such
objection is stated at the commencement of the meeting.
ARTICLE X
SEAL
The corporate seal of the Corporation shall be in such form as the
Board of Directors shall determine from time to time and may consist of a
facsimile thereof or the word "SEAL" enclosed in parentheses or brackets. The
corporate seal of the Corporation shall not be necessary
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to validate or authenticate any instrument duly executed by the Corporation or
to render any such instrument enforceable against the Corporation.
ARTICLE XI
POWERS OF ATTORNEY
The Board of Directors may authorize one or more of the officers of the
Corporation to execute powers of attorney delegating to named representatives
or agents power to represent or act on behalf of the Corporation, with or
without the power of substitution.
In the absence of any action by the Board of Directors, any officer of
the Corporation may execute, for and on behalf of the Corporation, waivers of
notice of meetings of stockholders and proxies, or may vote shares directly,
for such meetings of any company in which the Corporation may hold voting
securities.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
12.1 Definitions. As used in this article, the term "Person" means any
past, present or future director, officer or employee of the Corporation or any
subsidiary of the Corporation.
12.2 Indemnification Granted. The Corporation shall indemnify, to the
full extent and under the circumstances permitted by the General Corporation
Law of the State of Delaware in effect from time to time, any Person, made or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that such Person is or was or with his or her consent is
named by the Corporation as being or about to become a director of the
Corporation or any subsidiary thereof, or is or was an officer or employee of
the Corporation or any subsidiary thereof, or is or was an employee or agent of
the Corporation or any subsidiary thereof, or is or was serving at the specific
request of the Corporation as a director, officer, employee or agent of another
company or other enterprise in which the Corporation owns or owned, directly or
indirectly, an equity interest or of which it may be a creditor.
The right of indemnification shall not be deemed exclusive of any other
rights to which a Person indemnified herein may be entitled by Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, and
shall continue as to a Person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of such Person. It is not
intended that the provisions of this article be applicable to, and they are not
to be construed as granting indemnity with respect to, matters as to which
indemnification would be in contravention of the laws of Delaware or of the
United States of America, whether as a matter of public policy or pursuant to
statutory provision.
12.3 Miscellaneous. Subject to the limitations set forth in the
General Corporation Law of the State of Delaware, the Board of Directors may
also on behalf of the Corporation grant
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indemnification to any individual other than a Person to such extent and in
such matter as the Board of Directors in its sole discretion may from time to
time and at any time determine.
ARTICLE XIII
AMENDMENTS
13.1 Amendment or Repeal. Except as provided otherwise by the laws of
the State of Delaware or the Certificate of Incorporation, these Bylaws may be
amended or resealed either:
(a) At any meeting of stockholders at which a quorum is
present by vote of a majority of the number of shares of stock entitled to vote
present in person or by proxy at such meeting as provided in Article II of
these Bylaws; provided that the notice of such meeting of stockholders or
waiver of notice thereof contains a statement of the substance of the proposed
amendment or repeal; or
(b) At any meeting of the Board of Directors by a majority vote
of the directors then in office.
13.2 Stockholder Proposals. Any stockholder who intends to propose
that any provision of these Bylaws be amended by action of the stockholders
shall notify the Secretary of the Corporation in writing of the amendment or
amendments which such stockholder intends to propose not later than one hundred
eighty (180) days prior to a request by such stockholder to call a special
meeting for such purpose or, if such proposal is intended to be made at an
annual meeting of stockholders, not later than the latest date permitted for
submission of stockholder proposals by Rule 14a-8 under the Securities Exchange
Act of 1934. Such notice to the Secretary shall include the text of the
proposed amendment or amendments and a brief statement of the reason or reasons
why such stockholder intends to make such proposal.
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EXHIBIT 10.1
HOMECOM COMMUNICATIONS, INC.
STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
granting Options to purchase Shares to (i) Employees in order (a) to attract
and retain Employees, (b) to provide an additional incentive to each Employee
to work to increase the value of Shares, and (c) to provide each Employee with
a stake in the future of the Company which corresponds to the stake of each of
the Company's shareholders, and (ii) Key Persons who have rendered valuable
services to the Company, and to provide such Key Person with a stake in the
future of the Company which corresponds to each of the Company's shareholders.
SECTION 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3. COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the common stock of the Company, par value
$.0001 per share.
2.5 COMPANY means HomeCom Communications, Inc., a Delaware
corporation, and any successor to such organization.
2.6 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase
one (1) Share upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE of each Share of Common Stock on any date
shall mean the price determined below on the last business day immediately
preceding the date of valuation:
(a) The closing sales price per Share, regular
way, or in the absence thereof the mean of the last reported bid and asked
quotations, on such date on the exchange having the greatest volume of trading
in the Shares during the thirty-day period preceding such date (or if such
exchange was not open for trading on such date, the next preceding date on
which it was open); or
(b) If there is no price as specified in (a), the
final reported sales price per Share, or if not reported, the mean of the
closing high bid and low asked prices in the over-the-counter market for the
<PAGE> 2
Shares as reported by the National Association of Securities Dealers Automatic
Quotation System, or if not so reported, then as reported by the National
Quotation Bureau Incorporated, or if such organization is not in existence, by
an organization providing similar services, on such date (or if such date is
not a date for which such system or organization generally provides reports,
then on the next preceding date for which it does so); or
(c) If there also is no price as specified in (b),
the price per Share determined by the Committee by reference to bid-and-asked
quotations for the Shares provided by members of an association of brokers and
dealers registered pursuant to Subsection 15(b) of the Exchange Act, which
members make a market in the Shares, for such recent dates as the Committee
shall determine to be appropriate for fairly determining current market value;
or
(d) If there also is no price as specified in (c),
an amount per Share determined in good faith by the Committee based on such
relevant facts, which may include opinions of independent experts, as may be
available to the Committee.
2.10 ISO means an option granted under this Plan to purchase Shares
which is intended by the Company to satisfy the requirements of Code Section
422 as an incentive stock option.
2.11 KEY PERSON means (i) a member of the Board who is not an
Employee, (ii) a consultant, distributor or other person who has rendered
valuable services to the Company, a Subsidiary or a Parent, (iii) a person who
has incurred, or is willing to incur, financial risk in the form of
guaranteeing or acting as co-obligor with respect to debts or other obligations
of the Company, or (iv) a person who has extended credit to the Company. Key
Persons are not limited to individuals and, "person" as used herein may include
corporations, partnerships, associations and other entities.
2.12 NON-ISO means an option granted under this Plan to purchase
Shares which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.13 OPTION means an ISO or a Non-ISO.
2.14 OPTIONEE means grantee of an Option.
2.15 PARENT means any corporation which is a parent of the Company
(within the meaning of Code Section 424).
2.16 PLAN means the HomeCom Communications, Inc. Stock Option Plan,
as amended from time to time.
2.17 SHARE means a share of the Common Stock of the Company.
2.18 STOCK OPTION GRANT means the written agreement or instrument
which sets forth the terms of an Option granted to an Employee or Key Person
under this Plan.
2.19 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code Section 424(f)).
2.20 SURRENDERED SHARES means the Shares described in Section 11.2
which (in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 11.
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2.21 TEN PERCENT SHAREHOLDER means a person who owns (after taking
into account the attribution rules of Code Section 424(d)) more than ten
percent (10%) of the total combined voting power of all classes of shares of
either the Company, a Subsidiary or a Parent.
SECTION 3.
SHARES SUBJECT TO OPTIONS
220,000 Shares of Common Stock shall be reserved for issuance under
this Plan. Such Shares shall be reserved, to the extent that the Company deems
appropriate, from authorized but unissued Shares, and from Shares which have
been reacquired by the Company. Furthermore, any Shares subject to an Option
which remain after the cancellation, expiration or exchange of such Option
thereafter shall again become available for use under this Plan, but any
Surrendered Shares which remain after the surrender of an Option under Section
11 shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before
such shareholder approval, any Options granted under this Plan before the date
of such approval automatically shall be granted subject to such approval.
SECTION 5.
COMMITTEE
This Plan shall be administered by the Committee. The Committee
acting in its absolute discretion shall exercise such powers and take such
action as expressly called for under this Plan and, further, the Committee
shall have the power to interpret this Plan and (subject to Section 16) to take
such other action in the administration and operation of this Plan as the
Committee deems equitable under the circumstances. The Committee's actions
shall be binding on the Company, on each affected Employee or Key Person, and
on each other person directly or indirectly affected by such actions.
Notwithstanding anything else to the contrary herein, the Board shall have the
authority to assume the powers and responsibilities outlined above with respect
to the Committee, in whole or in part.
SECTION 6.
ELIGIBILITY
Except as provided below, only Employees shall be eligible for the
grant of Options under this Plan, but no Employee shall have the right to be
granted an Option under this Plan merely as a result of his or her status as an
Employee. Key Persons may be eligible, subject to written approval by the
Board, for the grant of Options under this Plan, but only if the Key Person has
provided valuable services to the Company, a Subsidiary or a Parent and only if
the Option is a Non-ISO.
SECTION 7.
GRANT OF OPTIONS
The Committee, acting pursuant to the procedure established by the
Board, shall either grant Options under this Plan, or recommend to the Board
that Options be granted under this Plan. In accordance with the procedure
established by the Board, the Committee, or the Board, in its absolute
discretion, shall grant Options under this Plan from time to time to purchase
Shares and, further, shall have the right to grant new Options in exchange for
outstanding Options. Such Options shall be granted to Employees or Key Persons
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<PAGE> 4
selected by the Committee, acting in its discretion as set forth above, and
neither the Board nor the Committee shall be under any obligation whatsoever to
grant Options to all Employees or Key Persons, or to grant all Options subject
to the same terms and conditions. Each grant of an Option shall be evidenced
by a Stock Option Grant and each Stock Option Grant shall:
1. specify whether the Option is an ISO or Non-ISO; and
2. incorporate such other terms and conditions as the
Committee or the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan, including (without limitation) a restriction on
the number of Shares subject to the Option which first become exercisable or
subject to surrender during any calendar year.
In determining Employee(s) or Key Person(s) to whom an Option shall be
granted and the number of Shares to be covered by such Option, the Committee or
the Board may take into account the recommendations of the President of the
Company and its other officers, the duties of the Employee or Key Person, the
present and potential contributions of the Employee or Key Person to the
success of the Company, the anticipated number of years of service remaining
before the attainment by the Employee of retirement age, and other factors
deemed relevant by the Committee or the Board, in its sole discretion, in
connection with accomplishing the purpose of this Plan. An Employee or Key
Person who has been granted an Option to purchase Shares of the Company,
whether under this Plan or otherwise, may be granted one or more additional
Options.
If the Committee or the Board grants an ISO and a Non-ISO to an
Employee on the same date, the right of the Employee to exercise or surrender
one such Option shall not be conditioned on his or her failure to exercise or
surrender the other such Option.
SECTION 8.
EXERCISE PRICE
If an Option is an ISO, the Exercise Price for each Share subject to
such Option shall be no less than the Fair Market Value of a Share on the date
such Option is granted or, if such Option is granted to a Ten Percent
Shareholder, the Exercise Price for each Share subject to such Option shall be
no less than 110% of the Fair Market Value of a Share on the date such Option
is granted. If an Option is a Non-ISO, the Exercise Price for each Share shall
be no less than the minimum price required by applicable state law, or by the
Company's governing instrument, or $0.01, whichever price is greater. The
Exercise Price shall be payable in full upon the exercise of any Option, and a
Stock Option Grant, at the discretion of the Committee or the Board, can
provide for the payment of the Exercise Price either in cash, or in Shares
acceptable to the Committee or the Board, or in any combination of cash and
Shares acceptable to the Committee or the Board. Any payment made in Shares
shall be treated as equal to the Fair Market Value of such Shares on the date
the properly endorsed certificate for such Shares is delivered to the Committee
or the Board.
Notwithstanding the above, and in the sole discretion of the Committee
or the Board, an Option may be exercised as to a portion or all (as determined
by the Committee or the Board) of the number of Shares specified in the Stock
Option Grant by delivery to the Company of a promissory note, such promissory
note to be executed by the Optionee and which shall include, with such other
terms and conditions as the Committee or the Board shall determine, provisions
in a form approved by the Committee or the Board under which (i) the balance of
the aggregate purchase price shall be payable in equal installments over such
period and shall bear interest at such rate (which shall not be less than the
prime bank loan rate as determined by the Committee or the Board) as the
Committee or the Board shall approve and (ii) the
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<PAGE> 5
Optionee shall be personally liable for payment of the unpaid principal balance
and all accrued but unpaid interest.
SECTION 9.
EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in whole or
in part at such time or times as set forth in the related Stock Option Grant,
but no Stock Option Grant shall:
1. make an Option exercisable before the date such Option
is granted; or
2. make an Option exercisable after the earlier of the:
(a) the date such Option is exercised in full, or
(b) the date which is the tenth (10th) anniversary
of the date such Option is granted, if such Option is a Non-ISO or an ISO
granted to a non-Ten Percent Shareholder, or the date which is the fifth (5th)
anniversary of the date such Option is granted, if such Option is an ISO
granted to a Ten Percent Shareholder.
A Stock Option Grant may provide for the exercise of an Option after
the employment of an Employee has terminated for any reason whatsoever,
including death or disability.
SECTION 10.
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee
or Key Person other than by will or by the laws of descent and distribution,
and such Option shall be exercisable during an Employee's or Key Person's
lifetime only by the Employee or Key Person, as the case may be. The person or
persons to whom an Option is transferred by will or by the laws of descent and
distribution thereafter shall be treated as the Employee or Key Person.
SECTION 11.
SURRENDER OF OPTIONS
11.1 GENERAL RULE. The Committee or the Board, acting in its
absolute discretion may incorporate a provision in a Stock Option Grant to
allow an Employee or Key Person to surrender his or her Option in whole or in
part in lieu of the exercise in whole or in part of that Option on any date
that:
1. the Fair Market Value of the Shares subject to such
Option exceeds the Exercise Price for such Shares, and
2. the Option to purchase such Shares is otherwise
exercisable.
11.2 PROCEDURE. The surrender of an Option in whole or in part
shall be effected by the delivery of the Stock Option Grant to the Committee or
the Board, together with a statement signed by the Employee or Key Person which
specifies the number of Shares ("Surrendered Shares") as to which the Employee
or Key Person surrenders his or her Option and how he or she desires payment be
made for such Surrendered Shares.
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<PAGE> 6
11.3 PAYMENT. An Employee or Key Person in exchange for his or her
Surrendered Shares shall receive a payment in cash or in Shares, or in a
combination of cash and Shares, equal in amount on the date such surrender is
effected to the excess of the Fair Market Value of the Surrendered Shares on
such date over the Exercise Price for the Surrendered Shares. The Committee or
the Board, acting in its absolute discretion, can approve or disapprove an
Employee's or Key Person's request for payment in whole or in part in cash and
can make that payment in cash or in such combination of cash and Shares as the
Committee or the Board deems appropriate. A request for payment only in Shares
shall be approved and made in Shares to the extent payment can be made in whole
shares of Shares and (at the Committee's or the Board's discretion) in cash in
lieu of any fractional Shares.
11.4 RESTRICTIONS. Any Stock Option Grant which incorporates a
provision to allow an Employee or Key Person to surrender his or her Option in
whole or in part also shall incorporate such additional restrictions on the
exercise or surrender of such Option as the Committee or the Board deems
necessary to satisfy the conditions to the exemption under Rule 16b-3 (or any
successor exemption) to Section 16(b) of the Exchange Act.
SECTION 12.
SECURITIES REGISTRATION
Each Stock Option Grant may provide that, upon the receipt of Shares
as a result of the surrender or exercise of an Option, the Employee or Key
Person shall, if so requested by the Company, hold such Shares for investment
and not with a view of resale or distribution to the public and, if so
requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Option Grant may also
provide that, if so requested by the Company, the Employee or Key Person shall
make a written representation to the Company that he or she will not sell or
offer to sell any of such Shares unless a registration statement shall be in
effect with respect to such Shares under the Securities Act of 1933, as amended
("1933 Act"), and any applicable state securities law or, unless he or she
shall have furnished to the Company an opinion, in form and substance
satisfactory to the Company, of legal counsel acceptable to the Company, that
such registration is not required. Certificates representing the Shares
transferred upon the exercise or surrender of an Option granted under this Plan
may at the discretion of the Company bear a legend to the effect that such
Shares have not been registered under the 1933 Act or any applicable state
securities law and that such Shares may not be sold or offered for sale in the
absence of an effective registration statement as to such Shares under the 1933
Act and any applicable state securities law or an opinion, in form and
substance satisfactory to the Company, of legal counsel acceptable to the
Company, that such registration is not required.
SECTION 13.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
(a) the tenth (10th) anniversary of the effective date of
this Plan (as determined under Section 4 of this Plan), in which event this
Plan otherwise thereafter shall continue in effect until all outstanding
Options have been surrendered or exercised in full or no longer are
exercisable, or
(b) the date on which all of the Shares reserved under
Section 3 of this Plan have (as a result of the surrender or exercise of
Options granted under this Plan) been issued or no longer are available for use
under this Plan, in which event this Plan also shall terminate on such date.
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<PAGE> 7
SECTION 14.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Options granted under this Plan, and the Exercise
Price of such Options shall be adjusted by the Committee in an equitable manner
to reflect any change in the capitalization of the Company, including, but not
limited to, such changes as stock dividends or stock splits. Furthermore, the
Committee or the Board shall have the right to adjust (in a manner which
satisfies the requirements of Code Section 424(a)) the number of Shares
reserved under Section 3 of this Plan, and the number of Shares subject to
Options granted under this Plan, and the Exercise Price of such Options in the
event of any corporate transaction described in Code Section 424(a) which
provides for the substitution or assumption of such Options. If any adjustment
under this Section 14 creates a fractional Share or a right to acquire a
fractional Share, such fractional Share shall be disregarded, and the number of
Shares reserved under this Plan and the number subject to any Options granted
under this Plan shall be the next lower number of Shares, rounding all
fractions downward. An adjustment made under this Section 14 by the Committee
or the Board shall be conclusive and binding on all affected persons and,
further, shall not constitute an increase in the number of Shares reserved
under Section 3 of this Plan.
SECTION 15.
SALE OR MERGER OF THE COMPANY
If the Company: (i) agrees to sell substantially all of its assets
for cash or property or for a combination of cash and property, (ii) agrees to
any merger, consolidation, reorganization, division or other transaction in
which Shares are converted into another security or into the right to receive
securities or property and such agreement does not provide for the assumption
or substitution of the Options granted under this Plan, or (iii) agrees to
dissolve the Company or liquidate its assets, then immediately following such
time that the Company manifests its agreement in writing to do any of the
foregoing, at the direction and discretion of the Board, or as is otherwise
provided in the Stock Option Grant Certificates, either (a) each Option shall
be exercisable for a period of thirty (30) days following delivery of written
notice to each holder of an Option (after which such Option shall expire), or
(b) each Option may be canceled unilaterally by the Company in exchange for the
whole Shares (or, subject to satisfying the conditions to the exemption under
Rule 16b-3 or any successor exemption to Section 16(b) of the Exchange Act, for
the whole Shares and the cash in lieu of a fractional Share) which each
Optionee otherwise would receive if he or she had the right to surrender his or
her outstanding Option in full under Section 9 of this Plan and he or she
exercised that right exclusively for Shares on a date fixed by the Board which
comes before such sale or other corporate transaction.
SECTION 16.
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee or the Board from time to
time to the extent that the Committee or the Board deems necessary or
appropriate; provided, however, no such amendment shall be made absent the
approval of the shareholders of the Company (1) to increase the number of
Shares reserved under Section 3 except as set forth in Section 14, (2) to
extend the maximum life of the Plan under Section 13 or the maximum exercise
period under Section 9, (3) to decrease the minimum Exercise Price under
Section 8, or (4) to change the designation of Employees or Key Persons
eligible for Options under Section 6. The Committee or the Board also may
suspend the granting of Options under this Plan at any time and may terminate
this Plan at any time; provided, however, the Company shall not have the right
to modify, amend or cancel any Option granted before such suspension or
termination unless (1) the Employee or Key Person consents in writing to such
modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in Section 14 or Section
15 of this Plan.
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<PAGE> 8
SECTION 17.
MISCELLANEOUS
18.1 SHAREHOLDER RIGHTS. No Employee or Key Person shall have any
rights as a shareholder of the Company as a result of the grant of an Option to
him or to her under this Plan or his or her exercise or surrender of such
Option pending the actual delivery of Shares subject to such Option to such
Employee or Key Person.
18.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to an
Employee or Key Person under this Plan shall not constitute a contract of
employment and shall not confer on an Employee any rights upon his or her
termination of employment in addition to those rights, if any, expressly set
forth in the Stock Option Grant which evidences his or her Option.
18.3 WITHHOLDING. The exercise or surrender of any Option granted
under this Plan shall constitute an Employee's or Key Person's full and
complete consent to whatever action the Committee or the Board directs to
satisfy the federal and state tax withholding requirements, if any, which the
Committee or the Board in its discretion deems applicable to such exercise or
surrender. In addition to and at the time of payment of the Exercise Price, the
Optionee shall pay to the Company in cash the full amount of any federal, state
and local income, employment or other taxes required to be withheld from the
income of such Optionee as a result of such exercise; provided, however, that
in the discretion of the Committee any Stock Option Grant Certificate may
provide that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes be owed by the
Optionee as a result of such exercise, may, upon the irrevocable election of
the Optionee, be paid by tendering to the Company whole Shares of Common Stock
duly endorsed for transfer and owned by the Optionee, or by authorizing the
Company to withhold Shares of Common Stock otherwise issuable upon exercise of
the Option, in either case in that number of Shares having a Fair Market Value
on the date of exercise equal to the amount of such taxes thereby being paid,
in all cases subject to such restrictions as the Committee may from time to
time determine, including any such restrictions as may be necessary or
appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3
under the Exchange Act.
18.4 TRANSFER. The transfer of an Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan.
18.5 CONSTRUCTION. This Plan shall be construed under the laws of
the State of Georgia.
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<PAGE> 9
HOMECOM COMMUNICATIONS, INC.
STOCK OPTION PLAN
STOCK OPTION GRANT CERTIFICATE
HomeCom Communications, Inc., a Delaware corporation (the "Company"),
hereby grants to the optionee named below ("Optionee") an option (this
"Option") to purchase the total number of shares shown below of Common Stock of
the Company (the "Shares") at the exercise price per share set forth below (the
"Exercise Price"), subject to all of the terms and conditions on the reverse
side of this Stock Option Grant Certificate and the HomeCom Communications,
Inc. Stock Option Plan (the "Plan"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to them in the
Plan. The terms and conditions set forth on the reverse side hereof and the
terms and conditions of the Plan are incorporated herein by reference.
In witness whereof, this Stock Option Grant has been executed by the Company by
a duly authorized officer as of the date specified hereon.
HOMECOM COMMUNICATIONS, INC.
By:
------------------------------------
Date of Grant: ________ __, 1996
Type of Stock Option:
[ ] Incentive
[ ] Non-Qualified
Shares Subject to Option: <<Shares>>
Exercise Price Per Share: <<Price>>
Term of Option: <<Term>>
Shares subject to issuance under this Option shall be eligible for exercise
according to the vesting schedule selected below and further described in
Section 10 on the reverse of this Stock Option Grant Certificate.
[<<Immediate>>] Immediate Vesting [<<Year1>>] One Year Vesting
[<<Year2>>] Two Year Vesting [<<Year3>>] Three Year Vesting
[<<Year4>>] Four Year Vesting [<<Year5>>] Five Year Vesting
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions of the Plan,
and accepts this Option subject to all the terms and conditions of the Plan and
this Stock Option Grant Certificate. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or disposition of the
Shares and that Optionee should consult a tax adviser prior to such exercise or
disposition.
- ----------------------------------------------------
Signature of Optionee
<<Name>>
- ----------------------------------------------------
Print Name of Optionee
<PAGE> 10
1. EXERCISE PERIOD OF OPTION. Subject to the terms and
conditions of this Option and the Plan, and unless otherwise modified by a
written modification signed by the Company and Optionee, this Option may be
exercised with respect to all of the Shares, but only according to the vesting
schedule selected on the reverse of this Stock Option Grant Certificate and as
described in Section 10 below, prior to the date which is the last day of the
Term set forth on the face hereof following the date of grant (hereinafter
"Expiration Date").
2. RESTRICTIONS ON EXERCISE. This Option may not be exercised,
unless such exercise is in compliance with the Securities Act of 1933 and all
applicable state securities laws, as they are in effect on the date of
exercise, and the requirements of any stock exchange or national market system
on which the Company's Common Stock may be listed at the time of exercise.
Optionee understands that the Company is under no obligation to register,
qualify or list the Shares with the Securities and Exchange Commission ("SEC"),
any state securities commission or any stock exchange to effect such
compliance.
3. TERMINATION OF OPTION. Except as provided below in this Section,
this Option may not be exercised after the date which is thirty (30) days after
Optionee ceases to perform services for the Company, or any Parent or
Subsidiary. Optionee shall be considered to perform services for the Company,
or any Parent or Subsidiary, for all purposes under this Section and Section 10
hereof, if Optionee is an officer or full-time employee of the Company, or any
Parent or Subsidiary, or if the Board determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company, or any Parent or Subsidiary. The Board shall have discretion
to determine whether Optionee has ceased to perform services for the Company,
or any Parent or Subsidiary, and the effective date on which such services
cease (the "Termination Date"). Notwithstanding anything contained herein to
the contrary, if the corporate position of Optionee is, at any time, altered or
revised such that Optionee's responsibilities are materially reduced or
decreased for any reason, as determined by the Board in its sole discretion,
the vesting of Shares under Section 10 shall cease, effective as of the date of
such reduction in Optionee's employment responsibilities; provided, however,
except as otherwise provided in this Option and the Plan, Optionee shall have
the right to exercise this Option with respect to Shares which have vested
under Section 10 as of the date of such reduction of Optionee's
responsibilities.
(a) Termination Generally. If Optionee ceases to perform
services for the Company, or any Parent or Subsidiary, for any reason, except
death or disability (within the meaning of Code Section 22(e)(3)), this Option
shall immediately be forfeited, along with any and all rights or subsequent
rights attached thereto, thirty (30) days following the Termination Date, but
in no event later than the Expiration Date.
(b) Death or Disability. If Optionee ceases to perform
services for the Company, or any Parent or Subsidiary, as a result of the death
or disability of Optionee (as determined by the Board in its sole discretion),
this Option, to the extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be exercised by Optionee
(or, in the event of Optionee's death, by Optionee's legal representative)
within ninety (90) days after the Termination Date, but in no event later than
the Expiration Date.
(c) No Right to Employment. Nothing in the Plan or this
Stock Option Grant Certificate shall confer on Optionee any right to continue
in the employ of, or other relationship with, the Company, or any Parent or
Subsidiary, or limit in any way the right of the Company, or any Parent or
Subsidiary, to terminate Optionee's employment or other relationship at any
time, with or without cause.
4. MANNER OF EXERCISE.
(a) Exercise Agreement. This Option shall be exercisable
by delivery to the Company of an executed Exercise and Shareholder Agreement
("Exercise Agreement") in the form of the Exercise Agreement delivered to
Optionee, if applicable, or in such other form as may be approved or accepted
by the Company, which shall set forth Optionee's election to exercise this
Option with respect to some or all of the Shares, the number of Shares being
purchased, any restrictions imposed on the Shares, and such other
representations and agreements as may be required by the Company to comply with
applicable securities laws.
(b) Exercise Price. Such notice shall be accompanied by
full payment of the Exercise Price for the Shares being purchased. Payment for
the Shares may be made in U.S. dollars in cash (by check) or, where permitted
by law and approved by the Board in its sole discretion: (i) by cancellation
of indebtedness of the Company to Optionee; (ii) by surrender of shares of
Common Stock of the Company that have been owned by Optionee for more than six
(6) months (and which have been paid for within the meaning of SEC Rule 144,
and, if such Shares were purchased from the Company by use of a promissory
note, such note has been fully paid with respect to such Shares), or were
obtained by Optionee in the open public market, having a Fair Market Value
equal to the Exercise Price of the Shares being purchased; (iii) by instructing
the Company to withhold Shares otherwise issuable pursuant to the exercise of
the Option having a Fair Market Value equal to the exercise price of the Shares
being purchased (including the withheld Shares); (iv) by waiver of compensation
accrued by Optionee for services rendered; or (v) a combination of the
foregoing.
(c) Withholding Taxes. Prior to the issuance of Shares
upon exercise of this Option, Optionee must pay, or make adequate provision
for, any applicable federal or state withholding obligations of the Company.
Where approved by the Board, Optionee may provide for payment of withholding
taxes upon exercise of the Option by requesting that the Company retain Shares
with a Fair Market Value equal to the minimum amount of taxes required to be
withheld. In such case, the Company shall issue the net number of Shares to
Optionee by deducting the Shares retained from the Shares exercised.
(d) Issuance of Shares. Provided that such notice and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall cause the Shares to be issued in the name of Optionee or
Optionee's legal representative.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this
Option is an ISO, and if Optionee sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of: (a) the date
two (2) years after the Date of Grant, or (b) the date one (1) year after
exercise of the ISO, with respect to the Shares to be sold or disposed,
Optionee shall immediately notify the Company in writing of such sale or
disposition. Optionee acknowledges and agrees that Optionee may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from any such early disposition by payment in cash or out of the
current wages or earnings payable to Optionee.
6. NONTRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner, other than by will or by the laws of descent and
distribution, and may be exercised during Optionee's lifetime only by Optionee.
The terms of this Option shall be binding upon the executor, administrators,
successors and assigns of Optionee.
7. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT THE GRANT AND
EXERCISE OF THIS OPTION, AND THE SALE OF SHARES OBTAINED THROUGH THE EXERCISE
OF THIS OPTION, MAY HAVE TAX IMPLICATIONS THAT COULD RESULT IN ADVERSE TAX
CONSEQUENCES TO OPTIONEE. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED
WITH, OR WILL CONSULT WITH, HIS OR HER TAX ADVISOR AND OPTIONEE FURTHER
ACKNOWLEDGES THAT OPTIONEE IS NOT RELYING OF THE COMPANY FOR ANY TAX, FINANCIAL
OR LEGAL ADVICE.
8. INTERPRETATION. Any dispute regarding the interpretation of
this Stock Option Grant Certificate shall be submitted by Optionee or the
Company to the Board or the Committee, which shall review such dispute at its
next regular meeting. The resolution of such a dispute by the Board or
Committee shall be final and binding on the Company and Optionee.
9. ENTIRE AGREEMENT. The Plan and the Exercise Agreement are
incorporated herein by this reference. Optionee acknowledges and agrees that
the granting of this Option constitutes a full accord, satisfaction and release
of all obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate, the Plan and the Exercise
Agreement constitute the entire agreement of the parties hereto, and supersede
all prior undertakings and agreements with respect to the subject matter
hereof.
10. VESTING AND EXERCISE OF SHARES. Subject to the terms of the
Plan, this Option and the Exercise Agreement, the Shares issued pursuant to the
exercise of this Stock Option Grant Certificate shall be subject to the vesting
restrictions selected on the reverse side of this Option and defined below.
For purposes of this Section, "Continuous Service" means a period of continuous
performance of services by Optionee for the Company, a Parent, or a Subsidiary,
as determined by the Board.
Immediate Vesting: Optionee may exercise this Option with respect to
any or all of the Shares at any time and in any amount following the
date of grant.
One Year Vesting: Optionee may exercise this Option with respect to
any or all of the Shares only after Optionee has completed twelve (12)
months of Continuous Service following the date of grant.
Two Year Vesting: Optionee may exercise this Option with respect to
the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the
date of grant:
(a) After twelve (12) months of Continuous Service, up to
fifty percent (50%) of the Shares; and
(b) After twenty-four (24) months of Continuous Service,
up to one hundred percent (100%) of the Shares.
Three Year Vesting: Optionee may exercise this Option with respect to
the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the
date of grant:
(a) After twelve (12) months of Continuous Service, up to
thirty-three and one third percent (33 1/3%) of the Shares;
(b) After twenty-four (24) months of Continuous Service,
up to sixty-six and two thirds percent (66 2/3%) of the Shares; and
(c) After thirty-six (36) months of Continuous Service,
up to one hundred percent (100%) of the Shares.
Four Year Vesting: Optionee may exercise this Option with respect to
the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the
date of grant:
(a) After twelve (12) months of Continuous Service, up to
twenty-five percent (25%) of the Shares;
(b) After twenty-four (24) months of Continuous Service,
up to fifty percent (50%) of the Shares;
(c) After thirty-six (36) months of Continuous Service, up
to seventy-five percent (75%) of the Shares; and
(d) After forty-eight (48) months of Continuous Service,
up to one hundred percent (100%) of the Shares.
Five Year Vesting: Optionee may exercise this Option with respect to
the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the
date of grant:
(a) After twelve (12) months of Continuous Service, up to
twenty percent (20%) of the Shares;
(b) After twenty-four (24) months of Continuous Service,
up to forty percent (40%) of the Shares;
(c) After thirty-six (36) months of Continuous Service, up
to sixty percent (60%) of the Shares;
(d) After forty-eight (48) months of Continuous Service,
up to eighty percent (80%) of the Shares; and
(e) After sixty (60) months of Continuous Service, up to
one hundred percent (100%) of the Shares.
<PAGE> 1
EXHIBIT 10.2
HOMECOM COMMUNICATIONS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this plan is to promote the interests of the Company
and its stockholders by strengthening the Company's ability to attract and
retain the services of experienced and knowledgeable non-employee directors and
by encouraging such directors to acquire an increased proprietary interest in
the Company.
SECTION 2.
DEFINITIONS
Each term set forth in this section shall have the meaning set forth
opposite such term for purposes of this plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1 ANNUAL MEETING DATE means, with respect to each fiscal year,
the date within such fiscal year on which the annual meeting of the
shareholders of the Company is held. If in any fiscal year the Company shall
not hold an annual meeting of shareholders, the Annual Meeting Date shall be
deemed to occur on the 120th day of the fiscal year in which no such annual
meeting of shareholders is held.
2.2 BOARD means the Board of Directors of the Company.
2.3 CODE means the Internal Revenue Code of 1986, as amended.
2.4 COMMITTEE means the committee appointed by the Board pursuant
to Section 5.
2.5 COMMON STOCK means the common stock of the Company, $.0001 par
value per share, as defined in the Company's Certificate of Incorporation, as
the same may be amended from time to time, and shall also mean any other stock
or securities (including any other share or securities of an entity other than
the Company) for or into which the outstanding shares of such stock are
hereinafter exchanged or changed.
2.6 COMPANY means HomeCom Communications, Inc., a Delaware
corporation, and any successor to such organization.
2.7 ELIGIBLE DIRECTOR means a director of the Company who is not
an employee of the Company or a Parent or Subsidiary.
2.8 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.9 EXERCISE PRICE means the price which shall be paid to purchase
one Share upon the exercise of an Option granted under this Plan.
2.10 FAIR MARKET VALUE of each Share of Common Stock on any date
shall mean the price determined below on the last business day immediately
preceding the date of valuation:
<PAGE> 2
(a) The closing sales price per Share, regular way, or in
the absence thereof the mean of the last reported bid and asked quotations, on
such date on the exchange having the greatest volume of trading in the Shares
during the thirty-day period preceding such date (or if such exchange was not
open for trading on such date, the next preceding date on which it was open); or
(b) If there is no price as specified in (a), the final
reported sales price per Share, or if not reported, the mean of the closing
high bid and low asked prices in the over-the-counter market for the Shares as
reported by the National Association of Securities Dealers Automatic Quotation
System, or if not so reported, then as reported by the National Quotation
Bureau Incorporated, or if such organization is not in existence, by an
organization providing similar services, on such date (or if such date is not a
date for which such system or organization generally provides reports, then on
the next preceding date for which it does so); or
(c) If there also is no price as specified in (b), the
price per Share determined by the Committee by reference to bid-and-asked
quotations for the Shares provided by members of an association of brokers and
dealers registered pursuant to Subsection 15(b) of the Exchange Act, which
members make a market in the Shares, for such recent dates as the Committee
shall determine to be appropriate for fairly determining current market value;
or
(d) If there also is no price as specified in (c), an
amount per Share determined in good faith by the Committee based on such
relevant facts, which may include opinions of independent experts, as may be
available to the Committee.
2.11. INTERIM GRANT DATE means the date on which an Eligible
Director is first appointed or elected to the Board, if such Eligible Director
is so appointed or elected on a date other an Annual Meeting Date.
2.12 OPTION means an option granted under this Plan to purchase
Shares; all Options granted under this Plan are intended by the Company to be
nonqualified options which are not entitled to special tax treatment under, and
do not satisfy the requirements of, Code Section 422.
2.13 OPTIONEE means grantee of an Option.
2.14 PARENT means any corporation which is a parent of the Company
within the meaning of Section 424(e) of the Code.
2.15 PLAN means the HomeCom Communications, Inc. Non-Employee
Directors Stock Option Plan, as amended from time to time.
2.16 SHARE means a share of the Common Stock of the Company.
2.17 STOCK OPTION GRANT CERTIFICATE means the written agreement or
instrument which sets forth the terms of an Option granted to an Eligible
Director under this Plan.
2.18 SUBSIDIARY means any corporation which is a subsidiary (within
the meaning of Section 424(f) of the Code) of the Company.
2.19 SURRENDERED SHARES means the Shares described in Section 9
which (in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 9.
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<PAGE> 3
SECTION 3.
SHARES SUBJECT TO OPTIONS
One hundred Seventy thousand (170,000) shares of Common Stock shall be
reserved for issue under this Plan. Such Shares shall be reserved to the
extent that the Company deems appropriate from authorized but unissued Shares
and from Shares which have been reacquired by the Company. Furthermore, any
Shares subject to an Option which remain after the cancellation, expiration or
exchange of such Option thereafter shall again become available for use under
this Plan, but any Surrendered Shares which remain after the surrender of an
Option under Section 9 shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before
such shareholder approval, any Options granted under this Plan before the date
of such approval automatically shall be granted subject to such approval. The
Plan shall continue in effect until it is terminated by action of the Board or
the Company's stockholders, but such termination shall not affect the terms of
any Options then outstanding.
SECTION 5.
ADMINISTRATION
The Plan shall be administered by the Committee, which shall consist
of two (2) or more directors appointed by the Board. The Committee, acting in
its absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Committee shall have the power to
interpret this Plan and, subject to Section 14, to take such other action in
the administration and operation of the Plan as it deems equitable under the
circumstances. The Committee's actions shall be binding on the Company, on
each affected Eligible Director, and on each other person directly or
indirectly affected by such action.
SECTION 6.
ELIGIBILITY
Each Eligible Director shall be entitled to participate in the Plan
and shall be eligible to receive those grants of Options which shall be
applicable to such Eligible Director pursuant to the terms and conditions of
Section 7.
SECTION 7.
GRANT OF OPTIONS
7.1 REGULAR GRANTS. An Option to purchase Five Thousand (5,000)
Shares shall automatically be granted to each Eligible Director on the Annual
Meeting Date for the Company's 1997 fiscal year. Subsequent Options to
purchase Five Thousand (5,000) Shares shall automatically be granted each
Annual Meeting Date thereafter. Options shall continue to be granted hereunder
so long as this Plan continues in effect, or until the Shares available for
grant shall no longer be sufficient to grant each Eligible Director an Option
for the number of Shares determined according to this Subsection 7.1, at which
time Options shall be granted to each director to acquire a number of shares
determined by allocating all Shares remaining available for grant hereunder
among the Eligible Directors then entitled to a grant hereunder. Eligible
Directors shall not be entitled to any payment of cash hereunder in lieu of
receiving Options. Each grant of
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<PAGE> 4
an Option shall be evidenced by a Stock Option Grant Certificate, and each
Stock Option Grant Certificate shall incorporate such other terms and
conditions as the Committee, acting in its absolute discretion, deems
consistent with the terms of this Plan, including (without limitation) a
restriction on the number of Shares subject to the Option which first become
exercisable or subject to surrender during any calendar year. Any Option
granted to an Eligible Director shall, at his request, be issued to, in the
name and for the benefit of the entity through which such Eligible Director has
invested in the Company.
7.2 INITIAL GRANTS. Each Eligible Director who is first appointed
or elected to the Board shall be granted an Option to purchase Ten Thousand
(10,000) Shares of Common Stock.
SECTION 8.
TERMS AND CONDITIONS OF OPTIONS
8.1 EXERCISE PRICE. The Exercise Price for each Option granted
shall be the Fair Market Value of the Common Stock on the last business day
preceding the date that the Option is automatically granted.
8.2 VESTING OF OPTIONS. Each Option granted under the Plan shall
vest as provided below unless otherwise specified in the Plan or the Stock
Option Grant Certificate. For purposes of the Plan, that portion of an Option
which is vested may be exercised by the Optionee according to the terms and
conditions of the Plan.
(a) An Optionee shall be entitled to acquire fifty percent
(50%) of the Shares subject to an Option on the date on which the Optionee
completes twelve (12) months of continuous service on the Board following the
date of grant of such Option;
(b) An Optionee shall be entitled to acquire one hundred
percent (100%) of the Shares subject to an Option on the date on which the
Optionee completes twenty-four (24) months of continuous service on the Board
following the date of grant of such Option.
8.3 TERM OF OPTION. Each Option granted under the Plan shall
include an expiration date, which shall be set forth in the Stock Option Grant
Certificate. Unless otherwise provided in the Stock Option Grant Certificate,
the termination of service of an Optionee as a member of the Board by death or
otherwise shall not accelerate or otherwise affect the number of Shares with
respect to which an Option may be exercised, and such Option may only be
exercised with respect to that number of Shares which could have been purchased
under the Option had the Option been exercised by the Optionee on the date that
such Optionee ceased to be a member of the Board by reason of such Optionee's
death or for any other reason.
Each Option granted under this Plan shall be exercisable in
whole or in part at such time or times as set forth in the related Stock Option
Grant Certificate, but no Stock Option Grant Certificate shall:
(a) make an Option exercisable before the date such Option
is granted; or
(b) make an Option exercisable after the earlier of the
first to occur of the following (at which time such option shall be deemed to
have terminated):
(i) immediately at the time and on the date such
Option is exercised in full;
(ii) at 5:00 p.m., EST, on the date which is the
tenth (10th) anniversary of the date such Option is granted;
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<PAGE> 5
(iii) at 5:00 p.m., EST on the thirtieth (30) day
following the date an Optionee ceases to be a member of the Board of Directors
for any reason other than his death or disability; or
(iv) at 5:00 p.m., EST on the ninetieth (90) day
following the date that an Optionee ceases to be a member of the Board of
Directors by reason of his death or disability.
8.4 TIME AND MANNER OF OPTION EXERCISE. Any vested and
exercisable Option is exercisable in whole or in part at any time or from time
to time prior to the expiration of an Option by giving written notice, signed
by the person exercising the Option, to the Company stating the number of
Shares with respect to which the Option is being exercised, accompanied by
payment in full of the Exercise Price for the number of Shares to be purchased.
The date and time upon which the Company's Secretary or Treasurer shall have
received both such notice and payment shall be the date and time of exercise of
the Option as to the number of Shares described by the Optionee. No Option may
be exercised at any time with respect to a fractional share. Any Option of a
deceased Optionee may be exercised, to the extent vested at the time of such
Optionee's death, by the estate of such Optionee or by a person or persons whom
the Optionee has designated in writing filed with the Company, or, if no such
designation has been made, by the person or persons to whom the Optionee's
rights have passed by will or the laws of descent and distribution.
8.5 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price may
be in cash, by cashier's check, by personal check, or by promissory note of the
Optionee. The Committee may also provide in an exercise agreement upon
exercise of an Option that, in lieu of cash, all or any portion of the Exercise
Price may be paid by tendering to the Company Shares of Common Stock duly
endorsed for transfer and owned by the Optionee, to be credited against the
Option price at the Fair Market Value of such Shares on the date of exercise.
A promissory note tendered in payment of the Exercise Price shall be in a form
designated by the Committee, shall be signed by the Optionee (which signature
shall be notarized or guaranteed) and shall include substantially the following
terms: interest on the principal amount of the note shall accrue at a per
annum rate equal to the prime rate as announced from time to time by the
principal bank of the Company, or if the Company has no principal bank, that
rate announced by the Wall Street Journal as the prevailing "prime rate" of
interest per annum; equal payments of principal and interest shall be payable
in installments for a period determined by the Committee following exercise,
and upon the expiration of such period the entire unpaid principal amount,
together with accrued by unpaid interest, shall be due and payable; and the
Optionee executing the note shall be personally liable for timely payment of
the unpaid principal balance and all accrued by unpaid interest.
8.6 TRANSFERABILITY. The right of any Optionee to exercise an
Option granted under the Plan shall, during the lifetime of such Optionee, be
exercisable only by such Optionee or by a person who obtained such Option
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the rules thereunder (a "QDRO"), and shall not be assignable or
transferable by such Optionee other than by will or by the laws of descent and
distribution or by a QDRO.
8.7 LIMITATION OF RIGHTS.
(a) LIMITATION AS TO SHARES. Neither the recipient of an
Option under the Plan nor an Optionee's successor or successors in interest
shall have any rights as a stockholder of the Company with respect to any
Shares subject to an Option granted to such person until the date of issuance
of a stock certificate for such Shares.
(b) LIMITATION AS TO DIRECTORSHIP. Neither the Plan, nor
the granting of an Option, nor any other action taken pursuant to the Plan
shall constitute or be evidence of any agreement or
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<PAGE> 6
understanding, express or implied, that an Eligible Director has a right to
continue as a member of the Board for any period of time or at any particular
rate of compensation.
(c) REGULATORY APPROVAL AND COMPLIANCE. The Company shall
not be required to issue any certificate or certificates for Shares upon the
exercise of an Option granted under the Plan or to record as a holder of record
of Shares the name of the individual exercising an Option under the Plan,
without obtaining to the complete satisfaction of the Board the approval of all
regulatory bodies deemed necessary by the Board and without complying, to the
Board's complete satisfaction, with all rules and regulations under federal,
state, or local law deemed applicable by the Board. In addition, with respect
to persons subject to Section 16 of the Exchange Act, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan or
action by the Board or the Committee fail to comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Board.
SECTION 9.
SURRENDER OF OPTIONS
9.1 GENERAL RULE. The Committee, in its absolute discretion, may
incorporate a provision in a Stock Option Grant Certificate to allow an
Optionee to surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such
Option exceeds the Exercise Price for such Shares; and
(b) the Option to purchase such Shares is otherwise
exercisable.
9.2 PROCEDURE. The surrender of an Option in whole or in part
shall be effected by the delivery of the Stock Option Grant Certificate to the
Committee (or to its delegate) together with a statement signed by the Optionee
which specifies the number of Shares ("Surrendered Shares") as to which the
Optionee surrenders his or her Option and how he or she desires payment be made
for such Surrendered Shares.
9.3 PAYMENT. An Optionee in exchange for his or her Surrendered
Shares shall receive a payment in cash or in Shares, or in a combination of
cash and Shares, equal in amount on the date such surrender is effected to the
excess of the Fair Market Value of the Surrendered Shares on such date over the
Exercise Price for the Surrendered Shares. The Committee, acting in its
absolute discretion, can approve or disapprove an Optionee's request for
payment in whole or in part in cash and can make that payment in cash or in
such combination of cash and Shares as the Committee deems appropriate. A
request for payment only in Shares shall be approved and made in Shares to the
extent payment can be made in whole shares of Shares and (at the Committee's
discretion) in cash in lieu of any fractional Shares.
9.4 RESTRICTIONS. Any Stock Option Grant Certificate which
incorporates a provision to allow an Optionee to surrender his or her Option in
whole or in part also shall incorporate such additional restrictions on the
exercise or surrender of such Option as the Committee deems necessary to
satisfy the conditions to the exemption under Rule 16b-3 (or any successor
exemption) to Section 16(b) of the Exchange Act.
SECTION 10.
SECURITIES REGISTRATION
Each Stock Option Grant Certificate may provide that, upon the receipt
of Shares as a result of the surrender or exercise of an Option, the Optionee
shall, if so requested by the Company, hold such Shares for investment and not
with a view of resale or distribution to the public and, if so requested by the
Company,
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<PAGE> 7
shall deliver to the Company a written statement satisfactory to the Company to
that effect. Each Stock Option Grant Certificate also may provide that, if so
requested by the Company, the Optionee shall make a written representation to
the Company that he or she will not sell or offer to sell any of such Shares
unless a registration statement shall be in effect with respect to such Shares
under the Securities Act of 1933, as amended ("1933 Act") and any applicable
state securities law or unless he or she shall have furnished to the Company an
opinion, in form and substance satisfactory to the Company, or legal counsel
acceptable to the Company, that such registration is not required.
Certificates representing the Shares transferred upon the exercise or surrender
of an Option granted under this Plan may at the discretion of the Company bear
a legend to the effect that such Shares have not been registered under the 1933
Act or any applicable state securities law and that such Shares may not be sold
or offered for sale in the absence of an effective registration statement as to
such Shares under the 1933 Act and any applicable state securities law or an
opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required.
SECTION 11.
LIFE OF PLAN
No option shall be granted under this Plan on or after the earlier of:
(a) The tenth (10th) anniversary of the effective date of
this Plan (as determined under Section 4 of this Plan), in which event this
Plan otherwise thereafter shall continue in effect until all outstanding
Options have been surrendered or exercised in full or no longer are
exercisable; or
(b) The date on which all of the Shares reserved under
Section 3 of this Plan have (as a result of the surrender or exercise of
Options granted under this Plan) been issued or no longer are available for use
under this Plan, in which event this Plan also shall terminate on such date.
SECTION 12.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, the number
of Shares subject to Options granted under this Plan and the Exercise Price of
such Options shall be adjusted by the Board in an equitable manner to reflect
any change in the capitalization of the Company, including, but not limited to,
such changes as stock dividends or stock splits. Furthermore, the Board shall
have the right to adjust (in a manner which satisfies the requirements of Code
Section 424(a)) the number of Shares reserved under Section 3 of this Plan and
the number of Shares subject to Options granted under this Plan and the
Exercise Price of such Options in the event of any corporate transaction
described in Code Section 424(a) which provides for the substitution or
assumption of such Options. If any adjustment under this Section creates a
fractional Share or a right to acquire a fractional Share, such fractional
Share shall be disregarded and the number of Shares reserved under this Plan
and the number subject to any Options granted under this Plan shall be the next
lower number of Shares, rounding all fractions downward. An adjustment made
under this Section by the Board shall be conclusive and binding on all affected
persons and, further, shall not constitute an increase in the number of Shares
reserved under Section 3 of this Plan.
SECTION 13.
SALE OR MERGER OF THE COMPANY
If the Company: (i) agrees to sell substantially all of its assets
for cash or property or for a combination of cash and property, (ii) agrees to
any merger, consolidation, reorganization, division or other transaction in
which Shares are converted into another security or into the right to receive
securities or
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<PAGE> 8
property and such agreement does not provide for the assumption or substitution
of the Options granted under this Plan, or (iii) agrees to dissolve the Company
or liquidate its assets, then immediately following such time that the Company
manifests its agreement in writing to do any of the foregoing, at the direction
and discretion of the Board, or as is otherwise provided in the Stock Option
Grant Certificates, either (a) each Option shall be exercisable for a period of
thirty (30) days following delivery of written notice to each holder of an
Option (after which such Option shall expire), or (b) each Option may be
canceled unilaterally by the Company in exchange for the whole Shares (or,
subject to satisfying the conditions to the exemption under Rule 16b-3 or any
successor exemption to Section 16(b) of the Exchange Act, for the whole Shares
and the cash in lieu of a fractional Share) which each Optionee otherwise would
receive if he or she had the right to surrender his or her outstanding Option
in full under Section 9 of this Plan and he or she exercised that right
exclusively for Shares on a date fixed by the Board which comes before such
sale or other corporate transaction.
SECTION 14.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, no such
amendment shall be made absent the approval of the shareholders of the Company:
(i) to increase the number of Shares reserved under Section 3, except as set
forth in Section 12, (ii) to extend the maximum life of the Plan under Section
11 or the maximum exercise period under Section 8, (iii) to decrease the
minimum Exercise Price under Section 7, or (iv) to change the designation of
Optionees eligible for Options under Section 6. The Board also may suspend the
granting of Options under this Plan at any time and may terminate this Plan at
any time; provided, however, the Company shall not have the right to modify,
amend or cancel any Option granted before such suspension or termination
unless: (a) the Optionee consents in writing to such modification, amendment
or cancellation, or (b) there is a dissolution or liquidation of the Company or
a transaction described in Section 12 or Section 13 of this Plan.
SECTION 15.
MISCELLANEOUS
15.1 WITHHOLDING. The exercise or surrender of any Option granted
under this Plan shall constitute an Optionee's full and complete consent to
whatever action the Committee directs to satisfy the federal and state tax
withholding requirements, if any, which the Committee in its discretion deems
applicable to such exercise or surrender. In addition to and at the time of
payment of the Exercise Price, the Optionee shall pay to the Company in cash
the full amount of any federal, state and local income, employment or other
taxes required to be withheld from the income of such Optionee as a result of
such exercise; provided, however, that in the discretion of the Committee any
Stock Option Grant Certificate may provide that all or any portion of such tax
obligations, together with additional taxes not exceeding the actual additional
taxes be owed by the Optionee as a result of such exercise, may, upon the
irrevocable election of the Optionee, be paid by tendering to the Company whole
Shares of Common Stock duly endorsed for transfer and owned by the Optionee, or
by authorizing the Company to withhold Shares of Common Stock otherwise
issuable upon exercise of the Option, in either case in that number of Shares
having a Fair Market Value on the date of exercise equal to the amount of such
taxes thereby being paid, in all cases subject to such restrictions as the
Committee may from time to time determine, including any such restrictions as
may be necessary or appropriate to satisfy the conditions of the exemption set
forth in Rule 16b-3 under the Exchange Act.
15.2 CONSTRUCTION. This Plan shall be construed under the laws of
the State of Georgia.
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<PAGE> 9
HOMECOM COMMUNICATIONS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
STOCK OPTION GRANT CERTIFICATE
HomeCom Communications, Inc., a Delaware corporation (the "Company"),
hereby grants to the optionee named below ("Optionee") an option (this
"Option") to purchase the total number of shares shown below of Common Stock of
the Company (the "Shares") at the exercise price per share set forth below (the
"Exercise Price"), subject to all of the terms and conditions on the reverse
side of this Stock Option Grant Certificate and the HomeCom Communications,
Inc. Non-Employee Directors Stock Option Plan (the "Plan"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in the Plan. The terms and conditions set forth on the reverse side
hereof and the terms and conditions of the Plan are incorporated herein by
reference.
In witness whereof, this Stock Option Grant Certificate has been executed by
the Company by a duly authorized officer as of the date specified hereon.
HOMECOM COMMUNICATIONS, INC.
By:
-----------------------------------------
Date of Grant: <<Date>>
Shares Subject to Option: <<Shares>>
Exercise Price Per Share: <<Price>>
Term of Option: <<Term>>
Shares subject to issuance under this Option shall be eligible for exercise
according to the vesting schedule described in Section 9 on the reverse of this
Stock Option Grant Certificate.
Optionee hereby acknowledges receipt of a copy of the Plan, represents that
Optionee has read and understands the terms and provisions of the Plan, and
accepts this Option subject to all the terms and conditions of the Plan and
this Stock Option Grant Certificate. Optionee acknowledges that there may be
adverse tax consequences upon exercise of this Option or disposition of the
Shares and that Optionee should consult a tax adviser prior to such exercise or
disposition.
- -----------------------------------------------------
Signature of Optionee
<<Name>>
- -----------------------------------------------------
Print Name of Optionee
<PAGE> 10
1. EXERCISE PERIOD OF OPTION. Subject to the terms and
conditions of this Option and the Plan and unless otherwise modified by a
written modification signed by the Company and Optionee, this Option may be
exercised with respect to all of the shares of Common Stock covered by this
Option ("Option Shares"), but only according to the vesting schedule described
in Section 9 below, prior to the date which is the last day of the Term set
forth on the face hereof following the date of grant (hereinafter "Expiration
Date").
2. RESTRICTIONS ON EXERCISE. This Option may not be exercised
unless such exercise is in compliance with the Securities Act of 1933 and all
applicable state securities laws, as they are in effect on the date of
exercise, and the requirements of any stock exchange or national market system
on which the Company's Common Stock may be listed at the time of exercise.
Optionee understands that the Company is under no obligation to register,
qualify or list the Shares with the Securities and Exchange Commission ("SEC"),
any state securities commission or any stock exchange to effect such compliance.
3. TERMINATION OF OPTION. Except as provided below in this
Section, this Option may not be exercised after the date which is thirty (30)
days after Optionee ceases to be a member of the Board of Directors of the
Company (the "Board"). Optionee shall be considered to be a member of the
Board for all purposes under this Section and Section 9 hereof, if Optionee is
serving as a director of the Company. The Board shall have discretion to
determine whether Optionee has ceased to be a member of the Board, and the
effective date on which such services cease (the "Termination Date").
(a) Termination Generally. If Optionee ceases to be a
member of the Board for any reason except death or disability (within the
meaning of Code Section 22(e)(3)), this Option shall immediately be forfeited,
along with any and all rights or subsequent rights attached thereto thirty (30)
days following the Termination Date, but in no event later than the Expiration
Date.
(b) Death or Disability. If Optionee ceases to be a
member of the Board because of the death of Optionee or the disability of
Optionee (as determined by the Board), this Option, to the extent (and only to
the extent) that it would have been exercisable by Optionee on the Termination
Date, may be exercised by Optionee (or, in the event of Optionee's death, by
Optionee's legal representative) within ninety (90) days after the Termination
Date, but in no event later than the Expiration Date.
(c) No Right to Membership. Nothing in the Plan or this
Stock Option Grant Certificate shall confer on Optionee any right to continue
as a member of the Board, or limit in any way the right of the Company to
terminate Optionee's membership on the Board, with or without cause.
4. MANNER OF EXERCISE.
(a) Exercise Agreement. This Option shall be exercisable
by delivery to the Company of an executed Exercise Agreement and Shareholder
Agreement ("Exercise Agreement") in the form of the Exercise Agreement
delivered to Optionee, if applicable, or in such other form as may be approved
or accepted by the Company, which shall set forth Optionee's election to
exercise some or all of this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and such other representations and
agreements as may be required by the Company to comply with applicable
securities laws.
(b) Exercise Price. Such notice shall be accompanied by
full payment of the Exercise Price for the Shares being purchased. Payment for
the Shares may be made in U.S. dollars in cash (by check) or, where permitted
by law and approved by the Board in its sole discretion: (i) by cancellation
of indebtedness of the Company to Optionee; (ii) by surrender of shares of
Common Stock of the Company that have been owned by Optionee for more than six
(6) months (and which have been paid for within the meaning of SEC Rule 144
and, if such Shares were purchased from the Company by use of a promissory
note, such note has been fully paid with respect to such Shares), or were
obtained by the Optionee in the open public market, having a Fair Market Value
equal to the exercise price of the Option; (iii) by instructing the Company to
withhold Shares otherwise issuable pursuant to an exercise of the Option having
a Fair Market Value equal to the exercise price of the Option (including the
withheld Shares); (iv) by waiver of compensation accrued by Optionee for
services rendered; or (v) a combination of the foregoing.
(c) Withholding Taxes. Prior to the issuance of the
Shares upon exercise of this Option, Optionee must pay or make adequate
provision for any applicable federal or state withholding obligations of the
Company. Where approved by the Board, the Optionee may provide for payment of
withholding taxes upon exercise of the Option by requesting that the Company
retain Shares with a Fair Market Value equal to the minimum amount of taxes
required to be withheld. In such case, the Company shall issue the net number
of Shares to the Optionee by deducting the Shares retained from the Shares
exercised.
(d) Issuance of Shares. Provided that such notice and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall cause the Shares to be issued in the name of Optionee or
Optionee's legal representative.
5. NONTRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner other than (a) by will or by the laws of descent and
distribution or (b) pursuant to a qualified domestic relations order (a "QDRO")
as defined by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended. This Option may be exercised during the lifetime of
the Optionee only by the Optionee or a person who obtains the Option pursuant
to a QDRO. The terms of this Option shall be binding upon the executor,
administrators, successors, assigns and transferees of the Optionee.
6. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT THE GRANT AND
EXERCISE OF THIS OPTION, AND THE SALE OF SHARES OBTAINED THROUGH THE EXERCISE
OF THIS OPTION, MAY HAVE TAX IMPLICATIONS THAT COULD RESULT IN ADVERSE TAX
CONSEQUENCES TO OPTIONEE. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OR WILL CONSULT WITH HIS OR HER TAX ADVISOR, AND OPTIONEE FURTHER ACKNOWLEDGES
THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
7. INTERPRETATION. Any dispute regarding the interpretation of
this Stock Option Grant Certificate shall be submitted by Optionee or the
Company to the Board, or the Committee thereof that administers the Plan, which
shall review such dispute at its next regular meeting. The resolution of such
a dispute by the Board or Committee shall be final and binding on the Company
and Optionee.
8. ENTIRE AGREEMENT. The Plan and the Exercise Agreement are
incorporated herein by this reference. Optionee acknowledges and agrees that
the granting of this Option constitutes a full accord, satisfaction and release
of all obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities or rights to acquire securities, of the Company or any of its
affiliates. This Option, the Plan and the Exercise Agreement constitute the
entire agreement of the parties hereto and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
9. VESTING AND EXERCISE OF SHARES. Subject to the terms of the
Plan, this Option and the Exercise Agreement, the Shares issued pursuant to the
exercise of this Option shall be subject to the vesting restrictions below.
For purposes of this Section, "Continuous Service" means a period of continuous
membership on the Board from the date of grant of the Option, as determined by
the Board.
Two Year Vesting: Optionee may exercise the number of Shares set
forth below only after Optionee has completed the following periods of
Continuous Service following the date of grant:
(a) After twelve (12) months of Continuous Service, up to
fifty percent (50%) of the Option Shares; and
(b) After twenty-four (24) months of Continuous Service,
up to one hundred percent (100%) of the Option Shares.
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as
of the _______ day of ____________________, 1996 by and between Homecom
Communications, Inc. ("Homecom"), a Delaware corporation, ("Company") and
("Employee"), an individual.
For and in consideration of the agreement to employ Employee described
below, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Employee, and Employee
agrees to accept such employment, upon the following terms and conditions.
2. DUTIES. Employee shall assume and perform the duties specified in
EXHIBIT A. Such duties may be revised from time to time at the sole discretion
of the Company. Employee agrees to devote his or her full time and energy to
the Company's business and shall not during the term of employment work or
perform services in any advisory or other capacity for any other individual or
entity.
3. COMPENSATION. The Company shall pay to Employee the salary and
additional compensation, if any, described in EXHIBIT B as compensation for all
the services to be rendered by Employee and as such compensation may be
modified by the Company in its sole discretion from time to time. The
Company's obligation to pay Employee any compensation shall cease upon
termination of Employee's employment with the Company. Employee's annual or
monthly salary shall be prorated on a daily basis for the years or months, as
the case may be, in which Employee commences and terminates his or her
employment relationship with the Company.
4. TERM AND TERMINATION. This Agreement shall be effective upon
execution by the parties and shall remain in full force and effect thereafter,
until terminated as provided herein. Either party may terminate this Agreement
at any time for any reason, whether for cause or not for cause, by providing
written notice to the other on or prior to the proposed date of termination.
This Agreement shall terminate immediately upon the death of Employee. Upon
termination of employment for any reason, Employee shall return immediately to
the Company all documents, property, and other records of the Company, and all
copies thereof, within Employee's possession, custody or control, including but
not limited to any materials containing any Trade Secrets or Confidential
Information (as defined below) or any portion thereof.
5. OWNERSHIP. For purposes of this Agreement, "Work Product" shall mean
the data, materials, documentation, computer programs, inventions (whether or
not patentable), and all works of authorship, including all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right, created or developed in whole or in part by Employee,
whether prior to the date of this Agreement or in the future while employed by
the Company (whether developed during work hours or not) and which either (i)
relate to the present or anticipated business, research, developments, tests,
products, work or activities of the Company or (ii) result from or are
suggested by any work Employee may do for the Company. All Work Product shall
be considered work made for hire by the Employee and owned by the Company. If
any of the Work Product may not, by operation of law, be considered work made
for hire by Employee for the Company, or if ownership of all right, title, and
interest of the intellectual property rights therein shall not otherwise vest
exclusively in the Company, Employee hereby assigns to the Company, and upon
the future creation thereof automatically assigns to the Company, without
further consideration, the ownership of all Work Product. The Company shall
have the right to obtain and hold in its own name copyrights, registrations,
and any other protection available in the Work Product. Employee agrees to
perform, during or after Employee's employment, such further acts as may be
necessary or desirable to transfer, perfect, and defend the Company's ownership
of the Work Product that are reasonably requested by the Company.
6. LICENSE. To the extent that any preexisting materials are contained
in the materials Employee delivers to Company or Company's customers, Employee
grants to Company an irrevocable, nonexclusive, worldwide, royalty-free license
to: (i) use and distribute (internally or externally) copies of, and prepare
derivative works based upon, such preexisting materials and derivative works
thereof, and (ii) authorize others to do any of the foregoing.
7. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) The Company may disclose to Employee certain Trade Secrets and
Confidential Information (defined below). Employee acknowledges and agrees
that the Trade Secrets and Confidential Information are the sole and exclusive
property of the Company (or a third party providing such information to the
Company) and that the Company or such third party owns all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right. Employee acknowledges and agrees that the disclosure of
the Trade Secrets and Confidential Information to Employee does not confer upon
Employee any license, interest or rights of any kind in or to the Trade Secrets
or Confidential Information. Employee may use the Trade Secrets and
Confidential Information solely for the benefit of the Company while Employee
is employed or retained by the Company. Except in the performance of services
for the Company, Employee will hold in confidence and not reproduce,
distribute, transmit, reverse engineer, decompile, disassemble, or transfer,
directly or indirectly, in any form, by any means, or for any purpose, the
Trade Secrets or the Confidential Information or any portion thereof. Employee
agrees to return to the Company, upon request by the Company, the Trade Secrets
and Confidential Information and all materials relating thereto.
(b) Employee's obligations under this Agreement with regard to the
Trade Secrets shall remain in effect for as long as such information shall
remain a trade secret under applicable law. Employee acknowledges that its
obligations with regard to the Confidential Information shall remain in effect
while Employee is employed or retained by the Company and for three (3) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (a) derives economic value, actual
or potential,
<PAGE> 2
from not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its
disclosure or use; and (b) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy. As used herein, "Confidential
Information" means information, other than Trade Secrets, that is of value to
its owner and is treated as confidential, including, but not limited to, future
business plans, licensing strategies, advertising campaigns, information
regarding executives and employees, and the terms and conditions of this
Agreement.
(c) Employee acknowledges that existing or prospective customers
of the Company may be companies which are publicly traded and subject to
various rules and regulations of the Securities and Exchange Commission.
Employee acknowledges that the Company has a policy that no one associated with
the Company may trade in securities of any customer of the Company based on
material, nonpublic information concerning the customer. Additionally, the
Company expressly forbids the unauthorized disclosure of any nonpublic
information acquired by anyone associated with the Company relating to a
customer of the Company. Employee shall notify the Company prior to trading
the securities of any customer of the Company.
8. CUSTOMER NON-SOLICITATION. Employee agrees that for a period of
eighteen (18) months immediately following termination of Employee's employment
with the Company for any reason, including, without limitation, voluntary
resignation from employment by Employee ("Non-Solicitation Period"), Employee
shall not, within the Atlanta metropolitan area, on Employee's own behalf or on
behalf of any person, firm, partnership, association, corporation or business
organization, entity or enterprise, solicit, contact, call upon, communicate
with or attempt to communicate with any customer or prospect of the Company, or
any representative of any customer or prospect of the Company, with a view to
sale or providing of any deliverable or service competitive or potentially
competitive with any deliverable or service sold or provided or under
development by the Company during the time of two (2) years immediately
preceding cessation of Employee's employment with the Company, provided that
the restrictions set forth in this paragraph shall apply only to customers or
prospects of the Company, or representatives of customers or prospects of the
Company, with which Employee had contact during such two (2) year period. The
actions prohibited by this paragraph shall not be engaged in by Employee
directly or indirectly, whether as manager, salesperson, agent, technical
support, sales or service representative, developer, or otherwise. Employee
acknowledges that the Company provides products and services to customers
throughout the Atlanta metropolitan area and that a more limited territorial
restriction on the non-solicitation provisions of this paragraph would not
adequately protect the legitimate interests of the Company.
9. NONCOMPETITION. Employee agrees that during the term of Employee's
employment and during the Non-Solicitation Period, Employee shall not, within
the Atlanta metropolitan area, on Employee's own behalf or on behalf of any
person, firm, partnership, association, corporation or business organization,
entity or enterprise, perform services substantially similar to the activities
described on EXHIBIT A for any company or other entity that creates Web sites
or develops Internet or Intranet enabled computer software applications,
provided that the restrictions set forth in this paragraph shall apply only to
customers or prospects of the Company, or representatives of customers or
prospects of the Company, with which Employee had contact during the time of
two (2) years immediately preceding cessation of Employee's employment with the
Company. The actions prohibited by this paragraph shall not be engaged in by
Employee directly or indirectly, whether as manager, salesperson, agent,
technical support, sales or service representative, developer, or otherwise.
Employee acknowledges that the Company provides products and services to
customers throughout the Atlanta metropolitan area and that a more limited
territorial restriction on the non-competition provisions of this paragraph
would not adequately protect the legitimate interests of the Company. The
provisions of this Section 9 shall apply after the term of Employee's
employment only in the event that Employee's termination from employment is for
one or more of the following reasons: (i) termination by the Company for
willful dishonesty toward or deliberate injury or attempted injury to the
Company; or (ii) termination by the Company for criminal conduct involving
mortal turpitude; or (iii) termination by the Company for a violation or other
failure of Employee to perform in accordance with any of the material
provisions of this Agreement; or (iv) termination by the Company for recurring
negligence or disregard in the performance of the Employee's duties, or (v)
voluntary resignation from employment by Employee.
10. EMPLOYEE NON-SOLICITATION. Employee agrees that Employee shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the Non-
Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business.
11. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Employee of any of the terms or conditions of this Agreement will
result in irrevocable harm to the Company and that the remedies at law for such
breach may not adequately compensate the Company for damages suffered.
Accordingly, Employee agrees that in the event of such breach, the Company
shall be entitled to injunctive relief or such other equitable remedy as a
court of competent jurisdiction may provide. Nothing contained herein will be
construed to limit the Company's right to any remedies at law, including the
recovery of damages for breach of this Agreement.
12. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent
jurisdiction, such holding shall not affect the enforceability of any other
provisions or parts thereof, and all other provisions and parts thereof shall
continue in full force and effect.
13. MISCELLANEOUS. This Agreement shall not be amended or modified except
by a writing executed by both parties. This Agreement shall be binding upon
and inure to the benefit of the Company and its successors and assigns. Due to
the personal nature of this Agreement, Employee shall not have the right to
assign Employee's rights or obligations under this Agreement without the prior
written consent of Company. This Agreement shall be governed by the laws of
the State of Georgia without regard to its rules governing conflicts of law.
This Agreement and the attached Exhibits represent the entire understanding of
the parties concerning the subject matter hereof and supersede all prior
communications, agreements and understandings, whether oral or written,
relating to the subject matter hereof. All communications required or
otherwise provided under this Agreement shall be in writing and shall be deemed
given when delivered to the address provided below such party's signature (as
may be amended by notice from time to time), by hand, by courier or express
mail, or by registered or certified United States mail, return receipt
requested, postage prepaid. Exhibits A and B, attached hereto, are
incorporated herein by this reference.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed
their hands and seals effective as of the date first above written.
EMPLOYEE: HOMECOME COMMUNICATIONS, INC.
By:
------------------------------------
Title:
- -------------------------------------
Date:
----------------------------------
Date: Address:
-------------------------------
Address: Building 14, Suite 100
3535 Piedmont Road
Atlanta, Georgia 30305
- -------------------------------------
- -------------------------------------
- -------------------------------------
<PAGE> 4
EXHIBIT A
Duties of Employee
The Employee's duties under this Agreement shall be as follows:
[Enter brief description of job title and duties]
<PAGE> 5
EXHIBIT B
Compensation
The Employee shall be entitled to compensation as follows:
1. SALARY: Employee's annual salary shall be $____________, payable in
accordance with the Company's normal payroll policies.
2. BONUS:
<PAGE> 1
EXHIBIT 10.5
PIEDMONT CENTER
This Lease, made as of the 22nd day of January, 1996, by and between
PROPERTY GEORGIA OBJLW ONE CORPORATION, an Oregon Corporation, first party,
(hereinafter called "Lessor"); and HOMECOM COMMUNICATIONS, INC., a Delaware
corporation, second party, (herein called "Lessee").
W I T N E S S E T H:
1. PREMISES
Lessor does hereby rent and lease to the Lessee Suites 90 & 100, Fourteen
Piedmont Center (hereinafter called the "Premises") in the building
(hereinafter called the "Building") situated at 3535 Piedmont Road, N.E.,
Atlanta, Georgia 30305, consisting of approximately 10,195 rentable square feet
as shown outlined in red on Exhibit "A" attached hereto and made a part hereof.
No easements are included in this Lease, including without limitation,
easements for light, air and view.
2. TERM
This Lease shall be for a term (hereinafter called the "Term"), commencing
on March 1, 1996 and ending on the last day of the calendar month which is 5
years and 0 months following the commencement date. Notwithstanding the
foregoing, (a) if Lessee takes occupancy of the Premises prior to the aforesaid
commencement date, then the Term shall commence on the date of said occupancy,
and (b) if Lessor does not deliver to Lessee possession of the Premises on or
before the aforesaid commencement date (and such delay in delivery of
possession of the Premises is not attributable to any failure of Lessee to
fully and punctually perform Lessee's obligations as set forth in this Lease),
then the Term of this Lease shall not commence until Lessor delivers to Lessee
notice that the Premises are available for occupancy by Lessee and the date set
forth in such notice shall establish the commencement date.
3. RENTAL
Lessee shall pay to Lessor (or to Lessor's designee as set forth by
written notice from Lessor to Lessee), at the address set forth in Paragraph 21
of this Lease, without any prior demand, offsets or deductions, the sum of
$241,440.00 per annum as fixed rent (hereinafter, together with any adjustments
as hereinbelow provided, called "Base Rental"), payable in equal monthly
installments of $20,120.00 per month (subject to adjustment as hereinbelow
provided) in advance, on the first day of each calendar month during the Term
of this Lease. Base Rental, together with all "additional rent" and other sums
payable by Lessee as herein provided (hereinafter collectively called "Rent")
shall be payable at Lessor's office or at such other place as Lessor may from
time to time designate in writing to Lessee. In the event the Term does not
commence on the first day of a calendar month or end on the last day of a
calendar month, the Base Rental for such fractional month shall be
proportionately reduced.
a. As used herein, the term "Adjustment Date" shall mean each January 1
occurring during the Term commencing with the year 1997, and the term "Adjusted
Base Rental" shall mean the Base Rental in effect immediately prior to the
adjustment to said Base Rental occurring as of such Adjustment Date. The Base
Rental shall be adjusted effective as of each Adjustment Date to reflect such
increases, if any, as are reflected by changes in the "All-Items" figures in
the "Consumer Price Index - U.S. City Average for All Urban Consumers" (1982-84
= 100) of the Bureau of Labor Statistics of the Unites State Department of
Labor. AS of each Adjustment Date the Base Rental shall be adjusted to the
amount determined by dividing Adjusted Base Rental by the index number
published in the issue of "Monthly
<PAGE> 2
Labor Review" for the second December preceding each annual Adjustment Date and
subsequently multiplying that amount by the index number published in the
"Monthly Labor Review" for the December immediately preceding such Adjustment
Date. If the "Consumer Price Index" published by the Bureau of Labor
Statistics is discontinued, then the "Consumer Price Index" published by the
United State Department of Commerce shall be used (with proper adjustment), and
if the Department of Commerce Index is discontinued then the parties shall, in
good faith, agree on a suitable substitute. In no event shall the Base Rental
payable hereunder be reduced by any such adjustment. Lessor shall endeavor to
notify Lessee of the adjustments to Base Rental as soon as practicable
following each Adjustment Date and Lessee shall continue to pay Base Rental
otherwise in effect under this Lease until Lessor shall notify Lessee of such
adjustment to Base Rental. Within thirty (30) days following Lessor's
notification of the adjustment to Base Rental in accordance with this
paragraph, Lessee shall pay to Lessor the difference between the Base Rental
actually paid by Lessee since the last preceding Adjustment Date and accrued
but unpaid Base Rental owed in accordance with the terms of this paragraph.
The obligation of Lessee under the last preceding sentence hereof shall survive
the expiration or earlier termination of this Lease.
b. As used herein, the term "taxes" shall include every type of tax,
charge or impost assessed against the real estate and improvements upon and
within which the Premises are located, or upon the operation of such real
estate and improvements, excepting only income taxes imposed upon Lessor. In
addition to Base Rental, Lessee agrees to pay, as additional rent, 3.398% (the
percentage is determined by dividing the rentable square feet of the Premises
by the total rentable square feet in said improvements, i.e., 300,000 rentable
square feet) of the amount, if any, of any increase in taxes on said real
estate and improvements for the current calendar year over taxes on said real
estate and improvements for the year 1995, prorated as may be necessary based
upon such increase in taxes, if any, and Lessee agrees to pay Lessor, within
thirty (30) days thereafter, Lessee's share of additional rent hereunder. The
obligations of Lessee under this Paragraph 3.b. shall survive the expiration or
earlier termination of this Lease.
4. USE
The Premises shall be used for office purposes and no other. The Premises
shall not be used for any illegal purposes; nor in violation of any law or
regulation of any governmental body, nor in any manner to create a nuisance or
trespass; nor in any manner which could result in a cancellation of the
insurance or an increase in the rate of insurance on the Premises.
5. LESSEE'S ACCEPTANCE
Except for the substantial completion of the work as may be set forth in
Exhibit "D" ("Leasehold Improvements") attached hereto, Lessee accepts the
Premises in their present condition and as suited for the use intended by
Lessee, and Lessor shall not be required to make any repairs, or improvements
to the Premises. However, Lessor shall make such structural repairs to the
Premises as are necessary for safety and tenantability. Taking possession of
the Premises by Lessee shall be conclusive evidence that Lessee has accepted
the Premises in "as is" condition, subject only to the substantial completion
of any items covered in any punch list agreed upon in writing by Lessor and
Lessee within thirty (30) days after occupancy of the Premises by Lessee.
6. LESSEE'S CARE; INSURANCE
All repairs to the Premises not required to be made by Lessor shall be
made by Lessee, at its sole cost. Without limiting the foregoing, Lessee shall
repair all partitions and all glass and plate glass, and
2
<PAGE> 3
all equipment, plumbing and fixtures included within or forming the Premises.
If Lessee is insured for the claim, Lessee shall be liable for and shall hold
Lessor harmless in respect of damage or injury to the Premises, or to the
person or property of the Lessee, or to the person or property of Lessor's
other tenants, or anyone else, if arising in whole or in part out of or related
to Lessee's occupancy of the premises. If Lessee is not insured for the claim
described in the preceding sentence, then Lessee shall be liable for and shall
hold Lessor harmless in respect of damage or injury to the Premises, or to the
person or property of the Lessee, or to the person or property of Lessor's
other tenants, or anyone else, if arising in whole or in part out of or related
to Lessee's occupancy of the Premises, except to the extent such damage or
injury is caused by Lessor's negligence. Lessee shall at once report in
writing to Lessor any defective condition known to Lessee which Lessor is
required to repair and failure to so report shall make Lessee responsible for
damages resulting from such defective condition. all personal property owned
by Lessee, or by any of Lessee's employees or visitors, which is located upon
the Premises or the real property and improvements upon and within which the
Premises are located (including, without limitation, parking lots) shall be at
the risk of Lessee only, and Lessor shall not be liable for any damage thereto
or theft thereof.
Lessee shall maintain in full force and effect throughout the Term (i)
commercial general liability insurance coverage in an amount not less than two
(2.0) million dollars and which shall include property damage, bodily injury
and products liability and (ii) all risk insurance in an amount adequate to
cover the replacement cost of all of Lessee's property located within the
Premises. Such policies shall be issued by insurance companies rated no less
than A-XII (A.M. Best Rating). Such policies shall name Lessor, and such other
parties as Lessor may designate, as additional insureds; shall contain
endorsements providing that the limits and coverage of such policies cannot be
reduced or policies cancelled except after thirty (30) days prior written
notice to Lessor; and, shall contain such other provisions as Lessor may, in
the exercise of its discretion, deem necessary or appropriate. Lessee shall
deliver to Lessor certificates or other evidence satisfactory to Lessor
confirming the existence of such insurance coverage on or before the
commencement date of the Term and at such other times as Lessor may reasonably
request.
7. INSPECTIONS
Lessor may enter the Premises at reasonable hours: to exhibit same to
prospective purchasers, mortgagees or tenants, to inspect the Premises to see
that Lessee is complying with all Lessee's obligations hereunder; and to make
repairs required of Lessor under the terms hereof or repairs or modifications
to any adjoining space.
8. DEFAULT; REMEDIES
Without limiting the other provisions of this Lease, the occurrence of any
of the following shall constitute an "event of default'' under this Lease: (A)
any Rent is not paid within five days after written notice by Lessor to Lessee
that the Rent is due and unpaid: or (B) the Premises shall be deserted or
vacated; or (C) Lessee shall fail to comply with any terms, provision,
condition or covenant of this Lease other than the payment of Rent, or any of
the Rules and Regulations now or hereafter established for the government of
the Building, and shall not cure such failure within ten days after written
notice to Lessee of such failure to comply; or (D) any petition is filed by or
against Lessee under any section or chapter of the National Bankruptcy Act, as
amended; or (E) Lessee shall become insolvent or make a transfer in fraud of
creditors; or (F) Lessee shall make an assignment for benefit of creditors; or
(G) a receiver is appointed for a substantial part of the assets of Lessee; or
(H) the leasehold interest of Lessee, or any portion thereof, is levied on
under execution. Specifically, notwithstanding any provision for notice and
cure afforded Lessee by virtue of this paragraph, Lessor shall have no
obligation to notify Lessee of any
3
<PAGE> 4
violations by Lessee of the terms of this Lease on more than two (2) occasions
during any twelve month period nor on more than five (5) occasions during the
Term, and an event of default shall be deemed to have occurred hereunder in
such circumstances without the necessity of any prior notice by Lessor or
opportunity to cure for Lessee.
Upon the occurrence of an event of default, in addition to and not in
limitation of any other right or remedy available to Lessor at law or in
equity, Lessor shall have the option at any time thereafter to:
(1) Terminate this Lease (but Lessee shall nevertheless remain liable for
damages as hereinafter set forth), in which event Lessee shall immediately
surrender the Premises to Lessor, but if Lessee shall fail to so do, Lessor
may, without further notice and without prejudice to any other remedy Lessor
may have for possession or arrearages in Rent, enter upon the Premises and
expel or remove Lessee and Lessee's effects, by force if necessary, without
being liable to prosecution or any claim for damages therefor. Upon any such
termination Lessee shall pay to Lessor all Rent due and payable to the date
upon which this Lease shall have been terminated and Lessor shall be entitled
to recover from Lessee, and Lessee shall pay to Lessor, on demand, as and for
liquidated and agreed final damages and not as a penalty, a sum equal to the
amount by which the Base Rental and additional rent payable for the period
which otherwise would have constituted the unexpired portion of the Term
(conclusively presuming the additional rent to be the same as was payable for
the year immediately preceding such termination) exceeds the fair and
reasonable rental value of the Premises for the same period, both discounted at
the rate of seven percent per annum to present worth. In determining the fair
and reasonable rental value of the Premises, the rental realized by any relet,
if such reletting be accomplished by Lessor within a reasonable time after
termination of this Lease or after Lessor regains possession of the Premises,
shall be deemed prima facie to be the rental value.
(2) Reenter the Premises, without notice, either by summary proceedings or
by any other action or proceeding or by force if necessary (without being
liable for any claim for damages therefor), and repossess the Premises and
dispossess Lessee and any other persons from the Premises. Lessor at any time
thereafter may relet the Premises, or any part thereof, in the name of Lessor
or as agent for Lessee for a term or terms which may, at Lessor's option, be
less than or exceed the period of the remainder of the Term, and at such rent
or rental and upon such other conditions, which may include concessions as
Lessor, in its sole discretion, shall determine. Lessor shall receive the rents
from such reletting and shall apply the same, first, to pay such expenses as
Lessor may have incurred in connection with reentering, ejecting, removing,
dispossessing, reletting, altering, repairing, redecorating, subdividing or
otherwise preparing the Premises for reletting, including without limitation
brokerage and attorney's fees and expenses; second, to the payment of any
indebtedness other than Rent charges and other sums due hereunder from Lessee
to Lessor; and the residue, if any, shall apply to the fulfillment of the
terms, covenants and conditions of Lessee hereunder, and Lessee hereby waives
all claims to the surplus, if any. Lessee shall be, and hereby agrees to be,
liable for and to pay Lessor any deficiency between the Rents, charges and
other sums reserved hereunder (conclusively presuming that additional rent is
the same as payable for the year immediately preceding such reentry) and the
net rentals, as aforesaid, to relet, if any, for each month of the period which
would otherwise have contributed the balance of the Term. Lessee hereby agrees
to pay such deficiency in monthly installments on the date specified in this
Lease for the payment of Base Rental, and any suit or proceeding brought to
collect a deficiency for any month shall not prejudice or preclude in any way
the right of Lessor to collect a deficiency for any subsequent month by similar
suit or proceeding. Lessor shall in no event be liable in any manner whatsoever
for the failure to relet the Premises or, in the event of such reletting, for
failure to collect the rents reserved thereunder. No such reentry or taking
possession of the Premises by Lessor shall be construed as an election on its
part to terminate this Lease unless Lessor gives written notice to Lessee of
such intention to so terminate this Lease.
4
<PAGE> 5
(3) As agent for Lessee, Lessor, without thereby waiving such default and
without liability to Lessee in connection therewith, may, but shall not be
obligated to, cure any default of Lessee in the performance by Lessee of any of
the terms of this Lease on Lessee's part to be performed. Lessor may enter the
Premises at any time to cure any default without any liability to Lessee.
Lessee shall reimburse Lessor immediately upon demand for any expenses which
Lessor may incur in effecting compliance with this Lease on behalf of Lessee.
9. PERSONALTY OF LESSEE
If Lessee shall not remove all of its effects from said Premises at any
termination of this Lease, Lessor may, at its option, remove all or part of
said effects in any manner that Lessor shall choose and store the same without
liability to Lessee for loss thereof, and Lessee shall reimburse Lessor on
demand for all expenses incurred in such removal and also storage of said
effects. Lessee hereby grants to Lessor a line and security interest upon the
property and effects of Lessee on the Premises, and upon any termination of
this Lease or re-entry by Lessor upon the Premises in accordance with Paragraph
hereof wherein Lessee shall be liable in any amount to Lessor, Lessor may, at
its option, without notice, take possession of said property and effects and
sell at public or private sale all or part of said property and effects for
such price as Lessor may deem best and apply the proceeds of such sale to any
amounts due under this Lease from Lessee to Lessor, including the expenses of
removal and sale.
10. POSSESSION
If this Lease is executed before the Premises herein become ready for
occupancy and Lessor cannot deliver possession of the Premises by the time the
Term is fixed herein to begin, this Lease shall not be void or voidable (except
as hereinbelow provided) and Lessee waives any claim for damages due to such
delay. In the event Lessor fails to deliver the Premises to Lessee for
occupancy before one hundred eighty (180) days after the commencement date set
forth in Paragraph 2 of this Lease due to reasons other than the fault of
Lessee or circumstances beyond the reasonable control of Lessor, then Lessee
shall have the right and option to terminate this Lease and Lessee's sole and
exclusive remedy against Lessor.
11. SERVICES
Provided Lessee has not abandoned the Premises and there exists no event
of default on behalf of Lessee, Lessor shall furnish to the Premises the
following services in the following amounts:
(a) Janitorial services on Monday through Friday inclusive, but excepting
holidays observed by national banks in Atlanta as legal holidays;
(b) Electricity in the Premises on a level suitable for normal office use,
including usual and normal small office machines and similar equipment using
110 volt current, and lighting of the Premises to building standard light
levels produced by building standard fluorescent lighting fixtures (Lessee
being obligated to pay for replacement of all light bulbs including florescent
tubes;
(c) Seasonal air conditioning and heating on Monday through Friday
inclusive, with holidays observed by national banks in Atlanta as legal
holidays excepted, from 8:00 a.m. to 6:00 p.m.
Lessor reserves the right to prohibit installation within the Premises of
equipment using electricity in amounts greater than the amounts provided,
including, but not limited to, non-standard lighting, electric heaters, air
conditions, data processing and duplicating equipment, stoves, microwaves,
refrigerators and vending machines.
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In no event shall Lessee's use of electric current exceed the capacity of
existing feeders to the Building, risers, wiring installations or other
facilities which serve utilities to the Premises. Lessor further reserves the
right to prohibit the installation of any additional equipment unless and until
arrangements are made by Lessee, acceptable to Lessor, to install supplementary
air conditioning equipment on the Premises at Lessee's cost and expense. Any
cost of operation and maintenance of such additional equipment or supplementary
air conditioning services incurred by Lessor shall be paid by Lessee to Lessor
as additional rent on the monthly rental payment date set forth in this Lease
for Base Rental. Should Lessee desire heating or air conditioning at times
when such services are not furnished by Lessor under the terms of this Lease,
Lessor will furnish such services as requested by Lessee upon reasonable
advance notice from Lessee, and Lessee shall pay to Lessor the currently
established charges for such services as additional rent on demand. Lessor
shall not be liable for any damages directly or indirectly resulting from the
installation, use or interruption of use of utilities or the furnishing of
services referred to in this paragraph where such interruption results from
circumstances beyond Lessor's reasonable control or from interruptions made
necessary by repairs and maintenance being undertaken by Lessor.
12. SUBLETTING AND ASSIGNMENTS
Lessee shall not voluntarily, involuntarily or by operation of law,
assign, transfer, hypothecate or otherwise encumber this Lease, or any interest
herein, and shall not sublet nor permit the use by others of the Premises or
any part thereof without first obtaining in each instance Lessor's prior
written consent, which consent Lessor shall be entitled to withhold in its sole
discretion. Lessor's consent to one assignment, sublease, transfer or
hypothecation shall not be deemed consent to any other or further assignment,
sublease, transfer or hypothecation. Any such assignment, sublease, transfer
or hypothecation without Lessor's prior written consent shall be void and shall
constitute an immediate event of default under this Lease. No acceptance by
Lessor of any rent or any other sum of money from any assignee, sublessee or
other category of transferee shall release Lessee from any of its obligations
hereunder or be deemed to constitute Lessor's consent to any assignment,
sublease, transfer or hypothecation. In the event Lessee shall desire to
assign this Lease or sublet the Premises or any part thereof, Lessee shall give
Lessor written notice at least sixty (60) days in advance of the date on which
Lessee desires to make such assignment or sublease, which notice shall specify:
(a) the name and business of the proposed assignee or sublessee, (b) reasonably
detailed character and financial reference for the proposed assignee or
sublessee (including a recent certified financial statement), (c) the amount
and location of space in the Premises affected, (d) the proposed effective date
and duration of the subletting or assignment, and (e) the proposed rental and
all other consideration to be paid to Lessee by such sublessee or assignee.
Lessor shall then have a period of thirty (30) days following receipt of such
notice within which to notify Less in writing that Lessor elects, at its option
(1) to terminate this Lease as to the space so affected as of the date so
specified by Lessee, in which event Lessee will on that date surrender to
Lessor possession of the affected space and thereafter be relieved of all
further obligations to pay Rent hereunder as to such space; or (2) to permit
Lessee to assign or sublet such space, in which event any rent payable by
sublessee to Lessee in excess of the rental rate of this Lease shall be deemed
additional rent owed by Lessee to Lessor under this Lease in the same manner
that Lessee pays Base Rental hereunder and in addition thereto (similarly, any
sums payable by any proposed assignee to Lessee in consideration of an
assignment of Lessee's interest in this Lease which are properly allocable to
such assignment [as determined by Lessor in its sole discretion based upon
reasonable attribution methods] shall be payable by Lessee to Lessor as
additional rent and in consideration of Lessor's consent of such assignment);
or (3) to withhold consent to Lessee's assignment of sublease of such space and
to continue this Lease in full force and effect as to the entire Premises. If
Lessor shall elect to terminate this Lease as aforesaid, Lessee shall notify
Lessor in writing within ten (10) days thereafter of Lessee's intention to
either refrain from such assignment, subletting or transfer or to accept the
termination of this
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Lease. If Lessee advises Lessor it intends to refrain from such assignment,
subletting or transfer, then Lessor's right to terminate this Lease as
aforesaid shall be null and void in such instance. If Lessee fails to so
notify Lessor within said 10-day period, then Lessee will be deemed to have
accepted such termination of this Lease and, upon any such termination, Lessor
shall have the right to enter into a direct Lease with Lessee's proposed
assignee, sublessee or other transferee. In no event whatsoever shall (x)
Lessee sublet, assign or otherwise endeavor to transfer any interest of Lessee
in this Lease to any other tenant in space in Piedmont Center, (y) Lessee list,
advertise or otherwise publicize in any way the availability of all or any part
of the Premises at a rental rate which is less than the rate for which Lessor
is then offering any other space in the Building or any other improvements of
which the Building and Premises form a part, and (z) any advertisement or other
publication for subletting or assignment state the name (as distinguished from
the address) of the Building.
13. DESTRUCTION OF DAMAGE
Should the Premises or Building be so damaged by fire or other cause,
without fault or neglect of Lessee, to the extent, as determined by Lessor in
its sole discretion, that rebuilding or repairs cannot be completed within one
hundred eighty (180) days from the date of the fire or such other cause of
damage, then either Lessor or Lessee may terminate this Lease, in which event
Rent shall be abated from the date of such damage or destruction. However, if
the damage or destruction is such that rebuilding or repairs can be completed
within one hundred eighty (180) days, as so determined by Lessor, then Lessor
covenants and agrees to make such repairs with reasonable promptness and
dispatch, and to allow Lessee an abatement in the Rent for such time as the
Premises is untenantable or proportionately for such portion of the Premises as
shall be untenantable, and Lessee covenants and agrees that the terms of this
Lease shall not be otherwise affected. Lessee acknowledges and agrees that in
no event shall Lessor have any obligation to repair or restore any of Lessee's
furnishings, fixtures or equipment brought upon the Premises by or on behalf of
Lessee.
14. CONDEMNATIONS
If the whole or any material part of the Premises shall be taken or
condemned by any competent authority, then, and in that event, the Term of this
Lease shall cease and terminate from the date when the possession of the part
so taken shall be required for such use or purpose, and the entire amount of
the condemnation award shall be paid to Lessor (excepting only any portion of
such award designated for moving expenses). If the whole or any material part
of the Building shall be taken or condemned by any competent authority
(regardless of whether or not any portion of the Premises shall be so taken or
condemned), Lessor shall have the right to terminate this Lease upon notice to
Lessee.
15. ALTERATIONS AND IMPROVEMENTS
Lessee will make no alterations in, or additions to, the Premises without
first obtaining Lessor's written consent. All erections, additions, fixtures
and improvements, whether temporary or permanent in character (except only
movable office furniture and equipment of Lessee), made in or upon the
Premises, either by the Lessee or the Lessor, shall be Lessor's property, and
shall remain upon said Premises at the termination of the Term by lapse of time
or otherwise, without compensation to Lessee. As a condition to granting
consent to the making of such alterations or additions, Lessor may impose such
requirements as Lessor may in its sole discretion deem reasonable or necessary
including, by way of illustration and not limitation, requirements as to the
manner in which or time at which such work is performed, the design of such
alterations or additions, the quality of materials and workmanship utilized in
making such alterations or additions, and the selection of the contractor who
shall perform the work required to complete such alterations or additions.
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16. ATTORNEYS' FEES; LATE PAYMENTS
Lessee agrees to pay all attorney's fees and expenses Lessor incurs in
enforcing any of the obligations of the Lessee under this Lease, or in any
litigation or negotiation in which Lessor shall, without fault, become involved
through or on account of this Lease. Any installment of Rent delinquent for
more than ten (10) days shall bear interest at the rate of eighteen percent
(18%) per annum, after as well as before judgment, from the date due until
paid.
17. RULES AND REGULATIONS
The rules and regulations attached to this Lease as Exhibit "B" shall be
and are hereby made an integral part of this Lease. Lessee, its contractors,
servants and agents, will perform and abide by said rules and regulations, and
any amendments or additions to said rules and regulations as may be made from
time to time by Lessor, upon notice to Lessee, for the safety, care,
cleanliness and preservation of good order in the Building.
18. NO ESTATE
This contract shall create the relationship of landlord and tenant between
Lessor and Lessee; no estate shall pass out of Lessor; Lessee has only a
usufruct, not subject to levy and sale.
19. HOLDING OVER
If Lessee remains in possession of the Premises after expiration of the
Term, with Lessor's acquiescence and without any distinct agreement of the
parties, then Lessee by virtue of this paragraph shall become a tenant from
month-to-month at a monthly base rent, payable in advance, in an amount equal
to twice the amount of Base Rental payable for the last month of the Term and
otherwise subject to all of the conditions and covenants of this Lease as
though this Lease had originally been a month-to-month tenancy. In no event
shall there a renewal of this Lease by operation of law, and any such
month-to-month tenancy may be terminated by either Lessor or Lessee by giving
thirty (30) days written notice to the other. Specifically notwithstanding the
foregoing, if Lessee shall remain in possession of the Premises as a holdover
tenant without the acquiescence of Lessor or otherwise in violation of the
terms and provisions of this Lease, in addition to any other rights and
remedies available to Lessor, Lessor shall have the immediate right to reenter
and take possession of the Premises.
20. SURRENDER OF PREMISES
At termination of this Lease, Lessee shall surrender the Premises (and all
keys to the Premises to Lessor in good condition, natural wear and tear only
excepted. Any property of Lessee left upon the Premises at the termination of
this Lease shall be deemed abandoned by Lessee, and Lessor may thereafter use
or dispose of such property as Lessor sees fit without obligation to Lessee.
Lessee shall reimburse Lessor on demand for Lessor's costs and expenses in
removing and disposing of such property, and Lessee shall further indemnify and
hold Lessor free and harmless from any liability, claim or expense suffered or
incurred by Lessor in connection with the removal or disposal of such property.
21. NOTICES
Lessee hereby appoints as his agent to receive the service of all
dispossessory or distraint proceedings and notices thereunder, and all notices
required under this Lease to be given by Lessor to Lessee, the person in charge
of said Premises at the time, or occupying said Premises; and if no person is
in charge or occupying same, then such service or notice may be made by
attaching the same on the main
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entrance to the Premises. Any notice given by Lessee to Lessor under this
Lease shall be in writing, effective only when received by Lessor at Lessor's
address hereinbelow set forth. Unless Lessor otherwise notifies Lessee, all
Rent payable by Lessee to Lessor and any notice given by Lessee to Lessor shall
be delivered to Lessor at the following address:
Suite 515, Two Piedmont Center, Atlanta, Georgia 30305
Either party may, by written notice to the other, specify a different
address for notice purposes, except that Lessor may in any event use the
Premises as proper and sufficient for service of dispossessory or distraint
proceedings and notice of an event of default.
22. PARTIES
"Lessor" as used in this Lease shall include first party, its
representatives, assigns and successors-in-title to the Premises. It is
understood and agreed that the term "Lessor", as used in this Lease, means only
the owner (or the lessee under a superior lease) from time to time of the
Building so that the event of any sale, the Lessor as transferor shall be
relieved of all covenants and obligation of Lessor hereunder and Lessee shall
attorn to any successor Lessor hereunder. "Lessee" shall include second party,
its representatives, and if this Lease shall be validly assigned or sublet,
shall include also Lessee's assignees or sublessees, as to the Premises covered
by such assignment or sublease. "Lessor" and "Lessee" include male and female,
singular and plural, corporation, partnership or individual, as may fit the
particular parties.
23. CHANGE OF PREMISES
If the Premises contain less than 3,000 square feet, Lessor reserves the
right to relocate Lessee, and Lessee agrees to relocate, to other space of
substantially equivalent area and equivalent rent in the Building (if space
suitable to Lessee is available in the Building) or other improvements, if any,
within Piedmont Center (if no space suitable to Lessee is available in the
Building) on thirty (30) days prior written notice of Lessor's intent. In the
event Lessor and Lessee do not agree within ten (10) days on terms and
conditions of relocation, then this Lease shall, at Lessor's option, become
null and void and of no further effect after thirty (30) days from the date of
the aforementioned notice. Lessor agrees to reimburse Lessee for the
reasonable expenses of such relocation, not exceeding the amount of one month's
Base Rental. When Lessee take possession of the other space, such other space
shall become the "Premises" for all purposes of this Lease except as expressly
provided herein, and Exhibit "A" hereto shall be modified accordingly.
24. ADVANCE RENT
Upon execution of this Lease, Lessee shall pay to Lessor, as security for
the full and punctual performance by Lessee of all of the terms of this Lease,
the sum of $20,120.00, which, unless otherwise applied, shall be used in
payment or reduction of Base Rental due under this Lease for the first calendar
month(s) of the Term. In the event Lessee defaults in the performance of any
of the terms of this Lease, including the payment of Rent, Lessor may use,
apply or retain the whole or any part of said sum so deposited to the extent
required for the payment of any Rent or for any such other sum which Lessor may
expend or may be required to expend by reason of Lessee's default.
25. SUBORDINATION
This Lease and all rights of Lessee hereunder are and shall be inferior
and subordinate to any mortgage, deed to secure debt, deed of trust or other
instrument in the nature thereof which may now or
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hereafter affect Lessor's interest in the Premises or Building, and to any
modifications, renewals, consolidations, extensions or replacements of any such
security instrument. This paragraph shall be self-operative, and no further
instrument of subordination shall be required by the holder of any such
security instrument. Lessee shall, however, execute, acknowledge and deliver
to Lessor or the holder of any such security instrument, upon demand and
without expense, any and all instruments that may be requested by Lessor for
the purpose of subordinating this Lease and the rights of Lessee hereunder to
the rights and interests of the holder of such security instrument and for any
and all purposes reasonable related thereto. In the event the holder of any
such security instrument or purchaser at foreclosure or power of sale shall
hereafter succeed to the rights of Lessor under this Lease, whether by
foreclosure or other means, Lessee shall attorn to and recognize same as the
successor Lessor under this Lease and shall promptly execute and deliver any
instrument that may be necessary to evidence such attornment.
26. ESTOPPEL CERTIFICATES
Lessee shall at any time and from time to time, upon not less than ten
(10) days prior written notice from Lessor, execute, acknowledge and deliver to
Lessor, or Lessor's designee, a statement in writing (a) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modifications), (b) stating that Lessee has accepted occupancy
of the Premises, (c) specifying the dates to which rent, and other amounts due
hereunder have been paid, and (d) certifying that there are no existing
defaults on the part of Lessor hereunder and that Lessee has no defenses or
offsets against the enforcement of this Lease or specifying such defaults,
defenses or offsets if any are claimed.
27. EXCULPATION
Lessor's obligations and liabilities to Lessee with respect to this Lease
shall be limited solely to Lessor's interest in the Building, and neither
Lessor, not any of the representatives, partners, officers, directors or
shareholders of Lessor, shall have any personal liability whatsoever with
respect to this Lease or Lessor's obligations hereunder.
28. QUIET POSSESSION
Upon Lessee's paying the Rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on Lessee's part to
be observed and performed hereunder, Lessee shall have quiet possession of the
Premises for the Term hereof, subject to all the terms and provisions of this
Lease.
29. HAZARDOUS SUBSTANCES
Lessee hereby represents, warrants, covenants and agrees not to bring or
permit to be brought upon the Premises or any portion thereof, any substances
or materials (hereinafter collectively called "Hazardous Substances"), the
generation, handling, manufacturing, treatment, storage, use, transportation or
discharge of which is regulated by any state, federal or local law or
regulation. Lessee hereby indemnifies and shall hold Lessor harmless from and
against any claim, liability, expense or damage imposed upon Lessor by any
person, entity or governmental body whatsoever arising out of any claims,
action, administrative proceedings, judgments, damages, penalties, fines and
costs, including, without limitation, attorneys' fees, costs of investigation
or settlement, that arise directly or indirectly from or in connection with the
presence, release or suspected release of any hazardous Substances at, on or
about the Premises as a result of any action or omission of Lessee. The terms
and provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.
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30. NON-LIABILITY AND INDEMNIFICATION
Unless due solely to the gross negligence or willful misconduct of Lessor
or its agents, neither Lessor nor Lessor's agents shall be liable to Lessee or
Lessee's agent, contractors or visitors, and Lessee shall and does hereby
indemnify and hold Lessor harmless from and against any and all loss, cost,
liability, claim, damage or expense (including, without limitation, reasonable
attorneys' fees, court costs and costs of investigation) incurred in connection
with or arising from (a) any default by Lessee in the performance of any of the
terms and provisions of this Lease on Lessee's part to be performed; (b)
Lessee's use and occupancy of the Premises; or (c) any acts, omissions or
negligence of Lessee or any such person in or about the Premises. Lessee, and
all those claiming by, through or under Lessee, shall store their property in
and shall occupy and use the Premises and all portions of the Building and
related improvements solely at their own risk. Lessee and all those claiming
or entering the Premises by, through or under Lessee hereby release Lessor, to
the full extent permitted by law, from all claims of every kind, including,
without limitation, personal injury, property damage, loss or other damages
occurring by theft or mysterious disappearance, or business interruption,
unless caused by or due to the gross negligence with willful misconduct of
Lessor.
31. ENTIRE AGREEMENT, ETC.
This Lease contains the entire agreement of the parties and no
representations or agreements, oral or otherwise, between the parties not
embodied herein shall be of any force or effect. No failure of Lessor to
exercise any power given Lessor hereunder, or to insist upon strict compliance
by Lessee of any obligation hereunder, and no custom or practice of the parties
at variance with the terms hereof, shall constitute a waiver of Lessor's right
to demand exact compliance with the terms hereof. The submission by Lessor to
Lessee of this Lease in draft form shall be deemed submitted for discussion
only, shall have no binding force or effect, and shall not constitute an option
to Lessee. This Lease may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and
the same instrument. This Lease shall be governed by the laws of the State of
Georgia. Lessee shall not record this Lease nor any memorandum hereof.
32. TIME OF ESSENCE
Time is of the essence of this Lease.
33. EXHIBITS
The exhibits referred to in this Lease and identified below are attached
to this Lease and by reference made a part hereof:
Exhibit "A" Floor Plan of Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Special Stipulations
Exhibit "D" Leasehold Improvements
Exhibit "E" Lease Rider No. 1
34. SPECIAL STIPULATIONS
Insofar as the Special Stipulations, if any, set forth on Exhibit "C"
conflict with any of the provisions of this Lease, said Special Stipulations
shall control.
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IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, the day and year first above written.
Signed, sealed and delivered by "LESSOR" - PROPERTY OF GEORGIA OBJLW ONE
Lessor in the presence of: CORPORATION
By: /s/ Jones Lang Wootten Realty Advisors
- -------------------------------- --------------------------------------
Witness
Its: Agent
------------------------------------
- --------------------------------
Notary Public
JONES LANG WOOTON REALTY ADVISORS
(NOTARY SEAL)
Its: General Partner
------------------------------------
By: /s/ Beuce Sirof
------------------------------------
Title: Senior Director
----------------------------------
Signed, sealed and delivered by "LESSEE" - HOMECOM COMMUNICATIONS, INC., a
Lessor in the presence of: Delaware corporation
By: /s/ Harvey Sax
- --------------------------------- -------------------------------------
Witness
Its: President
------------------------------------
- ---------------------------------
Notary Public
(NOTARY SEAL)
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PC ASSOCIATES
January 23, 1996
Mr. Harvey Sax, President
HomeCom Communications, Inc.
600 W. Peachtree St.
Suite 2370
Atlanta, Georgia 30308
Dear Mr. Sax:
So that we may better serve you in your move to Piedmont Center, it is
necessary for us to obtain some preliminary information. Please complete and
return the enclosed forms via fax to my attention, fax 841-3687, as soon as
possible. Please keep in mind that if you require special signage, it must
first be approved by Piedmont Center.
For stationery and correspondence, your new address will be as follows:
Fourteen Piedmont Center
Suite 100/Suite 90
3535 Piedmont Road
Atlanta, Georgia 30305
Typically, all moves at Piedmont Center must take place after 5:30 pm on
weekdays or anytime on weekends. If you have other requirements, please let me
know so I can make the necessary arrangements.
Please contact me if we may be of further assistance. We look forward to
having you with us at Piedmont Center.
Sincerely,
Linda M. Edwards
Tenant Coordinator
Enclosures: Insurance Letter Directory Listing Form
Move-In Questionnaire Access Key Order Forms
Move Checklist Piedmont Center Map
Moving Policies Signage Order Form
SUITE 904 / TEN PIEDMONT CENTER / ATLANTA, GEORGIA 30305 / 404 841-3675
<PAGE> 14
EXHIBIT "A"
Schematic drawings of the plaza and lobby levels of the Piedmont Center
14 building illustrating the Registrant's space therein.
<PAGE> 15
EXHIBIT "B"
BUILDING REGULATIONS
(WHICH ARE REFERRED TO IN THE WITHIN LEASE AND MADE A PART THEREOF)
To insure minimization of inconvenience to tenants and to maintain the interior
space in the best possible condition, Lessee shall comply with the following
Building Regulations:
1. The sidewalks, entry passages, corridors, halls, elevators and
stairways shall not be obstructed by Lessee (including Lessee's agents,
contractors and visitors), nor used by them for any purpose other than those of
ingress and egress. The floors, skylights and windows that reflect or admit
light into any place in the Building shall not be covered or obstructed by
Lessee. The water closets and other water apparatus shall not be used for any
purpose other than those for which they were constructed, and no sweepings,
rubbish, or other obstructing substances shall be thrown therein.
2. No advertisement, sign, or other notice shall be inscribed, painted or
affixed by Lessee on any part of the outside or inside of the Premises or any
portion of the Building and related improvements, except only upon the interior
doors and windows of the Premises when permitted by Lessor in writing. All
such advertisements, signs or other notices shall be of such order, size and
style, and at such places as shall be designated by Lessor. Exterior signs on
doors will be provided for Lessee by Lessor, the cost of signs to be charged to
be charged to and paid for by Lessee. Lessee will not distribute, display or
place any handbills, bumper stickers or other advertisement or notice in any
area of the Building and related improvements.
3. Nothing shall be thrown by Lessee out of the windows or doors, or down
the passages or skylights of the Building. No rooms shall be occupied or used
as sleeping or lodging apartments at any time.
4. Lessee shall not employ any persons other than the janitors of Lessor
(who will be provided with pass-keys into the Premises) for the purpose of
cleaning or taking charge of said Premises. Lessee shall not change or install
any additional locks or security systems in the Premises without Lessor's
written consent. It is understood and agreed that Lessor shall not be
responsible to Lessee for any loss of property from the Premises, however
occurring, or for any damage done to the furniture or other effects of Lessee
by the janitor or any of its employees.
5. No animals, birds, bicycles or other vehicles shall be allowed in the
offices, halls, corridors, elevators or elsewhere in the Building.
6. No painting shall be done, nor shall any alterations be made, to any
part of the Building or Premises by putting up or changing any partitions,
doors or windows, nor shall there be any nailing, boring or screwing into the
woodwork or plastering, nor shall either any cabling be installed in or about
the Premises or any connection be made to the electric wires or electric
fixtures, without the consent in writing on each occasion of Lessor. All
glass, locks and trimmings in or upon the doors and windows of the Building and
the Premises shall be kept whole and, when any part thereof shall be broken,
the same shall be immediately replaced or repaired and put in order under the
direction and to the satisfaction of Lessor, and shall be left whole and in
good repair. Lessee shall not injure, overload or deface the Building, the
Premises, or any improvements included in either, nor allow upon the Premises
any noxious, noisy, or offensive business. Lessee shall not change or remove
blinds or other window coverings without Lessor's consent.
<PAGE> 16
7. Lessee shall not (without Lessor's written consent) put up or operate
any steam engine, boiler, machinery or stove upon the Premises, or carry on any
mechanical business therein, nor do any cooking therein, nor use or allow to be
used upon the Premises oil, burning fluids, camphene, gasoline or kerosene for
heating, warming or lighting. No article deemed extra hazardous on account of
fire and no explosives, fire arms or weapons shall be brought into said
Premises or Building. No offensive gases of liquids will be permitted. Lessee
shall not generate, store, handle or otherwise deal with any hazardous or toxic
waste, substance or material, or any oil or pesticide, upon any portion of the
Building and related property.
8. If tenants require electrical wiring for any electrical device, such
wiring shall be done by Lessor's approved electrician only, and no outside
wiring men shall be allowed to do work of this kind unless by written
permission of Lessor. If telegraphic or telephonic service is desired, or if
wiring or cabling is to be installed for any other purpose, the wiring for same
shall be done as directed by Lessor's approved electrician or by some other
employee of Lessor designated by Lessor to supervise same, and no boring or
cutting for wiring shall be done unless approved by Lessor.
9. Lessor will post on the directory of its Building one name to be
designated by Lessee at no charge. All additional names which Lessee shall
desire put upon said directory must be first consented to by Lessor, and if so
approved, a charge will be made for such additional listing as prescribed by
Lessor to be paid to Lessor by Lessee.
10. Lessor, and its agents and contractors, shall have the right to enter
the Premises at all reasonable hours for the purpose of making any repairs,
alterations, or additions which it shall deem necessary for the safety,
preservation, or improvement of the Building, and Lessor shall be allowed to
take all material into and upon such Premises that may be required to make such
repairs, improvements, and additions, or any alterations for the benefit of
Lessee without in any way being deemed or held guilty of an eviction of Lessee
or other liability to Lessee; and the rent reserved shall in no way abate while
said repairs, alterations, or additions are being made; and Lessee shall not be
entitled to maintain a set-off of counterclaim for damage against lessor by
reason of loss or interruption to the business of Lessee because of the
prosecution of any such work. All repairs, decorations, additions and
improvements shall be done during ordinary business hours, or, if any such work
is at the request of Lessee to be done during any other hours, Lessee shall pay
for all overtime costs. In cases of emergency, Lessor, its agents and
contractors, shall have the right to enter the Premises at any time, with force
if necessary.
11. Lessor reserves all vending rights. Lessee's request for such
services to be made by Lessee to Lessor's management office.
12. All moves (whether moving into or out of the Premises) and deliveries
of large furniture or equipment shall be coordinated through Lessor's
management offices, and Lessee shall advise Lessor at least two (2) working
days prior to truck arrival. Lessee shall provide Lessor such information
(including the completion of Lessor's standard moving questionnaires) as Lessor
requires to coordinate such moves or deliveries, and Lessee (together with
Lessee's agents and contractors) will comply with Lessor's guidelines and
instructions in the work associated with such moves or deliveries. All moving
and delivery companies shall provide Lessor certificates of insurance
evidencing the existence of property damage and liability insurance in amounts
acceptable to Lessor. All moves shall be made after 6:00 p.m. Friday and prior
to 8:00 a.m. Monday. Lessee shall be responsible for any damages to the
Premises, Building and related improvements occurring from such move or
delivery, and shall ensure that proper precautions are undertaken to avoid any
such damage. Lessee shall provide Lessor the forwarding address of Lessee
prior to any move out. A representative of Lessor shall have the right to be
at, and to supervise, all moves and deliveries.
2
<PAGE> 17
13. No load shall be placed on the floor of the Premises which exceeds
Lessor's prescribed load limits. All equipment of Lessee will be kept and
operated by Lessee free of abnormal noise and vibrations which may transmit to
any part of the Building or beyond the confines of the Premises. No odors or
vapors will be permitted or caused to emanate from the Premises.
14. Lessor reserves the right to require all persons entering the Building
to sign a register, to be announced to Lessee that such person is visiting and
to be accepted as a visitor by Lessee or to be otherwise properly identified
(and, if not so accepted or identified, reserves the right to exclude such
persons from the Building) and to require persons leaving the Building to sign
a register or to surrender any pass given to such person. Lessee shall be
responsible for all persons for whom it requests any such pass or any person
who Lessee so accepts. Any person whose presence in the Building at any time
shall, in the judgment of Lessor, be prejudicial to the safety, character,
security, reputation or interest of the Building or the tenants of the Building
may be denied access to the Building or may be ejected from the Building.
3
<PAGE> 18
EXHIBIT "C"
SPECIAL STIPULATIONS
This Exhibit "C" is a part of the Lease between PROPERTY GEORGIA
OBJLW ONE CORPORATION, an Oregon Corporation, as Lessor, and
HOMECOM COMMUNICATIONS, INC., a Delaware Corporation, as Lessee
for Suites 90 and 100, Fourteen Piedmont Center.
NOT APPLICABLE
<PAGE> 19
EXHIBIT "D"
LEASEHOLD IMPROVEMENTS
This Exhibit "D" is a part of the Lease between PROPERTY GEORGIA
OBJLWE ONE CORPORATION, an Oregon Corporation, as Lessor, and
HOMECOM COMMUNICATIONS, INC., a Delaware Corporation, as Lessee
for Suites 90 and 100, Fourteen Piedmont Center.
Lessee accepts the premises in its existing condition including
improvements and fixtures affixed and appliances in place, but
excluding moveable furniture and equipment. Lessor shall
contribute an allowance of $7,300.00 to be utilized only for
additional improvements to the premises. Any additional costs
incurred in excess of said allowance shall be the sole
responsibility of Lessee.
<PAGE> 1
EXHIBIT 10.6
LEASE AND SERVICES AGREEMENT
LEASE AND SERVICES AGREEMENT ("Agreement"), made this 25th day of July
1996, by and between ALLIANCE Greensboro, L.P., a Delaware partnership d/b/a
ALLIANCE Business Centers with principal offices at 8201 Greensboro Drive,
McLean, VA 22102 (the "Landlord") and HOMECOM COMMUNICATIONS CORPORATION, a
Delaware corporation with principal offices at 3535 Piedmont Road, 14 Piedmont
Center, #100, Atlanta, Georgia 30305 (the ''Tenant"), to lease the office(s)
described below and to purchase certain services described in this Agreement.
Agreement to Lease. Landlord hereby leases to Tenant, and Tenant rents
from Landlord, a portion of the Landlord's executive suite (the "Executive
Suite") located in the building known as 8201 Greensboro Drive, Suite 1000,
McLean, VA 22102 (the "Building") identified as Office/Suite number #1035
designated on the floor plan attached to this Agreement as Exhibit "A" (the
"Premises"). Premises shall be used by no more than three persons. No
adjustment in the maximum number of persons occupying the Premises will be made
without Landlord's prior written consent. Changes in the number of persons
occupying the Premises shall result in a rental adjustment as stated in
paragraph 6 of this Agreement. Tenant shall pay the rent and other charges and
perform all other obligations required of Tenant: in this Agreement without
set-off or deduction. The Basic Terms of this Agreement are also outlined in
Exhibit "B & D", attached.
1. Use of Office. During the term of this Agreement, provided Tenant is
not in default of any of the terms, covenants, conditions or provisions of this
Agreement, Tenant shall have the exclusive use of the Premises. Landlord may
take possession of the Premises and substitute other space in the Executive
Suite substantially comparable to the Premises by giving written notice to
Tenant at least thirty (30) days in advance, and Landlord shall pay for all
reasonable costs of relocation.
2. Rent and Other Charges. Tenant agrees to pay Fixed Monthly Rental
Charges of $2900.00 in advance, on the first day of each calendar month
during the term of this Agreement, without notice or demand, and without set
off or deduction. The rent for the first month shall be paid upon the signing
of this Agreement. If any payment of rent or other charges due under this
Agreement is not received within five (5) calendar days after its due date, the
Tenant will also pay late payment charge which shall be an amount equal to 10%
of the past due payment for each and every month or part thereof that such
payment remains unpaid or $50.00, whichever is greater. The financial terms of
this Agreement are strictly confidential and Tenant agrees not to divulge this
information to any other Tenant or potential tenant of Landlord. All checks
must be drawn on a United States Bank or all fees or delays shall be charged to
Tenant.
3. Term. The term of this Agreement is for a period of approximately
twelve months, commencing on August 1, 1996 at 9:00 a.m. and expiring on July
31, 1997 at 5:00 p.m. Tenant must notify Landlord in writing at least sixty
(60) days prior to the end of the term of its intent to renew this agreement
beyond its original term, or terminate this agreement. Tenant shall have the
option to expand within ALLIANCE Business Center, Greensboro, upon availability.
<PAGE> 2
4. Security Deposit. Tenant shall deposit with Landlord $5800.00 as a
non-interest bearing security deposit. Landlord may use the security deposit
to cure any default of Tenant under this Agreement, restore the Premises
including any and all furniture, fixtures and equipment provided by Landlord
and vendors at the Premises to their original condition, reasonable wear and
tear excepted, to pay for repairs to any damage to the Premises, Executive
Suite or Building, caused by Tenant or Tenant's guests, to pay any rent or
other charges which Tenant owes Landlord at or prior to the expiration of this
Agreement, and to reimburse Landlord for costs or expenses arising from any
other obligation of Tenant which Tenant has failed to perform. If Landlord
transfers control or ownership of the Premises and Landlord transfers the
security deposit to such purchaser, Tenant will look solely to the new Landlord
for the return of the security deposit, and the Landlord named in this
Agreement shall be released from all liability for the return of the security
deposit. The security deposit (less any sums used by Landlord) will be
returned within sixty (60) days after the termination of any services rendered
or expiration of the term hereof. The security deposit shall not be considered
to be the final payment of Fixed Monthly Rental charges or service charges
under this Agreement.
5. Services. Provided Tenant is not in default of any of the terms,
covenants, conditions or provisions of this Agreement, Landlord shall make
available to Tenant certain Services and Facilities ("Services") as more fully
described in Exhibit "C" attached to this Agreement. Such Services which are
described in Exhibit "C" as being subject to a separate charge are due and
shall be paid for by Tenant on the first day of each calendar month following
the period being billed during the term of this Agreement. If payment is not
received by Landlord within five (5) calendar days of first becoming due,
Tenant shall pay a late charge in an amount equal to 10% per month on the
unpaid balances, or $350.00, whichever is greater. All such Services shall be
performed or provided at rates which are from time to time established by
Landlord during the term of this Agreement. The current rates are listed on
Exhibit ''C". Landlord reserves the right to change the rates and charges for
Services, or to discontinue any Services upon a default by Tenant of any of the
terms, covenants, conditions or provisions of this Agreement, or, after
providing thirty (30) days advance written notice to Tenant.
6. Multiple Occupancy/Use. The Fixed Monthly Rental Charges are based on
the Premises and services being used by three persons. If more than three
persons habitually use the Premises or services, the Fixed Monthly Rental
Charges will be increased by a factor of $100.00 for each additional person.
7. Telecommunications.
a. Provided Tenant is not in default of any of the terms, covenants,
conditions or provisions of this Agreement, Landlord will make available to
Tenant, a telecommunications package which may consist of some combination of
telephone numbers, lines, optional features such as call forwarding, conference
calling, etc., voice mail, long distance, and directory listing. All
components of the telecommunications package including any telephone numbers
used by Tenant will remain at all times the property of Landlord and Tenant
will acquire no rights in the components beyond the term specified by Landlord.
In the event that any toll fraud is traceable to telecommunications services
employed by Tenant, Tenant
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<PAGE> 3
will reimburse Landlord for all charges associated with the toll fraud
including, but not limited to, unauthorized use of calling cards or telephone
lines. It is expressly acknowledged and agreed that Landlord shall be the sole
and exclusive provider of telecommunication services to Tenant.
b. Tenant waives its recourse to the Landlord for any claimed
liability arising from the provision of telecommunication services. The
liability of Landlord for direct damages including, without limitation,
injuries to persons or property, arising out of mistakes, omissions,
interruptions, delays, errors or defects in transmissions occurring in the
course of furnishing telecommunications services and not caused by the
negligence of the Tenant or Tenant-provided equipment, or arising out of the
failure of Landlord to maintain proper standards of maintenance and operation
and to exercise reasonable supervision shall not exceed an amount equivalent to
the proportionate telecommunications charges to the Tenant for the period of
time during which such mistake, omission, delay, error or defect in
transmission occurs as calculated on a pro rata basis in quarter hour
increments using a thirty (30) day month as the base period.
c. Landlord has granted an exclusive license to Fairchild
Communication Services Company to provide telephone equipment, voice and data
services and other telecommunication services for the Premises. Tenant shall
enter into a customer service agreement with Fairchild for telecommunication
services as described in and at the rates set out in the Service Order
Agreement which is attached hereto as Exhibit ''F" and made a part hereof.
8. Furnishings. The Premises shall contain those items of furniture and
other items indicated on the Schedule of Furnishings attached hereto as Exhibit
"E" and made a part hereof ("furnishings"). All furniture and office equipment
supplied to Tenant for its exclusive use will be returned to Landlord at the
expiration of this contract in the same condition as first delivered to Tenant,
normal wear and tear excepted. If any repairs become necessary, Landlord will
cause the repairs to be made and, if repairs are necessitated by Tenant's acts
or negligence the repair charges will be billed to Tenant's account. Tenant is
not authorized to order any repairs or to make any repairs itself.
9. Use of Office. Tenant will use the Premises only for general office
purposes. The type of business Tenant will conduct from the Premises is
Internet application/sales. Tenant will not conduct any other type of business
from the Premises without the prior written consent of Landlord. Tenant will
not store or use anything which will create a fire or theft hazard, cause
noise, create an odor, use abnormal amounts or electricity, create a nuisance,
cause an increase in Landlord's insurance premiums or cancellation of its
insurance. Tenant will not act in any manner which may offend Landlord or
other tenants. Tenant will not bring any pets into the office. If Tenant uses
an impact or dot matrix printer, it will keep its office door closed during
use. Smoking is not permitted in the Executive Suite.
10. Alterations. Tenant will not make any alterations to the Premises
unless it obtains prior written approval from Landlord. Approval may be
conditioned on: (a) agreement that improvements will remain the property of
Landlord, at the termination of this Agreement; and/or (b) Tenant making a
security deposit; and/or (c) agreement by Tenant that it will return the
Premises to its original condition when it vacates.
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<PAGE> 4
11. Assignment/Subletting. Tenant shall not assign or encumber this lease
nor sublease all or a part of the Premises used by it.
12. Recruiting Landlord's Employees. Tenant acknowledges that finding,
hiring and training employees is time-consuming and expensive. Tenant agrees
that it will not, during the term of this Agreement and any renewals thereof;
or for a period of one year after the expiration or sooner termination of this
Agreement, hire or cause an offer to employ any person who is or has
been an employee of Landlord or Landlord's agent. If Tenant either (i) hires
an employee of Landlord or Landlord's agent; or (ii) hires any person who has
been an employee of Landlord or it's agent within six months prior to the time
they are hired by Tenant, Tenant will be liable to Landlord for liquidated
damages in an amount equal to six months' wages of the employee, at the rate
last paid that employee by Landlord. The provisions hereof shall survive the
expiration or sooner termination of the term hereof.
13. Personal Property Damage. Landlord shall not be liable for any damage
to personal property owned by Tenant, its guests, customers, invitees or
visitors, unless the damage is caused by the gross negligence of the Landlord
or its employees.
14. Personal Injury. Landlord shall not be liable for personal injury
suffered by Tenant, its guests, customers, invitees or visitors, unless the
injury is caused by Landlord's own gross negligence, or that of its employees.
15. Tenant's Property. If Tenant vacates the Premises and leaves behind
any property, whatsoever, same will be considered abandoned by Tenant and may
be disposed of by Landlord at Tenant's expense. If Tenant defaults in the
payment of sums due to Landlord, and Landlord changes the locks, removes
Tenant's property, or otherwise denies access to Tenant, Landlord will not be
guilty of conversion.
16. Indemnity. If a claim is made against Landlord because of some action
or inaction of Tenant or its guests, customers, invitees or visitors, Tenant
will indemnify Landlord and hold it harmless from those claims. This indemnity
includes not only the amount of any such claim, but also all of Landlord's
costs in investigating and defending those claims including all related fees
charged by Landlord's Legal Counsel, plus a charge at the rate of $170.00 per
hour for any time spent by Landlord's officers in dealing with those claims.
Further, in the event that any of Landlord's employees travel off premises at
the request of Tenant and such travel results in damages or exposes Landlord to
liability, then Tenant will indemnify Landlord and hold it harmless from any
such claims or damages.
17. Insurance: Waiver of Claims.
a. Landlord has no obligation to and will not carry insurance on
Tenant's liability coverage, personal or business property or on the Premises.
Landlord will not be liable to Tenant or to any other person for damages on
account of loss, damage or theft, to any business or personal property of
Tenant. Tenant waives any claims against Landlord from any loss, cost,
liability or expense (including reasonable attorneys' fees) arising from
Tenant's use of the Premises or any common areas made available to Tenant by
Landlord or from the conduct of
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<PAGE> 5
Tenant's business, or from any activity, work, or thing done in the Premises or
common areas by Tenant or Tenant's agents, contractors, visitors or employees.
b. The Landlord shall not be liable or responsible to the Tenant for
any injury or damage resulting from the acs or omissions of Landlord, its
employees, persons leasing office space or obtaining services from the
Landlord, or other persons occupying any part of the Executive Suite or
Building, or for any failure of services provided such as water, gas or
electricity, or for any injury or damage to person or property caused by any
person (except for such loss or damage arising from the willful or grossly
negligent misconduct of the Landlord, its agents, servants, or employees) or
from the Landlord's failure to make repairs which it is obligated to make
hereunder. Neither Landlord or any of its agents, employees, officers or
directors shall be responsible for damages resulting from any error, omission
or defect in any typing, copying, assembling or other secretarial work, or work
performed or provided as part of the services rendered, whether uncompensated
services or compensated services are rendered.
c. Tenant shall provide Landlord with a certificate of insurance
evidencing General/Public Liability coverage with liability limits of not less
than One Million Dollars ($1,000,000) per occurrence for Bodily Injury and/or
Property Damage Liability and One Hundred Thousand Dollars ($100,000) per
occurrence for Fire/Legal Liability. Said insurance coverage shall remain in
force during the term of this Agreement and renewals thereof and the Landlord
shall be named as an additional insured. Tenant's failure to provide or
maintain such insurance shall not reduce or otherwise alter Tenant's liability
or responsibility to pay any judgment rendered against Tenant for such
Liability and Damages.
d. Tenant agrees to defend, indemnify and hold Landlord harmless for
and against any and all claims, damages, injury, loss and expenses to or of any
person or property resulting from the acts or negligence of Tenants. its
agents, employees, invitees and licensees while in the Building, Executive
Suite and Premises.
18. Right of Entry. Landlord has the right without notice to enter upon
the Premises at any reasonable time to examine same, make repairs, alterations
or improvements, or to show the Premises to prospective tenants, and in the
ordinary course of providing services requested by Tenant. Landlord's right of
entry shall include the right to enter upon the Premises for the purposes of
inspection. Landlord shall have a key to the Premises.
19. Waiver. If Landlord allows any default or variance in this Agreement,
or does not enforce each and every provision of this Agreement, same will not
constitute a waiver of its rights. No matter how often Landlord allows the
default or variance, or a variety of defaults or variances by Tenant or others,
or does not enforce each and every provision of this Agreement, it may still,
without advance notice, require strict adherence to this Agreement or prohibit
future variances. Nothing will change the terms of this Agreement, or extend
it, or add to it, unless in writing and signed by Landlord and Tenant.
20. Holdover. If Tenant or any one claiming through Tenant holds over in
the Premises beyond the expiration or termination of the term of this Agreement,
then Tenant's occupancy may be continued, at Landlord's option, on a
month-to-month basis, at an increased
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<PAGE> 6
rate equal to twice the Fixed Monthly Rental Charges set forth in Paragraph 2
hereof. The Fixed Monthly Rental Charges will be due on the first day of each
month, and there will be no pro-ration for a partial month of use.
21. Vacating. Upon the expiration or sooner termination of the term of
this Agreement, Tenant will promptly vacate the Premises in the same condition
as when first occupied by Tenant, normal wear and tear excepted, turn in its
keys, and provide Landlord with a forwarding address and telephone number.
22. Mail Forwarding. After termination or expiration of the term of this
Agreement, Tenant shall notify all parties of Tenant's new address. Landlord
will forward mail to Tenant at its new address for a period of 15 days, and
will bill Tenant for clerical, supplies and/or any cost of delivery or any new
postage necessary for the forwarding. Afterwards, mail forwarding may be
continued for a monthly fee of $50.00, plus 50 cents per piece handling fee and
any cost associated with delivery or postage. Tenant, if requested by
Landlord, shall pay a retainer against anticipated monthly forwarding charges.
Absent such an arrangement, mail will be returned.
23. Events of Default. The following are Events of "Default":
a. Fixed Monthly Rental Charges more than
five days past due;
b. Any other costs or charges more than ten
days past due;
c. If Tenant becomes insolvent, makes an
assignment for benefit of creditors, or files a
voluntary petition under any bankruptcy or insolvency
law, or has filed against it an involuntary petition
under any such law; or,
d. Default in any other terms of this
Agreement or the exhibits attached hereto, but only if
Landlord gives Tenant written notice of the default,
and Tenant fails to cure the default within five (5)
days of the notice. In the event of a recurring
default, Landlord will give Tenant five (5) days notice
to cure for the first event of default. Thereafter,
Landlord need not give Tenant any notice for a
substantially similar default.
24. Remedies. On Default, Landlord may choose any or all of the following
remedies:
a. Terminate this Agreement;
b. Accelerate the Fixed Monthly Rental
Charges, and demand all sums due immediately;
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<PAGE> 7
c. Take possession of all property in the
Premises and store same, at Tenant's expense, until
taken in full or partial satisfaction of any lien or
judgment;
d. Deny access to the Premises (as well as to
the Executive Suite) by Tenant and deny use of any of
the services; and
c. Any other remedies allowed by law.
25. Additional Charges Upon Default. In the event of default, Tenant will
be liable for the following additional charges:
a. Attorneys' fees and expenses incurred by
Landlord;
b. Time spent by any of Landlord's management
or the management of Landlord's agents, at the rate of
$170.00 per hour;
c. Interest on unpaid sums at 18% per annum;
d. Any other costs incurred by Landlord as a
result of the default.
26. Other Consequences of Default. In the event of default, Landlord may
immediately cease providing Tenant with any or all services, including but not
limited to, telecommunications services.
27. Primary Lease. Tenant recognizes that by a Primary Lease Agreement
between the owner of the Building and Landlord, dated November 15, 1994,
Landlord, ALLIANCE Greensboro, L.P., doing business as ALLIANCE Business
Centers, leased the Executive Suite. This Agreement is subject to the Primary
Lease Agreement.
28. Severability. In the event any one or more provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision were not contained herein.
29. Notices. All notices excluding late notification, under this Agreement
shall be in writing and shall be deemed given if: (i) delivered by hand, the
receiving party having signed a receipt therefor, or (ii) mailed by registered
mail or certified mail, return receipt requested, first class postage, or sent
by overnight courier providing a receipt, if to the Landlord:
ALLIANCE Greensboro, L.P.
Attn: Lori Shackleton
8201 Greensboro Drive, Suite 1000
McLean, VA 22102
with a copy to: ALLIANCE Business Centers
Attn: Accounting
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<PAGE> 8
122 East 42nd Street, Suite 1700
New York, NY 10168
and if to Tenant: HomeCom Communications Corporation
Attn: Mr. Vinod Keni
3535 Piedmont Road
14 Piedmont Center, #100
Atlanta, Georgia 30305
30. Ambiguities. Tenant has had an opportunity to read this Agreement and
to ask questions. If Tenant later claims any ambiguities in the Agreement,
those ambiguities will be interpreted in favor of Landlord.
31. Guaranty. In consideration of the execution this Agreement by the
Landlord, the undersigned Guarantors, jointly and severally, do hereby
guarantee to the Landlord, its successors and assigns, payment of all or any
sums due or to become due under the terms and conditions of this Agreement and
the performance by Tenant of all of the undertakings, obligations and
liabilities imposed upon Tenant by this Agreement. The liability of the
guarantors hereunder shall be unconditional and shall not in any manner be
affected by any indulgence whatsoever granted or consented to by the Landlord,
including but not limited to, any extension of time, renewal, waiver or other
modification. Guarantors are liable for all sums due under this Agreement, any
Extensions, Amendments, or Addenda thereof, and for any other sums due from
Tenant to Landlord, no matter when or how incurred. Landlord does not have to
attempt collection from Tenant before proceeding against Guarantor. Guarantor
will not be released unless Landlord specifically releases Guarantor in writing
signed by Landlord.
32. Returned Check. If a Tenant check is returned for any reason at all,
Tenant will pay an additional charge of $100.00 per returned check and, for the
purposes of calculating late charges or events of default, it will be as if the
payment represented by the check had never been made.
33. Entire Agreement. This Agreement, including Attachments and Exhibits,
expresses the entire understanding and all agreements of the parties. Neither
party has made or shall be bound by any agreement or representation to the
other party which is not expressly set forth herein. This Agreement may not be
modified orally or in any manner other than by an amendment in writing signed
by both the parties hereto.
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<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
<TABLE>
<S> <C>
Landlord:
ALLIANCE Greensboro, L.P., a Delaware
Partnership
Date: 7/29/96 By: /s/Lori Shackleton
------------------------------- ----------------------------------
EOG Greensboro, Inc.
General Partner
Lori Shackleton - General Manager
Tenant:
HomeCom Communications Corporation
Date: 7/25/96 By: /s/Roger Nebel
------------------------------- ----------------------------------
Print: Roger Nebel
-------------------------------
GUARANTORS:
-------------------------------------
-------------------------------------
</TABLE>
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<PAGE> 10
EXHIBIT A
Floor plan of Suite 1000 of the 8201 Greensboro Drive property.
<PAGE> 11
EXHIBIT B
BASIC TERMS OF AGREEMENT
<TABLE>
<S> <C>
Tenant: HomeCom Communications Corporation
Landlord: ALLIANCE Greensboro, L.P.
Term: Twelve Month Lease
Move in date: August 1, 1996 Move out date: July 31, 1997
Office/Suite No.(s): #1035
Conference Room Usage Allowance: Up to 40 hours per month
Fixed Monthly Office Rental: $2,675.00
Fixed Monthly Furniture Rental: $225.00
Fixed Monthly Phone Charge: See Exhibit "F"
Fixed Monthly Add'l People Charge 0.00
Fixed Monthly Parking: $50.00 per pass (Three Complimentary Passes for first lease term)
Other Fixed Monthly Charges:
Description
Refundable Service Deposit:
Equal to Two Months Recruiting $5,800.00
Keys Sets Included (#3 of Sets))
Total Deposit $5,800.00
Payment Due at Signing:
1st Month's Office Rental $2,675.00
1st Month's Furniture Rental 225.00
1st Month's Add'l Person 0.00
1st Month's Furniture Tax 10.13
Start-Up Fee 75.00
Service Deposit 5,800.00
TOTAL FIRST MONTH'S RENTAL AND CHARGES AND DEPOSIT $8,785.13
Note: Please be sure to write a separate check for al deposits.
Payment Due on the first of each month thereafter:
Fixed Monthly Office Rental $2,675.00
Fixed Monthly Furniture Rental 225.00
State Tax on Furniture Rental (4.5%) 10.13
Other Fixed Monthly Charges 0.00
TOTAL FIXED MONTHLY RENTAL CHARGES $2,910.13
</TABLE>
<PAGE> 12
EXHIBIT B (CONTINUED)
FEATURES & SERVICES INCLUDED IN OFFICE RENT
1. Individual office(s) appointed with a set of office furniture (if
included in Exhibit E).
2. Cleaning and maintenance of office space and trash collection.
3. HVAC during normal business hours (per building regulations), electric
utility costs and real estate taxes per Agreement (Does not include
occupancy taxes if applicable.)
4. Twenty-four hour access to office.
5. Reasonable use of kitchen facilities.
6. Furnished reception area and a receptionist to greet and announce guests.
7. Use of conference rooms and audio-visual equipment based on the
"Allowance" specified in Exhibit B and subject to availability.
8. Personalized telephone answering Monday through Friday from 8:30 a.m. to
5:30 p.m.
9. Building directory listing, subject to availability.
10. Facsimile Number (usage to be billed at attached rates)
11. Normal Mail and package receiving.
<PAGE> 13
EXHIBIT C
SCHEDULE OF SERVICES
<TABLE>
<S> <C> <C>
A. ACCOUNTING
1. Establishing a second account for Tenant's convenience $25.00 each time
2. Clerical fee for processing payment using MC/VISA $25.00 each time
3. Clerical fee for processing payment using American Express $25.00 each time
4. Fax or send duplicate statement or records
(plus postage and faxing costs) $5.00/copy/each
5. Research, collection calls or processing Actual time billed as Clerical Service
(plus postage, faxing and telephone incurred charges)
B. ADMINISTRATIVE
1. Credit authorization fee per contract (charged to all new Tenants/Clients) $75.00/contract (Full-time Tenant)
2. Moving a Tenant from one suite to another, switching keys and cards $50.00/contract (Identity)
3. Additional employee initial set up $50.00 one-time charge
Recurring Monthly Charge $100.00/month
4. Painting and cleaning fee for a lease of less than six (6) months
including administrative coordination $200.00 per office
5. Lost security card, lost key $25.00 per item
C. ANSWERING SERVICE (8:30 - 5:30 p.m.) (Mon. - Fri.)
1. Full-Time Tenant Included in Contract
2. Answering Service/Voice Mail Only $110.00 (Includes 2 persons, one
voice mail box)
(Hand written messages will be assessed a Clerical Service fee billed in 6 minute
increments.)
D. CLERICAL SERVICE*
Standard Clerical Rate
1. Proofreading/Editing, outgoing calls for Tenants, typing forms,
preparation of expense reports, payroll, check reconciliation, light
accounting, bill paying, invoicing (bookkeeping), extensive fax
transmission, travel, ordering office supplies, photocopying for $22.00/Hour
Tenants or visitors, bank deposits, arrange conference calls and (24-Hour Turnaround)
meetings, computer maintenance, research, filing, project Clerical Service billed in 6 minute
coordination. increments
2. The clerical services mentioned above will be billed at 200% per $44.00/Hour
Clerical rate if performed before or after scheduled working hours, (1-8/Hour Turnaround)
or requested as a rush job. Clerical Service billed
in 6 minute increments
3. Notary Clerical Service billed
in 6 minute increments
4. Patching a call through to a seven-digit number not set up with a patch 6 minutes Clerical per call plus
service. cost of call
E. CONCIERGE SERVICES
Arrangement for Business Supplies, Catering, Meal order taking, etc. Clerical Service billed in 6 minute
increments (18 minute minimum)
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C>
F. CONFERENCE ROOMS
1. Rental Included for Full-Time Tenants
$25.00/Hour
$150.00/day (1-12 Persons)
2. Seminar Room Included for Full-Time Tenants
$50.00/Hour
$300.00/day (up to 40 Persons)
3. Cancellation, if not within 24 hours for conference room, will be applied Billed at 50% of time reserved
to Identity Tenants only.
4. Clean up after Client/Tenant in conference room Clerical Service billed in 6
minute increments
(18 minute minimum)
G. DIRECTORY LISTING - BUILDING LOBBY
1. Full-Time Tenant Included
2. Identity Client or Additional Listing $40.00/line/one-time
H. FURNITURE
1. Moves/adds/changes including administrative coordination $25.00/piece
2. Additional Furniture Rental Price Based on Piece Requested
Standard Furniture Set $75.00/month/set
I. KITCHEN FACILITIES - Coffee, tea, etc.
1. Tenants/Clients per cup service Included
2. Pots for Conf. Room $10.00/pot
J. MAIL SERVICES
1. Deliver parcel to Tenants office or distribute to client from front desk.
All parcels are called to Tenant. (If not picked up by 5:00 p.m., we will
deliver to office. (6 minutes Clerical Service)
2. Prepare Certified, express, or Courier (6 minutes Clerical Service)
3. Check mailbox/review mail by phone (6 minutes Clerical Service)
4. Prepare packages, such as label/wrap Clerical Services billed in 6
minute increments
5. Trace Shipments (Fed Ex, UPS, etc.) (6 minutes Clerical Service plus call
of call)
6. Mass mailings (folding, stuffing, posting, etc.) Varies depending upon size of
mailing.
K. MESSAGE HANDLING
1. Message taking for visitors or conference room use Clerical Services billed in 6 minute
increments
2. Tenant advertisements - recording messages Clerical Services (18 minute
minimum)
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C>
3. Relaying Tenant voice mail messages over the phone Clerical Services billed in 6
minute increments
4. Advertisements - Newspaper/magazine/publish material, etc. $30.00/ad/month
L. OFFICE SUPPLIES
1. Minimum supplies are available on site through ALLIANCE or may be Cost + 20%
ordered. (See a Clerical Assistant for requests)
2. Weekly orders may be placed directly for Tenant Clerical Services billed in 6
minute increments (18 minute
minimum)
M. PARKING
1. Surface Complimentary
2. Covered Parking Garage $50.00/pass/month
N. POSTAGE FEES
1. U.S. Mail/UPS Cost + 20%
2. Courier Service Cost + 20%
3. Federal Express Standard Rates
(Landlord shall serve as postal agent to all tenants and clients.)
O. PRODUCTION AND COPYING
1. Binding, copying, transparencies (production time only) Clerical Services billed in 6
minute increments
2. Photocopies $.15/ea. (1-500)
$.10/ea. (Production Rate)
3. Binding (Includes Spine, Cover & Backing)
(A medium volume copy machine is available for Tenants.) $3.50/ea.
P. TELECOMMUNICATIONS
1. Standard Phone Equipment
- includes phone with built in speaker phone, DID phone number with 2 $95.00/set per month
rollover lines, 1 line directory listing, voice mail and other basic features
of telephone system. Installation fee and set up not included. (Billed
Directly from Fairchild Communications Services Company)
2. Phone, Fax or Dataline installation. $130.00/line
3. Fax or Data Line (Additional recurring charge each month) $40.00/line per month
4. Additional voice mail boxes/telephone answering $110.00/person per month
5. Splitting a phone number for additional voice mail boxes $10.00/each box per month
6. Voice mail; adding another personal box $10.00/each box per month
7. Programming voice mail to pager $25.00 programming fee per pager
8. Voice Mail Paging (Monthly) $25.00/each pager per month
plus call transfer fee (As
charged by local phone company)
9. Call Patching set up fee $25.00 per number (one time
charge)
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C>
10. Call Patching (Monthly) (Includes 40 patches) $25.00/month plus call transfer
fee (Based on distance of call)
Additional patches $.75 ea.
11. Reconnect fee (after termination of service) $130.00/phone or data line
Q. TELECOPY/FAX - (Plain paper fax available)
1. Outgoing $2.00/page + Phone Call
2. Incoming $.50/page
(Clerical charges may be incurred for faxes sent after normal business
hours.)
R. WORD PROCESSING/GRAPHICS*
1. Standard Word Processing Rate $26.00/hour
2. The Word Processing rate mentioned above will be billed at 200% per this $52.00/hour
rate if performed before or after scheduled working hours, or requested as a
rush job.
3. Resumes: $40.00/1st page
Typing Only $20.00/each additional page
4. Resume Writing Consultation Services $45.00/hour
5. Resumes supplied on diskette provided by Landlord $10.00/disk
6. Letters typed for outside Tenants (including cover letters for resumes) $9.00/page
7. Letters, memos, proposals $26.00/hour billed in 6 minute
increments (18 minute minimum)
8. Tables, charts $35.00 - 80.00/hour billed in 6
minute increments (18 minute
minimum)
9. Company Flyers, Pamphlets, Brochures Varies upon scope of project
10. Technical Design Varies upon scope of project
11. Flow Charts Varies upon scope of project
12. Logo Design Varies upon scope of project
13. Business Cards (consultation with Tenant and includes 3 designs-does not
include print shop charges) Varies upon scope of project
14. Letterhead and/or envelope design (consultation with Tenant and includes
5 designs--does not include print shop charges) Varies upon scope of project
15. Spreadsheets $35.00-80.00 (Price may vary
depending upon complexity of
spreadsheet (i.e., formats)
</TABLE>
*Landlord shall bill in accordance with Industry Production Standards (IPS),
published by the National Association of Secretarial Services and the Executive
Suite Association. IPS are used for computing the time charged for document
production and non-keyboarding services. IPS are based on the average time
required to perform specific duties by a professional word processing operator.
This allows Tenant to know how much a project will cost regardless of how long
it takes to complete it.
<PAGE> 17
EXHIBIT D
RULES AND REGULATIONS
1) Landlord shall assign Tenant a specific Client number, unique to Tenant
which Tenant shall use to obtain various services from Landlord including:
photocopies, typing, word processing and dictation/transcription,
clerical, concierge and assorted other services. Tenant agrees to keep
this Client number confidential and Tenant agrees to pay all costs for
services charged to this Client number. The Landlord will maintain
records that account for all such service charges for a period of sixty
(60) days after billing Tenant for these charges. These records are
available for review by Tenant upon request of at least three (3) business
days prior written notice.
2) Any special wiring, including any computer or printer networking wiring
desired by Tenant, must be approved in writing by the Landlord and
installed at Tenant's expense by an electrician approved by the Landlord.
Tenant shall bear the cost of removing such wiring at the expiration of
the Lease term.
3) Tenant shall not use hot plates, coffee makers, microwave ovens or
similar devices in the Premises nor shall Tenant at any time use in the
Premises any machine, equipment, or other article which, in Landlord's
judgment, creates an unreasonable risk of fire, explosion, or other
hazard, or requires excess electrical current.
4) The sidewalks, entries, passages, public corridors, stairways and other
parts of the Building and Executive Suite shall not be obstructed or used
for any other purpose than ingress or egress.
5) Tenant shall not install or permit the installation of mylar films or sun
filters on windows. Tenant shall not place any type of sign in the
Premises, Executive Suite or the Building.
6) Tenant agrees to conduct business in the Premises in a quiet and orderly
manner so as not to disturb other occupants. Loud music, noisy equipment
and other disturbing sounds are not permitted. Tenant agrees to take
whatever steps are necessary to correct or cease any violation of this
regulation immediately upon notification of such violation by Landlord.
7) Bicycles, motor scooters or any other type of vehicle shall not be
brought into the Building, Executive Suite or the Premises.
8) No animal shall be permitted within the Premises, Executive suite or the
Building at any time, except if permission is granted in writing by
Landlord.
9) Tenant will not conduct any activity within the Premises, Executive Suite
or Building which in the sole judgment of the Landlord will create
excessive traffic or is inappropriate to the executive suite environment.
10) Without Landlord's specific prior written permission, Tenant is not
permitted to place "mass market", direct mail or advertising (i.e.
newspaper, classified advertisements, yellow pages, billboards) using
Tenant's assigned telephone number or take any such action that would
generate a significant number of incoming phone calls.
11) Immediately following Tenant's use of conference room space and/or
Audio/Visual equipment, Tenant shall clean up and return the space and
equipment to the state and condition it was in prior to Tenant's use. If
not, Landlord may charge Tenant for the "clerical time" and any other
expenses required to restore the conference space and/or equipment to its
original condition.
12) Tenants who leave equipment "on" in the Premises overnight or for long
periods of time when they are not in the Premises will be subject to an
additional charge for excess electrical usage unless this usage was
approved in writing by the Landlord and specifically included in Tenant's
monthly rent.
13) Tenant shall not provide or offer to provide any services to Landlord's
Tenants or it's other customers if such services are available from the
Landlord.
<PAGE> 18
14) Cigar smoking is not permitted anywhere in the Building. Cigarette
and/or pipe smoking is permitted only in designated areas. Landlord has
the right to change designated smoking areas upon at least two (2) days
prior written notice.
15) Tenant shall not make any additional copies of any Landlord issued keys.
All keys and security cards are the property of Landlord and must be
returned upon request or by the close of the business on the expiration or
sooner termination of the Agreement terms. Any lost or unreturned keys or
cards shall incur a $25.00 per item charge and the cost to re-key the
office.
16) Landlord must be notified in writing if Tenant desires to utilize the
conference room or other common areas of the Executive Suite during
weekend hours. Landlord may deny the Tenant access if the desired usage
is inappropriate and may disrupt normal operations.
17) Tenant shall not solicit other Tenants of the Executive Suite or
companies and their employees in the Building without first obtaining
Landlord's prior written approval.
18) Tenant is aware that employees of Landlord are not permitted to date
Tenants or their employees and Tenant shall so advise its employees.
19) Tenant's parking rights (if any) are defined by the Landlord's Lease
agreement with the owner of the Building. Landlord reserves the right to
modify parking arrangements if required to do so by Building management.
20) Tenant must abide by any rules and regulations set forth by the Building
in addition to those of the Landlord.
21) ALLIANCE Business Centers is a network of shared office facilities which
includes owned, Affiliate, and Associate locations. Due to the nature of
the network there may be periodic changes in membership. Consequently,
ALLIANCE cannot guarantee that any location that is currently in the
network will be a participant in the future.
22) ALLIANCE Business Centers is not a franchise and therefore does not in
any way dictate or control the operations of Affiliate or Associate
locations.
23) Without Landlord's specific prior written permission, Tenant shall not
install any equipment such as copiers and fax machines in the Premises.
24) Schedule D may be modified or amended at any time by the Landlord to
assure, in Landlord's sole judgment, a professional and cost effective
business operation of the Executive Suite within which the Premises are
contained.
<PAGE> 19
EXHIBIT E
SCHEDULE OF FURNISHINGS
<TABLE>
<CAPTION>
FURNITURE COLOR CONDITION CHARGE
- --------- ----- --------- ------
<S> <C> <C> <C>
3 Executive Desk(s) Mahogany Good
- -
3 Credenza(s) Mahogany Good
- -
0 Lateral File(s)
- -
1 Bookcase(s) Mahogany
- -
0 Round Conference Table(s)
3 Executive Chair(s) Teal Good
- -
6 Guest Chair(s) Mahogany Good
- -
0 Secretarial Chairs(s)
- -
3 Waste Basket(s) Tan Good
- -
3 Floor Mat(s) Clear Good
- -
</TABLE>
<TABLE>
<CAPTION>
ARTWORK: _____ FRAMED PICTURE(S)
- -------
<S> <C>
(1) (2)
------------------------------------------- ---------------------------------------
(3) (4)
------------------------------------------- ---------------------------------------
(5) (6)
------------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
<S> <C>
ADDITIONS/DELETIONS: DATE:
--------------------------------------- ------------------
COMMENTS ON CHANGES:
----------------------------------------------------------------------
Tenant SIGNATURE: /s/ Roger Nebel DATE: 7/29/96
--------------------------------------- ------------------
Landlord SIGNATURE: /s/ Lori Shackleton DATE: 7/29/96
--------------------------------------- ------------------
</TABLE>
<PAGE> 20
EXHIBIT E (CONTINUED)
SCHEDULE OF KEYS
One key each for file drawer in credenza and desk
<TABLE>
<S> <C>
3 keys(s) for office/suite (#1035) door
3 security card for building #8201 (card #_____________)
3 security key or card for 10th floor at 8201 Greensboro Drive
Tenant SIGNATURE: /s/ Roger Nebel DATE: 7/29/96
-------------------------------------------- -----------------
Landlord SIGNATURE: /s/ Lori Shackleton DATE: 7/29/96
-------------------------------------------- ------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.8
APPLE SOLUTION PROFESSIONALS NETWORK ENROLLMENT AGREEMENT
This Apple Solution Professionals Network Enrollment Agreement ("Agreement") is
made between Apple Computer, Inc., ("Apple") and the qualified individual or
organization set forth on the reverse side of this Agreement ("Applicant").
This Agreement shall govern Applicant's ability to participate in Apple's
then-current Apple Solution Professionals Network ("ASPN") Program (the
"Program"). By signing below, Applicant agrees to be bound by the terms and
conditions of this Agreement.
1. ASPN Offerings. Apple shall communicate to Applicant the current
offerings under the Program. The Applicant understands that Apple reserves the
right to modify terms, conditions, and policies of the Program at any time
without notice.
2. Certification. The Applicant hereby certifies that the information that
the Applicant has supplied in the application is true and correct and
acknowledges that Apple has relied on such information for purposes of
determining the Applicant's qualifications for the Program. It is understood
and agreed that this information is for the express use of Apple and does not
constitute certification or endorsement by Apple or the Applicant. The
Applicant understands that Apple reserves the right to discontinue membership
of any applicant who does not meet the criteria for participation; such
criteria shall be determined at Apple's sole discretion. NO refund or partial
refund of the Program's annual fee will be made in the event Applicant's
membership is discontinued. The Applicant understands that participation in
the Program is limited to entities located in and supplying information to
customers located in the United States (fifty states and DC) only.
3. Relationship with Apple. The Applicant understands and agrees that the
Applicant is an independent contractor, has no power or authority to bind
Apple, and is applying solely for membership in the Program. Nothing in this
Agreement or the Program application shall be construed as creating any
relationship such as employer-employee, principal-agent or
franchisor-franchisee.
4. Apple Proprietary Rights. The Applicant agrees that the Applicant is not
authorized or permitted by Apple to use the name "Apple Solution Professionals
Network," unless and until ASPN membership has been fully processed at the
Affiliate level. Use of the ASPN logo shall adhere strictly to the guidelines
as set forth in Apple's then current ASPN Handbook. The Applicant further
agrees that the Applicant is not authorized or permitted by Apple to use the
registered trademarks "Apple," the Apple logo, or any other trademarks
or trade names belonging or licensed to Apple in any advertising or in any way.
5. Information Access and Release Authorization. Applicant hereby
authorizes Apple to disclose and/or publish information regarding the
Applicant's name, address, expertise profile, and business profile in printed
and/or electronic forms such as directories, HyperCard stacks, CD-ROMs, on-line
access, and the like.
6. Confidentiality. The Applicant agrees that any information disclosed to
the Applicant by Apple, whether oral or written or in other tangible form, and
that is identified by Apple as confidential or proprietary, shall be
characterized as confidential information and that the Applicant will not
disclose such confidential information to any employees who do not have a
specific need to use such information or to any third party without Apple's
prior written consent. The Applicant agrees to return to Apple immediately
upon Apple's written request any confidential information the Applicant has
received in writing or in other tangible form. The Applicant acknowledges that
the unauthorized disclosure or use of Apple confidential or proprietary
information will cause irreparable harm and significant injury to Apple that
may be difficult to ascertain. Accordingly, the Applicant agrees that Apple
will have the right to seek and obtain immediate injunctive relief in addition
to any other rights and remedies Apple may have.
7. No Warranty. The Applicant understands that the information provided to
the Applicant by Apple is supplied "AS IS" without warranty of any kind as to
its accuracy or completeness. To the extent that Apple makes available any
products or product information, the applicant understands that Apple is under
no obligation to provide updates, enhancements, or corrections or to notify the
Applicant of any product changes that Apple may make. Apple accepts no
responsibility or liability for any expenses, losses, or action incurred or
undertaken by the applicant with respect to the information.
8. Terms. Unless terminated as provided herein, this Agreement shall be
effective upon the shipment of the Program Welcome Kit to the Applicant from
Apple. Applicant fees are for an annual period beginning from the effective
date. Applicant and Apple agree that in no event shall either party be
obligated to renew or extend this Agreement.
9. Termination with Thirty (30) Days Notice. Either party may terminate
this Agreement at will at any time, with or without cause, by written notice to
the other party not less
<PAGE> 2
than THIRTY (30) DAYS before the effective date of such notice.
10. Immediate Termination. To the extent permitted by applicable law, Apple
may terminate this Agreement immediately and without notice in the event that:
(A) Applicant fails to perform any obligation, duty, or responsibility imposed
under this Agreement and such failure remains unremedied FIFTEEN (15) DAYS
after written notice thereof;
(B) Applicant commits a felony, engages in an unlawful business practice;
(C) there should be any material change or transfer in the management or
control of Applicant, Applicant's business operations, or any new affiliation
or transfer or any substantial part of its business; or
(D) any conduct or proposed conduct of Applicant exposes or threatens to expose
Apple to any liability or obligation, including any federal, state, or local
law.
11. Effect of Termination. Upon expiration or termination of this
Agreement:
(A) Applicant shall immediately cease use of the name "Apple Solution
Professionals Network" and the ASPN logo, and otherwise discontinue
representing to the public and trade that it is a participant in the Program.
(B) Applicant shall promptly return to Apple all Apple confidential information
or certify in writing that it has destroyed such information;
(C) No refund or partial refund of the Program's annual fee will be made in the
event the Agreement is terminated; however, if Apple terminates the Agreement
pursuant to Section 9 above, Apple shall refund a pro-rata portion of the
annual membership fee based on the effective date and the termination of the
Agreement.
12. Limitation of Liability. IN NO EVENT SHALL APPLE BE LIABLE FOR DIRECT,
INCIDENTAL, CONSEQUENTIAL, INDIRECT, OR SPECIAL DAMAGES OF ANY NATURE,
INCLUDING, WITHOUT LIMITATION, LOST BUSINESS PROFITS.
13. Limitation of Remedies. THE REMEDIES SET FORTH IN THIS AGREEMENT SHALL
BE APPLICANT'S SOLE AND EXCLUSIVE REMEDIES FOR ANY BREACH OF THIS AGREEMENT BY
APPLE.
14. Governing Law/Disputes/Notices. This Agreement and the corresponding
relationship of the parties shall be governed by and construed in accordance
with the laws of the State of California. Any dispute, resolution, or
proceeding with respect to this Agreement shall take place in the County of
Santa Clara, State of California. Notices and demands of any kind that
Applicant may be required or desire to serve upon Apple pursuant to this
Agreement shall be served by United States mail, postage prepaid, or overnight
courier, to Apple, Inc., at :
Apple Computer, Inc.
Attn: Apple Law Department
900 E. Hamilton Avenue, M/S 76-LG
Campbell, CA 95008
15. Severability/Waiver. In the event that any provision of this Agreement
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining portions of this Agreement shall remain in full
force and effect and construed so as to best effectuate the intention of the
parties upon execution. The waiver of any one default shall not waive
subsequent defaults of the same or different kind.
16. Entire Agreement. This document and all Apple provided documents with
respect to Applicants utilization of specific elements of the Program contain
all the agreements, warranties, understanding, conditions, covenants, and
representations made between Applicant and Apple. Any different or additional
terms and conditions in any purchase order, invoice or other such document are
hereby expressly rejected by Apple and shall have no force or effect.
The duly authorized representative of the Applicant hereby executes this
Agreement on the date set forth below.
/s/HomeCom Communications
- ---------------------------------------------
Company Name
/s/Shannon Kinnard
- ---------------------------------------------
Name (print)
/s/Marketing
- ---------------------------------------------
Title
/s/ Shannon Kinnard
- ---------------------------------------------
<PAGE> 3
ASPN ENROLLMENT FORM
Make the connection today! Simply complete and sign this form then:
Fax it to us at 1-800-ASPN-FAX (277-6329) or
Mail it to us at P.O. Box 277, Minneapolis, MN 55440-0277
Enrollment Process
Thank you for your interest in the Apple Solution Professionals Network. The
information you provide on this application will help us process your
membership quickly and easily. Please read and complete this form carefully.
Note: Your signature is required on the terms and conditions located on the
back of this form to finalize enrollment processing.
Once your enrollment form has been processed, an ASPN Welcome Kit will be sent
to you within two weeks.
Membership Information
<TABLE>
<S> <C> <C>
Kinnard Shannon Marketing
-----------------------------------------------------------
Last Name (please print) First Name Title
HomeCom Communications
-----------------------------------------------------------
Company Name
3535 Piedmont Road, Building 14, Suite 100
-----------------------------------------------------------
Mailing Address
Atlanta GA 30305
-----------------------------------------------------------
City State Zip
(404) 237-4646 (404) 237-3060
-----------------------------------------------------------
Phone Number Fax Number
</TABLE>
Market Focus
Please indicate which customer market segments you target. (Check all that
apply.)
[x] Accounting
[x] Advertising Agencies
[ ] Agribusiness
[ ] Architecture/Construction
[x] Business, Small
[x] Business, Medium
[x] Business, Large
[x] Communications
[x] Distribution
[ ] Education (K-12)
[ ] Education (Higher)
[x] Engineering
[x] Entertainment
[x] Finance/Banking
[ ] Government/Federal
[ ] Government/ St. & Local
<PAGE> 4
[x] Graphic Design
[x] Human Services
[ ] Legal
[ ] Manufacturing
[ ] Medical/Dental
[x] Non-Profit Organizations
[x] Printing/Publishing
[x] Professional Services
[x] Real Estate
[x] Retail
[ ] Utilities
[ ] Other
Services & Solutions
Please indicate the services & solutions areas in which you have expertise.
(Check all that apply.)
[x] 2D/3D Drawing
[x] Business Consulting
[x] Custom Development
[x] Database Management
[x] Developer/Programmer
[ ] Executive Info. Systems
[ ] Financial
[ ] General Productivity
[x] Graphic Design
[x] Imaging
[x] Internet Services
[x] Multimedia
[ ] Network Configuration
[x] Networking & Communications
[ ] Newton Development
[x] Office Automation
[x] On-site Support
[ ] Pre-Press/Publishing
[ ] Project Management
[x] Sales Automation
[x] Technical Design
[x] Technology Planning
[x] Training
[x] Troubleshooting
[x] Other Web Development
Membership Requirements
An e-mail address is required of all ASPN members to provide product, program,
and industry information, as well as offer a consistent and timely
communication exchange mechanism with program members, Apple personnel, and
other interested parties.
If you don't have an e-mail service, information on establishing an e-mail
account will be in your ASPN Welcome Kit. If you already have an e-mail
account, please provide your address.
Shannon @ HomeCom
Apple Representative Approval
If you are enrolling as an Affiliate member, the Apple Representative for your
area will contact you.
<PAGE> 5
Payment Information
[ ] Colleague (U.S. $95)
[ ] Affiliate (U.S. $495)
[ ] Money Order, Personal, Company, or Cashier's check payable to: Apple
Computer, Inc.
Amount enclosed or authorized $495
- --------------------------------------------
Card Holder Name
- ------------ ----------------------------
Card Number Expiration Date
- --------------------------------------------
Card Holder Signature
<PAGE> 1
EXHIBIT 10.10
BBN PLANET CORPORATION
Internet Services and Products Master Agreement
(September 1995)
This Master Agreement defines the terms and conditions under which BBN
Planet Corporation ("BBN Planet") will provide your organization ("Customer")
with Internet services and products.
1. BBN Planet will provide services and products as ordered by Customer.
Scope, price and payment terms for services to be provided, and any additional
terms and conditions, will be defined in Addenda to this Master Agreement.
This Master Agreement, together with all such Addenda, shall replace and
supersede any other Agreements between the parties for Internet services and
products.
2. BBN Planet makes no warranty of any kind with respect to services and
products provided under this Agreement. BBN PLANET DISCLAIMS ALL WARRANTIES,
EXPRESS AND IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. In any instance involving performance or
nonperformance of services or products provided hereunder, Customer's sole
remedy shall be (a) in the case of services, refund of pro rata portion of the
price paid for services which were not provided, or (b) in the case of
products, repair or return of the defective product to BBN Planet for refund,
at the option of BBN Planet. Except as may otherwise be set forth in this
Agreement, in the case of refund for lost service, credit will only be issued
for periods of lost service greater than twenty-four (24) hours.
BBN Planet will not be liable for any damages Customer may suffer arising
out of use, or inability to use, its Internet services or related products
unless such damage is caused by an intentional and willful act of BBN Planet.
In no event shall BBN Planet be liable for unauthorized access to Customer's
transmission facilities or Customer premises equipment or for unauthorized
access to or alternation, theft or destruction of Customer's data files,
programs, procedure or information through accident, fraudulent means or
devices, or any other method. BBN Planet will not be liable for indirect,
incidental, special or consequential damages or for any lost property or data
of Customer. BBN Planet's liability for damages to Customer for any cause
whatsoever, regardless of form of action, including negligence, shall not
exceed an amount equal to the price of products and services purchased by
Customer during the twelve month period preceding the event which caused the
damages or injury; provided, however, that this limitation shall not apply to
damages to Customer for personal injuries or destruction of tangible personal
property proximately caused by the negligence of BBN Planet.
3. BBN Planet will indemnify and hold Customer harmless against any
claim or demand by any third party that any hardware or software provided to
Customer hereunder, infringes any copyright, patent, trade secret or other
intellectual property right under the laws of the U.S., Japan, Canada, or any
member country in the European Union as of January 1, 1995. Except for damages
incurred by BBN Planet caused by (a) proprietary rights infringement claims as
provided for above, or (b) damages for personal injuries or destruction of
tangible property
<PAGE> 2
proximately caused by BBN Planet's negligence, Customer agrees to indemnify and
hold BBN Planet harmless against any claim or demand by any third party due to
or arising out of the use by Customer of Internet services and related products
provided hereunder.
4. Customer understands that Internet use, and related products and
services provided under this Master Agreement, may require registrations and
related administrative reports which are public in nature. In addition,
Customer agrees BBN Planet may include its name in directories of BBN Planet
customers.
5. Customer's right to use the Internet services and products provided
hereunder is limited to Customer and is nontransferable except to organizations
controlling, controlled by, or under common control with Customer. Customer
may also transfer its right to use these Internet services and products if
transferred as part of a sale or transfer of substantially all its assets
subject to the approval of BBN Planet which will not be unreasonably withheld.
6. This Master Agreement, together with any Addenda, constitutes the
entire agreement of the parties with respect to the services and products
provided hereunder. These terms and conditions shall prevail notwithstanding
any different or additional terms and conditions in any forms provided by
Customer.
These Terms and Conditions have been read, are understood, and are hereby
accepted.
<TABLE>
<S> <C>
Customer Representative (Signature): /s/ Harvey Sax Date: 2/1/96
---------------- -----------------
Name: HomeCom Communications Title: President
----------------------------------------------- ----------------
Customer Name: Harvey Sax
--------------------------------------
</TABLE>
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<PAGE> 1
EXHIBIT 10.11
BUSINESS PARTNERS PROGRAM
AUTHORIZED BUSINESS PARTNERS AGREEMENT
This Agreement (the "Agreement") is between BBN Planet Corporation ("BBN
Planet"), a Massachusetts corporation, located at 150 CambridgePark Drive,
Cambridge, MA 02140 and you, the BBN Planet Business Partner ("BP")
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BBN Planet hereby appoints BP as a non-exclusive BP under the BBN Planet
Authorized Business Partner Program in the United States, excluding U.S.
territories, for the services and products made available by BBN Planet under
the BBN Planet Authorized Business Partner Program (the "BP Program").
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Planet for BP Program participants.
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2.5. Program Terms Subject to Change. BBN Planet may change any of the
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Agreement and its participation in the BP Program without cause upon any change
in BBN Planet in these terms.
3. BP PROGRAM SALES AGENT AUTHORITY
3.1. BP shall not make any representations or statements regarding BBN
Planet services and products other than those contained in BBN Planet marketing
literature and promotional materials.
3.2. BP acknowledges and agrees that the relationship between it and BBN
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be construed as making BP or any of its employees as an employee, partner or
representative except as may be expressly provided in this Agreement.
<PAGE> 2
3.3. BP has neither expressed no implied authority to accept orders from
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This Agreement shall take effect on the date this Agreement is signed by
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The Term of this Agreement shall automatically extend for an additional one (1)
year period commencing on the expiration date of the then-current term unless
either party has provided written notice of termination prior to such date.
Either party shall have the right to terminate this Agreement at any time,
without cause on the giving of thirty (30) days prior written notice. Neither
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belief, all the information it supplied in its BBN Program application is
accurate in all material respects and undertakes that it will continue to be
so during the term of this Agreement. Should there by any changes in such
information during the term of this Agreement, BP shall promptly inform BP in
writing of such changes.
5.2. BP may represent itself as an authorized BBN Planet Business
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represent that BP's products and services are affiliated with or endorsed by
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BBN Planet hereby grants BP a non-exclusive, revocable right to use
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letterhead and in related sales, marketing and promotional materials in the
manner set forth and subject to the color and size restrictions determined by
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way. BP agrees to submit to BBN Planet, upon request, samples of its use of
the Logo for review. Upon expiration or termination of this Agreement, BP
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5.3. BP shall participate in BBN Planet BP Program training activities
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6. ORDER ACCEPTANCE
Unless otherwise agreed to in writing by BBN Planet, orders for BBN Planet
products and services which are presented to BBN Planet shall not be deemed
accepted by BBN Planet until such orders have been signed by BBN Planet and
returned to BP.
-2-
<PAGE> 3
7. COMMISSIONS
BBN Planet shall pay commissions to BP for sale by BP of BBN Planet
services and products made available under the BP Program in amounts determined
from time to time by BBN Planet.
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8.1 All trademarks, service marks, trade names, or logos which identify
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BP title to any intellectual property rights in or to BBN Planet services or
products.
8.2 BP shall use and disseminate only current BBN Planet-provided sales
and promotional materials.
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Each party shall retain in confidence all information and know-how
transmitted to the other that the disclosing party has identified as being
proprietary and/or confidential or that, by the nature of the circumstances
surrounding the disclosure, ought in good faith to be treated as proprietary or
confidential, and will made no use of such information and know-how except
under the terms and during the term of this Agreement. However, neither party
shall have an obligation to maintain the confidentiality of information that
(i) it rightfully received from another party prior to its receipt from the
disclosing party; (ii) the disclosing party has disclosed to a third party
without any obligation to maintain such information in confidence; (iii) enters
the public domain by some action other than breach of this Agreement by the
receiving party; or (iv) is independently developed by the receiving party.
Each party shall safeguard proprietary or confidential information disclosed by
the other using the same degree of care it uses to safeguards its own
proprietary and confidential information but, in no event, shall use less than
a reasonable degree of care. Each party's obligation under this paragraph
shall extend for a period of three (3) years following termination or
expiration of this Agreement.
10. LIMITED WARRANTY
EXCEPT ANY EXPRESS WARRANTIES AS MAY BE SET FORTH IN BBN PLANET SERVICE
AND PRODUCT AGREEMENTS MADE AVAILABLE UNDER THE BP PROGRAM, BBN PLANET
DISCLAIMS ALL WARRANTIES WITH REGARD TO SERVICES AND PRODUCTS RECEIVED UNDER
THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
11. LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE FOR SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR INDIRECT DAMAGES, INCLUDING, BUT NOT LIMITED
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<PAGE> 4
TO, DAMAGES RESULTING FROM THE USE OR INABILITY TO USE THE SERVICES OR
PRODUCTS, DELAY OF DELIVERY OR LOSS OR PROFITS, REVENUE, DATA OR GOODWILL,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THE LIMIT OF MONETARY DAMAGES AGAINST BBN PLANET UNDER THIS AGREEMENT SHALL IN
NO EVENT EXCEED THE AMOUNTS PAID BY BUSINESS PARTNER TO BBN PLANET UNDER THE
BUSINESS PARTNER PROGRAM.
12. GENERAL
12.1 All legal notices required to be given in connection with this
Agreement shall be deemed delivered two (2) business days after they are sent
by air express courier (e.g., Federal Express), charges prepaid, return receipt
requested, and addressed as follows:
BP: (name and address set forth in this Agreement)
MS: BBN PLANET CORPORATION
150 CambridgePark Drive
Cambridge, MA 02140
Attn: Director, Contracts
or to such other address as the party to receive the notice so designates by
written notice to the other.
12.2. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous communications. It shall not be modified except by a written
agreement dated subsequent to the Effective Date of this Agreement and signed
on behalf of BP and BBN Planet and their respective duly authorized
representative.
12.3. If this Agreement shall be terminated or held by a court of
competent jurisdiction to be invalid, illegal or unenforceable as to particular
provisions, this Agreement shall remain in full force and effect as to the
remaining provisions.
12.4. No waiver of any breach of any provisions of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of the same
or any other provisions hereof, and no waiver shall be effective unless made in
writing and signed by an authorized representative.
12.5. This Agreement, and any rights or obligations hereunder, shall not
be assigned or sublicensed by BP, without BBN Planet's prior written consent.
12.6. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without regard to its conflicts of law principles.
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<PAGE> 5
Each of the parties has read, understood and agrees to comply with these
terms and conditions.
BP: HomeCom BBN PLANET CORPORATION
By: /s/ Harvey Sax By: /s/ Ken Wheeler
------------------- ---------------------
Name: Harvey Sax Name: Ken Wheeler
----------------- -------------------
Title: President Title: Mgr. B P Program
---------------- ------------------
Date: 5/9/96 Date: 5/14/96
----------------- -------------------
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<PAGE> 1
EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
BY AND AMONG
HOMECOM COMMUNICATIONS, INC.,
ROGER NEBEL,
SAMUEL MIGUES,
CATHY E. CRIST,
AND
JAY HEISER
<PAGE> 2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of the 31st day of August, 1996 by and among HomeCom Communications, Inc., a
Delaware corporation ("HomeCom") and Roger Nebel, a resident of the State of
Virginia, Samuel Migues, a resident of the State of Virginia, Cathy E. Crist, a
resident of the State of Virginia, and Jay Heiser, a resident of the State of
Virginia, (collectively, the "Selling Stockholders").
BACKGROUND STATEMENT
The Selling Stockholders own all of the issued and outstanding shares
(the "Shares") of the $.01 par value per share common stock of HomeCom Internet
Security Services, Inc., a Delaware corporation ("HISS"), and the Selling
Stockholders desire to sell to HomeCom the Shares, and HomeCom desires to
purchase the Shares from the Selling Stockholders, all on the terms provided in
this Agreement.
Now therefore, in consideration of the premises and the mutual
covenants contained herein, the Selling Stockholders and HomeCom hereby agree
as follows:
1. PURCHASE AND SALE OF SHARES.
(a) Upon the terms and subject to the conditions of this
Agreement, the Selling Stockholders agree to and hereby do sell the Shares to
HomeCom, and HomeCom hereby purchases the Shares from the Selling Stockholders
for the Purchase Price set forth herein. HomeCom and the Selling Stockholders
acknowledge and agree that the Shares shall not be transferred by the Selling
Stockholders, except as set forth herein.
(b) The Selling Stockholders hereby transfer the Shares to HomeCom
in accordance with Irrevocable Stock Powers, in the forms attached hereto as
EXHIBIT A (the "Stock Powers"). HomeCom and the Selling Stockholders agree to
execute any and all other documents to effect the provisions of this Agreement
as may be reasonably requested by HomeCom from time to time.
2. PURCHASE PRICE.
(a) CLOSING PAYMENTS. In consideration for the sale, assignment
and transfer to HomeCom of the Shares, concurrent with the execution of this
Agreement HomeCom has paid $[.01] per Share to each of the Selling
Stockholders, receipt of which is hereby acknowledged by each Selling
Stockholder.
(b) EARNOUT PAYMENTS. As additional consideration for the
purchase of the Shares, HomeCom hereby agrees to pay to each of the Selling
Stockholders the following percentage of the Earnout Payments (as defined
below):
<TABLE>
<CAPTION>
Percentage of
Selling Stockholder Earnout Payments
------------------- ----------------
<S> <C>
Roger Nebel 48%
Samuel Migues 24%
Cathy E. Crist 5%
Jay Heiser 24%
</TABLE>
The "Earnout Payments" shall be calculated based on 30% of the gross
revenues of HISS (whether as a corporation or as a division of HomeCom) for the
period between September 30, 1996 and
-1-
<PAGE> 3
September 30, 1997 (the "Initial Value Pool"), and shall be payable in four
annual installments equal to 25% of the Initial Value Pool, adjusted as
follows:
(i) each annual installment shall be increased by the
amount of the annual installment not paid in a prior year as a result of the
Net Profit Cap (as defined below); and
(ii) in no event shall any total annual installment be
greater than the net profits of HISS (whether as a corporation or as a division
of HomeCom) during the calendar year ended September 30 of the year in which
such annual installment is to be paid (the "Net Profit Cap"); provided,
however, that no annual installment shall be paid to any Selling Stockholder
who is not in compliance with the provisions of Section 8 hereof relating to
noncompetition on September 30 of the calendar year in which such annual
installment is to be paid. All Earnout Payments shall be calculated in good
faith by HomeCom based upon the regularly prepared unaudited financial
statements of HomeCom and HISS and shall be paid no later than October 30 of
the applicable annual installment year.
HomeCom shall have the option to pay all or any portion of an Earnout
Payment to any or all of the Selling Stockholders in either (x) cash or cash
equivalents or (y) by issuing unregistered shares of HomeCom's common stock
(the "Earnout Shares"), which for purposes of paying annual installments shall
have the following value:
(i) If HomeCom common stock is publicly traded on a
national stock exchange or on the Nasdaq over-the-counter system, Earnout
Shares shall be deemed to have a value equal to the average closing price (or
the average of the bid and ask prices, if no closing sale price is reported)
for HomeCom common stock as reported by the stock exchange (or Nasdaq
bid-and-ask system) for the ten (10) trading days immediately preceding the
date of payment of such Earnout Shares;
(ii) If HomeCom common stock is not publicly traded as
provided above, the value of Earnout Shares shall be determined by the Board of
Directors in good faith, based on HomeCom's financial statements, and such
other relevant factors as the Company deems appropriate, immediately prior to
issuance of such Earnout Shares.
For the purposes of this Section 2, "gross revenues" and "net profits"
of HISS (whether as a separate company or a consolidated division of HomeCom)
shall be determined by HomeCom in accordance with generally accepted accounting
principles, modified as deemed appropriate by HomeCom, but applied on a
historically consistent basis.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. The
Selling Stockholders each hereby represents, warrants and covenants jointly and
severally to HomeCom as follows:
(a) HISS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with the full and
unrestricted power and authority, corporate and otherwise, to own, operate and
lease its assets and properties and to carry on its business as currently
conducted and in which it presently proposes to engage.
(b) HISS has no liabilities or obligations of any nature (whether
known or unknown) and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
HISS giving rise to any liability or obligation in excess of $10,000.
(c) HISS has no subsidiaries and does not control, directly or
indirectly, or have any direct or indirect equity participation or any interest
in any corporation, partnership, trust, venture, business, enterprise, firm or
other business association.
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<PAGE> 4
(d) each of the Selling Stockholders has full power and authority
to execute, deliver, and carry out the terms of this Agreement and that this
Agreement constitutes a valid and binding obligation of each of the Selling
Stockholders;
(e) with respect to the Shares being transferred by the Selling
Stockholders: (i) each Selling Shareholder has the unrestricted power and the
unqualified right to sell, assign, and deliver to HomeCom good, valid, and
marketable title to such Shares, free and clear of any liens, claims,
encumbrances and equitable rights; (ii) no option, contract, or other agreement
exists pursuant to which any person or entity has any right to purchase or
otherwise acquire, now or in the future, any portion of any of such Shares; and
(iii) no person or entity owns or holds any option, warrant, convertible
security, or any right, contractual or otherwise, to purchase or acquire any
additional interests in HISS; and
(f) each of the Selling Stockholders has had an opportunity to
consult with his attorney, financial advisors, and others regarding all
financial, securities, tax and other aspects of this transaction.
4. INVESTMENT REPRESENTATIONS AND WARRANTIES. As to the Earnout Shares
which may be issued by homecom to each Selling Stockholder as part or all of
the Earnout Payments, each Selling Stockholder represents, warrants and
covenants to HomeCom as follows:
(a) The Earnout Shares which may be acquired by him hereby are
being purchased for investment purposes only with no intention of dividing or
allowing others to participate in this investment or of reselling or otherwise
participating, directly or indirectly, in a distribution of the Earnout Shares.
(b) He is a resident of the state shown in his address below and
will be the sole party in interest as to the Earnout Shares which may be issued
to him and is acquiring the Earnout Shares for his own account, for investment
only and not with a view toward the resale or distribution thereof.
(c) He understands that he must bear the economic risk of this
investment for an indefinite period of time because the Earnout Shares are not
registered under the Securities Act of 1933, as amended (the "Securities Act")
or the securities laws of any state or other jurisdiction. He has been advised
that the Earnout Shares are not being registered under the Securities Act upon
the basis that the transactions involving their sale are exempt from such
registration requirements as transactions by an issuer not involving any public
offering and in reliance on Regulation D, as promulgated by the United States
Securities and Exchange Commission ("SEC") pursuant to the Securities Act, and
that reliance by HomeCom on such exemption is predicated in part on his
representations set forth in this Agreement. He acknowledges that HomeCom
makes no representations of any kind concerning its intent or ability to offer
or sell the earnout shares in a public offering or otherwise. He further
understands that HomeCom makes no representation or warranty regarding its
fulfillment in the future of any reporting requirements under the Securities
Exchange Act of 1934, as amended, or its dissemination to the public of any
current financial or other information concerning the HomeCom, as may be
required as a condition for the unregistered resale of restricted securities.
(d) He represents and warrants that he is able to bear the
economic risk of losing his entire investment in HomeCom, which is not
disproportionate to his net worth, and that he has adequate means of providing
for his current needs and personal contingencies without regard to the
investment in HomeCom.
(e) He represents and warrants that in connection with his
purchase of any of the Earnout Shares no oral or written representations or
warranties have been made to him. He acknowledges that no
-3-
<PAGE> 5
person is authorized to give any information or to make any statement not
contained in this Agreement, and that any information or statement not
contained herein must not be relied upon as having been authorized by HomeCom,
any affiliates of HomeCom, or any professional advisors thereto.
(f) He represents and warrants that, to the extent he has deemed
necessary, he has consulted with his attorney, financial advisors and others
regarding all financial, securities and tax aspects of the proposed investment,
this Agreement and all documents relating thereto on his behalf. He and his
advisors have sufficient knowledge and experience in business and financial
matters to evaluate HomeCom, to evaluate the risks and merits of an investment
in HomeCom, to make an informed investment decision with respect thereto, and
to protect his interest in connection with his subscription without need for
the additional information which would be required to be included in more
complete registration statements effective under the Securities Act.
(g) He acknowledges that he and his advisors have received and
reviewed (i) this Agreement, and (ii) for informational purposes only, the
draft form of HomeCom's Registration Statement attached hereto as EXHIBIT A.
He represents that he and his advisors have had an opportunity to ask questions
of and to receive answers from the officers of HomeCom and to obtain additional
information in writing to the extent that HomeCom possesses such information or
could acquire it without unreasonable effort or expense: (x) relative to
HomeCom and the offering of the Earnout Shares, and (y) necessary to verify the
accuracy of any information, documents, books and records furnished to him.
All such materials and information requested by him and his advisors (including
information requested to verify information previously furnished) have been
made available and examined by him or his advisors.
(h) He agrees that he will not attempt to pledge, transfer, convey
or otherwise dispose of the Earnout Shares without first offering them to
HomeCom pursuant to the terms of this Agreement and thereafter, only in a
transaction that is the subject of either (i) an effective registration
statement under the 1933 Act and any applicable state securities laws, or (ii)
an opinion of counsel, which opinion of counsel shall be satisfactory to
HomeCom, to the effect that such registration is not required. HomeCom may
rely on such an opinion of his counsel in making such determination. He
consents to the placement of legends on any certificates or documents
representing any of the Earnout Shares stating that they are subject to the
restrictions contained in this Agreement, and have not been registered under
the 1933 Act or any applicable state securities laws and setting forth or
referring to the restrictions on transferability and sale thereof. He is aware
that HomeCom will make a notation in its appropriate records, and notify its
transfer agent, with respect to the restrictions on the transferability of the
Earnout Shares.
(i) He understands and agrees that stop transfer instructions will
be given to HomeCom's transfer agent or the officer in charge of its share
records and noted on the appropriate records of HomeCom to the effect that the
Earnout Shares may not be transferred out of his name unless approval is first
obtained from HomeCom. He further agrees that there will be placed on the
certificate for the Shares, or any substitutions therefor, a legend stating in
substance as follows, and he understands and agrees that HomeCom may refuse to
permit the transfer of the Shares out of his name and that the Shares must be
held indefinitely in the absence of compliance with the terms of such legend
and this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT"), OR
UNDER THE PROVISIONS OF THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED
("GEORGIA ACT"), OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION, BUT HAVE BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF
FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
UNDER THE FEDERAL ACT, AS SET FORTH AT O.C.G.A. SECTION 10-5-
-4-
<PAGE> 6
9(13) UNDER THE GEORGIA ACT AND AS SET FORTH IN OTHER APPLICABLE
SECURITIES LAWS. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION
UNDER PROVISIONS OF THE FEDERAL ACT, THE GEORGIA ACT, OR ANY OTHER
APPLICABLE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE FEDERAL ACT, THE GEORGIA ACT, OR ANY OTHER
APPLICABLE SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, UNLESS,
UPON REQUEST OF THE CORPORATION, THE CORPORATION HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION OF THE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN THAT
CERTAIN STOCK PURCHASE AGREEMENT BETWEEN THE INITIAL (AND ANY
SUBSEQUENT) OWNER OF THESE SHARES AND THE CORPORATION DATED AUGUST
____, 1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
5. HOMECOM'S RIGHT OF FIRST REFUSAL. Each Selling Shareholder agrees with
HomeCom that before any Earnout Shares which may be issued to him may be
sold or otherwise transferred by him (including transfer by gift or operation of
law), he must first fully comply with the right of first refusal to purchase the
Earnout Shares as set forth in this Section 5 (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. If any Selling Stockholder
desires to sell or otherwise transfer any Earnout Shares, such Selling
Stockholder shall deliver a written notice (the "Notice") to HomeCom stating:
(i) such Selling Stockholder's bona fide intention to sell or otherwise
transfer such Earnout Shares; (ii) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (iii) the number of Earnout Shares to be
transferred to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which such Selling Stockholder proposes to offer or to
sell the Earnout Shares (the "Offered Price"); and such Selling Stockholder
shall offer to sell the Earnout Shares at the Offered Price to HomeCom.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, HomeCom or its assignee may, by giving
written notice to such Selling Stockholder, elect to purchase any or all of the
Earnout Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with Section 5.c.
below.
(c) PURCHASE PRICE. The purchase price for the Earnout Shares
purchased under this paragraph shall be the Offered Price. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of HomeCom
in good faith.
(d) PAYMENT. Payment of the purchase price shall be made, at the
option of HomeCom or its assignee, either (i) in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of such
Selling Stockholder or his assignees, or by any combination thereof within
thirty (30) days after receipt of the Notice or (ii) in the manner and at the
time(s) set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Earnout Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by HomeCom and/or its assignee as provided in this paragraph, then
the Selling Stockholder may sell or otherwise transfer such Earnout Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within one hundred and twenty
(120) days after the date of the Notice, and provided further than any such
sale or other transfer is effected in accordance with any applicable securities
laws and the Proposed Transferee agrees in writing that the provisions of this
paragraph shall continue to apply to the Earnout Shares in the hands of such
Proposed Transferee. If the Earnout Shares
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<PAGE> 7
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to HomeCom, and HomeCom shall again be
offered the Right of First Refusal, before any Earnout Shares held by the
Selling Stockholder may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this paragraph notwithstanding, the transfer of
any or all of the Earnout Shares, during such Selling Stockholder's lifetime or
on any Selling Stockholder's death by will or intestacy, to such Selling
Stockholder's immediate family or a trust for the benefit of such Selling
Stockholder or such Selling Stockholder's immediate family shall be exempt from
the provisions of this paragraph; provided that, as a condition to receiving
the Earnout Shares, the transferee or other recipient shall agree in writing to
receive and hold the Earnout Shares so transferred subject to the provisions of
this Agreement, and to transfer such Earnout Shares no further except in
accordance with the terms of this Agreement. As used herein, "immediate
family" shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Earnout Shares upon the closing of a firmly
underwritten public offering of HomeCom's common stock with gross proceeds to
HomeCom of more than $5,000,000.
6. RELEASE. The Selling Stockholders do hereby remise, release, acquit and
forever discharge HomeCom and HISS and any parent, subsidiary and affiliates of
HomeCom or HISS, and their directors, officers, agents, representatives, and
employees of and from all manner of actions, causes of action, suits, debts,
covenants, trespasses, contracts, agreements, damages, judgments, liabilities,
losses, costs, expenses (including, but not limited to, attorneys' fees) and
claims of any nature whatsoever, in law or equity; including, but not limited
to, (i) any and all rights to any securities of HISS or any affiliate thereof,
(ii) any and all guaranties of debt or obligations of the Selling Stockholders
executed by HomeCom or HISS, and (iii) any and all security interests held by
the Selling Stockholders on any assets or securities of HISS, whether or not
now or hereafter known, suspected or claimed, which the Selling Stockholders
ever had, now have, or which the Selling Stockholders hereafter can, shall or
may have or allege against HomeCom or HISS, any parent, subsidiary, or
affiliates of HomeCom or HISS, or their directors, officers, agents,
representatives, or employees or by reason or any manner, cause or thing from
the beginning of the world to the date hereof.
7. INDEMNIFICATION. Each of the Selling Stockholders do hereby agree to
indemnify and hold harmless the other party, and any affiliated corporation or
entity, the partners, officers, directors and employees of any of the foregoing
and any professional advisors thereto, from and against any and all loss,
damage, liability or expense, including costs and reasonable attorneys' fees,
to which HomeCom or HISS may become subject or which such other party may incur
by reason of or in connection with any misrepresentation made by any of the
Selling Stockholders, any breach of their representations or warranties, or any
failure to fulfill their covenants or agreements under this Agreement.
8. NONCOMPETITION.
(a) DEFINITIONS. As used in this Section 8, the following terms
shall have the following meanings:
(i) Acquisition. "Acquisition" shall mean the
acquisition of the Shares by HomeCom contemplated by this Agreement.
-6-
<PAGE> 8
(ii) Employee. "Employee" shall mean any individual who
as of the date hereof or at any time hereafter is or becomes an employee or
independent contractor of HomeCom or HISS (or a parent or subsidiary of HomeCom
or HISS), whether or not such employee or independent contractor is employed or
retained pursuant to written agreement or at will.
(iii) Person. "Person" shall mean any individual,
corporation, partnership (whether general or limited), trust, association,
firm, business trust, proprietorship, or unincorporated organization or a
government or any agency or political subdivision thereof.
(Iv) Purchaser. "Purchaser" shall mean HomeCom, its
successors and assigns.
(v) Territory. "Territory" shall mean the continental
United States.
(b) SCOPE AND REASONABLENESS OF RESTRICTIONS. Each of the Selling
Stockholders acknowledges the following:
(i) that HISS is engaged in the production and marketing
of Internet security programs and services throughout the Territory;
(ii) that the Purchaser would not consummate the
Acquisition without the assurance that the Selling Stockholders will not engage
in the activities prohibited by this Agreement for the periods set forth below,
and, in order to induce the Purchaser to consummate the Acquisition, each of
them agrees to the terms of this Agreement which restrict his or its actions
throughout the Territory;
(iii) that the Selling Stockholders fully understand their
respective obligations undertaken by this Agreement; and
(iv) that such restrictions are reasonable in light of the
business of HISS and the benefits of the Acquisition to the Selling
Stockholders.
(c) COVENANTS REGARDING NONCOMPETITION. The Selling Stockholders
each agree that it or he will not, directly or indirectly, within the Territory
for a period of four years from the date hereof:
(i) have any direct or indirect interest or ownership in
(whether as owner, joint venturer, officer, director, shareholder or otherwise
except as a shareholder in a publicly-traded entity);
(ii) enter the employment of;
(iii) act as management agent for, broker for, independent
contractor for, or consultant to; or
(iv) in any other way assist any Person, which owns,
operates, or manages within the Territory any business enterprises that
directly competes with the Purchaser in the markets in which the Purchaser
markets and sells it products and services in the ordinary course of its
business.
(d) COVENANT REGARDING NONSOLICITATION OF EMPLOYEES. Each of the
Selling Stockholders agrees that for a period of four years from the date
hereof, he or it will not, directly or indirectly, individually or on the
behalf of any Person, (i) employ or solicit for employment any Employee or (ii)
solicit or otherwise induce any Employee to terminate his or her employment or
association with the Purchaser.
-7-
<PAGE> 9
(e) REMEDIES. Each of the Selling Stockholders acknowledges that
a breach of any covenant in paragraph (c) or (d) above may cause irreparable
harm to the Purchaser and that monetary damages at law will be inadequate.
Each of the Selling Stockholders therefore agrees that the Purchaser shall be
entitled to an injunction by an appropriate court in the appropriate
jurisdiction, enjoining him or it or any one or more of them from the direct or
indirect continuance of any such violation, in addition to any monetary damages
which might be adjudicated to have occurred by reason of the breach of any
covenant in paragraph (c) or (d) above.
(f) SEVERABILITY. Each of the covenants in this Section 8 shall
be independent and severable from the others, and should any covenant for any
reason be held illegal, invalid or unenforceable in whole or in part, such
illegality, invalidity or unenforceability shall not affect any other covenant
in this Section 8. Similarly, should any covenant contained herein be held to
be overly broad so as to be unenforceable, then the parties agree that the
remainder of said covenant as is held to be otherwise enforceable, shall be
enforced.
9. NO EMPLOYMENT RIGHTS. It is acknowledged and agreed by the parties
hereto that (i) as of the date hereof, each of the Selling Stockholders is an
employee of HISS under separate written employment agreements, and (ii) this
Agreement shall not amend or otherwise affect the terms of such employment
agreements or otherwise obligate HomeCom or HISS to retain any Selling
Stockholder as an employee of HomeCom or HISS, except as may be provided in
such employment agreements.
10. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, U.S.A., without regard to the
principles or laws governing conflict of laws, and HomeCom and the Selling
Stockholders hereby consent to the jurisdiction of the courts of such State for
this purpose.
(b) This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof. The provisions of this
Agreement may not be modified or waived except in writing.
(c) The headings of this Agreement are for convenience of
reference only and shall not limit or otherwise affect the interpretation of
any term or provision hereof.
(d) This Agreement and the rights, powers and duties set forth
herein shall, except as set forth herein, bind and inure to the benefit of the
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto. Neither HomeCom nor any of the Selling Stockholders may
assign any of their rights or interests in and under this Agreement without the
prior written consent of HISS, and any attempted assignment without such
consent shall be void and without effect.
(e) All notices given or made hereunder shall be in writing and
shall be deemed to have been given (i) when delivered personally, (ii) upon
five (5) business days following the day so mailed by U.S. certified or
registered mail, return receipt requested, and postage prepaid if the
recipient's address is in the United States, or (iii) upon three (3) business
days following the day when delivered to an express, overnight courier (such as
Federal Express or DHL) for delivery to the recipient at the address indicated
for notice of such parties on the signature page to this Agreement, or at such
other address as such party may designate by ten (10) days advance written
notice to the other party.
11. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of such
-8-
<PAGE> 10
counterparts shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories. This Agreement may be executed and
delivered by fax (telecopier); any original signatures that are initially
delivered by fax shall be physically delivered with reasonable promptness
thereafter.
[SIGNATURES ON FOLLOWING PAGES]
-9-
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
<TABLE>
<S> <C>
HOMECOM: SELLING STOCKHOLDERS:
HOMECOM COMMUNICATIONS, INC.
By: /s/ Harvey Sax By: /s/ Roger Nebel
----------------------------------------------- ----------------------------------------------
Harvey Sax, President Roger Nebel, President
Address: Address:
808 Fulton Ave
------------------------------------------ -------------------------------------------
Falls Church, VA 22046
------------------------------------------ -------------------------------------------
Social Security No.: ###-##-####
---------------------
By: /s/ Samuel Migues
----------------------------------------------
Samuel Migues
Address:
4524 Apple Tree Drive
-------------------------------------------
Alexandria, VA 22310
-------------------------------------------
Social Security No.: ###-##-####
---------------------
By: /s/ Cathy E. Crist
----------------------------------------------
Cathy E. Crist
Address:
1815 Central St.
-------------------------------------------
Broadway, VA 22815
-------------------------------------------
Social Security No.: ###-##-####
---------------------
</TABLE>
[SIGNATURES CONTINUE ON NEXT PAGE]
-10-
<PAGE> 12
<TABLE>
<S> <C>
SELLING STOCKHOLDERS [CONTINUED]:
By: /s/ Jay Heiser
-----------------------------------------------
Jay Heiser
Address:
1813 Clover Meadow Dr.
-------------------------------------------
Vienna, VA 22182
-------------------------------------------
Social Security No.: ###-##-####
---------------------
</TABLE>
-11-
<PAGE> 13
EXHIBIT A
IRREVOCABLE STOCK POWER
For value received, the undersigned hereby transfers unto HomeCom
Communications, Inc., a Delaware corporation, Ten Thousand (10,000) shares of
$.01 par value per share common stock of HomeCom Internet Security Services,
Inc., a Delaware corporation, ("HISS"), represented by Certificate No. ____,
and does hereby irrevocably constitute and appoint any officer of HISS as
attorney-in-fact to transfer the said shares on the books of HISS with full
power of substitution in the premises.
Dated as of August 30, 1996.
By: /s/ Roger Nebel
--------------------------------
Roger Nebel
In the presence of:
/s/ Samuel Migues
- ------------------------------
Witness
- i -
<PAGE> 14
EXHIBIT A
IRREVOCABLE STOCK POWER
For value received, the undersigned hereby transfers unto HomeCom
Communications, Inc., a Delaware corporation, Five Thousand (5,000) shares of
$.01 par value per share common stock of HomeCom Internet Security Services,
Inc., a Delaware corporation, ("HISS"), represented by Certificate No. ____,
and does hereby irrevocably constitute and appoint any officer of HISS as
attorney-in-fact to transfer the said shares on the books of HISS with full
power of substitution in the premises.
Dated as of August 30, 1996.
By: /s/ Samuel Migues
----------------------------
Samuel Migues
In the presence of:
/s/ Roger Nebel
- -----------------------------
Witness
- i -
<PAGE> 15
EXHIBIT A
IRREVOCABLE STOCK POWER
For value received, the undersigned hereby transfers unto HomeCom
Communications, Inc., a Delaware corporation, One Thousand (1,000) shares of
$.01 par value per share common stock of HomeCom Internet Security Services,
Inc., a Delaware corporation, ("HISS"), represented by Certificate No. ____,
and does hereby irrevocably constitute and appoint any officer of HISS as
attorney-in-fact to transfer the said shares on the books of HISS with full
power of substitution in the premises.
Dated as of August 30, 1996.
By: /s/ Cathy E. Crist
-----------------------------
Cathy E. Crist
In the presence of:
/s/
- -----------------------------
Witness
- i -
<PAGE> 16
EXHIBIT A
IRREVOCABLE STOCK POWER
For value received, the undersigned hereby transfers unto HomeCom
Communications, Inc., a Delaware corporation, Five Thousand (5,000) shares
of $.01 par value per share common stock of HomeCom Internet Security Services,
Inc., a Delaware corporation, ("HISS"), represented by Certificate No. ____,
and does hereby irrevocably constitute and appoint any officer of HISS as
attorney-in-fact to transfer the said shares on the books of HISS with full
power of substitution in the premises.
Dated as of August 30, 1996.
By: /s/ Jay Heiser
------------------------------
Jay Heiser
In the presence of:
/s/ Roger Nebel
- -------------------------------
Witness
- i -
<PAGE> 1
EXHIBIT 10.13
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY STATE
SECURITIES LAWS. THIS PROMISSORY NOTE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE
SECURITIES ACT, AND ALL APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH APPLICABLE STATE AND FEDERAL SECURITIES LAWS; AND IN THE CASE OF AN
EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER ANY
APPLICABLE SECURITIES LAWS.
PROMISSORY NOTE
U.S. $_________ _________, 1996
Principal Amount Original Issue Date
FOR VALUE RECEIVED, the undersigned HOMECOM COMMUNICATIONS, INC. (the
"Promisor") promises to pay to _____________ ("Payee"), at the principal
offices of the Promisor (or at such other place as the Payee may designate in
writing) the sum of ________________________ U.S. Dollars ($___________)
together with interest on the unpaid principal at the rate of ___ percent (__%)
annually, computed on a 365 day/year basis.
Unpaid principal after any default in payment shall accrue interest at
a rate of ________ percent (____ % ) per month on the unpaid balance until
paid.
If not earlier paid in full as provided herein, the unpaid principal
and all accrued interest shall be due and payable in full on the eighteen month
anniversary of the Original Issue Date. Unpaid principal and accrued interest
shall be payable, at the Promisor's sole option, either (i) in cash or cash
equivalents or (ii) by issuance to the Payee of shares of the Promisor's common
stock equal to [one or two] percent (___%) of the then issued and outstanding
shares of common stock of the Promisor, which stock issuance shall constitute
full payment of all unpaid principal and accrued interest under this Note. In
addition, the Company shall have the right to prepay this Note in whole or in
part immediately prior to the effectiveness of a registration statement
covering an initial public offering of the Company's common stock through the
issuance of common stock of the Company in an amount equal to the aggregate
amount which the Company wishes to repay (in U.S. Dollars), divided by the U.S.
Dollar price per share at which the Company will offer such shares to the
public. The Payee shall execute such documents as reasonably requested by the
Company to allow the Company to comply with all applicable federal and state
securities laws when issuing such shares to the Payee. Finally, the Promisor
reserves the right to prepay this Note at any time by making payment in full,
in cash or cash equivalents, of the then remaining unpaid principal and accrued
interest.
If any payment obligation under this Note is not paid when due, the
Promisor promises to pay all costs of collection, including reasonable
attorneys' fees, whether or not a lawsuit is commenced as part of the
collection process.
If any of the following events of default occur (an "Event of
Default"), this Note and any other obligations of the Promisor to the Payee,
shall become due immediately, without demand or notice (except as indicated
below):
1) the failure of the Promisor to pay any installment of
principal or any payment of accrued interest when
due, if such failure to pay is not cured within ten
(10)
<PAGE> 2
business days after the Payee gives the Promisor
written notice of such failure to pay;
2) the filing of a petition against the Promisor seeking
any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief under any present or future federal, state or
other law or regulation relating to bankruptcy,
insolvency or other relief for debtors, or the
appointment of any trustee, receiver or liquidator of
the Promisor unless such petition shall be dismissed
within one hundred twenty (120) days after such
filing, but in any event prior to the entry of an
order, judgment or decree approving such petition; or
3) the making of a general assignment for the benefit of
the Promisor's creditors.
If any one or more of the provisions of this Note are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
The Promisor waives presentment for payment, protest, and notice of
protest and nonpayment of this Note. Time is of the essence of this Note.
No renewal or extension of this Note, delay in enforcing any right of
the Payee under this Note, acceptance of a partial or past due payment, or
assignment by the Payee of this Note shall affect the liability of the
Promisor. All rights of the Payee under this Note are cumulative and may be
exercised concurrently or consecutively at the Payee's option.
This Note may not be changed, altered, modified, or terminated orally,
but only by an agreement or discharge in writing signed by the party against
whom enforcement of any change, alteration, modification, or discharge is
sought. As used herein, the term "Note" shall mean this Note as the same may
from time to time be amended, modified, renewed, extended or supplemented by
written agreement.
As used herein, the terms "Promisor" and "Payee" shall be deemed to
include their respective heirs, legal representatives, successors and assigns
and the heirs and legal representatives of such successors and assigns, whether
voluntarily or by operation of the parties or involuntary by operation of law.
All covenants, provisions and agreements by or on behalf of the Promisor which
are contained herein shall inure to the benefit of the successors and assigns
of the Payee.
This Note shall be construed in accordance with the laws of the State
of Georgia.
Signed by the Promisor as of this _____ day of ______, 1996 at
Atlanta, Georgia.
PROMISOR:
HomeCom Communications, Inc.
By:
---------------------------------
Harvey W. Sax, President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
of HomeCom Communications, Inc. of our report dated March 11, 1996, on our
audits of the financial statements of HomeCom Communications, Inc. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
September 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HOMECOM COMMUNICATIONS, INC. FOR THE YEAR ENDED DECEMBER
31, 1995 AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 129,095 346,158
<SECURITIES> 0 0
<RECEIVABLES> 88,810 274,677
<ALLOWANCES> 2,485 12,500
<INVENTORY> 0 0
<CURRENT-ASSETS> 215,568 609,156
<PP&E> 33,737 317,779
<DEPRECIATION> 3,722 31,670
<TOTAL-ASSETS> 247,382 966,945
<CURRENT-LIABILITIES> 81,776 374,965
<BONDS> 160,792 611,761
0 0
0 0
<COMMON> 27,706 179
<OTHER-SE> (22,892) (49,381)
<TOTAL-LIABILITY-AND-EQUITY> 247,382 966,945
<SALES> 0 121,699
<TOTAL-REVENUES> 327,574 817,306
<CGS> 0 77,476
<TOTAL-COSTS> 59,871 196,497
<OTHER-EXPENSES> 267,189 649,330
<LOSS-PROVISION> 2,485 10,015
<INTEREST-EXPENSE> 3,469 15,576
<INCOME-PRETAX> (5,440) (54,112)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,440) (54,112)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,440) (54,112)
<EPS-PRIMARY> (0.00) (0.03)
<EPS-DILUTED> (0.00) (0.03)
</TABLE>
