<PAGE>
As filed with the Securities and Exchange Commission on January 20, 2000
Registration No. 333-94755
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment
No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTEK INFORMATION, INC.
(Exact name of registrant as specified in its charter)
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Delaware 7389 84-1334615
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
5619 DTC Parkway, 12th Floor
Englewood, Colorado 80111-3017
(303) 357-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Timothy C. O'Crowley
Chief Executive Officer
5619 DTC Parkway, 12th Floor
Englewood, Colorado 80111-3017
(303) 357-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Laurie P. Glasscock, Esq. Francis S. Currie, Esq.
G. James Williams, Jr., Esq. Davis Polk & Wardwell
Carin M. Kutcipal, Esq. 1600 El Camino Real
Chrisman, Bynum & Johnson, P.C. Menlo Park, California 94025-4112
1900 Fifteenth Street (650) 752-2000
Boulder, Colorado 80302
(303) 546-1300
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
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If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
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<CAPTION>
Proposed Maximum Amount of
Aggregate Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock...................... $57,500,000 $15,180
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</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
This registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained in this prospectus is not complete and may be changed. +
+We may not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell securities, and we are not soliciting an offer to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated
PROSPECTUS
Shares
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+[LOGO OF iINTEK.] +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Common Stock
This is the initial public offering of common stock by Intek Information,
Inc. We are selling shares of our common stock at an estimated initial
public offering price between $ and $ per share.
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There is currently no public market for the common stock. We have applied to
list our common stock on the Nasdaq National Market under the symbol "NTEK."
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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price........................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds, before offering expenses, to Intek.................... $ $
</TABLE>
The underwriters may also purchase up to additional shares of common
stock from us at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.
Delivery of the shares of common stock will be made on or about , 2000.
--------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 6.
--------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Chase H&Q
Robertson Stephens
U.S. Bancorp Piper Jaffray
Wit Capital Corporation
, 2000
<PAGE>
[Cover 1 is the portion of the cover visible when opening the front cover of
the prospectus. Reversed-out (white) copy over full page "I3 circle logo."
"Intek provides an integrated set of solutions that takes our clients from
concept to launch and operation of their e-commerce and other direct-to-
customer initiatives."]
<PAGE>
[The prospectus front cover is a gatefold; Cover 2 is the inside front cover
spread visible upon opening the gatefold cover. Four 4-color photographs, with
copy pertaining to each photo, laid out in the circle, to describe our service
offering.
PHOTO #1: This photo, at the top of the circle, is of several people in a
conference situation demonstrating our strategic consulting services. PHOTO #1
COPY: Headline: "Design"; Subhead: "Strategic Consulting"; "We help clients
architect their e-commerce and other direct-to-customer initiatives from
concept to launch and operation."
PHOTO #2: This photo, at the 3 o'clock position on the circle, is of two
employees in a computer room. PHOTO #2 COPY: Headline: "Build"; Subhead:
"Technology Solutions"; "We customize and operate a Web-based processing
platform that we integrate with our clients' existing systems, enabling them
to rapidly deploy their e-commerce and other direct-to-customer initiatives."
PHOTO #3: This photo, at the bottom on the circle, depicts an employee in a
Communications Center on the telephone with a client's customer. PHOTO #3
COPY: Headline: "Operate"; Subhead: "e-Operations"; "We provide communications
services that handle our clients' sophisticated transactions with their
customers via voice, e-mail, fax and real-time online communications."
PHOTO #4: This photo, at the 9 o'clock position on the circle, shows several
employees in a working conference session. PHOTO #4 COPY: Headline: "Analyze";
Subhead: "Customer Knowledge"; "We offer sophisticated database marketing and
analysis services to help our clients maximize their marketing efforts and
customer relationships."]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary.................................................. 1
Risk Factors........................................................ 6
Forward-Looking Statements.......................................... 13
Use of Proceeds..................................................... 13
Dividend Policy..................................................... 13
Capitalization...................................................... 14
Dilution............................................................ 16
Selected Historical and Pro Forma Financial Data.................... 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 20
Business............................................................ 27
Management.......................................................... 38
Employee Benefit Plans.............................................. 46
Related Party Transactions.......................................... 48
Principal Stockholders.............................................. 56
Description of Capital Stock........................................ 58
Transfer Agent and Registrar........................................ 61
Shares Eligible for Future Sale..................................... 61
Underwriting........................................................ 62
Legal Matters....................................................... 65
Experts............................................................. 65
Where You Can Find More Information................................. 65
Index to Consolidated Financial Statements of Intek Information,
Inc................................................................ F-1
Index to Unaudited Pro Forma Condensed Financial Information........ P-1
Index to Financial Statements of Acorn Information Services, Inc. .. A-1
</TABLE>
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Unless otherwise indicated, all references to "Intek," "we," "us" and
"our" refer to Intek Information, Inc., a Delaware corporation, and our
predecessor Colorado corporation.
All brand names and trademarks appearing in this prospectus are the
property of their respective holders.
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you
should consider before investing in our common stock. You should read the
entire prospectus carefully, including the information under "Risk Factors"
beginning on page 6 and the financial statements beginning on page F-1, before
making an investment decision.
Our Company
Intek provides an integrated set of strategic, technological, operational
and analytical solutions that takes our clients from concept to launch and
operation of their e-commerce and other direct-to-customer sales and marketing
initiatives. Our clients are Fortune 1000 and emerging Web-based companies
that, either because they sell complex products or employ complicated sales
processes, require sophisticated solutions. Our ability to design, build, and
operate e-commerce and other associated direct-to-customer initiatives enables
our clients to rapidly capitalize on their market opportunities. We provide
clients access to our strategic consultants, Web-based processing technology,
high-level customer support personnel and communication services, and database
marketing and analysis services. Our major clients in 1999 included Safeway,
Sega and Sony. In addition, we have recently established relationships with
emerging Web-based companies, including AutoWeb.
Our Market Opportunity
Our market is driven by the continued acceptance and rapid growth of the
Internet, which has dramatically changed the way businesses and consumers
communicate and conduct business. International Data Corporation, or IDC,
estimates that the actual number of Web buyers worldwide will increase from
nearly 31 million in 1998 to more than 182 million in 2003, and that the amount
of worldwide commerce conducted over the Internet will increase from
approximately $50 billion in 1998 to about $1.3 trillion in 2003. This dramatic
increase in the use of the Internet for commerce is creating significant new
opportunities and challenges for a broad spectrum of businesses.
In response to growing competitive pressures and the escalating rate of
technological innovation, many companies are outsourcing business functions to
access expertise, resources and technology that may otherwise be unavailable or
prohibitively expensive. As a growing number of companies offer more complex
products and services online, demand has increased for sophisticated outsourced
service providers that use an integrated approach in delivering technology
solutions and specialized services. Additionally, the delivery of these
multiple services must be flexible and easy for the customer to use and must
enable the client to maintain brand recognition and customer loyalty.
Our Services
Intek's comprehensive range of solutions for designing, building and
operating our clients' direct-to-customer initiatives consists of the following
four service offerings:
Strategic Consulting. We help our clients plan their e-commerce and other
direct-to-customer initiatives by determining their needs and objectives,
working with them to establish an overall program structure, and designing an
integrated solution that incorporates technology platforms, customer
communication processes, data requirements and personnel skills.
Technology Solutions. We customize and operate a Web-based technology
platform that enables us to rapidly deploy our clients' e-commerce and other
direct-to-customer initiatives. Our platform incorporates the front-end user
interface and reference materials, the transaction processing system and the
customer and client information databases, all of which can be tailored to meet
a client's specific needs. We integrate this platform with our clients' and
their vendors' existing systems to provide the sharing of information.
1
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e-Operations. We provide communications services that handle our clients'
sophisticated transactions with their customers via voice, e-mail, fax and
real-time online communications. These transactions include the sale of complex
products such as financial instruments for direct brokerage and online trading
firms, and computer and electronic equipment for technology manufacturers. Our
infrastructure, including our technology platform and communications centers,
permits efficient and reliable operations of our clients' complex direct-to-
customer-initiatives.
Customer Knowledge. We offer sophisticated database marketing and analysis
services to help our clients improve their marketing efforts and customer
relationships through a better understanding of their customers' buying
processes and behaviors.
Our Strategy
Intek's strategy is to be a leading provider of integrated solutions to
companies developing e-commerce and other direct-to-customer initiatives that
involve the sale of complex products or the use of complicated sales processes.
We support our clients in both business-to-consumer and business-to-business
transactions. Key elements of our strategy are to:
. target clients that provide substantial growth opportunities;
. pursue clients in specialized markets that require sophisticated
services;
. promote our brand through expanded sales and marketing efforts;
. broaden and continue to strengthen our service offerings; and
. continue to hire, train and retain talented people.
Our History
We incorporated in Colorado in March 1996 and reincorporated in Delaware
in August 1996. Effective October 1, 1999, we acquired all of the outstanding
capital stock of Acorn Information Services, Inc., a Delaware corporation based
in Connecticut that provides database marketing and analysis services. Also
effective October 1, 1999, we transferred software that we had developed to
Spider Technologies, Inc., a newly-formed wholly-owned subsidiary, and we then
distributed all of the stock of Spider to our stockholders.
Our principal executive offices are located at 5619 DTC Parkway, 12th
Floor, Englewood, CO 80111, and our telephone number is (303) 357-3000.
We maintain a Web site at www.intekinfo.com and our subsidiary, Acorn,
maintains a Web site at www.acornis.com. Information contained on these Web
sites does not constitute part of this prospectus and is not incorporated by
reference in this prospectus.
2
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The Offering
<TABLE>
<S> <C>
Common stock offered by Intek................. shares
Common stock to be outstanding after this shares
offering.....................................
Use of proceeds............................... For general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol........ "NTEK"
</TABLE>
Unless otherwise noted, the information in this prospectus assumes that
all outstanding shares of preferred stock are converted into common stock upon
the closing of this offering and that the underwriters do not exercise their
option to purchase an additional shares of common stock from us to cover
over-allotments, if any.
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999, plus (1)
1,504,190 shares issuable to holders of our preferred stock as payment-in-kind
dividends assuming the closing of this offering on March 15, 2000 and (2)
shares issuable to holders of our Series F preferred stock assuming the
sale of shares in this offering at an initial offering price of $ per share.
See "Related Party Transactions - Securities Issuances and Loans." It does not
include the following:
. 2,330,563 shares of common stock subject to options granted under our
1997 and 1998 stock plans at a weighted average exercise price of $6.28
per share;
. 4,750,000 shares of common stock available for future issuance under
our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase
Plan;
. 181,250 shares of common stock subject to a warrant issued to Sony
Electronics Inc. at an exercise price of $8.52 per share; and
. 527,778 shares reserved for contingent future issuance to the former
stockholders of Acorn.
Please see "Capitalization" for a more complete discussion regarding the
outstanding shares of our common stock, the options and warrant to purchase our
common stock and related matters.
3
<PAGE>
Summary Financial Information
The following table presents summary financial data. You should read this
information together with the financial statements and the notes to those
statements appearing elsewhere in this prospectus and the information under
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Unaudited Pro Forma Condensed
Financial Infomation."
The unaudited pro forma condensed statement of operations information for
the year ended December 31, 1999 gives effect to our acquisition of Acorn and
the spin-off of Spider as if those transactions had occurred on January 1,
1999. The following transactions are assumed to have occurred on January 1,
1999, in the pro forma as adjusted per share data in the pro forma as adjusted
statements of operations data and on December 31, 1999, in the pro forma as
adjusted balance sheet data:
. the issuance of shares in this offering at an assumed initial
public offering price of $ per share (after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses);
. the automatic conversion of all shares of preferred stock outstanding
as of December 31, 1999 into 9,560,188 shares of common stock;
. the issuance of 1,333,433 shares of common stock to the holders of our
preferred stock as payment-in-kind dividends as of December 31, 1999;
and
. the issuance of additional shares of common stock to the holders of
our Series F preferred stock assuming the sale of shares in this
offering at an initial offering price of $ per share. See "Related
Party Transactions - Securities Issuances and Loans."
Additional shares of common stock will be issued to the holders of our
preferred stock as payment-in-kind dividends subsequent to December 31, 1999.
If this offering were to close on March 31, 2000, we would issue 170,757
additional shares.
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------------------------
1999
Inception ----------------------
(March 6, 1996) Pro forma
December 31, 1996 1997 1998 Actual as adjusted
----------------- --------- --------- --------- -----------
(unaudited)
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenue............... $ 480 $ 9,546 $ 17,664 $ 24,699 $ 26,707
Gross profit.......... 269 1,779 4,455 7,713 8,743
Loss from operations.. (1,802) (12,084) (9,509) (11,919) (10,597)
Net loss applicable to
common stockholders.. $ (1,809) $ (13,226) $ (11,464) $ (25,235) $(13,997)
Per share data:
Basic and diluted net
loss per share....... $ (1.07) $ (7.09) $ (6.14) $ (13.50) $
Weighted average
common shares........ 1,697,417 1,866,385 1,867,941 1,869,803
</TABLE>
4
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<TABLE>
<CAPTION>
December 31, 1999
---------------------
Pro forma
Actual as adjusted
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(unaudited)
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................... $ 6,204 $
Working capital......................................... 7,533
Total assets............................................ 26,378
Long-term borrowings, net of current portion............ 1,722 1,722
Total stockholders' equity (deficit).................... (41,997)
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. Our business, financial condition and
operating results could be adversely affected by any of the following factors,
in which event the trading price of our common stock could decline, and you
could lose part or all of your investment. The risks and uncertainties
described below are not the only ones that we face. Additional risks and
uncertainties not currently known to us, or that we currently think are
immaterial, may also impair our business operations.
Risks Related to Our Business
We are dependent on a limited number of clients for a major portion of our
revenue.
A substantial majority of our revenue during the past two years has been
derived from on-going business with a few significant clients. In 1999, Sony
accounted for 27% of our revenue and our next three largest clients accounted
for a total of 29% of our revenue. We anticipate that our revenue will continue
to be concentrated with a limited number of clients and that the amount of
revenue from any particular client will vary from period to period. The
services required by any one client may be limited by a number of factors,
including industry consolidation, economic slowdown, internal budget
constraints and reduced demand for the client's products. Our inability to
maintain and develop long-term client relationships or to perform to our
significant clients' satisfaction, or the loss of, decrease in, or deferral of
work for, a significant client, could seriously harm our business, reputation
and financial results.
We do not have long-term contracts with our clients and contracts may be
cancelled with little or no penalty.
Our agreements with our clients generally provide for services and payment
on a month-to-month basis. Under most of our existing contracts, our clients
may reduce or cancel their agreements with us with little or no penalty. In
addition, we sometimes perform work for a client following expiration of a
contract or while the terms of a letter of intent, new contract or contract
extension are under negotiation. In those cases, we would not have a binding
agreement to rely on should a dispute arise with a client regarding delivery of
or payment for our services. Consequently, you should not anticipate our future
revenue based on the number or identity of the clients we have, the level of
services we have performed for those clients in the past or the scope of our
existing agreements with those clients. In addition, some clients may prohibit
us from doing work for their competitors.
Our stock price could decline because of quarterly fluctuations in our revenues
and operating results.
Our revenues and operating results may vary significantly from quarter-to-
quarter due to a number of factors. In future quarters, our operating results
may be below the expectations of public market analysts or investors, and the
price of our common stock may decline. Factors that could cause quarterly
fluctuations include:
. the beginning and ending of significant services for clients during a
quarter;
. the number, size and scope of our clients' direct-to-customer
initiatives;
. the utilization of our employees;
. fluctuations in demand for our clients' products;
. fluctuations in demand for our services resulting from clients' budget
constraints, program delays, economic downturns or similar events;
. expenses incurred in connection with possible acquisitions;
6
<PAGE>
. expenses relating to our sales and marketing efforts; and
. changes in the prices of services offered by us or our competitors.
Personnel and related costs constitute the substantial majority of our
operating expenses. Because we establish these expenses in advance of any
particular quarter, underutilization of our personnel may cause significant
reductions in our operating results for a particular quarter. Therefore, any
failure to generate revenues according to our expectations in a particular
quarter could seriously harm that quarter's financial results. To the extent
the addition of employees in anticipation of future work is not followed by
corresponding increases in revenues, we would incur additional expenses that
would not be matched by corresponding revenues.
We may not be successful in expanding our Strategic Consulting, Technology
Solutions and Customer Knowledge services.
Our ability to significantly increase our revenue and operating margins in
the future depends substantially on expanding our Strategic Consulting,
Technology Solutions and Customer Knowledge professional services. We have only
recently begun billing for our Strategic Consulting services and a material
amount of work done by our Technology Solutions group to date has not been
billable to our clients. In addition, we recently acquired Acorn to
significantly enhance our database marketing and analysis capabilities. We must
continue to develop our marketing efforts and billing policies with respect to
these services to increase revenues and profitability. To the extent we are
unable to do this, our margins and financial results may be impaired.
We may not be able to maintain or improve our e-Operations gross margins.
To date, a substantial majority of our revenue has come from our
communications center operations. Our ability to maintain or improve gross
margins for these operations depends on our continuing to provide high-end,
value-added services to our clients. If our e-Operations services become
commoditized or increased competition creates pricing pressures, our gross
margins could be impaired. Because our e-Operations services are expected to
generate a major portion of our revenue for the foreseeable future, any adverse
effect on the margins associated with these services would have a significant
negative effect on our overall gross margin.
Several of our executive officers have worked together for only a short time.
Ten of our fifteen executive officers joined us in 1999. As a result,
there is a risk that management will not be able to work together effectively
as a team. If we are unable to successfully integrate these and future managers
into our operations, we may not be able to execute our strategies, which could
harm our business.
We may be unable to attract, train, license and retain the talented people we
need to execute our growth plans.
We rely heavily on our management, consulting and key technical personnel
to develop business and execute our strategies. Most of our revenues to date
have been generated by the sales efforts of our senior management and key
technical personnel. We have not historically had a marketing department and
only recently hired a director of marketing as well as sales personnel. We need
to hire additional sales and marketing personnel to implement our sales and
marketing growth strategy. We may not be successful in attracting and retaining
additional sales and marketing personnel or in integrating our new sales and
marketing department with our operations.
We must attract a significant number of new employees to implement our
growth plans. The majority of our employees work in our communications centers
handling voice, fax, e-mail and other communications for our clients. It
generally takes approximately five weeks of training before a new employee can
perform these functions. In addition, a substantial portion of our e-Operations
services is for clients in regulated industries and may require that our
personnel working on behalf of these clients be licensed by
7
<PAGE>
governmental or regulatory agencies. Some of our personnel must be extensively
trained and pass rigorous tests to obtain certain licenses, such as NASD Series
6, 7 and 63 broker licenses. We have experienced, and may in the future
experience, difficulty getting personnel licensed as quickly as necessary to
meet clients' expanding programs. Additionally, if we have higher than
anticipated turnover in our communications centers, we may have to absorb costs
of training new personnel in excess of the costs to be paid by our clients.
Competition for talented people is particularly intense currently. In
addition, we face the issues of escalating recruitment and labor costs and
expectations of significant benefits. The loss of any of our key personnel or
our inability to meet our goals for hiring, training, licensing and retaining
personnel could damage our relationships with existing clients and impair our
business in the future.
We may not be able to manage and support our anticipated growth.
We are currently experiencing a period of significant growth that may
strain our managerial and operational resources. To support our growth, our
organizational infrastructure must grow accordingly. We expect this expansion
to continue to place a substantial strain on our managerial, operational and
financial resources. To manage the expected growth of our operations, we must:
(1) improve existing and implement new managerial, operational and financial
controls, reporting systems and procedures, (2) maintain and expand our
financial management information systems, (3) hire additional personnel who are
trained in managing these types of systems and (4) improve communications among
our management and operations personnel. If we fail to address these issues,
our revenues and profitability could be harmed because of the inability of our
operational infrastructure to support our levels of business activity.
We may not be successful in developing and maintaining brand awareness and a
good reputation.
An important part of our strategy is to develop and maintain widespread
awareness of our brand. We believe that establishing our brand and reputation
is critical for attracting and expanding our targeted client base, especially
as competition in our markets increases. To promote our brand, we plan to
increase our marketing expenses, which may cause our operating margins to
decline. In addition, our name may become closely associated with the business
success or failure of some of our clients. The failure or difficulties of one
of our high-profile clients could harm our reputation. If we are unsuccessful
in promoting or maintaining our brand or if our reputation is damaged, we may
become less competitive or lose market share.
Our recent transfer to Spider of software assets upon which we rely will lessen
our control over our primary technology platform and divert the attention of
some of our management and technical personnel.
To date, we have used our IntekWebDirect System as the technology platform
in the vast majority of solutions we have developed for our clients. In
November 1999, we transferred the proprietary software that we developed and
that is used in our IntekWebDirect System to a newly-formed subsidiary, Spider.
We then distributed all of the stock of Spider to our stockholders. Although we
have a 20-year non-exclusive license from Spider to use this software, as well
as certain other protections, we no longer control the development of the
software or the right to license it to third parties. If for any reason we had
to develop a new software platform to replace the software licensed from
Spider, we would incur significant costs and could experience substantial
delays in implementing solutions for our clients, which would harm our
business. In addition, Paul Tartre, president of our Technology Solutions
group, will spend 40% of his time on Spider matters, and Timothy O'Crowley, our
president and chief executive officer, will be chairman of the board of
directors of and a consultant to Spider. These roles will divert time that
these individuals would otherwise spend on our matters.
Spider may be unable to pay amounts due to us in connection with the spin-off.
In connection with the spin-off, we distributed $1 million to Spider. We
also agreed to share certain facilities, supplies and personnel with Spider,
for which it will pay us specified fees. We have accounted for the $1 million
distribution as a long-term receivable which is to be repaid by Spider's
minimum royalty
8
<PAGE>
obligation. If Spider is unable to generate sufficient revenue to pay its
obligations, we may not be able to recover the $1 million or the costs incurred
or to be incurred on its behalf pursuant to agreements entered into in
connection with the spin-off. This would have a negative effect on our results
of operations in the period in which the losses are recognized.
Demand for our clients' products and services could decline.
Our revenue depends upon customer demand for our clients' products and
services. In particular, a significant portion of our revenue is derived from
our communications center operations and depend upon the amount of time that
our personnel devote to our clients' customers. In addition, our revenue under
one new long-term contract with a major client are based on the client's sales
generated from our operation of its direct-to-customer initiative. We may enter
into additional contracts with similar terms. Accordingly, a decline in
customer demand for a significant client's products could result in
underutilization of our personnel and facilities, reduced revenue and
termination of our relationship with the client. These events could adversely
affect our business and financial results.
Our failure to comply with applicable regulations or to get and maintain
necessary licenses could harm our business.
Some of our operations for financial services, mortgage broker and
insurance clients are subject to regulation by federal, state and other
regulatory agencies. We also conduct marketing activities for clients in
regulated industries that require that we and, in some cases, certain of our
employees be licensed. New regulations and modifications to existing
regulations may be adopted at any time. In addition, the content and
geographical scope of our clients' initiatives change from time to time, which
may subject us to further regulations. Some agreements with our clients require
us to indemnify them if we are not in compliance with applicable regulations.
We are currently applying for licenses with respect to mortgage broker services
and telephone contact activities in certain states where we may have been
required to be licensed in connection with activities conducted in the past.
Our failure to have been so licensed or to comply with applicable regulations
in the future could expose us to enforcement actions, private actions for
damages, civil or criminal penalties or the possibility of being barred from
engaging in the securities business. We cannot assure you that we have been,
are now or will be in compliance with all applicable regulations.
We may not be successful in completing and integrating acquisitions.
We recently acquired Acorn to significantly enhance our database marketing
and analysis capabilities. Our strategy includes continuing to acquire
complementary businesses. Acquisitions are often expensive and time consuming
and require integrating widely dispersed operations with distinct corporate
cultures. These integration efforts may not succeed or may distract our
management from our existing business. Our failure to manage acquisitions
successfully could seriously harm our business. In addition, costs associated
with both completed and uncompleted acquisitions could adversely affect our
operating results and financial condition. Our operating results could also be
harmed by unanticipated liabilities of an acquired company, such as subsequent
litigation. We may need to raise additional funds to finance acquisitions, and
funds may not be available on favorable terms, if at all.
We could pay significant additional purchase consideration to the former
stockholders of Acorn.
If Acorn achieves its earn-out goals, we will pay significant additional
cash and stock consideration to the former stockholders of Acorn. The non-cash
amortization of this additional purchase consideration could significantly
affect our earnings over the next five years.
Our limited operating history makes it difficult for you to evaluate our
business, prospects and an investment in our common stock.
Although we were incorporated in March 1996, we did not begin providing a
number of our current services to clients until mid-1997. Our experience with
certain services we offer, such as the database
9
<PAGE>
marketing and analysis capabilities we significantly enhanced in October 1999,
are more limited. Because of our limited operating history, we may encounter
unexpected problems and expenses. These uncertainties make it difficult for you
to evaluate our business, prospects and an investment in our common stock.
We have incurred losses since inception and expect to incur losses for the
foreseeable future.
We have incurred net losses of approximately $36.2 million for the period
from inception (March 6, 1996) through December 31, 1999. Our stockholders'
deficit was approximately $42.0 million at December 31, 1999. We expect to
incur losses for the foreseeable future. In particular, we anticipate that our
sales and marketing expenses will increase substantially in the near future as
we add personnel and expand our brand awareness and other marketing efforts. We
do not anticipate that revenues will grow sufficiently in the near term to
offset these and other costs and expense increases.
Variations in our sales and implementation cycles make prediction of future
operating results difficult.
The sales cycle for our services is variable, typically ranging between a
few weeks to several months from initial contact with a potential client to
contract signing. Occasionally, the sales cycle is much longer. The timing of
the sales cycle may be affected by factors over which we have little or no
control, including the potential client's internal decision-making process and
our competitors' selling activities. In addition, the time required to
structure and implement a program for a client may vary depending upon the
complexity of the client's needs. This variability makes it difficult for us to
forecast future revenue amounts and timing.
A breach of our e-commerce security measures could reduce demand for our
services.
A requirement of the continued growth of e-commerce is the secure
transmission of confidential information over public networks. A party who is
able to circumvent our security measures could misappropriate proprietary
information or interrupt our operations. Any compromise or elimination of our
security could reduce demand for our services.
We may be required to expend significant capital and other resources to
protect against security breaches or to address any problems they may cause.
Because our activities involve the storage and transmission of proprietary and
confidential information, such as credit card numbers, security breaches could
damage our reputation and expose us to litigation and possible liability. Our
security measures may not prevent security breaches, and failure to prevent
security breaches may disrupt our operations.
Our business and services are subject to risks related to the Year 2000
problem.
The "Year 2000" problems of our clients, their vendors, our internal
systems and companies on the Internet generally could negatively affect our
systems or operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Issue."
Risks Related to Our Industry
Existing competitors may expand their services and new competitors may enter
our market.
A number of companies offer, on an individual basis, one or more of the
same services that we do. Many of these companies have greater name
recognition, marketing, technical and financial resources, and access to
capital than we have. In addition, there are relatively few barriers preventing
competitors from entering our market. We do not own any patented technology
that precludes or inhibits competitors from offering the same services we
offer. We also face competition from the in-house capabilities of existing or
potential clients, which could increase if economic conditions decline and
companies take or keep programs in-house to avoid layoffs. While competition in
any form can have a negative effect on our business, we believe the greatest
competitive threat to us would occur if a company were to offer the full range
of services we do on a more cost-effective or timely basis.
Our business depends on continued growth in the use and improvement of the
Internet.
10
<PAGE>
Because we are in the business of providing services to clients that use
the Internet to sell their products, our future success depends on the
continued expansion of, and reliance of consumers and businesses on, the
Internet. If consumers have difficulties when buying products on the Internet,
as happened with a number of Web sites this holiday season, they may be
reluctant to use the Internet in the future. In addition, the Internet may not
be able to support an increased number of users or an increase in the volume of
data transmitted over it. As a result, the performance or reliability of the
Internet may be adversely affected as usage increases. Increased demands will
require timely improvement of the infrastructure of the Internet, including
bandwidth access and other communications technology. The Internet has already
experienced certain outages and delays as a result of damage to portions of its
infrastructure. The effectiveness of the Internet may also decline due to
delays in the development or adoption of new technical standards and protocols
designed to support increased levels of activity. There can be no assurance
that the infrastructure, products or services necessary to maintain and expand
the Internet will be developed, or that the Internet will remain a successful
commercial medium.
Changes in government regulation of the Internet could adversely affect our
business.
Due to the increasing popularity and use of the Internet, any number of
state, federal, foreign and international laws and regulations may be enacted
regarding pricing, acceptable content, taxation, quality of products and
services, and other aspects of e-commerce. Any new legislation could inhibit
growth in the use of the Internet and decrease the acceptance and desirability
of the Internet as a commercial medium. Such a decrease could harm our future
operating performance.
Consumers' concerns and possible legislation about privacy of consumer
information on the Internet may adversely affect our business.
An important feature of our Customer Knowledge services is the ability to
collect and analyze customer data to refine and measure the effectiveness of
marketing programs. This information is captured with or without consumers'
knowledge when they visit a site on the Internet and volunteer information in
response to questions or other forms of solicitation concerning their
backgrounds, interests and preferences. However, privacy concerns may cause
consumers to stop visiting certain Web sites that collect this data or to
resist providing the personal data necessary to support this capability.
Moreover, privacy concerns, whether or not valid, may indirectly inhibit market
acceptance of the Internet as a means of commerce and marketing. Privacy
concerns could be heightened by legislative or regulatory requirements that
mandate notification to Internet users that the data captured on certain
Internet sites may be used by marketing entities to address product promotion
and advertising to that user. We can make no assurances that such legislation
or regulatory requirements will not be adopted. If the privacy concerns of
consumers are not adequately addressed, our future operating performance could
be harmed.
We need to keep pace with changing technologies.
Our success depends in part on our ability to integrate and adapt our
services to keep pace with advances in communications technologies and the new
and improved devices and services that result from these changes. Our inability
to respond quickly and cost-effectively to changing technologies and devices
could make our existing service offerings non-competitive and may cause us to
lose market share.
11
<PAGE>
Risks Related to the Offering
After the offering, a few existing stockholders could control or strongly
influence actions requiring the approval of stockholders.
After the offering, the stockholders named below will own approximately
the percentages of the outstanding common stock shown:
<TABLE>
<S> <C>
The Beacon Group III - Focus Value Fund, L.P. .......... %
Conning Capital Partners V, L.P. .......................
Timothy O'Crowley.......................................
Brinson Partners........................................
Resource Bancshares.....................................
---
%
===
</TABLE>
If these stockholders were to act together, they could substantially
influence our business and control certain stockholder votes. This
concentration of stock ownership may discourage someone from making a tender
offer or bid to acquire us at a price per share higher than the then current
market price.
Our stock price may be extremely volatile after the offering.
Prior to this offering, there has been no public market for shares of our
common stock. The initial public offering price of the shares of our common
stock will be determined by negotiation between representatives of the
underwriters and us. This price will not necessarily reflect the market price
of the common stock following this offering, and you may not be able to resell
your shares at or above the initial public offering price.
The market price for our common stock following this offering may be
volatile and could decline or fluctuate in response to a variety of factors,
including:
. the announcement of new services or pricing policies by us or our
competitors;
. acquisitions or strategic alliances by us or others in our industry;
. quarterly variations in our or our competitors' results of operations;
. failure to achieve financial analysts' or other estimates of our
results of operations for any fiscal period;
. changes in earnings estimates or recommendations by securities
analysts;
. announcements of technological innovations that render our
capabilities outdated;
. developments in our industry; and
. general market conditions and other factors, including factors
unrelated to our operating performance or the operating performance of
our competitors.
In addition, stock prices for many companies in the high technology and
emerging growth sectors have experienced wide fluctuations that have often been
unrelated to their operating performance. These factors and fluctuations, as
well as general economic, political and market conditions, may negatively
affect the market price of our common stock.
We may seek additional funding or make acquisitions, which may be dilutive to
stockholders or impose operational restrictions.
If we raise additional funds or make acquisitions through the issuance of
equity securities, it will reduce the percentage ownership of our stockholders.
These stockholders may experience additional dilution in net book value per
share, and any additional equity securities may have rights, preferences and
privileges senior to those of the holders of common stock. In addition, debt
financing, if available, may involve restrictive covenants that limit our
operating flexibility with respect to certain business matters.
12
<PAGE>
You should consider the following additional risks before purchasing our stock:
. declines in our stock price or other events could result in securities
class action litigation against us. Securities litigation involves
substantial costs and use of management's time, which could adversely
affect our business and financial results;
. our charter documents contain provisions that could make it more
difficult for us to be acquired and for you to receive a premium for
your stock;
. substantial sales of our common stock by current stockholders could
cause a decline in the price of our common stock;
. the exercise of options and warrants and purchases of stock under our
employee benefit plans will dilute your percentage ownership of our
common stock; and
. we may use the proceeds of this offering differently than you may
prefer or may fail to maximize our return on the proceeds.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus. These
statements are subject to risks and uncertainties, and there can be no
guarantee that these statements will prove to be correct. Forward-looking
statements include assumptions as to how we may perform in the future. When we
use words like "believe," "could," "may," "will," "estimate," "continue,"
"seek," "anticipate," "intend," "expect," "predict," "potential," and "plan" or
similar expressions, we are making forward-looking statements.
We have based these statements on our current expectations about future
events. Although we believe that the expectations reflected in our forward-
looking statements are reasonable, we cannot guarantee that these expectations
actually will be achieved. In evaluating these statements, you should consider
various factors, including the risks set forth in the section entitled "Risk
Factors" beginning on page 6. These risk factors may cause actual results to
differ materially from any forward-looking statements.
USE OF PROCEEDS
Assuming an initial public offering price of $ per share, we will
receive net proceeds of approximately $ from the sale of shares of common
stock in this offering (approximately $ if the underwriters exercise their
over-allotment in full), after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds of this offering for general corporate
purposes, including capital expenditures and working capital. In addition, we
may, if appropriate opportunities arise, use an undetermined portion of the net
proceeds to acquire or invest in companies offering services or products
complementary to ours. However, we currently have no commitments or agreements
with any third party regarding any such potential acquisition or investment.
Pending such uses, we will invest the net proceeds in investment grade,
interest-bearing securities.
DIVIDEND POLICY
We have never paid or declared cash dividends on our common stock. We
currently intend to retain any future earnings to fund the development and
growth of our business. Therefore, we do not currently anticipate paying any
cash dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table shows our capitalization at December 31, 1999:
. on an actual basis;
. on an unaudited pro forma basis giving effect to (1) the automatic
conversion upon the closing of this offering of all outstanding shares
of preferred stock into 9,560,188 shares of common stock and (2) the
issuance of 1,333,433 shares of common stock to holders of our
preferred stock as payment-in-kind dividends assuming the closing of
this offering on December 31, 1999; and
. on an unaudited pro forma basis as adjusted to reflect (1) the
issuance of shares of common stock in this offering and the
receipt by us of net proceeds of approximately $ assuming an
initial public offering price of $ per share (after deducting the
estimated underwriting discounts and commissions and estimated
offering expense), and (2) the issuance of additional shares of
common stock to holders of our Series F preferred stock assuming the
sale of shares in this offering at an initial offering price of $
per share (see "Related Party Transactions-Securities Issuances and
Loans").
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------
Pro forma
as
Actual Pro forma adjusted
----------- ------------ ------------
(unaudited)
(in thousands, except share data)
<S> <C> <C> <C>
Long-term borrowings, net of current
portion................................ $ 1,722 $ 1,722 $ 1,722
----------- ----------- ---------
Convertible Preferred Stock, subject to
mandatory redemption; 79,000,000 shares
authorized, 35,255,741 shares issued
and outstanding actual; convertible
into 38,240,741 common shares; no
shares issued and outstanding pro forma
and pro forma as adjusted.............. 59,408 -- --
----------- ----------- ---------
Stockholders' equity (deficit):.........
Common stock, 170,000,000 shares
authorized, 1,881,444 shares issued
and outstanding, actual; 100,000,000
shares authorized, pro forma and pro
forma as adjusted; shares issued
and outstanding, pro forma; shares
issued and outstanding, pro forma as
adjusted ............................ 1 2
Additional paid-in capital.............. -- 59,407
Unearned compensation................... (1,266) (1,266)
Accumulated deficit..................... (40,732) (40,732)
----------- ----------- ---------
Total stockholders' equity
(deficit).......................... (41,997) 17,411
----------- ----------- ---------
Total capitalization................ $ 19,133 $ 19,133 $
=========== =========== =========
</TABLE>
The outstanding share information shown in the table above excludes:
. 2,330,563 shares of common stock subject to options granted under our
1997 and 1998 stock plans at a weighted average exercise price of
$6.28 per share;
. 4,750,000 shares of common stock available for future issuance under
our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase
Plan;
. 181,250 shares of common stock subject to a warrant issued to Sony
Electronics at an exercise price of $8.52 per share; and
. 527,778 shares reserved for contingent future issuance to the former
stockholders of Acorn.
14
<PAGE>
An additional 170,757 shares of common stock will be issued to the holders
of preferred stock as payment-in-kind dividends subsequent to December 31, 1999
assuming the closing of this offering on March 31, 2000.
For additional information about our stock plans, see "Employee Benefit
Plans," and for information about the warrant issued to Sony Electronics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
15
<PAGE>
DILUTION
The unaudited pro forma net tangible book value of our common stock at
December 31, 1999 was $ , or $ per share of common stock. The unaudited
pro forma net tangible book value per share represents the amount of our total
tangible assets less total liabilities, divided by shares of common stock
outstanding after giving effect to (1) the conversion of all outstanding shares
of preferred stock into 9,560,188 shares of common stock upon the closing of
this offering, (2) the issuance of 1,333,433 shares of common stock to holders
of our preferred stock as payment-in-kind dividends assuming the closing of
this offering on December 31, 1999, and (3) the issuance of additional
shares of common stock to holders of our Series F preferred stock assuming the
sale of shares in this offering at an initial offering price of $ per share
(see "Related Party Transactions - Securities Issuances and Loans"). It does
not include shares that we may issue in connection with the acquisition of
Acorn upon Acorn's achievement of certain contingencies.
After giving effect to this offering and the receipt of approximately $
of net proceeds from this offering (based on an assumed initial public offering
price of $ per share and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses), our unaudited pro
forma as adjusted net tangible book value at December 31, 1999 would have been
approximately $ million, or $ per share. This amount represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to purchasers
of common stock in this offering. Dilution is determined by subtracting
unaudited pro forma as adjusted net tangible book value per share after this
offering from the amount of cash paid by a new investor for a share of common
stock. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Unaudited pro forma as adjusted net tangible book value per
share at December 31, 1999..................................... $
Increase in unaudited pro forma as adjusted net tangible book
value per share attributable to new investors..................
----
Unaudited pro forma as adjusted net tangible book value per share
after this offering..............................................
----
Dilution per share to new investors............................... $
====
</TABLE>
The following table summarizes as of December 31, 1999, on the unaudited
pro forma as adjusted basis described above, the number of shares of common
stock purchased from us, the total consideration paid to us, and the average
price per share paid by existing stockholders and by new investors who purchase
shares of common stock in this offering, before deducting the estimated
underwriting discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- ---------------------- Price Per
Number Percent Amount Percent Share
-------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)........ $ $
New investors(1)........
-------- -------- ---------- ---------
Total................. $
======== ======== ========== =========
</TABLE>
- ------------------
(1) If the underwriters' over-allotment option is exercised in full, sales in
this offering will reduce the number of shares of common stock held by the
existing stockholders to approximately % of the total shares of common
stock outstanding after the offering and will increase the number of shares
held by new investors to , or approximately % of the total shares of
common stock outstanding after the offering. See "Underwriting."
16
<PAGE>
The above table assumes no exercise of any outstanding stock options or
warrants. As of December 31, 1999, there were options outstanding to purchase a
total of 2,330,563 shares of common stock with a weighted average exercise
price of $6.28 per share. In January 2000, we issued a warrant to Sony
Electronics to purchase 181,250 shares at $8.52 per share. If any of these
options or the warrant are exercised, there will be further dilution to new
public investors. Please see "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Employee Benefit
Plans," and Notes 10 and 13 of Notes to Consolidated Financial Statements for
additional information about the outstanding options and warrant.
17
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and related notes, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Condensed Financial Information," included elsewhere in this prospectus.
Historical Presentation
The historical statements of operations data set forth below are derived
from and qualified by reference to our financial statements included elsewhere
in this prospectus. The historical periods are not necessarily indicative of
results to be expected in any future period.
Pro Forma Presentation
The pro forma financial data have been derived from our unaudited pro
forma condensed financial statements which were prepared to illustrate the
effects of certain transactions and events and the application of the net
offering proceeds. For a more complete discussion, this data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The unaudited pro forma consolidated statements of
operations data for the year ended December 31, 1999 give effect to our
acquisition of Acorn and the spin-off of Spider as if those transactions had
occurred on January 1, 1999. The pro forma consolidated balance sheet data give
effect to the sale of shares in this offering at an assumed initial public
offering price of $ per share (after deducting the estimated underwriting
discounts and commissions and estimated offering expenses) as if this offering
had occurred on December 31, 1999. The following transactions are assumed to
have occurred on January 1, 1999 in the pro forma as adjusted per share data in
the consolidated statements of operations data and on December 31, 1999 in the
pro forma consolidated balance sheet data:
. the issuance of shares in this offering at an assumed initial
public offering price of $ per share (after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses);
. the automatic conversion of all shares of preferred stock outstanding
as of December 31, 1999 into 9,560,188 shares of common stock;
. the issuance of 1,333,433 shares of common stock to the holders of our
preferred stock as payment-in-kind dividends as of December 31, 1999;
and
. the issuance of additional shares of common stock to the holders
of our Series F preferred stock assuming the sale of shares in this
offering at an initial offering price of $ per share. See "Related
Party Transactions - Securities Issuances and Loans."
Additional shares of common stock will be issued to the holders of
preferred stock as payment-in-kind dividends subsequent to December 31, 1999.
If this offering were to close on March 31, 2000, we would issue 170,757
additional shares.
18
<PAGE>
<TABLE>
<CAPTION>
Period from
March 6, 1996
(inception) Years Ended December 31,
to December 31, ------------------------------------------------
1996 1997 1998 1999
--------------- ---------- ---------- ------------------------
Pro forma
Actual as adjusted
----------- -----------
(unaudited)
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenue................. $ 480 $ 9,546 $ 17,664 $ 24,699 $ 26,707
Direct cost of servic-
es..................... (211) (7,767) (13,209) (16,986) (17,964)
---------- ---------- ---------- ----------- --------
Gross profit............ 269 1,779 4,455 7,713 8,743
Operating expenses:
Selling, general and
administrative........ 2,046 10,464 9,312 15,020 15,129
Depreciation and amor-
tization.............. 25 2,941 3,755 3,533 3,933
Research and develop-
ment.................. -- 458 897 1,079 278
---------- ---------- ---------- ----------- --------
Total operating ex-
penses................ 2,071 13,863 13,964 19,632 19,340
---------- ---------- ---------- ----------- --------
Loss of operations...... (1,802) (12,084) (9,509) (11,919) (10,597)
---------- ---------- ---------- ----------- --------
Other (expense) income:
Loss from Spider........ -- -- -- (1,055) (3,320)
Interest income........ 11 245 266 134 134
Interest expense....... (16) (30) (17) (150) (194)
Loss on disposal of
equipment and other... (2) (26) (270) (20) (20)
---------- ---------- ---------- ----------- --------
(7) 189 (21) (1,091) (3,400)
---------- ---------- ---------- ----------- --------
Net loss................ $ (1,809) $ (11,895) $ (9,530) $ (13,010) $(13,997)
========== ========== ========== =========== ========
Net loss applicable to
common stockholders:
Net loss............... $ (1,809) $ (11,895) $ (9,530) $ (13,010) $
Accretion of mandatorily
redeemable convertible
preferred stock........ (90) (469) (864) --
Cummulative dividends to
preferred
stockholders........... -- -- -- (11,361) --
Loss on repurchase of
Series A preferred
stock.................. -- (1,241) -- -- --
Series C preferred
stock.................. -- -- (1,465) -- --
---------- ---------- ---------- ----------- --------
Net loss applicable to
common stockholders.... $ (1,809) $ (13,226) $ (11,464) $ (25,235) $
========== ========== ========== =========== ========
Basic and diluted net
loss per share......... $ (1.07) $ (7.09) $ (6.14) $ (13.50) $
---------- ---------- ---------- ----------- --------
Weighted average shares
outstanding--basic and
diluted................ 1,697,417 1,866,585 1,867,941 1,869,803
========== ========== ========== =========== ========
Pro forma net loss per
share, assuming conver-
sion of preferred stock
and accrued dividends:
Basic and diluted net
loss per share........ $ (1.26)
===========
Weighted average common
shares outstanding--
basic and diluted..... 10,364,936
===========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1996 1997 1998 1999
------ ------- ------- --------------------
Pro forma
Actual as adjusted
------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Da-
ta:
Cash and cash equivalents...... $ 441 $ 2,235 $ 3,752 $ 6,204 $
Working capital................ 268 1,897 7,082 7,533
Total assets................... 1,296 17,086 18,644 26,378
Long-term borrowing, net of
current portion............... 58 20 7 1,722 1,722
Total stockholders' equity
(deficit)..................... (1,219) (12,920) (22,990) (41,997)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with Selected Historical
and Pro Forma Financial Data and the financial statements and notes appearing
elsewhere in this prospectus. This discussion and analysis contains forward-
looking statements that involve risks, uncertainties and assumptions. Our
actual results may differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including, but not limited
to, those stated in the Risk Factors section and elsewhere in this prospectus.
Overview
We provide an integrated set of strategic, technological, operational and
analytical solutions that takes our clients from concept to launch and
operation of their e-commerce and other direct-to-customer sales and marketing
initiatives. Our clients are Fortune 1000 and emerging Web-based companies
that, either because they sell complex products or employ complicated sales
processes, require sophisticated solutions to effectively conduct their direct-
to-customer initiatives. Our services enable our clients to rapidly capitalize
on market opportunities, access sophisticated technology, use the services of
highly trained personnel and improve operating efficiencies.
We incorporated in Colorado in March 1996 and reincorporated in Delaware
in August 1996. In February 1997, we acquired Protocall Communications, a
customer support company in Livermore, California. The net purchase price of
Protocall after assumption of liabilities was approximately $6.7 million. We
recorded an intangible asset of $3.0 million for acquired customer
relationships and $3.6 million as goodwill. We are amortizing the customer
relationship intangible over three years and the goodwill amount over five
years. As a result of the Protocall acquisition, our communications center
services expanded. We opened our Hayward, California communications center in
May 1997.
We grew our business significantly in 1998. This growth came primarily
from expanding our communications center and technology development services to
existing clients and adding new clients. During 1999, we continued to expand
our e-Operations services, which include our communications center operations,
and our Technology Solutions services, as we increased services to our major
clients and, to a lesser extent, added new clients. We opened a large
communications center in Fort Scott, Kansas in June 1999 to support this growth
and planned future growth.
In October 1999, we acquired Acorn, which provides strategic consulting
and sophisticated data analytic services to its clients. The initial purchase
price for Acorn after assumption of outstanding borrowings was approximately
$2.0 million. Approximately $493,000 of the purchase price was allocated to
acquired goodwill and $950,000 to acquired intangibles. Goodwill will be
amortized on a straight-line basis over five years and intangibles will be
amortized on a straight-line basis over three years. We also agreed to make
significant future cash and stock payments to the former stockholders of Acorn
if Acorn meets certain earnings targets over the next three years. The non-cash
amortization of this additional purchase consideration could significantly
affect our earnings over the next five years.
Effective October 1, 1999, we transferred the rights to the proprietary
software that we had developed and that is used in our IntekWebDirect System to
a newly-formed subsidiary, Spider. We then distributed the stock of Spider to
our stockholders. Fifteen of our technical personnel became employees of
Spider. Spider is now primarily responsible for research and development
efforts with respect to the transferred software. As a result, our research and
development expenses for the fourth quarter of 1999 and on a pro forma basis
for 1999 were, and are expected to be for the foreseeable future, lower than
historical levels.
For federal income tax purposes, the distribution of the Spider shares to
our stockholders was a taxable event to us. The taxable gain was determined
based upon an independent valuation of Spider. To the
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extent the IRS requires the valuation of Spider to be increased and the taxable
gain exceeds the tax operating loss for 1999, we would owe alternative minimum
taxes, the payment of which would adversely affect our cash flow. Any increase
in the valuation would also decrease our net operating loss carryforward.
In connection with the spin-off, we distributed $1 million to Spider. We
also agreed to share certain facilities, supplies and personnel with Spider,
for which it will pay us specified fees. We have accounted for the $1 million
distribution as a long-term receivable which is to be repaid by Spider's
minimum royalty obligation. If Spider is unable to generate sufficient revenue
to pay its obligations, we may not be able to recover the $1 million or the
costs incurred or to be incurred on its behalf pursuant to agreements entered
into in connection with the spin-off. This would have a negative effect on our
results of operations in the period in which the losses are recognized.
To date, a substantial majority of our revenue has come from our e-
Operations services and nearly all of the remainder has been from Technology
Solutions services. In the fourth quarter of 1999, we began billing for our
Strategic Consulting services, which we had previously provided primarily as a
way to attract new clients for Technology Solutions and e-Operations services.
We also significantly enhanced our database marketing and analysis services in
the fourth quarter through our acquisition of Acorn. These types of
professional services traditionally have higher gross margins than our e-
Operations services.
Substantially all of our revenue to date has been based on time and
expenses as incurred. Recently we entered into a long-term contract with a
major client under which our revenues will be based primarily upon a percentage
of the client's revenues generated from our operation of its direct-to-customer
initiative. We may enter into additional contracts with similar terms in the
future. In addition, we have recently entered into fixed-price agreements for
certain Strategic Consulting services. To date, revenue under these fixed-price
agreements has been immaterial.
Direct cost of services consists primarily of compensation and benefits to
our employees engaged in the direct delivery of professional services related
to the development, implementation and support of programs for our clients.
Direct cost of services also includes materials, training, telecommunication
expenses and equipment necessary for execution of our clients' programs. Under
our agreements with Spider, we are not required to pay license fees for
transferred software until November 2002, which will have a positive effect on
our direct cost of services until that time.
Research and development expenses consist of charges, including labor and
materials, related to the development and enhancement of software and
technology platforms used in providing services to our clients.
Selling, general and administrative expenses consist primarily of
salaries, commissions, benefits, and related expenses for personnel engaged in
sales and client support; salaries and related expenses of executive
management, human resources, finance and administrative personnel; expenses
related to our facilities; marketing and branding expenses, including trade
shows and promotional events; and other general corporate expenses.
In January 2000, we issued a warrant to Sony Electronics for 181,250
shares of common stock. The value of this warrant is approximately $1.1 million
which will be changed to operations in the first quarter of 2000.
Depreciation and amortization expenses consist of the depreciation of
equipment used in our operations including phone switches and computer
equipment at our facilities.
Interest income is earned on cash balances in our bank accounts and short-
term investments. Interest expense is incurred on our debt and capital lease
obligations.
In connection with the Series F preferred stock financing, we provided
certain guarantees to the Series F preferred stock investors regarding the
future value of their investment. The adjustments we will be required to make
upon the closing of this offering will result in a charge of $13.2 million to
net loss applicable to common stockholders in the quarter in which the closing
occurs.
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Pro Forma Results of Operations
The pro forma information takes into account the acquistion of Acorn and
the spin-off of Spider as if those transactions had occurred on January 1,
1999. On a pro forma basis, Acorn contributed $2.9 million in revenue during
1999. In addition, on a pro forma basis, Acorn contributed $1.5 million in
gross profit, while incurring $2.1 million in operating expenses, resulting in
a loss for the year of $0.7 million.
During the first nine months of 1999, on a pro forma basis, Spider
incurred $1.2 million in expenses related to support services such as
accounting, payroll, human resources and insurance. Spider also incurred $1.1
million in research and development expenses related to the continued
development of the IntekWebDirect System. On a going-forward basis, R&D will
not include the effect of Spider. For the full year 1999, Spider's operating
expenses on a pro forma basis were $3.3 million.
Historical Results of Operations
The following table sets forth for the periods presented certain data from
our consolidated statements of operations as a percentage of revenues. These
data, other than the pro forma financial information, have been derived from
our audited financial statements and should be read in conjunction with the
financial statements and notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
March 6, 1996
(inception) Years Ended December 31,
to December 31, ---------------------------------
1996 1997 1998 1999
--------------- ---- ---- -------------------
Pro forma
Actual as adjusted
------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue....................... 100% 100% 100% 100% 100%
Direct cost of services....... (44) (81) (75) (69) (67)
---- ---- --- ---- ----
Gross profit.................. 56 19 25 31 33
Operating expenses:
Selling, general and
administrative............. 426 110 53 61 57
Depreciation and
amortization............... 5 31 21 14 13
Research and development.... -- 5 5 4 1
---- ---- --- ---- ----
Total operating expenses.. 431 146 79 79 72
---- ---- --- ---- ----
Loss from operations.......... (375) (127) (54) (48) (40)
---- ---- --- ---- ----
Other (expense) income:
Loss from Spider.............. -- -- -- (4) (12)
Interest income............. 2 3 2 1 1
Interest expense............ (3) -- -- (1) (1)
Loss on disposal of
equipment and other........ -- -- (2) -- --
---- ---- --- ---- ----
Net loss...................... (376)% (124)% (54)% (53)% (52)%
==== ==== === ==== ====
</TABLE>
Comparison of Years Ended December 31, 1997, 1998 and 1999
Revenue. Revenue increased 39.5% to $24.7 million in 1999, from $17.7
million in 1998. This increase was primarily due to growth in initiatives for
major existing clients, as well as the addition of new clients and billing rate
increases. Furthermore, our acquisition of Acorn contributed an additional $0.9
million during the fourth quarter of 1999. In 1999, we discontinued working
with certain clients whose initiatives did not require the sophisticated level
of services on which we are focusing. Revenue increased 86.3% to $17.7 million
in 1998 from $9.5 million in 1997. This increase was primarily due to revenue
from our three largest clients that we had added in late 1997, as well as the
addition of new clients and the expansion of our Technology Solutions services.
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<PAGE>
Direct cost of services. Direct cost of services in 1999 was $17.0
million, or 68.8% of revenue, as compared to $13.2 million, or 74.8% of
revenue, in 1998. On a dollar basis, the increase in direct cost of services
was due to the increase in activities related to providing our services. Direct
cost of services in 1998 was $13.2 million or 74.8% of revenue compared to $7.8
million or 81.4% of revenue in 1997. This dollar increase resulted from costs
related to increased services to new and existing clients. The improvements as
a percentage of revenue in 1999 and 1998 over the respective prior years were
related primarily to the leveraging of fixed direct costs against increased
revenue.
Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses were $15.0 million, or 60.8% of revenue, in 1999
compared to $9.3 million, or 52.7% of revenue, in 1998. This growth in SG&A
resulted from hiring additional management and support personnel, adding
facilities and other activities related to the increase in revenue. In June
1999, we opened a new communications center in Fort Scott, Kansas. Our
acquisition of Acorn in October 1999 resulted in additional SG&A expense of
$0.3 million. In addition, we incurred $0.4 million in compensation expense
related to incentive stock options. SG&A expenses in 1998 were $9.3 million, or
52.7% of revenue, compared to $10.5 million, or 109.6% of revenue, for 1997.
This decrease was primarily a result of the termination of certain management
personnel acquired in the Protocall acquistion.
Depreciation and amortization expenses. Depreciation and amortization
(D&A) expenses in 1999 were $3.5 million compared to $3.8 million in 1998. The
decrease in D&A expenses was a result of the disposal or full depreciation of
certain equipment from the acquisition of Protocall. D&A in 1998 was $3.8
million compared to $2.9 million in 1997. The increase of $0.8 million in 1998
compared to 1997 resulted from the depreciation of equipment in our Hayward
facility for a full year and new equipment added during the year.
Research and development. Research and development (R&D) expenses in 1999
were $1.1 million compared to $0.9 million in 1998. The increase in R&D
expenses was a result of continued development and support of the
IntekWebDirect System. In October 1999, we transferred the IntekWebDirect
System software to Spider and we then distributed all of the stock of Spider to
our stockholders. Consequently, R&D expenses in the fourth quarter of 1999 were
negligible. Research and development expenses increased in 1998 to $0.9 million
from $0.5 million in 1997 due to the continued development and support of the
IntekWebDirect System.
Interest income. Interest income in 1999 was $0.1 million compared to $0.3
million in 1998 and $0.2 million in 1997. Fluctuations from year to year were
due to preferred stock financings and the investment of the proceeds in short-
term financial instruments.
Interest expense. Interest expense in 1999 was $0.2 million. Interest
expense in 1998 and 1997 was negligible. Interest expense in 1999 resulted from
our borrowings against our lines of credit and leases for office equipment and
furniture.
Loss on disposal of equipment and other expense. In early 1998, we
disposed of telecommunications equipment we considered no longer useful in our
operations. The result was a $0.3 million loss.
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<PAGE>
Selected Unaudited Historical Quarterly Financial Data
The following table sets forth certain unaudited consolidated statements
of operations data for the eight quarters ended December 31, 1999. In our
opinion, the quarterly data include all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of such
information. Operating results for any quarter are not necessarily indicative
of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 3,402 $ 3,646 $ 4,989 $ 5,627 $ 5,432 $ 4,879 $ 5,567 $ 8,821
Direct cost of
services............... (3,086) (2,688) (3,404) (4,031) (3,638) (3,420) (4,296) (5,632)
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 316 958 1,585 1,596 1,794 1,459 1,271 3,189
Operating expenses:
Selling, general and
administrative........ 2,213 2,143 2,445 2,511 2,911 3,182 3,864 5,063
Depreciation and
amortization.......... 1,070 1,056 770 859 765 775 875 1,118
Research and
development........... 154 189 224 330 328 344 389 18
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 3,437 3,388 3,439 3,700 4,004 4,301 5,128 6,199
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (3,121) (2,430) (1,854) (2,104) (2,210) (2,842) (3,857) (3,010)
------- ------- ------- ------- ------- ------- ------- -------
Other (expense) income:
Loss from Spider....... -- -- -- -- -- -- -- (1,055)
Interest (income)...... (26) (87) (108) (45) (14) (45) (23) (52)
Interest expense....... 1 13 1 2 5 6 8 131
Loss on disposal of
equipment and other... 269 1 -- -- -- 1 11 8
------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $(3,365) $(2,357) $(1,747) $(2,061) $(2,201) $(2,804) $(3,853) $(4,152)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Liquidity and Capital Resources
We have raised $51.0 million of equity capital to date from the sale of
common and preferred stock, net of offering expenses.
Cash and cash equivalents at the end of 1997, 1998 and 1999 were $2.2
million, $3.8 million, and $6.2 million, respectively. The increases in cash
were primarily from the net proceeds from the issuance of convertible preferred
stock of $22.8 million in 1997, $11.8 million in 1998 and $14.5 million in
1999. The proceeds were used primarily to fund operating activities, capital
expenditures and acquisitions.
Cash used in operations for 1997, 1998 and 1999 was $9.5 million, $9.0
million and $6.6 million, respectively. Our negative operating cash flow
resulted primarily from our net losses experienced over these periods. During
these periods we continued to develop our communication centers, hire key
management and other personnel and expand our technology infrastructure to
support our growth.
Cash used in investing activities was $9.0 million, $1.2 million and $7.4
million for 1997, 1998 and 1999, respectively. We have invested in
communication centers, expanded our technology resources and enhanced our
support infrastructure. In 1997, we acquired Protocall for $6.7 million, of
which $3.3 million was in cash. We also spent $5.6 million for computer and
communications equipment and facilities expansion, including the opening of a
communications center in Hayward, California. During 1999, we opened a
communications center in Fort Scott, Kansas and moved our headquarters
operations, which resulted in capital investments in computer systems, facility
expansion, furniture and fixtures. Effective October 1, 1999, we purchased
Acorn for initial consideration of $ 2.0 million, of which $0.6 million was in
cash.
Our financing activities have generated cash of $20.3 million, $11.7
million and $16.5 million for 1997, 1998 and 1999 respectively. Net proceeds
from the sale of preferred equity have generated cash of
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<PAGE>
$22.8 million, $11.8 million and $14.5 million for 1997, 1998 and 1999,
respectively. In June 1999, we obtained a two-year revolving line of credit
from Silicon Valley Bank. Borrowings under this secured line of credit bear
interest at the bank's prime rate plus 1.5%. The credit limit is based on 80%
of the eligible accounts receivable balance up to a maximum credit limit of
$5.0 million. In September 1999, we obtained a 30-month, $2.5 million credit
facility secured by the capital assets at the Fort Scott communications center
and a junior lien on most of our other assets. In the fourth quarter of 1999,
we drew $2.5 million against this line to purchase equipment for use in the
Fort Scott facility.
In March 1999, we received an $800,000 grant from the Kansas Department of
Commerce and Housing to offset costs for instruction, curriculum development,
training equipment, facilities and other expenses associated with our Fort
Scott facility. Under the terms of the grant, we are required to maintain
certain employee and wage levels in our Fort Scott facility until the third
quarter of 2001. We have been reimbursed for approximately $300,000 of expenses
as of December 31, 1999. If there are insufficient funds available to fund this
grant in the future, we may not be reimbursed for expenses covered by the grant
until funds become available, if at all.
In addition, in April 1999, we received a $400,000 loan from the Kansas
Department of Commerce and Housing under the Kansas Economic Opportunity
Initiatives Fund. The loan is interest free and will be forgiven in equal
amounts over a five-year period provided that we meet and maintain certain
employee and wage levels and do not vacate our Fort Scott facility during this
period. If we fail to meet these requirements, or otherwise breach the
agreement, we must repay all or part of the amount of the loan plus 12%
interest.
We believe that the proceeds from this offering together with our cash and
borrowing capacity will be sufficient to fund our activities for at least the
next 12 months.
If the offering is not completed in a timely manner, we will need to
decrease our planned business expansion efforts or raise additional capital
through debt or private equity placements to fund our activities over this
period. There is no assurance that such alternative financing will be available
on terms acceptable to us, if at all. Beyond twelve months, we expect to
generate sufficient cash flow from operations to fund our business. In
addition, although there are no commitments or agreements with any third party
with respect to any acquisition of other businesses, products or technologies,
we may, from time to time, evaluate potential acquisitions of other businesses,
products and technologies. In order to consummate potential acquisitions, we
may need to issue equity or debt securities and these issuances may be dilutive
to existing investors.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.133,
"Accounting for Derivative Instruments and Hedging Activities"("SFAS No. 133").
The Company is required to adopt SFAS No. 133, as amended by SFAS No. 137, in
2001. SFAS No. 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Intek has not entered into any derivative financial
instruments or hedging activities. As a result, management believes adoption of
SFAS No. 133 will not have a material impact on the financial statements.
In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition."
SAB No. 101 provides guidance on the measurement and timing of revenue
recognition in financial statements of public companies. Changes in accounting
policies to apply the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change in the fiscal quarter ending March 31, 2000.
Management has not yet determined the effect SAB No. 101 will have, if any, on
its accounting policies or the amount of the cumulative effect to be recorded
from adopting SAB No. 101.
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<PAGE>
Quantitative and Qualitative Disclosures about Market Risks
Market risks represent the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
market prices and rates. We are exposed to market risks from changes in United
States interest rates. Historically, and as of December 31, 1999, we have not
used derivative instruments or engaged in hedging activities.
We had long-term borrowings (including current maturities) of $3.2 million
as of December 31, 1999. Of this amount, $2.3 million bears interest at a fixed
rate of 13.9%. The fair value of the fixed-rate debt would change approximately
$0.4 million for a 0.50% change in the level of interest rates.
We temporarily invest our excess cash in money market funds. Changes in
interest rates would not significantly affect the fair value of these temporary
cash investments because they are repriced on a daily basis.
Inflation
As a result of the relatively low levels of inflation during the last
three years, inflation did not have a significant impact on our results of
operations for those periods.
Income Taxes
We have historically concluded that there exists substantial doubt as to
the recoverability of our deferred tax assets. As a result, we have recorded a
valuation allowance of $9.7 million against those deferred tax assets. Our view
as to the ultimate recoverability of our deferred tax assets may change in the
near term based principally upon the successful execution of our business plan.
Year 2000 Issue
The "Year 2000" issue has been a general term used to describe the various
problems that may result from the improper processing of dates and date-
sensitive calculations by computers and other machinery after December 31,
1999. These problems arise from the inability of hardware and software to
distinguish dates in the "2000's" from dates in the "1900's" and from other
sources such as the use of special codes and conventions in software that make
use of a date field. We have not experienced any significant disruptions from
the Year 2000 rollover; however, we recognize the need to continue to ensure
that our operations will not be adversely affected by still undiscovered Year
2000 software failures.
To date, we have not incurred any material costs directly associated with
Year 2000 compliance efforts. We do not expect the total cost of Year 2000
problems to be material to our business, financial condition or operating
results. We will continue to evaluate any new software and hardware systems
that we may acquire to determine whether they are Year 2000 compliant. Despite
our current assessment, we may not identify and correct all significant Year
2000 problems on a timely basis. If the representations made by our various
vendors regarding Year 2000 compliance are inaccurate, additional Year 2000
compliance efforts may involve significant time and expense, and unremedied
problems could harm our business.
In addition, the software and hardware systems of our clients, third-party
service companies and others outside of our control may not be Year 2000
compliant. If these systems are not Year 2000 compliant, a systemic failure
beyond our control could result, including Internet, telecommunications or
general electrical failure. These type of failures would significantly
interfere with our ability to provide our services to our clients. If these
failures were prolonged, our business would be harmed.
26
<PAGE>
BUSINESS
Overview
Intek provides an integrated set of solutions that takes our clients from
concept to launch and operation of their e-commerce and other direct-to-
customer initiatives. Our services allow both traditional and Web-based
companies to quickly capitalize on market opportunities and to serve new and
existing customers while reducing the investments they may otherwise have to
make in technology, facilities and personnel infrastructure. Our comprehensive
range of services includes:
. Strategic Consulting. We provide strategic program design, specifying
the necessary technology platforms, customer communication processes,
data requirements and personnel skills necessary for the client's
initiative;
. Technology Solutions. We design and implement the software and
hardware components needed to rapidly deploy clients' initiatives and
to link our technology platform with the clients' and their vendors'
systems;
. e-Operations. We operate technology systems and provide high-level
customer support personnel and communications services on behalf of
our clients, conducting sophisticated transactions with their
customers via voice, e-mail, fax and real-time online communications;
and
. Customer Knowledge. We collect and analyze data to help our clients
improve their marketing efforts and customer relationships through a
better understanding of their customers' buying processes and
behaviors.
We enable our clients to implement their e-commerce strategies and
introduce new products and services by providing comprehensive direct-to-
customer services which are integrated with our clients' systems and
transparent to their customers.
Industry Background
The acceptance and rapid growth of the Internet has dramatically changed
the way businesses and consumers communicate, obtain information, purchase
goods and services, and conduct business. International Data Corporation, or
IDC, estimates that the number of users who make purchases over the Web will
increase from nearly 31 million in 1998 to more than 182 million in 2003, and
that the amount of worldwide e-commerce conducted over the Web will increase
from $50 billion in 1998 to about $1.3 trillion in 2003. Both new Web-based
companies and traditional providers of goods and services are transforming
their business processes into e-commerce processes in an effort to lower costs,
improve customer service and increase productivity.
Increasing use of e-commerce and associated direct-to-customer
initiatives. Emerging Web-based companies established to take advantage of
Internet sales opportunities are proliferating. To meet competitive pressures
from these companies, traditional businesses are reevaluating their sales and
marketing methods and increasingly seeking to sell directly to customers
through e-commerce and associated direct-to-customer initiatives rather than
relying solely on intermediaries, such as wholesalers and retailers. These
initiatives generally result in lower distribution costs and better control
over the customer experience and provide the basis for future targeted
marketing efforts. Direct sales can also provide companies with valuable end-
user customer information, including buying patterns, feature and function
preferences and customer support requirements. This information can be used to
design better products, enhance marketing programs and improve overall customer
satisfaction.
Increasing complexity of direct-to-customer initiatives. The process of
establishing e-commerce and other direct-to-customer initiatives is becoming
more complex as a result of the increasing sophistication of the products and
services being offered and, in many cases, the need to integrate the
initiatives into the existing business models of large traditional companies.
Comprehensive Internet strategies must include
27
<PAGE>
strategic and technological solutions that combine e-commerce and other direct-
to-customer support initiatives. Additionally, most direct-to-customer
initiatives require several alternative points of contact between a company and
its customers, including voice, e-mail, fax, real-time online communications
and mail. Companies are recognizing that the task of quickly and effectively
designing, building and operating these initiatives requires a specialized
range and level of skills, technology and infrastructure.
Growing trend to outsource. Many companies, whether implementing new, or
expanding existing, e-commerce and other associated direct-to-customer programs
often lack sufficient expertise, resources or the technical infrastructure to
move rapidly from concept to launch and operation. The skills and
infrastructure required to create and implement these initiatives are in short
supply, and the complexity of these efforts are increasing. This complexity,
the rapid pace of technological change and the difficulty of building in-house
resources are driving companies to outsource the development of their e-
commerce programs. IDC forecasts that the worldwide Internet services market
will grow from $7.8 billion in 1998 to $78.5 billion in 2003, representing a
five year compounded annual growth rate of 59%.
Typically, outsourcing service providers focus on only a subset of the
complete range of services required to take an e-commerce or other direct-to-
customer initiative from concept to launch and operation. As a growing number
of companies offer more complex products and services online, we believe that
demand has increased for more sophisticated outsourced service providers. These
companies are seeking service providers that can offer an integrated approach
to the technological and personnel services required to rapidly capitalize on
market opportunities.
The Intek Solution
We design, build and operate direct-to-customer solutions that integrate
and coordinate sophisticated e-commerce initiatives encompassing online and
offline components. Our services consist of Strategic Consulting, Technology
Solutions, e-Operations and Customer Knowledge. We typically initiate our
services with a strategic consulting engagement involving a team of our
management and technical personnel working with the client to plan their e-
commerce or other direct-to-customer initiatives. Based upon the specific
client's strategy, internal capabilities and existing technical platforms and
infrastructure, we will define a program to use all or some of our services to
meet their specific needs. We believe our comprehensive integrated services
approach allows our clients to:
Quickly capitalize on direct-to-customer market opportunities. Our
approach and services enable our clients to rapidly implement their e-commerce
and other direct-to-customer initiatives and take advantage of market
opportunities without lengthy start-up and in-house integration efforts. We
believe the expertise and infrastructure we have developed allow us to rapidly
and cost-effectively integrate new e-commerce initiatives and traditional
direct-to-customer programs. This integration creates an initiative that is
consistent across the various customer contact points and that is linked across
our, our client's and its vendors' systems. We also believe our experience
working with companies offering sophisticated products and using complicated
sales processes provides our clients with a competitive advantage as they
implement direct-to-customer initiatives. We believe that our ability to
improve time-to-market is particularly important for our target market of large
traditional and new Web-based companies that face urgent competitive needs to
establish direct-to-customer initiatives.
Access sophisticated technology. We use advanced software technology and
an infrastructure developed specifically for e-commerce and other direct-to-
customer initiatives to provide our integrated services to clients. Our
IntekWebDirect System enables effective transaction processing and customer
support across multiple communications channels, and provides personalization,
routing and management of customer interactions. It allows us and our clients
to rapidly deploy and maintain the technology across multiple geographic
locations, company divisions and hardware platforms. Our infrastructure
includes advanced networking technology that provides intra- and inter-company
communication, distribution of the IntekWebDirect System, and hosting and data
warehousing capabilities. The systems and infrastructure have been developed to
be scalable to meet our existing and potential clients' growth needs.
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<PAGE>
Improve the customer experience. We enable our clients to provide their
customers with a positive consumer experience, thereby maintaining and
promoting brand loyalty. Through our use of advanced technology, we can
communicate directly with our clients' customers by voice, fax, e-mail, and
real-time online communications. Our personnel educate customers about, and
assist them in obtaining, our clients' products and services. We believe we
offer our clients a superior level of service, including availability of 24
hour, seven day a week communications center services.
Access the services of highly-trained personnel. We train our personnel to
deal with our clients' complex products and complicated sales processes, which
we believe creates the basis for long-term client relationships. Some of our
clients work in regulated industries and therefore our personnel often must be
licensed by federal, state or other regulatory agencies in order to serve those
clients' customers. For example, our employees who work with certain financial
services products must be licensed by federal and state authorities to act as a
securities broker/dealer and must have Series 6, 7 and 63 licenses from the
NASD. We believe that providing these high-level services allows us to capture
sensitive aspects of business that have not traditionally been outsourced.
Reduce investment and improve operating efficiencies. We have made
significant investments in operations infrastructure, including technology
platforms, systems hardware, communications systems and highly-trained
personnel. This infrastructure provides clients with access to our economies of
scale and expertise to rapidly grow their direct-to-customer business while
limiting their additional fixed costs that may otherwise be necessary to create
and maintain their own infrastructure. Our clients have the flexibility to
scale their growth and to evolve the range of their direct-to-customer
initiatives, on a variable cost basis, preserving scarce capital resources for
other business-critical purposes.
The Intek Strategy
Our goal is to be a leading integrated services provider to companies
developing e-commerce or other direct-to-customer initiatives involving complex
products or sales techniques. Our strategies to achieve that goal are:
Target clients that provide substantial growth opportunities. We target
clients that we believe provide significant opportunities for growth. We direct
our marketing efforts toward Fortune 1000 and new Web-based companies with
which we can develop long-term relationships. We believe that our current
clients generally are, or are positioned to be, among the leaders in their
industries. We look to grow our business with our clients by offering them
additional services as their direct-to-customer initiatives grow and by
offering them new services as our capabilities expand.
Pursue clients in specialized markets that require sophisticated
services. We intend to focus our sales efforts on businesses in markets that
require complex solutions and skilled personnel. We believe our expertise with
sophisticated products, such as financial instruments, and with complicated
sales programs, such as those found in regulated industries, gives us a
competitive advantage in marketing to clients with similar products and
programs. In addition, we intend to leverage our expertise to target clients in
certain industries such as financial services.
Promote our brand through expanded marketing efforts. We believe that
building brand awareness and our reputation as a leading e-commerce solutions
provider is critical for attracting and retaining clients. We believe that no
existing company has established a prominent brand presence and that there
exists a market opportunity to establish our brand as a leading provider of
integrated services to companies developing e-commerce and other direct-to-
customer initiatives. We intend to build our brand awareness through targeted
branding efforts, focused on decision makers in various vertical markets. We
also plan to develop additional relationships with management consulting,
accounting, marketing and other professional firms that work with potential
clients.
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<PAGE>
Broaden and continue to strengthen our service offerings. We plan to meet
the evolving needs of businesses using e-commerce and other direct-to-customer
initiatives by adding to and improving our services through internal
development and strategic acquisitions. We believe we currently offer
sophisticated solutions that differentiate us from our competitors. Our focus
will continue to be on providing high value-added services. For example, we
acquired the database marketing and analysis firm Acorn in October 1999 to
complement our existing service offerings. We will continue to evaluate
selected acquisitions to complement our service offerings and seek the
personnel required to develop and implement comprehensive e-commerce direct-to-
customer initiatives.
Continue to hire, train and retain talented people. Our business involves
the delivery of sophisticated services that require consultants, technical
personnel and other highly-trained people. We believe that attracting and
retaining outstanding personnel is essential to our growth. We seek management,
marketing and technical personnel with expertise that will enhance our
operations and growth opportunities. In addition, we provide significant
training for our new and existing employees to allow them to increase their
skills and responsibilities.
Intek's Services
We provide an integrated service offering to companies that have or wish
to implement e-commerce and other direct-to-customer initiatives. We offer our
services on an outsourced basis using our technical and personnel resources to
deliver added value to our clients. Our services consist of Strategic
Consulting, Technology Solutions, e-Operations and Customer Knowledge. We
consult with our clients to select appropriate third-party vendors for other
services, such as handling product distribution and certain creative aspects of
direct-to-customer initiatives. At our clients' request, we will coordinate the
activities of the third-party vendors to enhance the smooth operation of our
clients' initiatives. We continually evaluate which services we wish to offer
on an outsourced basis to most effectively serve our clients. Our current range
of integrated services consists of:
Strategic Consulting. Our Strategic Consulting services are focused on
helping our clients increase sales and reduce costs, maintain customer loyalty
and develop better business processes. Strategic consulting during the initial
phase of a client engagement gives us the opportunity to develop a close, long-
term relationship with the client and provides the opportunity to work with the
client from inception to launch and operation of its initiative. Through our
strategic consulting, we determine the clients' needs and objectives, then work
with the clients to establish an overall program structure and to determine how
the technology platforms, customer communications, data requirements and
necessary personnel will work together. Steps in this process include:
. generating strategic options that address the complete range of issues
involved in establishing direct-to-customer initiatives, including
channels, branding, partnerships, pricing, technology deployment and
customer strategies;
. assessing the strategic options against the market opportunities, the
competitive environment, the client's overall business strategy, its
existing business processes and systems, available resources and
technologies, and timing requirements;
. determining the optimal client-specific strategic solution, including
the scope of the initiative and related initiatives, broad technical
requirements, timing and the parties responsible for each segment of
the initiative; and
. designing the overall initiative, including all deployment plans for
technology solutions, communications center operations and customer
data analysis. The planning includes implementation schedules, revenue
and cost structures, personnel requirements, technical partnerships
and operations management.
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<PAGE>
Our personnel also work with clients and third-party marketing experts to
design the clients' product launches and marketing campaigns. For certain
clients, we may provide specialized consulting services regarding regulatory
issues that are applicable to the client's direct-to-customer initiative. For
example, we consult with clients in the financial services business regarding
compliance with federal and state regulations.
Technology Solutions. We provide comprehensive technology design and
implementation services to facilitate e-commerce and other direct-to-customer
initiatives. Our solutions enable our clients to do business directly with
their customers via voice, e-mail, fax and real-time online communications.
Most of our technology solutions include implementation of our IntekWebDirect
System, which incorporates a Web-based software solution that we initially
developed and now license from Spider on a long-term basis. See "Related Party
Transactions -- Spin-Off of Spider Technologies" for additional information
about our license arrangement. Our IntekWebDirect System is specifically
designed to facilitate direct-to-customer initiatives using a modular design
approach that permits flexible and rapid implementation to meet a client's
specific needs. Our Technology Solutions services include:
. evaluating technology platforms to meet the clients' specific
requirements;
. installing, customizing and integrating the IntekWebDirect System
processing technology or other third-party technology platforms;
. designing the creative aspects of our IntekWebDirect System user
interfaces;
. customizing and configuring applications, such as customer interfaces,
order entry systems and customer information systems;
. integrating the direct-to-customer technology platform with the
clients' existing systems and, in most cases, to the clients' vendors'
systems;
. testing and documenting the systems; and
. providing on-going enhancements and optimization of the comprehensive
technical solution.
e-Operations. We use our high-level customer support personnel and
communications services to operate our clients' sophisticated e-commerce and
other direct-to-customer initiatives. We have made significant investments in
our infrastructure, such as technology platforms, systems hardware,
communications systems and highly-trained personnel. We have designed our
infrastructure specifically for efficient and reliable operations with complex
products and sales processes. Our e-Operations services include:
. managing the operations of our clients' direct-to-customer systems and
customer databases from our technology and communications centers;
. communicating with our clients' customers through voice, e-mail, fax
and real-time online communications;
. providing hosting and data warehousing for our clients;
. coordinating the activities of third-party vendors; and
. conducting one-to-one marketing programs that we design as part of our
Customer Knowledge services, including the upfront customer data
acquisition and subsequent program execution.
Our communications centers provide a full range of interaction between our
clients and their customers with a focus on services that require high levels
of skills, expertise and technology. Our communications center personnel are
assigned to specific clients' initiatives and are given extensive training in
the client's products and services in order to provide sales assistance and
technical support to our clients' customers. By using highly-trained personnel,
we are able to provide added value to our clients, and we become an integral
part of their businesses.
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<PAGE>
For our largest clients, we have personnel at two or more communications
centers to assure coverage, redundancy and reliability. In addition, some
clients have their own personnel at our communications centers to provide
assistance for complex programs and to increase client coordination. We have
servers in the technology centers of our Colorado, California and Kansas
facilities. The availability of multiple servers provides redundancy and back-
up to our clients.
Customer Knowledge. We offer sophisticated database marketing and analysis
services that are focused on understanding customers' buying processes and
behaviors to help our clients improve their marketing efforts and customer
relationships. Our Customer Knowledge services include:
. using sophisticated analytical methods to define and identify the
target population for clients, and to advise clients about capturing
key customer information and using external data sources to support
detailed profiles of their customers;
. analyzing the clients' customer and prospective customer information
to find patterns of purchasing behavior and tying them into the
clients' marketing objectives of improving sales effectiveness,
building customer loyalty or acquiring new customers;
. implementing a relationship marketing system for clients, using a
combination of a proprietary technology platform and off-the-shelf
tools. This system accepts customer contact marketing from all
channels, including Internet, e-mail, Web forms, business reply cards
and calls to communications centers, and integrates this data into a
single view of the customer;
. analyzing the effectiveness of the marketing channels and the
conversion rates so that adjustments can be made to improve sales and
marketing programs; and
. building meaningful and actionable reports that are accessible over
the Internet through secured interfaces to enable clients to have
real-time access to the entire marketing campaign lifecycle and make
the appropriate marketing decisions.
Our Clients
We have provided Strategic Consulting, Technology Solutions, e-Operations
and Customer Knowledge services to clients in various industries. These clients
are generally either large established companies or emerging Web-based
companies. Set forth below is a representative list of our clients and the
types of services we have performed or are contracted to perform for them.
<TABLE>
<CAPTION>
Types Of Services
--------------------------------------------
Strategic Technology Customer
Client Name Consulting Solutions e-Operations Knowledge
- ----------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
American Classic Voyages* X X
AutoWeb X X X
Pitney-Bowes* X X
Rx Remedy* X
Safeway X X X
Sega X X X
Sony X X
</TABLE>
- ------------------
* These companies were initially Acorn clients.
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During the past two years, we have derived a substantial majority of our
revenues from ongoing business with a few significant clients. For 1999, Sony
accounted for approximately 27% of our revenue, Sega accounted for 12% and our
next two largest clients, American Express and Safeway, accounted for an
aggregate of approximately 18%. The same four clients accounted for
approximately 54% of our revenue in 1998. We anticipate that a significant
portion of our revenues will remain concentrated with a few clients, but will
vary among clients from period to period.
Generally our work is performed and clients are charged based on time and
expenses according to the terms of written agreements. Recently we entered into
a contract with a major client under which our revenue will be based primarily
upon a percentage of the clients revenues generated by our operation of their
direct-to-customer initiatives. In addition, we have recently entered into
fixed-price agreements for certain strategic consulting services. In some
instances, we will perform work for a client following expiration of a contract
or while the terms of a letter of intent, new contract or contract extension
are being negotiated. Our contracts are generally terminable by the client on
30-days' written notice.
Sales and Marketing
We market our brand and integrated service offering to large companies
that are establishing or expanding their direct-to-customer initiatives and to
new companies formed to take advantage of commerce opportunities on the
Internet. Our marketing efforts will be focused on two primary objectives:
. educating potential clients and third-party influencers on e-commerce
and other direct-to-customer strategies, the effective application of
technology to direct-to-customer initiatives and the role of
electronic services and operations in meeting direct-to-customer
business objectives; and
. positioning our company and brand as an acknowledged leader in
designing, building and operating e-commerce initiatives for complex
products and sales processes.
We believe the importance of our brand and reputation will increase as new
competitors enter our market. We also believe that no existing company has
established a prominent brand presence as a provider of integrated services to
companies developing sophisticated e-commerce and other direct-to-customer
initiatives and that there exists a market opportunity to establish our brand
as a leader in that market. We intend to build our brand awareness through
marketing, focused on decision makers in various vertical markets, with an
emphasis on specific vertical markets where our experience and services provide
special value-added benefits to our clients. We have recently established a
core group of sales and marketing personnel to concentrate on the financial
services industry, in which we have substantial expertise.
Our efforts will include vertically-targeted direct campaigns utilizing
database marketing, advertisements in selected publications, an interactive and
educational Web site, information pieces published for industry forums and
educational seminars for high-level decision makers. We will promote our
expertise in trade forums and publications, and directly to prospective
clients.
We also plan to develop additional relationships with management
consulting, accounting, marketing and other professional firms that work with
potential clients. We have existing relationships with many of these firms
through our management team, board of directors and investors. We intend to
bring greater focus to leveraging these contacts and exploring a range of
partnerships, alliances and other formal relationships.
To expand our efforts in both sales and marketing, we have recently put in
place dedicated resources consisting of a head of sales and a head of
marketing, as well as two sales professionals. We intend to hire several
additional sales professionals over the next few months and to strengthen the
sales process. Prior to establishing this organization, our sales efforts had
been made primarily by senior management and key technical personnel. These
people will continue to be an important part of our sales and marketing
efforts.
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We anticipate incurring significant additional sales and marketing
expenses in the foreseeable future. These increased expenses may not be offset
by increased revenues, causing an adverse affect on our financial results.
Competition
We compete in the growing market of companies that support businesses
involved in e-commerce and other direct-to-customer initiatives. Many companies
offer, on an individual basis, one or more of the same services we do. In
addition, many potential clients could elect to perform these services in-
house. Our primary potential competitors in the areas in which we provide
services include the following:
. Strategic Consulting: consulting firms such as AnswerThink, Diamond
Technology Partners, Luminant, Mitchell Madison and the consulting
arms of the Big Five accounting firms;
. Technology Solutions: technology integrators, such as Andersen
Consulting, Cambridge Technology, Octane, Razorfish, Sapient, Seibel,
SilkNet, USWeb/CKS and Viant;
. e-Operations: customer support service companies, such as EDS, Perot
Systems, PFSWeb, Stream, and Teletech; and
. Customer Knowledge: data mining and analytics firms, such as Axciom,
Centrobe, Experian and Harte Hanks.
We believe that the principal competitive factor in our market is the
ability to provide a comprehensive range of high-end services to clients
quickly and cost effectively. We believe that the other competitive factors in
our market are operating performance and reliability, ease of implementation
and integration, and price. We believe that we compete favorably with respect
to these factors.
We anticipate that competition in our market will increase substantially.
We have no patents that preclude or inhibit others from offering the same
services that we do. Many of the companies with which we compete today in
limited areas, and other companies that may enter our market, have
significantly greater name recognition and marketing, technical and financial
resources than we have. If they or any other company were to offer comparable
services on a more cost-effective or timely basis than we do, our business and
financial results could suffer.
Technology
We provide our integrated services using Web-based software technology and
an infrastructure developed specifically for e-commerce and other direct-to-
customer initiatives. Our infrastructure incorporates advanced networking
technology that provides intra- and inter-company communications, including
hosting and distribution of our software technologies. We assure a high degree
of reliability through multiple Internet services and telecommunication
providers, redundant Web servers, back-up power supplies, multiple
communications centers and other measures.
Our technology solutions include our sophisticated IntekWebDirect System
transaction processing platform that provides personalization, routing and
management of customer interactions across multiple channels including voice,
e-mail, fax and real-time online communications. The IntekWebDirect System
supports most standardized services, protocols and interfaces for integration
into our clients' and their vendors' existing systems. Our Web-based platform
includes three primary components:
. a front-end user interface that provides product, company and customer
information as well as other data sources available through the Web to
dynamically build context-relevant information screens;
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. a transaction processing system, including custom links to our
clients' and their vendors' existing systems in order to handle order
entry, inventory control, payment management, product configuration,
fulfillment and shipping, and similar functions; and
. a customer database segment that maintains client and customer
information for transaction requirements and is structured to support
personalized marketing initiatives.
The IntekWebDirect System incorporates software code that was transferred
to Spider. We have a 20-year non-exclusive license to use the software and, in
general, to sublicense it to our clients. See "Related Party Transactions--
Spin-off of Spider Technologies" for more information about the spin-off of
Spider.
Our Customer Knowledge group uses sophisticated technologies and
analytical methods to enable our clients to maximize their marketing and
customer retention programs. The group has designed and developed database
marketing software in Java on an Oracle platform. In addition, the group
employs various analytical techniques that have been shown to be more effective
than standard methods.
Personnel and Training
At December 31, 1999, we had 704 full-time employees. Of these, 35 were in
executive, finance, sales and marketing, human resources and other
administrative positions in the Denver headquarters office; 62 were in the
technology, communications and consulting facility in San Diego; and 580 were
in communications center operations in Northern California, Denver and Fort
Scott, Kansas. Approximately 20% of the employees in our communications centers
are management and technical personnel. We also now have 27 employees in our
Shelton, Connecticut office, principally engaged in delivering our customer
knowledge and strategic consulting services. In addition, at any given time we
may have at our communications centers a substantial number of people from
temporary agencies. These people generally become our full-time employees
following a period of training and temporary employment with us.
Many of our employees are highly trained, not only in various
technologies, but in important aspects of our clients' businesses. For example,
some of our senior personnel who consult with financial services institutions
have previously worked in that industry. In addition, we provide training to
our communications center personnel specifically related to a client's product
or services. This training is generally covered by our agreements with the
client and may take several weeks or more. Using the same financial services
institutions example, the training may entail obtaining a Series 6, 7 or 63
license from the NASD. In certain cases, we may cross-train some personnel to
cover different clients' programs to provide back-up. Because our
communications center personnel are highly trained, we generally pay them more
and bill their services at higher rates than do traditional call center
employers.
Our success depends on our ability to continue to attract, retain and
motivate intelligent, skilled employees. Competition for these people,
especially those with technical and management capabilities, is particularly
intense now because of the strong economy and resulting growth of business
opportunities. We are adopting a stock purchase plan and will be expanding our
stock option program to provide additional incentives to our employees. None of
our employees is represented by any collective bargaining unit, and we have
never had a work stoppage. We believe our relations with our employees are
good.
Facilities
Our headquarters are located in approximately 15,700 square feet of leased
office space in Englewood, Colorado. This space is used by our executive,
financial, marketing and human resources personnel. The lease extends through
June 2005. Our San Diego personnel are located in a leased facility comprising
12,600 square feet, approximately 40% of which we are sub-leasing to Spider.
The lease for this facility expires in August 2003 and may be renewed for five
years. Our Shelton, Connecticut personnel are located in a 7,200 square foot
office under a lease that expires in April 2003.
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We operate communications centers in Hayward and Livermore, California,
Denver and Fort Scott, Kansas. The lease for our 7,565 square foot Hayward
facility expires in May 2000 and the lease for our 12,424 square foot Livermore
facility expires in April 2000. We plan to consolidate our Northern California
operations in another facility in the near future. We have signed a new lease,
with an eight-year term commencing on completion of the building, for a 21,254
square foot building in Livermore but intend to sublease it and lease another
facility. Until that facility is available, we are extending our existing
Livermore lease on a month-to-month basis. Our Denver communications center is
in a 21,600 square foot leased facility. The lease on this facility expires in
January 2001. In June 1999, we opened our new 35,000 square foot communications
center in Fort Scott, Kansas. The construction was financed by the City of Fort
Scott and leased to us through June 2005. Based upon our experience in Fort
Scott, we believe that we can furnish and staff a new communications center in
approximately 120 days.
Regulatory Matters
We provide services to companies in the financial services, insurance and
mortgage lending industries. These industries are subject to extensive federal
and state regulation. Although compliance with many of these regulations is
generally the responsibility of our clients, we and our employees must also
meet certain requirements.
State and federal regulations regarding our activities for our clients are
subject to change. In addition, the content and geographical scope of our
clients' initiatives change over time, possibly subjecting the initiatives to
regulations that previously did not apply. We attempt to monitor these changes
and to obtain licenses or make filings as necessary. We cannot assure you,
however, that we have been, are now or will be in compliance with all
applicable regulations at all times.
Financial services. We assist in the marketing of various mutual funds and
other financial products through a wholly- owned subsidiary. This subsidiary
and some of its employees must be registered with the SEC and licensed by the
NASD and state securities commissions. Some of our employees who assist in the
sales of financial products must pass a series of exams and meet certain
continuing education requirements in order to maintain their licenses. We
believe that we and our employees engaged in these activities are currently
registered and licensed as required. However, our failure to obtain and
maintain the necessary registration and licenses could expose us to private
actions for damages and enforcement actions for civil or criminal penalties.
For extremely serious violations, the NASD or the SEC could bar us or our
employees from engaging in the securities business for any specified period of
time or permanently.
Insurance services. We assist in the marketing of various insurance
products through a wholly- owned subsidiary. Most states have laws and
regulations governing the licensing and conduct of persons who market insurance
products. We and our employees who assist in the sales of insurance products
are required to be licensed by various state insurance commissions for the
particular type of insurance product to be sold and to participate in regular
continuing education programs which are currently paid for by us. Our
subsidiary and its employees are currently licensed in those states in which we
marketed insurance products in the past, but neither it nor its employees are
currently licensed in all fifty states.
Mortgage broker services. We assist in the marketing of mortgage lender's
products through a wholly-owned subsidiary. Most states have laws and
regulations governing the registration or licensing and conduct of persons who,
among other things, directly or indirectly solicit, accept or offer to accept
an application for a mortgage loan. Some states may require that we have a
local office or an employee who has experience in mortgage brokerage activities
or has completed the state's exam or both. We are currently licensed or exempt
from license requirements in 25 states. We are in the process of applying for
mortgage broker licenses in those remaining states in which we assist in the
marketing of mortgage-related products. We could be subject to a variety of
enforcement or private actions for failure to obtain a mortgage broker or
lender license in states in which we now assist in the marketing of, or have
assisted in the marketing of in the past, mortgage-related products.
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Business qualification laws. Because it is often a condition for the
various licenses that we must obtain and because we often provide services for
our clients to customers located throughout the United States, we and our
subsidiaries have registered to do business as a foreign corporation in each
state in which we or they conduct business. Failure to maintain registration in
a jurisdiction in which it is required could subject us or our subsidiaries to
taxes and penalties and limit our or their ability to conduct litigation in
such states.
Internet use. There is an increasing number of laws and regulations
pertaining to the Internet. In addition, a number of legislative and regulatory
proposals are under consideration by federal, state and foreign governments and
agencies. The requirement that we or our clients comply with any new
legislation or regulation, or any unanticipated application or interpretation
of existing laws, may decrease the growth in the use of the Internet, which
could in turn decrease the demand for our or our clients' products and
services, increase our cost of doing business or otherwise have a negative
effect on our business, results of operations and financial condition. In
addition, applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain.
Telephone contacts. Some of our communications center activities are
subject to FCC, FTC and state regulations regarding telephone calls to
residential telephone subscribers and telemarketing practices. Some states
require us to register under their telemarketing statutes. While we are
currently either licensed, exempt from license requirements or in the process
of obtaining a license in those states that regulate telemarketing activities,
we could be subject to a variety of enforcement or private actions for our
failure or the failure of our clients to comply with such regulations.
Legal Proceedings
From time to time, we may be involved in litigation incidental to the
conduct of our business. We are not currently party to any material legal
proceedings.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and our board of directors, as the board will be
comprised upon the closing of this offering, are as follows:
<TABLE>
<CAPTION>
Name Age(1) Position(s)
- ---- ------ -----------
<S> <C> <C>
Timothy C. O'Crowley(2)...... 44 Chairman of the Board, Chief Executive
Officer and President
G. Daniel Adams, Jr. ........ 41 Executive Vice President - Corporate
Operations
Sunil Gupta, Ph.D............ 45 Managing Director - Strategic Consulting
Steven Q. Hansen............. 35 Chief Financial Officer and Senior Vice
President
Timothy S. Hardin............ 47 President - e-Operations
Donald P. Hearn.............. 54 President - Financial Services Division
Jay D. Kirksey............... 43 Senior Vice President - Human Resources
Peter H. Kowalchuk........... 50 Senior Vice President - Marketing and
Communications
Shoba Murali................. 43 President - Customer Knowledge
James F. "Pat" O'Crowley..... 46 Executive Vice President - Corporate
Development
Patrick F. O'Neal............ 53 Managing Director - Sales
Jerry L. Parker.............. 56 Chief Operations Officer - Technology
Solutions
Raja Ramnarayan, Ph.D........ 44 Vice President - Customer Knowledge
Venkat V. Sharma............. 45 Chief Executive Officer - Customer
Knowledge
Paul A. Tartre............... 40 President - Technology Solutions and Chief
Information Officer
Stephen S.S. Hyde(3)......... 52 Director
Steven F. Piaker(3).......... 37 Director
Harold W. Pote(2)............ 53 Director
Rick L. Weller(2)............ 42 Director
Eric R. Wilkinson(3)......... 43 Director
</TABLE>
- ------------------
(1) As of December 31, 1999
(2) Member of Compensation Committee
(3) Member of Audit Committee
Timothy C. O'Crowley founded Intek in 1996 and has been our chairman,
chief executive officer and president since that date. From 1994 to 1996, Mr.
O'Crowley was chief executive officer and a director of FundMark Investment
Company Services, Inc., a consulting firm to the institutional asset management
industry, and managing director of Eden Financial Group, a consulting firm to
the financial products distribution industry. Before joining these firms, Mr.
O'Crowley was employed by E. F. Hutton and Company in numerous senior
management positions. He serves as a director of our subsidiary Acorn, chairman
of the board of directors of and a consultant to Spider, and a director of
Northern Trust Bank of Colorado. See "Related Party Transactions - Spin-off of
Spider Technologies" for a description of Mr. O'Crowley's consulting agreement
with Spider.
G. Daniel Adams, Jr. joined Intek in November 1999 as executive vice
president - corporate operations. Mr. Adams was chief operations officer from
1997 to 1999 and chief financial officer from 1996
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<PAGE>
to 1997 for Switch Manufacturing, a consumer recreational products manufacturer
and marketer where he managed all aspects of the company's operations and
strategic alliances with partners. From 1994 to 1996, Mr. Adams was senior
director - operations with Kenetech Corp., a publicly-traded energy provider
and capital equipment manufacturer. Prior to 1994, Mr. Adams was an executive
with Black & Decker, a management consultant with McKinsey & Company and an
engineer at Schlumberger.
Sunil Gupta, Ph.D., joined Intek in October 1999 as vice president -
Customer Knowledge in conjunction with our acquisition of Acorn. Dr. Gupta was
vice president - interactive and analytical services for Acorn from July 1998
to October 1999. He was a professor of marketing at the University of Michigan
Business School from 1990 to 1998 and at Columbia University's Graduate School
of Business from 1983 to 1990. Dr. Gupta has also consulted with several
companies, most recently in the area of Internet marketing.
Steven Q. Hansen joined Intek in November 1999 as senior vice president
and chief financial officer. Mr. Hansen was vice president and acting chief
financial officer from August to October 1999, vice president - finance from
November 1998 to October 1999, and senior director - financial planning and
analysis from March 1997 to November 1998 for Convergent Communications, Inc.,
a publicly-traded integrated communications provider. From 1996 to 1997, he was
a director of finance for ICG Communications, Inc., a public competitive local
exchange carrier. From 1994 to 1996, Mr. Hansen was manager of financial
operations - Rocky Mountain division, for Pepsi Cola Company.
Timothy S. Hardin joined Intek in June 1997 as senior vice president -
client services and became president - e-Operations in October 1999. From 1989
to 1997, Mr. Hardin was a co-founder and president of Telelink Systems, a
teleservices company. From 1993 to 1995, he was a co-founder and director of
marketing for Market Reach Ltd. in London, England, a sister teleservices
company to Telelink.
Donald P. Hearn joined Intek in April 1999 as president - financial
services division. From 1995 to January 1999, Mr. Hearn was chairman and chief
executive officer of Chase Global Funds Services Company, a subsidiary of Chase
Manhattan Bank. From 1990 to 1995, he was an executive vice president with U.S.
Trust of New York in their mutual funds division. Prior to 1994, Mr. Hearn held
senior positions with First Data Investor Services, the Boston Company and
Dalbar.
Jay D. Kirksey joined Intek in November 1997 as senior vice president -
human resources. From 1994 to 1997, Mr. Kirksey was vice president of human
resources for ADT Security Services, Inc., a residential and commercial
security company. From 1993 to 1994, he was director of human resources for
Alert Centre, Inc. and from 1989 to 1993 he was director of human resources for
United Technologies Corporation.
Peter H. Kowalchuk joined Intek in July 1999 as senior vice president -
marketing and communications. From 1993 to July 1999, Mr. Kowalchuk was
director of international communications for Otis Elevator Company, a
subsidiary of United Technologies Corporation.
Shoba Murali joined Intek in October 1999 as president - Customer
Knowledge in conjunction with our acquisition of Acorn. Ms. Murali was
president of Acorn from September 1996 to October 1999. From January 1994 to
August 1996, she was co-founder, managing partner and a director of Equinox
Solutions Inc., a systems integration company. Prior to 1994, Ms. Shoba served
as artificial intelligence senior product manager for Digital Equipment and was
corporate accounts system integrations manager for financial services clients.
James F. "Pat" O'Crowley III joined Intek in May 1999 as executive vice
president - corporate development. From 1996 to May 1999, Mr. O'Crowley was a
founder and managing director of Coalter Group International, a business
consulting firm focused on improving clients' sales and profitability. From
January 1998 through May 1999, Mr. O'Crowley consulted with Intek on strategic
and operational matters. From 1993 to 1996, he served as vice president
international of HON Industries, a publicly-traded manufacturer of office
furniture and pre-fabricated fireplaces, and general manager of HON Export
Limited.
39
<PAGE>
Prior to 1993, he served as director of operations and finance and as general
manager for Latin American and Asian Operations for Tenneco's J. I. Case. Prior
to 1989, Mr. O'Crowley held a variety of senior finance, operations, marketing
and business development positions at International Harvester and its successor
company, Navistar.
Patrick F. O'Neal joined Intek as a managing director in September 1996
and was named managing director - sales in July 1999. He served as a member of
our board of directors from March 1996 to January 2000. Mr. O'Neal is also a
director of Spider and president of our subsidiaries, Intek Teleservices, Inc.,
Intek Insurance Agency, Inc. and Brokerage Administrators Corp. He has been an
officer and managing director for Eden Financial Group and FundMark Investment
Company Services, Inc. from 1982 to the present. Eden and Fundmark
substantially ceased operations in early 1996. Mr. O'Neal was a national
product manager at E. F. Hutton and Company from 1981 to 1982.
Jerry L. Parker joined Intek in May 1999 as chief operating officer -
Technology Solutions. From December 1998 to May 1999, Mr. Parker consulted
with us regarding computer systems and integration. From 1996 to December 1998,
Mr. Parker was chief executive officer of SSDS, Inc., a computer systems and
networking integration company. From 1993 to 1996, Mr. Parker was senior vice
president of the commercial division of BDM Technologies (now a part of TRW,
Inc.), where he was responsible for a division that provided system
integration, networking and technology consulting to Fortune 1000 companies.
Raja Ramnarayan, Ph.D, joined Intek in November 1999 as vice president -
Customer Knowledge in conjunction with our acquisition of Acorn. Dr.
Ramnarayan has been chief technology officer for Acorn since January 1997. He
was a principal consultant for Microsoft Corporation from 1996 to 1997 and an
engineering fellow for Honeywell from 1983 to 1996.
Venkat V. Sharma joined Intek in October 1999 as chief executive officer -
Customer Knowledge in conjunction with our acquisition of Acorn. Mr. Sharma
founded and became chief executive officer of Acorn in 1994. Prior to 1994, he
held positions at 3M and J. Walter Thompson. Additionally, he founded and was
president of C4 Information Services, a private market research company for the
cable television and communications industries, in 1994, and founded and was
president of VSA Technologies, a mainframe computer outsourcing company, from
1990 to 1994.
Paul A. Tartre joined Intek in 1996 as a managing director and chief
information officer. Mr. Tartre was named president - Technology Solutions in
August 1999. From 1987 to 1996, Mr. Tartre was senior vice president and chief
information officer for Eden Financial Services and FundMark Investment Company
Services. From 1983 to 1986, he was a software developer at NCR, and from 1986
to 1987 he was director of software development at Apricorn, Inc. Effective
November 1999, Mr. Tartre began to devote 40% of his time to Spider. See
"Related Party Transactions - Spin-Off of Spider Technologies" for more
detailed information about Mr. Tartre's continuing role with Spider.
Stephen S.S. Hyde has been a director since January 2000. Since September
1999, Mr. Hyde has been chairman of the board of Diabetes Manager.com, a
provider of diabetes management over the Internet. Since December 1986, he has
been chairman and president of IG Ventures, Ltd. From September 1978 to
December 1986, he was chairman of the board and chief executive officer of Peak
Health Care, Inc., a public HMO company that he founded. Prior to September
1978, Mr. Hyde was a financial advisor to the U.S. Department of Health and
Human Services, a consultant with the Health Management Group and a consultant
with Arthur Young & Company. He is a director of Lesvergers du Roi Corp., a
privately-held argricultural production and sales business.
Steven F. Piaker has been a director since May 1998. In 1994, Mr. Piaker
joined Conning & Company, an investment management and research firm focusing
on insurance and financial services industries, as vice president and became a
senior vice president in 1997, where he is responsible for helping to manage
all aspects of Conning's private equity business. Conning & Company is the
managing member of Conning Investment Partners V, LLC, which serves as the
general partner of Conning Capital Partners V,
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<PAGE>
L.P. one of our major stockholders. Since November 1999, Mr. Piaker has served
as a director of Spider.
Mr. Piaker is a director of TeleBanc Financial Corporation, Clark Bardes
Holdings, Inc., Answer Financial, Inc., Health Right Inc., MedSpan, Inc.,
Intersections, Inc. and Sterling Autobody, Inc.
Harold W. Pote has been a director since February 1999. Since 1993, Mr.
Pote has been a general partner of The Beacon Group, a private investment,
strategic advisory and wealth management firm, which is affiliated with one of
our major stockholders, The Beacon Group III-Focus Value Fund, LP. From 1984 to
1988, he was Chief Executive Officer of First Fidelity Bancorporation (and
Fidelcor, Inc., a predecessor company). Since November 1999, Mr. Pote has
served as a director of Spider. Mr. Pote is also a director of Norfolk Southern
Corp., the American Craft Museum, Drexel University, the President's Foreign
Intelligence Advisory Board and MCP Hahnemann School of Medicine.
Rick L. Weller has been a director since May 1998. From October 1997 to
January 1999, Mr. Weller was our chief financial officer. Since November 1999,
he has been chief operating officer for Ionex Telecommunications, Inc.,
competitive local exchange carrier. Since November 1999, Mr. Weller has served
as a director of Spider. In April 1999, Mr. Weller formed Compass Partners to
develop a telecommunications company. Compass Partners was instrumental in the
formation of Ionex Telecommunications, Inc. From January 1999 to March 1999,
Mr. Weller was chief financial officer for USA Global Link, Inc., an
international telecom entity. From January 1990 to September 1997, Mr. Weller
was vice president of Sprint Communications Corporation, where he was
responsible for financial management.
Eric R. Wilkinson has been a director since February 1997. Since 1994, Mr.
Wilkinson has been employed by The Beacon Group, where he is responsible for
the management of The Beacon Group III - Focus Value Fund, LP. From 1989 to
1994, he was a partner of Apax Partners & Cie Ventures S.A., a European private
equity firm, where Mr. Wilkinson shared responsibility for the firm's principal
investments. From 1983 to 1989, he was a partner of Bain & Company, the
strategic consulting firm. Since November 1999, Mr. Wilkinson has served as a
director of Spider. He is also a director of Doctors Health, Inc., Eyeweb Inc.,
International Components Corporation, National Century Financial Enterprises,
Inc., OnCare, Inc., The Identity Group, Inc. and director and president of
Generac Portable Products, Inc.
Officers serve at the discretion of the board of directors. Timothy
O'Crowley and James F. O'Crowley III are brothers.
Board Composition
Upon the closing of this offering, our board of directors will consist of
three classes that serve staggered three-year terms as follows:
<TABLE>
<CAPTION>
Class Expiration Members
----- ---------- -------
<S> <C> <C>
Class I...................... 2001 Stephen Hyde and Eric Wilkinson
Class II..................... 2002 Rick Weller and Steven Piaker
Class III.................... 2003 Timothy O'Crowley and Harold Pote
</TABLE>
Board Committees
Following the offering, our audit committee will consist of Stephen Hyde,
Steven Piaker and Eric Wilkinson and our compensation committee will consist of
Timothy O'Crowley, Harold Pote and Rick Weller.
The audit committee will select the independent public accountants to
audit our annual financial statements and will establish the scope and oversee
the annual audit. It will review our internal accounting procedures and review
other services provided by our independent accountants. The compensation
41
<PAGE>
committee will establish and review general policies relating to compensation
and determine the compensation for all officers of the company and any other
employee that the compensation committee may designate from time to time. It
will approve and administer our stock option plans, except with respect to
persons subject to Section 16 under the Securities Exchange Act of 1934, and
employee stock purchase plan. Our board may establish other committees from
time to time to facilitate the management of the business and affairs of our
company.
Director Compensation
Our directors have not received cash or stock compensation for their
services as directors in the past. Our directors have been and will be
reimbursed for all reasonable expenses incurred in connection with their
attendance at meetings of our board and committee meetings of the board. After
the closing of this offering, directors who are not officers or employees of
Intek or any of our subsidiaries will receive options for board service under
our 2000 Stock Incentive Plan. Upon the effectiveness of the registration
statement of which this prospectus is a part, each eligible director will
receive an option to purchase 10,000 shares of common stock. In the future,
each eligible director will receive an option to purchase 10,000 shares
immediately upon his or her initial election as a director. We will also grant
to each eligible director, immediately following each annual meeting of
stockholders, an additional option to purchase 5,000 shares of common stock if
that director has served continuously as a member of our board since the prior
annual meeting. The options have ten year terms. They will terminate one year
after the director ceases to provide services to us either as a director or
consultant. The initial 10,000 share options will vest immediately and the
annual 5,000 share options will vest one year after the date of grant. Options
will stop vesting if a director ceases to provide services to us either as a
director or a consultant. Option grants to directors are automatic and
nondiscretionary, and the exercise price of the options must equal the fair
market value of our common stock on the date of grant.
Compensation Committee Interlocks and Insider Participation
Before this offering, our board of directors did not have a compensation
committee and all compensation decisions were made by the full board. Timothy
O'Crowley and Harold Pote served as a committee authorized to make limited
grants of stock options. Timothy O'Crowley participated in deliberations of the
board of directors concerning executive compensation during 1999. After this
offering, our compensation committee will make all compensation decisions,
except that our board of directors will make compensation decisions with
respect to Timothy O'Crowley. Mr. O'Crowley is chairman of the board of, and a
consultant to, Spider and was its chief executive officer from October 1999 to
January 2000. Mr. Pote is a member of Spider's board. Spider does not have a
compensation committee. In addition, Steven Piaker and Eric Wilkinson are
members of both our and Spider's boards of directors. No other interlocking
relationship exists between our board of directors or compensation committee
and the board of directors or compensation committee of any other company.
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<PAGE>
Executive Compensation
Summary Compensation Table
The following table shows all compensation for services rendered to us in
all capacities that was awarded to, earned by, or paid to, our chief executive
officer and our four next most highly compensated executive officers whose
total annual salary and bonus exceeded $100,000 during 1999, whom we refer to
in this prospectus collectively as the "Named Executive Officers." We have
entered into agreements relating to the employment of the Named Executive
Officers which provide in certain circumstances for severance payments upon
termination (other than for cause) of their employment and for the acceleration
of the vesting of their stock options upon a change in control.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- -------------
Number of
Securities
Name and Principal Underlying All Other Annual
Positions Salary Bonus Options Compensation(1)
- ------------------ ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
Timothy O'Crowley ......... $ 240,000 $ 11,000 537,500 $55,560(2)
Chairman of the Board,
Chief Executive Officer
and President
Paul Tartre ............... $ 190,000 $ 45,000 200,000 $ 4,967
Chief Information Officer
and President -- Technol-
ogy Solutions
Frank Richards(3).......... $ 165,000 $ 58,875 218,750(4) $ 9,224
Chief Operating Officer
Timothy Hardin ............ $ 156,875 $ 20,000 67,500 $ 8,266
President -- e-Operations
Patrick O'Neal ............ $ 160,000 $ 15,000 275,000 $ 6,540
Managing Director -- Sales
</TABLE>
- ------------------
(1) Represents compensation with respect to one or more of the following:
personal use of automobiles, life insurance premiums paid for the benefit
of the named executive officer and matching 401(k) contributions made by
us.
(2) During 1999, Mr. O'Crowley received $45,000 as chief executive officer of
Spider. Mr. O'Crowley resigned as chief executive officer of Spider in
January 2000.
(3) On January 13, 2000, Mr. Richards' responsibilities with us changed and he
resigned as an officer and director.
(4) Of this amount, 75,000 options were canceled in January 2000 as part of an
amendment to Mr. Richards' employment agreement.
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<PAGE>
Option Grants in 1999
The following table shows certain information regarding stock options
granted to the Named Executive Officers during 1999. All of these stock options
were granted under our 1998 option plan.
<TABLE>
<CAPTION>
Potential
Realizable Value
Percent of at Assumed
Total Annual Rates
Number of Options of Stock
Securities Granted to Exercise Appreciation for
Underlying Employees Price Option Term(1)
Options During Per Expiration ----------------
Name Granted Period Share Date 5% 10%
---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Timothy O'Crowley....... 137,500(2) 16.3% $6.44 2009
Frank Richards.......... 75,000(3) 8.9% $6.44 2009
Paul Tartre............. -- -- -- -- -- --
Timothy Hardin.......... 42,500(4) 5.0% $6.44 2009
Patrick O'Neal.......... 75,000(2) 8.9% $6.44 2009
</TABLE>
- ------------------
(1) These are hypothetical values using assumed annual rates of stock price
appreciation prescribed by the rules of the SEC.
(2) Vested on date of grant.
(3) These options were canceled in January 2000 as part of an amendment to Mr.
Richards' employment agreement.
(4) Vest over a 48 month period.
Aggregate Option Exercises and Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for 1999, and exercisable and
unexercisable options held at December 31, 1999:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy O'Crowley....... -- -- 500,686 36,815
Frank Richards.......... -- -- 130,061 88,689
Paul Tartre............. -- -- 166,998 33,615
Timothy Hardin.......... -- -- 22,605 44,895
Patrick O'Neal.......... -- -- 145,041 129,961
</TABLE>
- ------------------
(1) The value of in-the-money options is based on an assumed initial public
offering price of $ per share, less the per share exercise price,
multiplied by the number of shares underlying the option.
Employment Agreements
We entered into an employment agreement with Timothy O'Crowley dated
August 2, 1996, which was amended as of October 1, 1999, that provides for an
annual salary of $240,000 until August 1, 2002. After that date, the agreement
continues on a month-to-month basis. The base salary is subject to increase by
the board of directors. Mr. O'Crowley may terminate his employment voluntarily
upon 100 days' notice to us or immediately for cause if we violate a material
term of the agreement or move our headquarters from the Denver metropolitan
area. We may terminate his employment at any time without cause upon 20 days'
notice or immediately for cause. If Mr. O'Crowley is terminated without cause
or if he terminates the agreement for cause, he is entitled to receive monthly
payments equal to his last base salary for a period of
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<PAGE>
18 months. The payments are not reduced by compensation Mr. O'Crowley may
receive from other sources. In addition, certain unexercised options vest and
become exercisable by Mr. O'Crowley on the date of termination by us without
cause. The options remain exercisable for the lesser of (1) the maximum length
of time the option is exercisable and (2) one year after the date of
termination. We also pay for key-man life insurance on Mr. O'Crowley's life in
the amount of $5,000,000 that is payable to us and an automobile allowance of
$6,000 per year. Pursuant to the agreement, the options to purchase 400,000
shares of common stock granted on February 14, 1997, will vest six months and
one day after the effective date of this offering. Mr. O'Crowley is subject to
a non-compete agreement for a period of 18 months following termination of his
employment unless he is terminated without cause.
We entered into an employment agreement with Frank Richards dated February
14, 1997, which was amended as of October 1, 1999. On January 13, 2000, we
entered into a new amendment that supersedes the prior agreements. Under this
amendment, we agree to pay Mr. Richards a salary of $13,750 per month from
January 1, 2000 through September 30, 2000. In the event we have not completed
our public offering by September 30, 2000, Mr. Richards shall remain our
employee for three additional months and receive a salary of $13,750 per month
until December 31, 2000. If Mr. Richards is terminated without cause, or if Mr.
Richards terminates the agreement due to our actions, he is entitled to receive
his full salary for the remainder of the term of the agreement. The payments
are not reduced by compensation Mr. Richards may receive from other sources.
Mr. Richards has relinquished his options to purchase 75,000 shares of our
common stock which were granted on October 1, 1999 but retains his options to
purchase 143,750 shares of our common stock.
We entered into a letter agreement with Timothy Hardin dated April 18,
1997, governing his employment with us. Under the agreement, we agreed to pay
Mr. Hardin an initial annual salary of $125,000 and to grant him stock options
to purchase 25,000 of our common stock at an exercise price of $13.92 per
share. The options vest over a three-year period beginning April 1998. If Mr.
Hardin is terminated without cause, he is entitled to receive salary and full
benefits for six months from the date of termination.
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<PAGE>
EMPLOYEE BENEFIT PLANS
1997 Stock Option Plan. In February 1997, our board of directors adopted
and our stockholders approved our 1997 Stock Option Plan. We reserved a total
of 1,243,052 shares for issuance under the 1997 plan. We increased this number
to 1,368,052 in August 1997, to 1,505,552 in May 1998 and to 1,755,552 in
October 1999. As of December 31, 1999, options to purchase 1,795 shares of our
common stock had been exercised, options to purchase 1,283,625 shares were
outstanding with a weighted average exercise price of $5.87, and options to
purchase 470,132 shares were available for future grant. Following the closing
of this offering, no additional options will be granted under the 1997 plan.
1998 Stock Option Plan. In May 1998, our board of directors adopted and
our stockholders approved our 1998 Stock Option Plan. We reserved a total of
864,417 shares for issuance under the 1998 plan. We increased this number to
1,564,417 in October 1999. As of December 31, 1999, no options to purchase
shares of our common stock had been exercised, options to purchase 1,046,938
shares were outstanding with a weighted average exercise price of $6.66, and
options to purchase 517,500 shares were available for future grant. Following
the closing of this offering, no additional options will be granted under the
1998 plan.
2000 Stock Incentive Plan. In January 2000, our board of directors adopted
and our stockholders approved our 2000 Stock Incentive Plan. We have reserved a
total of 2,750,000 shares for issuance under the 2000 Stock Incentive Plan. No
options have been granted under the 2000 plan as of January 14, 2000.
Our 1997, 1998 and 2000 option plans provide for the grant of both
incentive stock options that qualify under Section 422 of the Internal Revenue
Code and nonqualified stock options. We can grant incentive stock options only
to our employees. We can grant nonqualified stock options to employees,
directors and consultants. The exercise price of incentive stock options must
be at least equal to the fair market value of our common stock on the date of
grant or, in the case of incentive stock options granted to holders of more
than 10% of our voting stock, not less than 110% of the fair market value. The
exercise price of nonqualified stock options must be equal to 85% of the fair
market value of our common stock on the date of grant under the 1997 plan, 50%
of the fair market value under the 1998 plan and 85% of fair market value under
the 2000 plan. Options generally have a term of ten years from date of grant,
but incentive stock options granted to stockholders holding 10% or more of our
stock have a term of five years. The maximum term of options granted under our
option plans is ten years. Options granted under our option plans generally
expire three months after the termination of the optionee's employment or
service. However, in the case of death or disability, the options generally may
be exercised up to 12 months following the date of death or disability. Options
will generally terminate immediately upon termination of employment or service
for cause.
Under our 1997 and 1998 plans, in the event of a major corporate
transaction such as a merger, share exchange or sale, or disposition of all or
substantially all of our assets, the vesting schedules of all options that
would have vested during the 12 month period following the major corporate
transaction will be accelerated. Our board has the option to accelerate the
vesting of all other options prior to a major corporate transaction. Instead of
allowing an optionee to exercise his options, the board may, in its discretion,
require some or all of the plan participants to accept a cash payment in
consideration for the termination of the person's option. All stock options
will be automatically accelerated if a person's employment is terminated
without cause within one year following a change of control transaction. This
offering does not constitute a change of control as defined in our option
plans.
Under the 2000 plan, in the event of a change in control, including a
merger, sale of all or substantially all of our assets, share exchange, or a
change in the majority of the incumbent board, options which would vest within
12 months after the change in control will be accelerated and immediately
exercisable. The Board has discretion to accelerate all other options prior to
the change in control. In addition, the Board may cancel outstanding options
and require participants to accept cash payment for their canceled options at
the price per share to be received in the change in control event. The 2000
Stock
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<PAGE>
Incentive Plan for certain matters will be administered by the Compensation
Committee of the board of directors consisting of two or more "outside
directors" as defined under section 162(m) of the Internal Revenue Code. The
2000 plan also provides for the automatic grant of options to non-employee
directors as discussed under "Management - Director Compensation."
2000 Employee Stock Purchase Plan. Our 2000 Employee Stock Purchase Plan
was adopted in January 2000 and will be effective upon the closing of this
offering. The 2000 Employee Stock Purchase Plan provides our employees with an
opportunity to purchase our common stock through accumulated payroll
deductions. A total of 2,000,000 shares of common stock have been reserved for
issuance under the purchase plan, none of which have been issued to date.
Our board of directors or a committee appointed by our board will
administer the purchase plan. The purchase plan will permit eligible employees
to purchase common stock through payroll deductions of up to 10% of an
employee's base compensation on each pay day during the offering period,
provided that no employee may purchase more than 1,500 shares or $25,000 worth
of stock in one calendar year. Any employee employed by us on a given
enrollment date is eligible to participate during that offering period,
provided that they remain employed by us for the duration of that offering
period, and if immediately after the grant, the employee will not own 5% or
more of our stock. Unless the board of directors or its committee determines
otherwise, the purchase plan will be implemented in a series of offering
periods, each approximately six months in duration. Offering periods will begin
on the first trading day on or after January 1 and June 1 of each year and
terminate on the last trading day in the period six months later. However, the
first offering period shall commence on the closing of this offering and
terminate on the last trading day of May 2000. The price at which common stock
will be purchased under the purchase plan is equal to 85% of the fair market
value of the common stock on the first day of the applicable offering period or
the last day of the applicable purchase period, whichever is lower. Employees
may end their participation in the offering period at any time, and
participation automatically ends on termination of employment. The board of
directors may amend, modify or terminate the purchase plan at any time as long
as the amendment, modification or termination does not impair vesting rights of
plan participants. The purchase plan will terminate on December 31, 2003,
unless terminated earlier in accordance with its provisions.
401(k) Plan. We sponsor a defined contribution plan intended to qualify
under Section 401 of the Internal Revenue Code. All employees who are at least
21 years old are eligible to make contributions to the 401(k) plan beginning
the first day of the month after the month they are hired. Participants may
make pre-tax contributions of up to 15% of their eligible earnings, subject to
a statutorily prescribed annual limit. After an employee has been with us for
one year, we make matching contributions on a discretionary basis on the basis
of $.50 for every $1 contributed by the employee, up to 6% of the employee's
annual salary. Each participant is fully vested in his or her contributions,
any of our matching contributions, and the investment earnings on either.
Contributions by the participants or us to the 401(k) plan, and the income
earned on these contributions, are generally not taxable to the participants
until withdrawn. Contributions by us, if any, will generally be deductible by
us when made. Contributions by us and the participants are held in trust, as
required by law. Individual participants may direct the 401(k) plan's trustee
to invest their accounts in authorized investment alternatives.
47
<PAGE>
RELATED PARTY TRANSACTIONS
Since our inception in February 1996, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
we were or are to be party in which the amount involved exceeds $60,000, and in
which any director, executive officer, holder of more than 5% of our common
stock, or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest other than (1)
compensation agreements and other arrangements which are described in
"Management" and (2) the transactions described below.
Securities Issuances and Loans
In March 1996, we sold 1,582,143 shares of our common stock to Timothy
O'Crowley for $40,000 at $.025 per share. In August 1996, we sold 50,000 shares
of common stock to Patrick F. O'Neal, a Named Executive Officer, for $100,000
at $2.00 per share.
In August 1996, we sold 20,000 shares of Series A preferred stock for
$2,000,000 at $100 per share to Resource Bancshares Corporation. Resource
Bancshares sold 5,000 of these shares back to us for $1,741,000 at $348.20 per
share as part of the Series B preferred financing in February 1997 and
distributed 250 shares to affiliated persons. We issued warrants in connection
with this offering to Timothy O'Crowley and Resource Bancshares that were
cancelled as part of the Series B financing described below. As part of the
Series A transaction, Resource Bancshares was given the right to appoint two
(subsequently reduced to one) directors. This right will terminate upon the
closing of this offering. The 15,000 outstanding shares of Series A preferred
stock will be converted into 750,000 shares of common stock on the closing of
this offering.
Between February and April 1997, we sold 10,475,898 shares of Series B
preferred stock for $18.2 million at $1.741 per share, of which Beacon
purchased 9,615,738 shares and Stephen Hyde, a director, purchased 86,157
shares. Part of the consideration for Beacon's purchase was the retirement of
the $800,000 promissory note evidencing its loan to us in February 1997. A
portion of the proceeds were used to repurchase the shares of Series A
preferred stock from Resource Bancshares. As part of the Series B transaction,
Beacon was given the right to appoint two directors. This right will terminate
upon the closing of this offering. Beacon will be a holder of more than 5% of
our common stock upon the closing of this offering. In February 1997, we also
issued 1,863,270 shares of Series B preferred stock having a fair value of $6.4
million to the shareholders of Protocall as part of the Protocall acquisition.
Frank Richards, a Named Executive Officer, acquired 748,168 of these shares and
an incentive stock option to purchase 143,750 shares of our common stock at
$2.72 per share. During 1998 and 1999, 21,539 and 11,488 shares of Series B
preferred stock were returned to us by the former shareholders of Protocall as
adjustments for the price paid for Protocall in 1997. The 12,306,141
outstanding shares of Series B preferred stock will be converted into 3,076,535
shares of common stock upon the closing of this offering.
In November 1997, Beacon loaned us $1 million for an unsecured note
payable on demand and bearing interest at 15% per year. In December 1997,
Beacon loaned us $2 million for an unsecured note payable on demand and bearing
interest at 15% per year.
In December 1997, we sold 2,871,913 shares of Series C preferred stock to
Beacon for $5 million at $1.741 per share. A part of the proceeds were used to
repay the $3.0 million in loans made to us by Beacon plus accrued interest of
$16,000. Beacon also received a warrant to purchase up to 875,000 shares of our
common stock at $6.96 per share and a Series B anti-dilution warrant for the
purchase of an indeterminable number of Series B preferred shares. In May 1998,
Beacon exchanged these warrants for 3,500,000 shares of Series C preferred
stock and a new anti-dilution warrant, which will terminate upon the closing of
this offering, as part of the Series D preferred stock financing. The 6,371,913
outstanding shares of Series C preferred stock will be converted into 1,592,978
shares of common stock upon the closing of the offering.
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<PAGE>
In December 1997, Timothy O'Crowley agreed to place into escrow 50,000
shares of his common stock. The shares were contingently transferable to
Resource Bancshares. The shares were to be returned to Mr. O'Crowley if, prior
to September 18, 1998, we received at least $15 million in net proceeds from
the sale of common stock at a price per share equal to at least $8.80. Since
this event did not occur, the shares were transferred to Resources Bancshares
in 1998.
In January 1998, Timothy O'Crowley granted an option to purchase 62,500
shares of his common stock to Paul Tartre at an exercise price of $6.96 per
share for a term of 10 years.
In April 1998, Beacon loaned us $1.4 million and Timothy O'Crowley,
Patrick O'Neal and Rick Weller each loaned us $100,000 for unsecured notes
payable on demand and bearing interest at 15% per year.
In May 1998, we sold 8,841,911 shares of Series D preferred stock for $12
million at $1.36 per share, of which Conning Capital Partners V purchased
8,823,529 shares. As part of this transaction, Conning was given the right to
appoint two directors. This right will terminate upon the closing of this
offering. Conning will be a holder of more than 5% of our common stock upon the
closing of this offering. A part of the proceeds were used to repay the loans
aggregating $1.7 million made to us by Beacon and Messrs. O'Crowley, O'Neal and
Weller plus accrued interest of $12,082. In addition, Conning and Beacon were
each granted a right to purchase up to $3 million of additional Series D
preferred stock at $1.36 per share through April 1999, which were not
exercised. The 8,841,911 outstanding shares of Series D preferred stock will be
converted into 2,210,478 shares of common stock upon the closing of this
offering.
Between April and September 1999, we sold 2,510,691 shares of Series E
preferred stock to unaffiliated investors for $4.04 million at $1.61 per share.
The 2,510,691 outstanding shares of Series E preferred stock will be converted
into 627,671 shares of common stock on the closing of this offering.
In November 1998, we loaned Frank Richards $29,028 bearing interest at 8%
per year. The note is unsecured and is due and payable on the earlier of
November 20, 2003 or whenever he may sell his stock under Rule 144 in an amount
equal to or greater than the principal balance. Mr. Richards may pay the note
with shares of our stock valued at the fair market value at the date of
payment.
In October 1999, we loaned $28,700 to Timothy O'Crowley and $33,000 to
Frank Richards to assist them in paying personal taxes incurred by each of them
as a result of their receipt of Spider stock in the spin-off. Each loan bears
interest at 7.75%. Mr. O'Crowley's loan is due in full on September 1, 2001 and
provides that one half of the loan is forgiven each year if they are still
employed at that time. Mr. Richard's loan is due on the earlier of November 30,
2003 or whenever he may sell his stock under Rule 144 in an amount equal to or
greater than the principal balance.
On November 23 1999, we loaned $600,000 to Timothy O'Crowley, our CEO. The
loan is a full recourse note secured by 150,000 shares of Mr. O'Crowley's
common stock. The loan bears fixed interest at 10.5%. The loan is due and
payable in full on November 23, 2000.
In November and December 1999, we sold 5,210,093 shares of Series F
preferred stock for $11,097,501 at $2.13 per share, of which Brinson Partners
purchased 3,755,869 shares. Brinson will hold more than 5% of our common stock
after the closing of this offering. The 5,210,093 outstanding shares of Series
F preferred stock will be converted into 1,302,523 shares of common stock upon
the closing of this offering, assuming no adjustment of the Series F preferred
stock conversion price. The conversion price, however, is subject to adjustment
depending on the public offering price per share of our common stock. The
following table sets forth the effect of the adjustment to the conversion price
on the number of shares of common stock to be issued based upon the high, mid
and low prices within the estimated public offering price range set forth on
the cover of this prospectus:
<TABLE>
<CAPTION>
Public
Offering Number of Shares of Common Stock
Price to be Issued Upon Converson
-------- -------------------------------- ---
<S> <C> <C>
$
$
$
</TABLE>
49
<PAGE>
Each series of preferred stock provides for the accrual of payment-in-kind
dividends from the date of issuance to the closing of our initial public
offering. Assuming that this offering closes on March 15, 2000, the following
numbers of shares of common stock will be issued as payment-in-kind dividends
on the various series of preferred stock:
<TABLE>
<CAPTION>
Name of Series Number of Shares
-------------- ----------------
<S> <C>
Series A................................................... 130,219
Series B................................................... 563,518
Series C................................................... 291,781
Series D................................................... 404,885
Series E................................................... 85,782
Series F................................................... 28,005
---------
Total.................................................... 1,504,190
=========
</TABLE>
Spin-Off of Spider Technologies
In October 1999, we transferred the proprietary software that is used in
our IntekWebDirect System to a newly-formed subsidiary named Spider
Technologies, Inc. We contributed $1 million in cash and certain other assets
to Spider and distributed 45,283,014 shares of Spider common and preferred
stock pro-ratably (on an as-converted to common basis) to our stockholders. We
also exercised a warrant for 1,000,000 shares of common stock of Spider that we
paid to the former Acorn stockholders (See "Acquisition of Acorn Information
Services"). The spin-off was taxable to us, and the spin-off and its tax
effects are shown in our 1999 financial statements.
The general purpose of the spin-off was to allow Spider to be an
independent software development and licensing business. We retained the
professional services business that integrates the software with our clients'
and their vendors' systems for their direct-to-customer initiatives.
We entered into several agreements with Spider as a part of the spin-off,
which are described below. In general, each agreement provides that each party
will indemnify the other party if it violates the agreement. All of our
agreements with Spider were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of the spin-off. Spider
was represented by its own counsel in connection with these negotiations.
Although we generally believe that the terms of these agreements are arms-
length and consistent with fair market values, we cannot assure you that the
prices charged to or by us under these agreements are not higher or lower than
the prices that may be charged to or by unaffiliated third parties for similar
services or goods or that the other terms are the same as those that would be
agreed upon by unaffiliated parties.
We have set forth below a summary description of the material terms of the
agreements involved in the spin-off. You should read the full text of these
agreements, which have been filed with the SEC as exhibits to the registration
statement of which this prospectus is a part.
Software Ownership. We transferred to Spider ownership of the
IntekWebDirect software code and related documentation, copyrights and
intellectual property rights. The source code and related documentation is from
time to time to be delivered to an independent escrow agent for delivery to us
if Spider breaches the agreement, goes out of business or abandons the
software. Abandonment exists if Spider:
. significantly fails to fulfill its maintenance and support obligations
(as explained below) for a period of 30 sequential days;
. is notified by us of a major error in the software that substantially
impairs the operation of the software, the problem continues for more
than one hour after we notify Spider, this occurs 25 days in a calendar
year, and it adversely affects us;
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<PAGE>
. substantially reduces the level of support for the software it develops
by not providing necessary error corrections so as to adversely affect
us; or
. announces it is going to discontinue developing, supporting or
maintaining the software.
If there is an abandonment, we can use the source code to provide direct-
to-customer outsourced services and, if the abandonment is of the third or
fourth type described above or Spider goes out of business, we can use the
source code for any purpose. In addition, we have the right to retain a copy of
the source code and documentation until May 2001 to allow us to make
corrections to the software. We lose this right if a competitor of Spider or
other entity that would jeopardize the confidentiality of the software acquires
control of us. We also have a security interest in current and future versions
of the software and related rights on which we can foreclose if Spider breaches
its agreements with us or fails to pay us royalties for 20 days.
If Spider wishes to sell the software or related rights prior to November
4, 2002, it must first offer them to us. It also cannot, prior to that date,
assign title or grant an exclusive license to the software to a competitor of
ours or voluntarily allow a competitor of ours to control it.
It is also a breach if a competitor involuntarily controls Spider. Spider
has further recently agreed for two years not to significantly engage in the
business of providing live human interaction (via e-mail, fax or telephone) on
behalf of a client and its customers who purchase goods or services of the
client. We will pay Spider $75,000 for this further agreement.
Control for these purposes means the direct or indirect ownership of 45%
or more of the party's outstanding stock or, in our case only, the power to
appoint a majority of our board.
License Arrangements. We have a 20-year worldwide, non-exclusive license
to use and integrate the object and source code of current and future versions
of the software. During that time, we can use the source code to develop
interfaces with hardware or other software and integrate the object code with
our and our clients' systems. Until November 4, 2000, we can generally
sublicense the software to our clients unless Spider wishes to directly license
to them, or those clients previously breached a license with Spider for the
software, or the country where the client is located or will use the software
is not a member of the Berne Convention.
We do not pay Spider a license fee to use the version of the software we
transferred to it or, until November 4, 2002, any new versions. After that
time, we will pay a "most favored nations" license fee for new versions.
In general, Spider owns all modifications to the software made by us or
our sublicensees.
Maintenance and Support Services. Spider will provide us with maintenance
and support, technical support, installation and training services until
November 5, 2002. For maintenance and support services, we pay Spider an amount
to compensate Spider for services it provides to us or to our clients that
exceed those the Spider group provided to us prior to the spin-off. For
technical support services, such as helping us operate telephone and computer
systems, we pay Spider its full employee costs plus 20%. After November 5,
2002, Spider will provide maintenance and support on its usual customer terms
and may elect, at our request, to provide technical support services.
In addition, at our request, Spider will host on its servers until
November 5, 2001, current and future versions of the software for operation by
us and our clients. For that service, we pay Spider what our clients existing
on November 5, 1999, pay us for the service, and for new customers after that
date we pay Spider its out-of-pocket costs for operating the server. After
November 5, 2001, Spider may continue to provide us and our clients with
hosting services at Spider's then current rates.
Spider may provide other maintenance and support services to our clients.
51
<PAGE>
Royalty. Spider agreed to pay us royalties totaling $1.45 million plus
interest of 8% per year on the unpaid amount. The royalty rate equals 4% of
Spider's net revenues from the distribution and licensing of current and future
versions of the software. Spider does not have to pay us a royalty until it has
total net revenues of $5.5 million or receives $7.5 million from the sale of
equity or convertible debt securities, whichever occurs first. In any event,
the $1.45 million plus interest is due on the earlier of November 4, 2004, or
the sale of all or substantially all Spider's assets.
Shared Personnel and Resources. Under various agreements, we have
committed to share some of our personnel and resources with Spider for limited
periods of time. Paul Tartre, our President - Technology Solutions, and his
administrative assistant will spend 40% of their time on Spider matters, for
which we will be paid $124,080 a year. Our officers Timothy Hardin and Patrick
O'Neal will spend 5% and 20%, respectively, of their time on Spider business,
and Spider will reimburse us monthly for those percentages of our costs of
their employment. In addition, we expect that Timothy O'Crowley will remain
chairman of the board of Spider, and he will be a consultant to Spider for
strategic planning and financing advice for which he will be paid $90,000 per
year for two years. In general, other than Paul Tartre, neither we nor Spider
may solicit each others' employees for approximately one year.
We have also agreed to provide certain administrative services to Spider
for $10,417 a month, as well as to sublease 40% of our office space in San
Diego for 40% of our rent and other occupancy costs. Spider also pays us for
equipment and supplies it uses in that office. These agreements generally
terminate between October 2000 and August 2003.
Referrals. We have agreed to refer to Spider those of our clients that
wish to license current or future versions of the software and Spider will
refer to us companies that might wish to use our outsourced communications
center services. These arrangements are for three years and are non-exclusive.
We will pay each other industry-standard commissions on the revenues generated
by any referrals, and Spider will charge our clients standard license fees.
Infringement. In general, we are liable to Spider if we know the software
and documentation we delivered to Spider, or if a modification we made to the
software, infringes the rights of others or is not owned by us. In general,
Spider is liable to us if the software and documentation it develops infringes
the rights of others or is not owned by Spider, or if at any time a client of
ours makes a claim against us involving work done by Spider. The claims of each
party against the other are generally limited to a maximum of $5 million, and
no claim can be made for the first $500,000 of claims. However, this limitation
does not apply to claims for indemnification regarding infringement or
misappropriation or, in Spider's case, claims our clients make against us based
on Spider's work.
Taxes. If in the future our or Spider's tax liability increases pursuant
to Section 482 of the Internal Revenue Code of 1986, the other party will pay
to the party whose liability was increased an amount equal to the reduction in
tax liability payable by the other party. No payment needs to be made until the
tax benefit actually results in a recognized tax savings to the other party on
a specific amount of tax then currently due and payable.
Termination. Spider can terminate the agreements, including the licenses,
and seek damages from us upon notice to us if we breach our obligations and
fail to materially cure such breach within certain time periods. We have the
right to foreclose on our security interest in the software and related rights,
terminate the agreement and seek recovery of damages from Spider upon notice to
Spider if (1) Spider willfully, recklessly or negligently, with the approval or
prior actual knowledge of senior management of Spider, breaches its
confidentiality obligations or (2) materially breaches any other provision of
the agreement with the exception of maintenance, support and hosting services,
and fails to cure such breaches within certain time periods. If Spider
materially breaches its obligations regarding maintenance, support and hosting
services and does not cure the breach after notice, we have the right to
contract with a third party to obtain those services, seek recovery of damages
from Spider and terminate the agreement.
52
<PAGE>
Stock Ownership and Board Representation
In connection with the spin-off of Spider, certain of our executive
officers, directors and principal stockholders received shares of common stock
or preferred stock of Spider as follows:
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of
Common Preferred Percentage
Name Stock Stock Owned(1)
---- ---------- ---------- ----------
<S> <C> <C> <C>
Timothy O'Crowley.......................... 7,715,328 15.2%
Paul Tartre................................ 3,000,000 5.9
Frank Richares............................. 500,000 841,467 2.6
Patrick O'Neal............................. 700,000 1.4
Venkat Sharma.............................. 388,155 *
Shoba Murali............................... 304,095 *
Raja Ramnarayan............................ 185,250 *
Sunil Gupta................................ 100,000 *
Stephen Hyde............................... 98,650 *
The Beacon Group III -
Focus Value Fund, L.P. .................... 14,298,360 28.2
Conning Capital Partners V, L.P. .......... 10,102,941 19.9
---------- ---------- ----
Total.................................... 12,892,828 25,341,418 75.3%
========== ========== ====
</TABLE>
- ------------------
* Less than one percent
(1) The total shares of common stock and preferred stock outstanding at
November 6, 1999, the date of distribution, was 50,783,371 shares.
In addition, Timothy O'Crowley, Steven Piaker, Harold Pote, Rick Weller
and Eric Wilkinson, who are members of our board, and Patrick O'Neal and Paul
Tartre, two of our executive officers, are members of the board of Spider and
represent seven of the ten members of Spider's board.
Acquisition of Acorn Information Services
Effective October 1, 1999, we acquired all of the capital stock of Acorn
Information Services, Inc., a Delaware corporation based in Connecticut that
provides strategic consulting and sophisticated data analytic services to help
their clients enhance their marketing efforts. Four of the five former Acorn
stockholders became executives of Acorn and us following the acquisition.
Timothy O'Crowley is currently the sole director of Acorn. In connection with
the Acorn transaction, we paid $100,000 of the fee incurred by the Acorn
stockholders for services provided by their investment banker Prospero LLC by
issuing 11,738 shares of our common stock to Prospero. A summary of the
acquisition and the agreements executed in connection with the acquisition is
provided below. We strongly urge you to read the entire agreements, which have
been filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.
Stock Purchase and Contingent Earn-Out Provisions. The purchase price for
all of the outstanding Acorn capital stock was $850,000 cash at closing plus
acquisition costs of $100,000. In addition, we must make certain contingent
payments of cash and our common stock if Acorn meets at least 75% of specified
minimum earnings targets as of November 30, 2000, 2001 or 2002. During this
three year earn-out period, the cash portion of the contingent payments will be
made at the end of each anniversary date of the agreement and the common stock
portion will be issued at the end of the third anniversary date of the
agreement. The former Acorn stockholders will receive an aggregate amount of up
to $1.9 million in cash and 527,778 shares of our common stock.
The contingent earn-out consideration payable to the former Acorn
stockholders who are also employees of Acorn may not be received under certain
circumstances if their employment ends before Acorn meets certain earnings
targets. When Acorn achieves certain earnings targets, however, up to two of
these employees may leave Acorn. In addition, if Acorn sells substantially all
of its assets or stock to a third party,
53
<PAGE>
or if we become insolvent, the former Acorn stockholders have a right of first
refusal to purchase the stock or assets of Acorn.
In connection with the Acorn transaction, we exercised our warrant to
purchase 1,000,000 shares of Spider common stock and delivered these shares to
the former Acorn stockholders. The shares must be returned to us if the earnout
conditions are not met. Each former Acorn stockholder is entitled to retain
four times the number of Spider shares as the number of shares of our common
stock that he or she is entitled to receive for the first year of the earn-out
period. We have the right to repurchase all of the forfeited Spider common
stock for $.013 per share. Further, if an employee stockholder's employment
terminates prior to the expiration of the earn-out period, we will have the
right to repurchase all of that stockholder's forfeited or unforfeited Spider
common stock at $.013 per share.
In addition, we agreed to make up to a total of $10.9 million of
economically justified (in our determination) capital contributions to Acorn
over the earn-out period to fund growth and ongoing business operations of
Acorn and to facilitate Acorn's achievement of the earnings targets. If Acorn
does not meet 100% of its earnings targets, our capital contributions will be
adjusted downward proportionately. If Acorn does not meet 75% of its targets,
we are not required to make any capital contribution. We have the final
determination as to the amount of our capital contributions.
In the event of a change in control of our capital stock during the earn-
out period, payment of the contingent earn-out earned for any annual periods
ending prior to the change in control and for the year in which a change in
control occurs will be accelerated. After the closing of this offering, the
cash and stock portions of the earn-out consideration payable in the first year
of the earn-out period will be paid within 30 days of our determination of
earn-out consideration payable for this period.
Employment Agreements. Each of the former Acorn stockholders who prior to
the transaction were Acorn employees entered into an employment agreement with
us and Acorn to provide services to us and Acorn. The employment agreements are
for an initial term of three years and provide for the assignment to Acorn of
all works and inventions developed on behalf of Acorn. With limited exceptions,
for not less than one year after a former Acorn stockholder's employment is
terminated, he or she cannot work for or provide services to a company that
competes with us or solicit other Acorn employees to leave Acorn's employ. The
employee stockholders (other than Mr. Sharma) will not be entitled to more than
12 months of severance pay upon termination of employment by the employee for
cause or by us without cause. Mr. Sharma will be entitled to 12 months of
severance pay plus, under certain circumstances, up to an additional 12 months
of severance pay upon termination by him for cause or by us without cause.
Registration Rights Agreement. To mitigate the tax liability of the former
Acorn stockholders for their receipt of our common stock at the end of the
three year earn-out period, we agreed to provide the former Acorn stockholders
with (1) a loan equal to 25% of the value of our common stock held by the
former Acorn stockholders, (2) an offer to repurchase 25% of our common stock
held by the former Acorn stockholders, or (3) one demand registration for up to
50% of our stock held by the former Acorn stockholders. The right of the former
Acorn stockholders to demand registration of a portion of their shares arises
only if we elect not to provide a loan or to repurchase shares of our common
stock.
Commercial Agreements
During 1996, we entered into certain transactions with Eden Financial
Group, Inc. or its subsidiaries. Timothy O'Crowley, Patrick O'Neal and Paul
Tartre, executive officers of Intek are stockholders of Eden Financial Group,
Inc. We paid a total of $115,000 for software applications developed by Eden
Financial Group, Inc. in the form of a note payable. The note was paid on
December 15, 1997. We received $80,000 from Eden Financial Group, Inc. in
return for assuming various lease obligations of Eden Financial Group, Inc.
54
<PAGE>
During 1997, we leased an aircraft from Mt. Evans Consulting, LLC, a
company partially-owned by Timothy O'Crowley. Rental payments were based upon
our usage of the aircraft. Amounts paid or accrued by us under the lease during
the year ended December 31, 1997, were $164,000. During 1998, the lease was
terminated.
From January 1998 through May 1999, Mr. Pat O'Crowley, our executive vice
president - corporate development, consulted with us on strategic planning and
operational matters, through his firm, Coalter Group International. In 1999,
Coalter Group International was paid $80,000 for these services.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows certain information with respect to beneficial
ownership of our common stock as of December 31, 1999, by (1) each stockholder
known to us to be the beneficial owner of more than 5% of our common stock, (2)
each of our directors, (3) each of our Named Executive Officers and (4) all
executive officers and directors as a group. The number of shares and
percentages in the table includes the shares issuable as payment-in-kind (PIK)
dividends assuming the closing of this offering on March 15, 2000.
Beneficial ownership is determined in accordance with the rules of the SEC
and represents sole or shared voting or sole or shared investment power with
respect to securities. Unless otherwise indicated below, the person and
entities named in the following table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. Shares of common stock subject to options or
warrants that are currently exercisable or exercisable within 60 days of
December 31, 1999, are deemed to be outstanding and to be beneficially owned by
the person holding the options or warrants for the purpose of computing the
percentage ownership of that person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The following table assumes that the underwriter's over-allotment option
to purchase up to shares from us is not exercised.
<TABLE>
<CAPTION>
Percent Owned
-----------------
Number Before After
Name and Address of Beneficial Owners of Shares Offering Offering
- ------------------------------------- ---------- -------- --------
<S> <C> <C> <C>
The Beacon Group III -- Focus Value Fund,
L.P. ...................................... 4,729,015(1) 36.5%
399 Park Avenue
New York, NY 10022
Conning Capital Partners V, L.P. ........... 2,609,927(2) 20.2%
CityPlace II, 9th Floor
185 Asylum Street
Hartford, CT 06103
Timothy O'Crowley........................... 2,066,332(3) 13.1%
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111-3017
Brinson Partners, Inc. ..................... 962,686(4) 7.4%
209 South LaSalle Street
Chicago, IL 60604-1295
Frank Richards.............................. 361,130(5) 2.8%
Paul Tartre................................. 200,000(6) 1.5%
Patrick O'Neal.............................. 325,000(7) 2.5%
Timothy Hardin.............................. 67,500(8) *
Stephen Hyde................................ 25,485 *
Stephen Piaker.............................. 0(9) *
Harold Pote................................. 0(10) *
Rick Weller................................. 0 *
Eric Wilkinson.............................. 0(11) *
All officers and directors as a group, 20
persons(12)................................ 11,347,075(12) 70.8%
</TABLE>
- ------------------
56
<PAGE>
* Less than 1%.
(1) Includes 440,309 shares issuable as a PIK dividend.
(2) Includes 404,044 shares issuable as a PIK dividend.
(3) Includes 537,500 shares subject to options that are exercisable within 60
days from December 31, 1999. Mr. O'Crowley is our Chief Executive
Officer.
(4) Includes 83,015 shares issuable as a PIK dividend. Brinson Partners, Inc.
is the managing member of Brinson Venture Management LLC, the investment
advisor to BVCF III, L.P., which has sole voting and investment power over
BVCF III, L.P.'s shares. The address of BVCF III L.P. is c/o Brinson
Partners, Inc.
(5) Includes 130,061 shares subject to options that are exercisable within 60
days from December 31, 1999 and 30,149 shares issuable as a PIK dividend.
(6) Represents shares subject to options that are exercisable within 60 days
from December 31, 1999.
(7) Includes 145,041 shares subject to options that are exercisable within 60
days from December 31, 1999.
(8) Represents shares subject to options that are exercisable within 60 days
from December 31, 1999.
(9) Does not include 2,982,774 shares held of record by Conning Capital
Partners V, L.P. Mr. Piaker is senior vice president of Conning & Conning.
Conning & Conning is the managing member of Conning Investment Partners V,
LLC, which serves as the general partner of Conning Capital Partners V,
L.P. Mr. Piaker disclaims beneficial ownership of the shares owned by
Conning Capital Partners V, L.P.
(10) Does not include 5,404,589 shares held of record by The Beacon Group III -
Focus Value Fund, L.P. The Beacon Group has voting and investment power
over shares owned of record by The Beacon Group III - Focus Value Fund,
L.P. Mr. Pote is a general partner of The Beacon Group and as such may be
deemed to be a beneficial owner of the shares shown as beneficially owned
by The Beacon Group III - Focus Value Fund, L.P. Mr. Pote disclaims
beneficial ownership of the shares owned by The Beacon Group III - Focus
Value Fund, L.P., and, accordingly, such shares are excluded from the
information in the table with respect to Mr. Pote.
(11) Does not include 5,404,589 shares held of record by The Beacon Group III -
Focus Value Fund, L.P. Mr. Wilkinson is employed by The Beacon Group. Mr.
Wilkinson disclaims beneficial ownership of the shares owned by The Beacon
Group III - Focus Value Fund, L.P.
(12) Includes 853,450 shares subject to options held by executive officers and
directors that are exercisable within 60 days from December 31, 1999.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 100,000,000 shares of common stock and
10,000,000 shares of undesignated preferred stock as of the closing of this
offering. The following description of our capital stock is qualified in its
entirety by our certificate of incorporation and bylaws, which are included as
exhibits to the Registration Statement of which this prospectus is a part, and
by the provisions of applicable Delaware law.
Common Stock
As of December 31, 1999, there were shares of common stock
outstanding, as adjusted to reflect (1) the conversion of all outstanding
shares of preferred stock into common stock, (2) the issuance of 1,504,190
shares of common stock as payment-in-kind dividends to the holders of our
preferred stock assuming the closing of this offering on March 15, 2000 and (3)
the issuance of an additional shares of common stock to the holders of our
Series F preferred stock assuming the sale of shares in this offering at an
initial offering price of $ per share. As of December 31, 1999, we had
approximately 32 stockholders of record.
Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of preferred stock, if any. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common
stock to be issued upon the closing of this offering will be fully paid and
nonassessable.
Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series, and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. We cannot state
the actual effect of the issuance of any shares of preferred stock upon the
rights of holders of the common stock until the board of directors determines
the specific rights of the holders of such preferred stock. However, the
effects might include, among other things, restricting dividends on the common
stock, diluting the voting power of the common stock, reducing the market price
of the common stock, or impairing the liquidation rights of the common stock,
without further action by the stockholders. We could issue preferred stock
quickly with terms calculated to delay or prevent a change in control or make
removal of management more difficult. We have no present plans to issue any
shares of preferred stock.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Certain provisions of Delaware law and our certificate of incorporation
and bylaws could make it more difficult or prevent a change in control that a
stockholder might consider favorable by a tender offer, a proxy contest or
otherwise, and to remove incumbent officers and directors. These provisions are
intended to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
us to first negotiate with us. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging takeover or acquisition proposals because, among
other things, negotiation of these proposals could result in an improvement of
their terms.
We are subject to Section 203 of the Delaware General Corporation Law,
which prohibits us from engaging in a "business combination" with an
"interested stockholder" for a period of three years following
58
<PAGE>
the date the person became an interested stockholder, unless (with certain
exceptions) the "business combination" or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. A
"business combination" includes a merger, a sale of 10% or more of our assets
or stock, or other transactions resulting in a financial benefit to the
interested stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior to
the determination of interested stockholder status, did own) 15% or more of a
corporation's voting stock. Section 203 does not restrict a transaction by us
with a person who owned stock before this public offering. Section 203 permits
companies to opt out of this provision, but we have elected not to opt out. The
applicability of this provision could prevent or delay a takeover that you
might consider favorable by an interested stockholder in a transaction that the
board of directors has not approved in advance, including takeovers that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Our certificate of incorporation and bylaws, effective upon the closing
date of this offering, contain certain provisions which are intended to deter
hostile takeover attempts. Our certificate of incorporation and bylaws require
that any action to be taken by our stockholders must be taken at a duly called
annual or special meeting of the stockholders and may not be taken by a consent
in writing. In addition, special meetings of our stockholders may be called
only by the board of directors. Our certificate of incorporation and bylaws
also provide that, beginning upon the closing of this offering, our board of
directors will be divided into three classes, with each class serving staggered
three-year terms so that approximately one-third of the directors are elected
each year. Staggering the terms of our directors delays the time it would take
stockholders to replace a majority of the incumbent directors. Certain
amendments of the certificate of incorporation and of the bylaws require the
approval of holders of at least 66 2/3% or 80% of the voting power of all
outstanding stock. In addition, our directors may only be removed with or
without cause by a vote of 80% of the stockholders. Our stockholders must give
notice of nominations or other business to be conducted at a stockholders
meeting at least 120 days before the date of our proxy statement sent to
stockholders for the prior year's annual meeting. These provisions may have the
effect of discouraging takeovers and tactics used in proxy fights or delaying
changes in control or management of the Company.
Limitations on Directors' Liability and Indemnification
Our certificate of incorporation limits the personal liability of our
directors to us and our stockholders to the maximum extent permitted by
Delaware law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
The limitation of liability does not apply to liabilities of our directors
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws also provide that we will
indemnify our directors and officers and may indemnify our employees and other
agents to the fullest extent permitted by law. We believe that indemnification
under our bylaws applies to negligent and grossly negligent acts of indemnified
parties. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other
59
<PAGE>
agent for any liability arising out of his or her actions in their capacity as
an officer, director, employee or other agent, regardless of whether the
certificate of incorporation or bylaws would permit indemnification. The
indemnification provisions in our bylaws and certificate of incorporation are
not exclusive of other rights of indemnification that may be available to our
directors or officers under any agreement or vote of stockholders or
disinterested directors.
In addition to the provisions in our bylaws, we have entered into
agreements to indemnify our directors, executive officers and certain
employees. These agreements, among other things, indemnify our directors,
executive officers and certain employees for judgments, fines, settlement
amounts and certain expenses, including attorneys' fees, incurred by them in
any action or proceeding, including any action by or on behalf of the company,
arising out of the person's services as a director, executive officer or
controller of us, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a derivative
claim or other lawsuit against our directors or officers for breach of their
fiduciary duty, even though a derivative action, if successful, might otherwise
benefit us and our stockholders. In addition, the value of your investment in
our stock may decline to the extent we pay the costs of settlement or damage
awards against our directors and officers under these indemnification
provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
Registration Rights
After this offering, the holders of approximately shares of
outstanding common stock, as converted, and the former stockholders of Acorn
who may receive up to 527,778 shares of our common stock in the future, or
their permitted transferees, are entitled to certain rights to register those
shares under the Securities Act of 1933 at any time after 12 months following
the closing of this offering.
We have entered into an agreement that will be effective upon the closing
of this offering with Beacon, Conning, Brinson, Frank Richards, Timothy
O'Crowley and certain other holders of our preferred stock. Under the
agreement, these stockholders, or their permitted transferees, may require, on
three occasions, and Brinson on one additional occasion, at any time one year
after this offering, that we file a registration statement at our expense under
the Securities Act with respect to the shares of common stock they acquire upon
conversion of their preferred stock, provided that the anticipated amount
offered would be at least $5 million. In addition, these stockholders and their
permitted transferees may, at any time one year after this offering, require
that we register their shares for public resale on Form S-3 or similar short-
form registration, provided that the value of the securities to be registered
is at least $2.5 million.
In addition, the stockholders whose shares are subject to this agreement
have piggyback registration rights. If we propose to register any of our common
stock under the Securities Act, other than under employee benefit plans or for
acquisitions, these stockholders may require us to include all or a portion of
their stock in the registration. However, the managing underwriter, if any, of
the offering has rights to limit the amount of stock to be sold by those
stockholders.
We have also entered into an investor rights agreement with the former
stockholders of Acorn in connection with the acquisition of Acorn. Please see
"Related Party Transactions - Acquisition of Acorn Information Services" for
more information about the terms of this agreement.
60
<PAGE>
All registration expenses incurred in connection with the above
registrations will be borne by us. Each selling stockholder will pay all
underwriting discounts and selling commissions applicable to the sale of that
stockholder's stock plus fees of their counsel in some cases.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American
Securities Transfer & Trust Company, Denver, Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
General
The shares of our common stock sold in this offering, or shares if
the underwriters exercise their over-allotment option in full, will be freely
tradable without restriction under the Securities Act, except for any such
shares which may be acquired by an "affiliate" of ours (an "Affiliate") as that
term is defined in Rule 144 promulgated under the Securities Act, which shares
will remain subject to the resale limitations of Rule 144.
The shares of our common stock that will continue to be held by
existing stockholders after this offering constitute "restricted securities"
within the meaning of Rule 144, and will be eligible for sale in the open
market after this offering, subject to certain contractual lockup provisions
and the applicable requirements of Rule 144, both of which are described below.
We granted registration rights to certain stockholders. See Description of
Capital Stock- "Registration Rights."
Generally, Rule 144 provides that a person who has beneficially owned
"restricted" shares for at least one year will be entitled to sell on the open
market in brokers' transactions within any three month period a number of
shares that does not exceed the greater of:
. 1% of the then outstanding shares of common stock; and
. the average weekly trading volume in the common stock on the open
market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain post-sale notice
requirements and, in some cases, the availability of current public information
about us.
In the event that any person who is deemed to be an Affiliate purchases
shares of our common stock pursuant to this offering or acquires shares of our
common stock pursuant to one of our employee benefit plans, the shares held by
such person are required under Rule 144 to be sold in brokers' transactions,
subject to the volume limitations described above. Shares properly sold in
reliance upon Rule 144 to persons who are not Affiliates are thereafter freely
tradable without restriction.
Sales of substantial amounts of our common stock in the open market, or
the availability of such shares for sale, could adversely affect the price of
our common stock.
We, our directors and executive officers, and certain stockholders have
agreed that, without the prior written consent of Hambrecht & Quist LLC on
behalf of the underwriters, we will not, during the period ending 180 days
after the date of this prospectus, sell or otherwise dispose of any shares of
our common stock, subject to certain exceptions. See "Underwriting."
An aggregate of 8,068,174 shares of our common stock are reserved for
issuance under our stock option and employee stock purchase plans. We intend to
file a registration statement on Form S-8 covering the issuance of shares of
our common stock pursuant to these plans. Accordingly, the shares issued
pursuant to these stock option plans will be freely tradable, subject to the
restrictions on resale by Affiliates under Rule 144.
61
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. Hambrecht & Quist LLC, Robertson Stephens, Inc., U.S. Bancorp Piper
Jaffray Inc. and Wit Capital Corporation are acting as representatives of the
underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and
conditions of the underwriting agreement, each underwriter has severally agreed
to purchase the number of shares of common stock set forth opposite its name
below.
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Hambrecht & Quist LLC.............................................
Robertson Stephens, Inc. .........................................
U.S. Bancorp Piper Jaffray Inc. ..................................
Wit Capital Corporation...........................................
-----
Total.............................................................
=====
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other
than those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. We have agreed to indemnify the underwriters against certain
civil liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of such liabilities.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a
concession of $ per share. The underwriters may also allow to dealers, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the shares are released for sale to the public,
the representatives may change the offering price and other selling terms at
various times.
The underwriters have informed us that the underwriters will not allow
discretionary account sales of the shares of common stock offered by this
prospectus.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of
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<PAGE>
additional shares from us to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover page of this
prospectus, less the underwriting discount. If this option is exercised in
full, the total price to the public will be $ million and the net proceeds
to us will be approximately $ million. The underwriters have severally
agreed that, to the extent the over-allotment option is exercised, they will
each purchase a number of additional shares proportionate to the underwriter's
initial amount reflected in the above table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us. Such amount is shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares.
<TABLE>
<CAPTION>
Paid by Us
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share......................................... $ $
Total............................................. $ $
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $ million.
We have agreed to indemnify each underwriter against all liabilities to
which they may become subject under the federal securities laws or other law
(including reimbursement of expenses) arising out of:
. any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus) or
the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements not misleading,
except that there is no indemnification for specific information
furnished by the underwriters; and
. the directed share program under which the underwriters have reserved
for sale up to shares for our officers, directors, employees and
associates.
This includes contribution to any payments which may be made by the
underwriters in the event that indemnification is not available.
We, our executive officers and directors, and certain other stockholders
have agreed to a 180-day lock up with respect to shares of common stock
that they beneficially own, including securities that are convertible into
shares of common stock and securities that are exchangeable or exercisable for
shares of common stock. This means that, subject to certain exceptions, for a
period of 180 days following the date of this prospectus, we and such persons
may not offer, sell, pledge or otherwise dispose of securities without
the prior written consent of Hambrecht & Quist LLC.
The underwriters have reserved for sale up to shares for employees,
directors and certain other persons associated with us. These reserved shares
will be sold at the public offering price that appears on the cover of this
prospectus. The number of shares available for sale to the general public in
the offering will be reduced to the extent reserved shares are purchased by
these persons. The underwriters will offer to the general public, on the same
terms as other shares offered by this prospectus, any reserved shares that are
not purchased by these persons.
Prior to this offering, there has been no public market for the common
stock. Consequently the offering price for the common stock will be determined
by negotiations between us and the underwriters and is not necessarily related
to our asset value, net worth or other established criteria of value. The
factors considered in such negotiations, in addition to prevailing market
conditions, will include the history of and prospects for the industry in which
we compete, an assessment of our management, our prospects, our capital
structure, prevailing market conditions, our results of operations in recent
periods and certain other factors as may be deemed relevant.
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<PAGE>
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution the shares is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:
. Stabilizing transactions. The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
. Over-allotments and syndicate covering transactions. The
underwriters may create a short position in the shares by selling
more shares than are set forth on the cover page of this
prospectus. If a short position is created in connection with the
offering, the representatives may engage in syndicate covering
transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
. Penalty bids. If the representatives purchase shares in the open
market in a stabilizing transaction or syndicate covering
transaction, they may reclaim a selling concession from the
underwriters and selling group members who sold those shares as
part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters make any representation or prediction as
to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.
One or more members of the underwriting selling group may make copies of
the preliminary prospectus available over the Internet to certain customers
through its or their Web sites. The representatives expect to allocate a
limited number of shares to such member or members of the selling group for
sale to brokerage account holders.
The Wallach Company, a member of the NASD, has advised us in connection
with this offering, for which we paid it $150,000. The Wallach Company also
acted as placement agent in connection with our Series F preferred stock
financing in November and December 1999, for which we paid it $537,375 in cash.
Market Street Partners, an investment partnership owned by the partners of The
Wallach Company, purchased 164,319 shares of our Series F preferred stock for
$349,999 at $2.13 per share.
Due to the fact that one of the representative of the underwriters was
organized within the last three years, we are providing you with the following
information. Wit Capital Corporation, one of the representatives of the
underwriters, was organized and registered as a broker-dealer on September 4,
1997. Since that time, Wit Capital Corporation has been named as lead or co-
manager of, or as a syndicate member in, numerous public offerings of equity
securities. Wit Capital Corporation does not have any material relationship
with us or any of our officers, directors or other controlling persons, except
with respect to its contractual relationship with us pursuant to the
underwriting agreement entered into in connection with this offering.
64
<PAGE>
LEGAL MATTERS
Chrisman, Bynum & Johnson, P.C. of Boulder, Colorado, will pass upon the
validity of the shares of common stock offered by us. Davis Polk & Wardwell of
Menlo Park, California, will pass upon legal matters in connection with this
offering for the underwriters. A limited liability company comprised of
partners of Chrisman, Bynum & Johnson, P.C. will own 13,092 shares of our
common stock upon conversion of the shares of Series F preferred stock
purchased by it.
EXPERTS
The financial statements and schedules of Intek Information, Inc included
in this prospectus and elsewhere in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The financial statements of Acorn Information Services, Inc. as of and for
the year ended December 31, 1998 included in this prospectus have been so
included in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described
in Note 2 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form S-1 under the Securities Act of
1933, with respect to the common stock offered hereby. This prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Items are omitted in accordance with the rules
and regulations of the SEC. For further information with respect to us and our
common stock offered hereby, reference is made to the Registration Statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and, in each instance, if such
contract or document is filed as an exhibit, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference to such
exhibit. The Registration Statement, including exhibits and schedules thereto,
may be inspected without charge at the public reference facilities maintained
by the SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices located at the North Western Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, NY 10048. Copies of all or any part thereof may
be obtained from such office after payment of fees prescribed by the SEC. The
SEC maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
As a result of this offering, we will become subject to the full
informational requirements of the Securities Exchange Act of 1934. We will
fulfill our obligations with respect to such requirements by filing periodic
reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing consolidated financial statements
certified by an independent public accounting firm. We also maintain a Web site
at http://www.intekinfo.com. Our Web site and the information contained therein
or connected thereto shall not be deemed to be incorporated into this
prospectus or the registration statement of which it forms a part.
65
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Financial Statements:
Audited Consolidated Balance Sheets at December 31, 1998 and 1999......... F-3
Audited Consolidated Statements of Operations for Each of the Three Years
in the Period Ended December 31, 1999.................................... F-4
Audited Consolidated Statements of Stockholders' Equity (Deficit) for Each
of the Three Years in the Period Ended December 31, 1999................. F-5
Audited Consolidated Statements of Cash Flows for Each of the Three Years
in the Period Ended December 31, 1999.................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Intek Information, Inc.:
We have audited the accompanying consolidated balance sheets of INTEK
INFORMATION, INC. (a Delaware corporation) and subsidiaries at December 31,
1998 and 1999, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1999. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Intek
Information, Inc. and subsidiaries at December 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Denver, Colorado,
January 13, 2000.
F-2
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 3,752 $ 6,204
Restricted certificates of deposit............ 135 407
Receivables, net of allowances of $411 and
$464, respectively--
Trade......................................... 4,375 5,218
Unbilled...................................... 1,689 1,108
Related party notes receivable................ -- 690
Prepaid expenses and other.................... 229 906
------- -------
Total current assets......................... 10,180 14,533
PROPERTY AND EQUIPMENT, net.................... 5,052 7,982
GOODWILL AND OTHER INTANGIBLES, net............ 3,314 2,808
OTHER ASSETS................................... 98 1,055
------- -------
Total assets................................. $18,644 $26,378
======= =======
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
---------------- December 31,
1998 1999 1999
------- ------- -------------
(Unaudited)
(Note 2)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.............................. $ 1,410 $ 1,668
Accrued expenses.............................. 1,109 3,381
Customer deposits............................. 230 237
Deferred revenue.............................. 336 --
Current borrowings............................ 13 1,316
Due to former Acorn stockholders.............. -- 200
Related party notes payable................... -- 198
------- -------
Total current liabilities.................... 3,098 7,000
DEFERRED RENT.................................. 89 245
LONG-TERM BORROWINGS, net of current portion... 7 1,722
------- -------
Total liabilities............................ 3,194 8,967
------- -------
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE PREFERRED STOCK SUBJECT TO
MANDATORY REDEMPTION, $.001 par value,
79,000,000 shares authorized (Note 9)......... 38,440 59,408
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value, 170,000,000
shares authorized, 1,868,087, 1,881,444 and
12,775,065 (unaudited pro forma) shares issued
and outstanding............................... 1 1 1
Additional paid-in capital..................... 243 -- 59,408
Unearned compensation.......................... -- (1,266) (1,266)
Accumulated deficit............................ (23,234) (40,732) (40,732)
------- ------- -------
Total stockholders' equity (deficit)......... (22,990) (41,997) $17,411
------- ------- =======
Total liabilities and stockholders' equity
(deficit)................................... $18,644 $26,378
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated balance sheets.
F-3
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
REVENUE..................................... $ 9,546 $ 17,664 $ 24,699
DIRECT COST OF SERVICES..................... (7,767) (13,209) (16,986)
--------- --------- ----------
GROSS PROFIT................................ 1,779 4,455 7,713
--------- --------- ----------
OPERATING EXPENSES:
Selling, general and administrative....... 10,464 9,312 15,020
Depreciation and amortization............. 2,941 3,755 3,533
Research and development.................. 458 897 1,079
--------- --------- ----------
Total operating expenses................ 13,863 13,964 19,632
--------- --------- ----------
LOSS FROM OPERATIONS........................ (12,084) (9,509) (11,919)
--------- --------- ----------
OTHER (EXPENSES) INCOME:
Loss from Spider.......................... -- -- (1,055)
Interest income........................... 245 266 134
Interest expense.......................... (30) (17) (150)
Loss on disposal of equipment and other... (26) (270) (20)
--------- --------- ----------
189 (21) (1,091)
--------- --------- ----------
NET LOSS.................................... $ (11,895) $ (9,530) $ (13,010)
========= ========= ==========
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS:
Net loss.................................... $ (11,895) $ (9,530) $ (13,010)
Accretion of mandatorily redeemable
convertible preferred stock................ (90) (469) (864)
Cumulative dividends to preferred
stockholders............................... -- -- (11,361)
Loss on repurchase of Series A preferred
stock...................................... (1,241) -- --
Loss on Series C preferred stock Exchange
Agreement.................................. -- (1,465) --
--------- --------- ----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS.. $ (13,226) $ (11,464) $ (25,235)
========= ========= ==========
BASIC AND DILUTED NET LOSS PER SHARE........ $ (7.09) $ (6.14) $ (13.50)
========= ========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING--
BASIC AND DILUTED......................... 1,866,585 1,867,941 1,869,803
========= ========= ==========
UNAUDITED PRO FORMA NET LOSS PER SHARE,
assuming conversion of preferred stock and
accrued dividends:
Basic and diluted net loss per share...... $ (1.26)
==========
Weighted average common shares
outstanding--basic and diluted........... 10,364,936
==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
---------------- Paid-In Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
--------- ------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31,
1996................... 1,857,142 $ 1 $ 589 $ -- $ (1,809) $ (1,219)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (90) -- -- (90)
Loss on repurchase of
Series A preferred
stock................. -- -- (1,241) -- -- (1,241)
Issuance of common
stock as consulting
fee for Series B
preferred stock
offering.............. 10,770 -- 29 -- -- 29
Warrant for common
stock granted in
connection with the
Series C preferred
stock offering........ -- -- 1,496 -- -- 1,496
Net loss............... -- -- -- -- (11,895) (11,895)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1997................... 1,867,912 1 783 -- (13,704) (12,920)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (469) -- -- (469)
Loss on Series C
preferred stock
Exchange Agreement.... -- -- (1,465) -- -- (1,465)
Warrant granted in
connection with Series
C preferred stock
Exchange Agreement.... -- -- 1,235 -- -- 1,235
Deemed contribution
from majority common
stockholder........... -- -- 157 -- -- 157
Exercise of stock
options for cash...... 175 -- 2 -- -- 2
Net loss............... -- -- -- -- (9,530) (9,530)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1998................... 1,868,087 1 243 -- (23,234) (22,990)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (864) -- -- (864)
Exercise of stock
options for cash...... 1,620 -- 8 -- -- 8
Reduction of redemption
and liquidation
value ................ -- -- 3,098 -- -- 3,098
Beneficial conversion
feature............... -- -- 2,624 -- -- 2,624
Issuance of common
stock in connection
with Acorn
acquisition........... 11,737 -- 100 -- -- 100
Cumulative dividends to
preferred
stockholders.......... -- -- (6,873) -- (4,488) (11,361)
Unearned compensation.. -- -- 1,664 (1,664) -- --
Amortization of
unearned
compensation.......... -- -- -- 398 -- 398
Net loss............... -- -- -- -- (13,010) (13,010)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1999................... 1,881,444 $ 1 $ -- $(1,266) $(40,732) $(41,997)
========= === ======= ======= ======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(11,895) $(9,530) $(13,010)
Adjustments to reconcile net loss to net cash
used in operating activities--
Depreciation and amortization.................. 2,941 3,755 3,533
Provision for bad debts........................ 88 323 269
Loss from Spider............................... -- -- 1,055
Amortization of discount....................... -- -- 20
Loss on disposal of equipment.................. -- 269 --
Stock compensation expense..................... -- -- 398
Changes in assets and liabilities--
Receivables.................................. (1,442) (3,191) 127
Prepaids and other assets.................... (144) (67) (954)
Accounts payable............................. 130 (246) 19
Accrued expenses............................. 865 (654) 2,160
Other........................................ (48) 299 (228)
-------- ------- --------
Net cash used in operating activities............ (9,505) (9,042) (6,611)
-------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (5,550) (1,195) (4,352)
Payments made on behalf of Spider................ -- -- (1,055)
Restricted cash.................................. (125) (10) (272)
Cash paid in purchase of Protocall, net of cash
acquired and refunded........................... (3,315) 37 101
Cash paid in purchase of Acorn, net of cash
acquired........................................ -- -- (637)
Cash advanced to Acorn prior to acquisition...... -- -- (450)
Related party loans.............................. -- -- (690)
Software development costs....................... -- -- (66)
-------- ------- --------
Net cash used in investing activities............ (8,990) (1,168) (7,421)
-------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock........... -- 2 8
Proceeds from issuance of preferred stock, net of
offering costs.................................. 22,839 11,837 14,485
Repurchase of Series A preferred stock........... (1,741) -- --
Net borrowings on revolving line of credit....... 100 (100) --
Borrowings....................................... -- -- 2,513
Repayment of borrowings.......................... (769) (12) (271)
Proceeds from related party borrowings........... 3,000 1,700 --
Repayment of related party borrowings............ (3,140) (1,700) --
Proceeds from contingent grant................... -- -- 400
Deferred offering costs.......................... -- -- (651)
-------- ------- --------
Net cash provided by financing activities........ 20,289 11,727 16,484
-------- ------- --------
Net increase in cash and cash equivalents........ 1,794 1,517 2,452
Cash and cash equivalents, beginning of year..... 441 2,235 3,752
-------- ------- --------
Cash and cash equivalents, end of year........... $ 2,235 $ 3,752 $ 6,204
======== ======= ========
Supplemental disclosures of cash flow
information:
Cash paid for interest........................... $ 29 $ 17 $ 125
======== ======= ========
Property and equipment acquired through
incurrence of capital lease obligations......... $ 32 $ -- $ --
======== ======= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(1) Organization and Nature of Business
Intek Information, Inc. ("Intek" or the "Company") is a provider of
Strategic Consulting, Technology Solutions, e-Operations and Customer Knowledge
services in connection with e-commerce and other direct-to-customer initiatives
of business enterprises. The Company operates communications centers in
California, Colorado and Kansas, with additional operations in Connecticut and
headquarters in Englewood, Colorado. Intek incorporated as a Colorado
corporation on March 6, 1996 and reincorporated as a Delaware corporation on
August 2, 1996.
In February 1997, Intek acquired, 100% of the common stock of Protocall
New Business Specialists, Inc. ("Protocall"). Protocall, a communications
center service operation, was located in Northern California. As a result of
the Protocall acquisition, the Company expanded its e-Operations, Technology
Solutions and Strategic Consulting services.
In March 1999, Intek formed a wholly-owned subsidiary, Spider
Technologies, Inc. ("Spider"). Spider was formed to pursue the development and
sales of a Web-based technology originally developed by Intek. Effective
October 1, 1999, Intek distributed all of the stock of Spider to its
stockholders.
In October 1999, Intek acquired 100% of the common stock of Acorn
Information Services, Inc. ("Acorn"). Acorn is a data analytics company based
in Connecticut. As a result of the acquisition of Acorn, the Company's services
expanded to include database marketing and analysis services.
Intek's business is subject to significant risks. Intek incurred net
losses of $36,244 for the period from inception (March 6, 1996) through
December 31, 1999, and projects that net losses will continue to be incurred
through 2000 or longer, while management pursues its plan to grow the business
and add clients and contracts with the goal of achieving profitability. Intek's
ability to achieve profitable operations is subject to significant risks and
uncertainties including, but not limited to, Intek's success in marketing its
services and managing its operations and competitive factors. Intek's plans
also include growth through acquisitions of complementary companies. There is
no guarantee that Intek will ever achieve profitable operations, that it will
be successful in identifying and consummating the acquisition of desirable
companies or that if acquired, Intek will successfully assimilate those
businesses into its operations. Intek's operations are also subject to various
forms of regulation.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Intek and
its subsidiaries, all of which are wholly-owned. All material intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported
F-7
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
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.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Intek considers all cash
and investments with an original maturity of 90 days or less to be cash
equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject Intek to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
accounts and notes receivable. Intek has no off-balance sheet concentrations of
credit risk. Intek maintains its cash balances in the form of bank demand
deposits and money market accounts with financial institutions that management
believes are creditworthy. Accounts receivable are typically unsecured and are
derived from transactions with and from customers located within the United
States. Intek performs ongoing credit evaluations of its customers and
maintains reserves for potential credit losses.
As discussed in Note 11, a significant portion of Intek's revenue is
derived from a limited number of customers. Additionally, those customers
account for a significant portion of billed and unbilled accounts receivable.
Intangible Assets
<TABLE>
<CAPTION>
December 31,
Estimated ---------------
Life 1998 1999
--------- ------- ------
<S> <C> <C> <C>
Customer relationships and intellectual property.... 3 years $ 3,000 $3,950
Goodwill............................................ 5 years 3,548 3,920
------- ------
6,548 7,870
Accumulated amortization............................ (3,234) (5,062)
------- ------
$ 3,314 $2,808
======= ======
</TABLE>
Amortization of goodwill and other intangibles was $1,509, $1,725 and
$1,828 for the years ended December 31, 1997, 1998 and 1999, respectively.
Property and Equipment
All additions, including betterments to existing facilities, are recorded
at cost. Maintenance and repairs are charged to expense as incurred. When
assets are retired or otherwise disposed of, the cost of the assets and the
related accumulated depreciation are removed from the accounts. Any gain or
loss is reflected in other income (expense) in the year of disposition.
Depreciation is computed on the straight-line method based on the
estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Computer equipment and software................................ 1.5--5 years
Furniture and fixtures......................................... 1.5--7 years
</TABLE>
Leasehold improvements are amortized over the shorter of their economic
life or the remaining term of the related lease.
F-8
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Deferred Rent
Intek recognizes rent expense ratably over the life of the lease
regardless of the timing or amount of periodic payments.
Reverse Stock Split
Effective January 14, 2000, Intek declared a 4 for 1 reverse stock split
on Intek's common stock. Common stock amounts and per share amounts have been
adjusted retroactively to give effect to the stock split. The conversion price
for the preferred stock has been adjusted to reflect the 4 for 1 reverse stock
split.
Stock-Based Compensation
The Company accounts for its stock-based employee compensation agreements
using the intrinsic value method under which no compensation is generally
recognized for equity instruments granted to employees with an exercise price
equal to or greater than the fair market value of the underlying stock. Equity
instruments granted to non-employees are recorded at fair value on the date
they become non-forfeitable.
Comprehensive Income
Comprehensive income includes all changes in equity (net assets) during a
period from non-owner sources. Since inception, comprehensive loss has been the
same as net loss.
Revenue Recognition
Intek's revenues are derived principally from contracts for direct-to-
customer services and technology design and implementation projects billed at
negotiated rates. Intek recognizes revenue as services are performed for its
clients based on contractual arrangements for hours incurred and transactions
processed. Unbilled accounts receivable represents revenues earned for services
rendered that are typically billed to the customer in the following month.
Intek periodically enters into fixed fee contracts for Strategic
Consulting services that are accounted for under the percentage of completion
method. At December 31, 1998 and 1999, no such contracts were in-progress.
Direct Cost of Services
Direct cost of services includes payroll and benefits of employees for
time incurred for providing services for customers, telephone costs and other
variable costs associated with generating revenue. All other fixed expenses
incurred, including rent expense for customer care centers, are included in
selling, general and administrative expense in the accompanying consolidated
statements of operations. Depreciation of
F-9
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
property and equipment used to provide services to customers and amortization
of goodwill and other intangibles are shown as a separate line item within the
accompanying consolidated statements of operations.
Advertising Cost
Intek expenses advertising costs as incurred. For the years ended December
31, 1997, 1998 and 1999, Intek had advertising expenses of $196, $132 and $456,
respectively.
Advances to Spider
The Company records a valuation allowance and a corresponding charge to
income against the net assets distributed to Spider and receivables from Spider
for shared costs because realization of the advances are principally dependent
on the operating results of Spider. The amount of the charge is equal to the
net loss incurred by Spider subsequent to the spin-off. The Company will
continue to recognize a valuation allowance until the advances are written down
to zero. Net advances to Spider were zero at December 31, 1999. It is
reasonably possible that additional losses related to Spider will be incurred
in an amount equal to shared support costs to be incurred on Spider's behalf.
Asset Impairment
Intek reviews its long-lived assets held and used in operations for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review
for recoverability, management estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, the asset is reduced to its
estimated fair value by recognizing an impairment loss.
Capitalized Software Costs
Software development costs for new software products are expensed as
incurred until technological feasibility is established. Software development
costs incurred subsequent to the establishment of technological feasibility and
prior to general release are capitalized. During 1999, Intek capitalized $66 of
software development costs. These costs will be amortized over a three-year
period. Amortization commences when the product is available for general
release to customers. Capitalized software costs are stated at the lower of
cost or net realizable value. There was no amortization expense incurred during
1999 as none of the products which had established technological feasibility
were available for general release to customers.
Income Taxes
The current provision for income taxes represents actual or estimated
amounts payable or refundable on tax returns filed or to be filed for each
year. Deferred tax assets and liabilities are recorded for the estimated future
tax effects of temporary differences between the tax basis of assets and
liabilities and amounts reported in the consolidated balance sheets. Deferred
tax assets are also recognized for net operating loss and tax credit
carryovers. The overall change in deferred tax assets and liabilities for the
period measures the deferred tax expense or benefit for the period. Effects of
changes in enacted tax laws on deferred tax assets and liabilities are
reflected as adjustments to tax expense in the period of enactment. The
measurement of deferred tax assets may be reduced by a valuation allowance
based on judgmental assessment of available evidence if deemed more likely than
not that some or all of the deferred tax assets will not be realized.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding for the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and
F-10
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
potential common shares outstanding during the period if the effect of the
potential common shares is dilutive. Intek has excluded the weighted average
effect (using the treasury stock method) of common stock issuable upon
conversion of all convertible preferred stock and stock options from the
computation of diluted earnings per share as the effect of all such securities
is anti-dilutive for all periods presented. The shares excluded are as follows:
<TABLE>
<CAPTION>
Convertible
Preferred Stock
Stock Options
----------- -------
<S> <C> <C>
December 31,
1996.................................................. 2,026,666 --
1997.................................................. 13,288,043 --
1998.................................................. 26,202,683 95,840
1999.................................................. 33,962,909 355,755
</TABLE>
Pro Forma Stockholders' Equity (Unaudited)
Effective upon the closing of Intek's planned initial public offering, the
outstanding shares of all Intek's preferred stock will automatically convert
into 10,893,621 shares of common stock as of December 31, 1999, including
1,333,433 shares for the preferred stock dividends accrued (Note 9). The
effects of these transactions have been reflected in unaudited pro forma
stockholders' equity on the balance sheet at December 31, 1999.
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share for the year ended December 31, 1999 is
computed using the weighted average number of common shares outstanding, and
the pro forma effects of the assumed conversion of all Intek's convertible
preferred stock, including preferred stock dividends accrued, into shares of
Intek's common stock as if such conversion occurred on January 1, 1999, or at
the date of original issuance or declaration if later. The resulting pro forma
adjustments include an increase in the weighted average shares used to compute
basic and diluted net loss per share of 8,495,133 shares for the year ended
December 31, 1999, and the elimination of all charges to adjust net loss to net
loss applicable to common stockholders. The pro forma effects of these
transactions are unaudited.
Segment Information
Intek operates in one business segment and does not internally report the
results of operations of the different services it provides to its customers.
Additionally, the different services provided are typically under one agreement
and are not differentiated to the client.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts and notes
receivable, accounts payable and accrued liabilities approximate fair value due
to the short-term nature of these assets and liabilities. The interest rates on
Intek's variable rate borrowings are adjusted regularly to reflect current
market rates. The majority of the Company's fixed rate borrowings have been
funded within the last fiscal quarter of 1999 or recorded at fair value in
connection with the acquistion of Acorn. Accordingly, the carrying amounts of
Intek's borrowings approximate fair value. Financial instruments also consist
of convertible preferred stock subject to mandatory redemptions, whose fair
value at December 31, 1998 and 1999 approximated their redemption and
liquidation value, except for the Series F preferred stock issued in 1999. The
fair value of the Series F preferred stock is approximately $22 million because
of its beneficial conversion feature.
F-11
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Intek is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Intek has not entered
into any derivative financial instruments or hedging activities. As a result,
management believes adoption of SFAS No. 133 will not have a material impact on
the financial statements.
In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bullentin ("SAB") No. 101, "Revenue Recognition."
SAB No. 101 provides guidance on the measurement and timing of revenue
recognition in financial statements of public companies. Changes in accounting
policies to apply the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change in the fiscal quarter ending March 31, 2000.
Mangagement has not yet determined the effect SAB No. 101 will have on its
accounting policies or the amount of the cumulative effect to be recorded from
adopting SAB No. 101, if any.
(3) Property and Equipment
Property and equipment consisted of the following at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Computer equipment and software........................... $ 3,463 $ 4,672
Furniture and fixtures.................................... 1,352 2,300
Leasehold improvements.................................... 506 1,230
Telephone equipment....................................... 3,016 5,003
------- -------
8,337 13,205
Less-accumulated depreciation............................. (3,285) (5,223)
------- -------
$ 5,052 $ 7,982
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999,
was $1,432, $2,030 and $1,705, respectively.
(4) Acquisitions
Protocall
On February 14, 1997, Intek purchased all of the common stock of Protocall
for 1,863,270 shares of Series B preferred stock valued at $3,244, cash of
$3,239 and acquisition costs of $180. The acquisition was accounted for under
the purchase method of accounting.
The purchase price was allocated to the acquired assets and liabilities as
follows:
<TABLE>
<S> <C>
Current assets...................................................... $1,684
Property and equipment.............................................. 1,604
Goodwill and other intangibles...................................... 6,623
------
Total assets........................................................ 9,911
Current liabilities assumed......................................... (3,248)
------
$6,663
======
</TABLE>
F-12
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Subsequent to closing, Intek received a total of $196 in cash and stock
held in escrow from the former Protocall stockholders as a purchase price
adjustment which has been recorded as a reduction to goodwill and other
intangibles in the accompanying consolidated balance sheets.
The following unaudited pro forma information details the estimated effect
of the Protocall acquisition assuming it had occurred on January 1, 1997:
<TABLE>
<CAPTION>
Intek
Year Ended 1997
December 31, 1997 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 9,546 $ 11,009
Net loss applicable to common stockholders... $(13,226) $(13,520)
Basic and diluted net loss per share......... $ (7.09) $ (7.24)
</TABLE>
The pro forma financial data presented above does not purport to represent
what Intek's results of operations would actually have been if the transaction
in fact had occurred on January 1, 1997, and is not necessarily representative
of Intek's results of operations for any future period.
Acorn
Effective October 1, 1999, Intek purchased all of the common stock of
Acorn. The purchase was accounted for under the purchase method of accounting.
The initial consideration consisted of cash of $550, $200 in short-term
payables, $100 from the issuance of 11,737 shares of Intek's common stock, and
acquisition costs of $100. The purchase agreement also includes a three-year
contingent earn-out of up to $1,900 in cash and up to 527,778 shares of Intek
common stock. The contingent earn-out will be recorded as additional purchase
price consideration (additional goodwill) when and if the annual goals are
achieved. The contingent earn-out is based on Acorn's annual targets of
earnings before interest, taxes, depreciation and amortization and will be
earned as follows:
<TABLE>
<CAPTION>
Contingent Earn-Out
--------------------
Cash Stock
--------- ----------
<S> <C> <C>
Year 1................................................. $ 600 250,000
Year 2................................................. 600 166,667
Year 3................................................. 700 111,111
--------- ----------
Total earn-out......................................... $ 1,900 527,778
========= ==========
</TABLE>
Additionally, Intek transferred 1,000,000 shares of Spider common stock to
the former Acorn stockholders. The former Acorn stockholders are entitled to
retain a proportionate number of Spider shares during year 1 of the earn-out
period. Intek will receive any forfeited Spider shares at the end of year 1 if
the earn-out provision is not fully met.
If Acorn achieves less than 100% but greater than 75% of its performance
targets, the above amounts will be adjusted for not achieving the estimated
targets. If Acorn achieves less than 75% of its performance targets for any
annual measurement period, then no earn-out payment will be made for that
period.
The purchase price allocation is subject to adjustment based upon the
final determination of the fair value of the assets acquired and liabilites
assumed. The contingent earn-out could result in additional goodwill and
because the stock based earn-out will be recorded based upon the fair value of
Intek's stock at the time of issuance, such additional goodwill could be
substantial. Goodwill will be amortized over five years. Any additional
goodwill recorded as a result of the earn-out will be amortized prospectively
over the remaining amortization period.
F-13
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
The initial purchase price of Acorn was allocated to the acquired assets
and liabilities as follows:
<TABLE>
<S> <C>
Cash................................................................. $ 13
Other assets......................................................... 687
Property and equipment............................................... 312
Goodwill and other intangibles....................................... 1,443
-----
Total assets....................................................... 2,455
Current liabilities.................................................. (429)
Amounts advanced by Intek to Acorn................................... (450)
Borrowings assumed................................................... (626)
-----
$ 950
=====
</TABLE>
The following unaudited pro forma information details the estimated
effect of the Acorn acquisition assuming it had occurred on January 1, 1998:
<TABLE>
<CAPTION>
Intek
Year Ended 1998
December 31, 1998 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 17,664 $ 20,476
Net loss applicable to common stockholders... $(11,464) $(11,636)
Basic and diluted net loss per share......... $ (6.14) $ (6.23)
<CAPTION>
Intek
Year Ended 1999
December 31, 1999 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 24,699 $ 26,707
Net loss applicable to common stockholders... $(25,235) $(26,222)
Basic and diluted net loss per share......... $ (13.50) $ (14.02)
</TABLE>
The pro forma financial data presented above does not purport to
represent what Intek's results of operations would actually have been if the
transaction in fact had occurred on January 1, 1998, and are not necessarily
representative of Intek's results of operations for any future period.
(5) Spider Spin-off
Effective October 1, 1999, Intek distributed 100% of the shares of Spider
to its stockholders on a pro-rata basis. In connection with the transaction,
Intek distributed $1 million in cash and technology that is currently under
development. Intek has the right to receive $1,450 in royalty payments plus
accrued interest at 8% over the next five years resulting from the spin-off.
The royalty payments are due by Spider regardless of its future operations.
Additionally, Intek has received a five-year warrant to purchase 1,000,000
shares of Spider's common stock at an exercise price of $0.013 per share.
Intek exercised this warrant during the fourth quarter of 1999 for $13 and the
shares were transferred to the former Acorn stockholders. As a condition of
the spin-off, Intek will be allowed to utilize the Spider technology for three
years without any fee or royalty due to Spider. Thereafter, Intek will pay for
the use of the technology at its most favored nations pricing if Intek chooses
to continue to utilize the Spider software. The realization of the advances to
Spider is principally dependent upon Spider's operating results and its
ability to raise additional capital subsequent to its spin-off. Intek will
continue to recognize Spider's net losses until all advances are reduced to
zero.
F-14
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
During 1999, a valuation allowance of $1,055 was recognized by a charge to
operations reducing the advances to zero. Intek has no funding commitments or
guarantees in favor of Spider beyond the recorded receivable; however, it is
reasonably possible that Intek will recognize additional losses on Spider for
future shared costs.
In connection with the spin-off of Spider, Intek has reduced the mandatory
redemption value of their preferred shares by $0.13 per share. The excess of
the carrying value of the preferred shares over the revised redemption value of
$3,098 has been credited to additional paid-in capital.
(6) Borrowings
Notes payable and capital lease obligations consisted of the following at
December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
---- -------
<S> <C> <C>
Equipment loan............................................... $ -- $ 2,297
Revolving credit facilities.................................. -- 225
Related party notes.......................................... -- 198
Contingent grant............................................. -- 400
Capital lease obligations.................................... 20 191
---- -------
Total notes payable and capital lease obligations............ 20 3,311
Less--Unamortized discount on contingent grant............... -- (75)
Less--Current portion........................................ (13) (1,514)
---- -------
$ 7 $ 1,722
==== =======
</TABLE>
Lines-of-Credit
In 1997, Intek had a line-of-credit facility with a bank that provided for
maximum borrowings of $100. The line-of-credit expired in 1998.
During 1999, Intek entered into a revolving credit facility agreement that
provides for maximum borrowings of $5,000 or 80% of eligible receivables, as
defined by the agreement ($3,079 at December 31, 1999). This facility matures
on May 31, 2001 and bears interest at prime plus 1.5% (10.0% at December 31,
1999). Principal and interest are payable monthly.
The borrowings under the line-of-credit are collateralized by receivables
and other assets of Intek. This facility requires Intek to maintain, among
other restrictions, a tangible net worth of $8,000 as defined in the agreement.
As of December 31, 1999, Acorn had an agreement with a bank for a $50
line-of-credit facility. At December 31, 1999, $50 was outstanding under this
line-of-credit. Interest accrues on outstanding borrowings at 12.5% per annum.
Interest is payable monthly and principal is payable upon demand.
As of December 31, 1999, Acorn had an agreement with a bank to provide a
$175 line of credit facility. At December 31, 1999, Acorn had outstanding
borrowings of $175 under this line. This obligation is collateralized by
certain assets of Acorn. Interest accrues at a per annum rate of 1% over the
bank's prime rate (9.5% at December 31, 1999). Principal and interest are
payable monthly.
Related Party Notes Payable
As of December 31, 1999, Acorn had notes totaling $198 to certain former
stockholders and officers of Acorn. The notes bear interest at a rate of 10%
per annum and are payable on demand.
F-15
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Equipment Facility
In September 1999, Intek entered into an equipment facility, which
provides for maximum borrowings of approximately $2,500 to allow for the
purchase of equipment to be used at Intek's communications center in Kansas.
This facility matures on March 5, 2002 and bears interest at 13.9%. Intek paid
$99 upon entering into the agreement as its first principal payment. During
1999, Intek borrowed $2,513 to purchase equipment. The borrowings under the
equipment facility are collateralized by the related equipment acquired.
Contingent Grant
In April of 1999, the Kansas Department of Commerce and Housing provided
Intek $400 as an incentive to open a communications center in Kansas. The grant
was received in the form of a non-interest-bearing note, which will be forgiven
over five years if certain prescribed employment and average salary levels are
maintained. Intek has discounted the note by $95 to reflect its effective
borrowing rate of 9.75%. The loan was used to purchase equipment to be used at
the Kansas location. As this loan is forgiven, Intek will adjust the basis of
the equipment purchased. If the levels of employment and average salaries
prescribed in the agreement are not maintained, the outstanding portion of the
loan, as defined in the agreement, plus penalties are due within thirty days.
The future minimum principal payments on long-term borrowings are as
follows:
<TABLE>
<CAPTION>
Capital
Equipment Lease Contingent
Loan Obligations Grant Other
--------- ----------- ---------- -----
<S> <C> <C> <C> <C>
Year ended December 31,
2000............................. $ 940 $109 $ 80 $423
2001............................. 1,068 84 80 --
2002............................. 289 7 80 --
2003............................. -- 3 80 --
2004............................. -- -- 80 --
------ ---- ---- ----
2,297 203 400 423
Less-payments representing inter-
est............................... -- (12) (75) --
------ ---- ---- ----
$2,297 $191 $325 $423
====== ==== ==== ====
</TABLE>
F-16
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
(7) Income Taxes
Components of the income tax provision applicable to federal and state
income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current benefit:
Federal........................................ $ -- $ -- $ --
State.......................................... -- -- --
------- ------- -------
Total........................................ -- -- --
------- ------- -------
Deferred benefit
Federal........................................ (3,728) (2,888) (1,778)
State.......................................... (601) (457) (455)
------- ------- -------
Total........................................ (4,329) (3,345) (2,233)
------- ------- -------
Total tax benefit............................ (4,329) (3,345) (2,233)
------- ------- -------
Valuation allowance.............................. 4,329 3,345 2,233
------- ------- -------
Net tax benefit.............................. $ -- $ -- $ --
======= ======= =======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory
tax rate (35%) to Intek's effective income tax rates are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected tax benefit........................... $(4,163) $(3,336) $(4,554)
State tax benefit.............................. (421) (320) (455)
Disallowance of meals and entertainment ex-
penses........................................ 30 10 23
Amortization of goodwill....................... 225 276 463
Taxable gain on Spider spin-off................ -- -- 1,710
Losses on Spider............................... -- -- 406
Other.......................................... -- 25 174
Change in valuation allowance.................. 4,329 3,345 2,233
------- ------- -------
Provision for income taxes..................... $ -- $ -- $ --
======= ======= =======
</TABLE>
At December 31, 1999, Intek had approximately $23,000 of net operating
loss carryforwards that begin to expire in 2012.
Intek recognized a taxable gain of $1,710 million upon its spin-off of
Spider. The amount of the gain was determined by an independent valuation of
Spider. It is reasonably possible that the amount of the gain could change in
the foreseeable future. Furthermore, the Tax Reform Act of 1986 contains
provisions that may limit the net operating loss carry forwards available for
use in any given year if certain events occur, including significant changes
in ownership interests.
F-17
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998 and
1999 were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Current deferred tax assets:
Bad debt allowance........................................ $ 156 $ 179
Vacation accrual.......................................... 53 103
Accrued bonus............................................. 79 308
Accrued severance and wages............................... 113 --
Customer deposits, deferred revenue and other............. 215 293
------- -------
616 883
------- -------
Non-current deferred tax assets:
Deferred rent............................................. 34 93
Net operating loss carryforward........................... 7,248 9,313
------- -------
7,282 9,406
------- -------
Total deferred tax assets................................. 7,898 10,289
------- -------
Non-current deferred tax liability:
Depreciation.............................................. (224) (431)
Acquired intangibles...................................... (412) (363)
------- -------
Total deferred tax liabilities............................ (636) (794)
------- -------
Net deferred tax asset.................................... 7,262 9,495
Valuation allowance....................................... (7,262) (9,495)
------- -------
$ -- $ --
======= =======
</TABLE>
Because Intek has incurred losses since its inception, management
determined a valuation allowance was necessary for the entire deferred tax
asset balance. It is reasonably possible that Intek's view of the realizability
of its deferred tax assets could change in the near future based upon the
successful execution of its business plan.
(8) Commitments and Contingencies
Leases
Intek leases office facilities and various equipment under operating
leases that expire through fiscal 2009. The total rental expense for office
facilities and equipment for the years ended December 31, 1997, 1998 and 1999
was $463, $888 and $1,294, respectively.
F-18
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Minimum future cash flow commitments under the above leases are as
follows:
<TABLE>
<S> <C>
Year ended December 31-
2000............................................................... $1,792
2001............................................................... 1,448
2002............................................................... 1,378
2003............................................................... 1,180
2004............................................................... 1,060
Thereafter........................................................... 2,640
------
$9,498
======
</TABLE>
Grant
Intek received a grant from the Kansas Department of Commerce and Housing
in connection with opening a communications center in Fort Scott, Kansas. The
grant was to reimburse Intek for certain costs incurred relating to the opening
of the customer care center, including training and project administration. The
grant is for up to $800, through November 2008. The grant requires Intek to
maintain certain minimum employment and average salary levels as prescribed in
the agreement. The reimbursements have been applied against the eligible costs
incurred in the accompanying statement of operations. Through December 31,
1999, Intek has earned $336 from this grant which has reduced selling, general
and administrative expense. At December 31, 1999, Intek recorded a receivable
for $185 for reimbursements of costs incurred.
Intek has also received a $400 contingent grant from the Kansas Department
of Commerce and Housing in the form of a non-interest bearing loan (Note 6).
Litigation
Intek is periodically involved in litigation arising in the ordinary
course of business. Management is of the opinion that the ultimate resolution
of any such matters will not have a material adverse effect on Intek's
financial position or results of operations.
(9) Convertible Preferred Stock Subject to Mandatory Redemption
In November 1999, Intek amended its Certificate of Incorporation to
increase the number of authorized shares of common and preferred stock to
170,000,000 and 79,000,000, respectively, and to accrue cumulative preferred
stock dividends of .145 preferred share for each share of the Series A, B, C
and D Stock and 0.1 preferred share for each share of the Series E Stock owned
on October 15, 1999. The declaration resulted in 4,676,464 shares (as converted
for Series A Stock) of preferred stock accrued on October 15, 1999. After
October 15, 1999, the cumulative dividend became 6% per annum on the stated
value of the Series A Stock and 8% per annum on the stated value of the Series
B, C, D, E and F Stock through July 31, 2001. This resulted in an additional
657,269 shares (as converted for Series A Stock) of preferred stock accrued
through December 31, 1999.
Preferred stock may be issued in series with such designations,
preferences, rights and limitations as the Board of Directors may deem
appropriate. The Series A, B, C, D, E and F Stock rank on a parity basis with
respect to dividends and rights upon liquidation. Each series of preferred
stock votes together with the common stock on all matters as if converted into
common shares. Other terms of each series of preferred stock, as amended on
November 19, 1999, are described below.
F-19
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Reverse Stock Split
Subsequent to year-end, Intek declared a 4 for 1 reverse stock split on
Intek's common stock. Common stock amounts and per share amounts have been
adjusted retroactively to give effect to the stock split. The conversion price
for the preferred stock has been adjusted to reflect the 4 to 1 reverse spilt
stock.
Conversion of Preferred Stock into Common Stock
Each share of Series A Stock is convertible at the option of the holders
into 50 shares of common stock. Accrued but unpaid dividends on the Series A
Stock may also be converted into common stock at the same effective conversion
ratio. All outstanding Series A Stock, including unpaid dividends,
automatically converts into common stock upon completion of an initial public
offering of common stock for aggregate proceeds of at least $20,000 and a per
share price of $4.44 (three times the conversion price per share).
Each share of Series B, C, D, E and F Stock is initially convertible at
the option of the holders into four shares of common stock (subject to
adjustment for certain events). The Series C, D, E and F conversion ratio and
the conversion ratio for certain Series B stockholders will be adjusted if
Intek issues or sells common stock or equivalents at a price less than their
stated conversion prices then in effect. Accrued but unpaid dividends on Series
B, C, D, E and F Stock may also be converted into common stock at the same
effective conversion ratio. All outstanding Series B, C, D, E and F Stock,
including unpaid dividends, automatically converts into common stock (4 for 1)
upon completion of an initial public offering of common stock for aggregate
proceeds of at least $25,000 and a per share price of at least $12.00, or, if
following any public offering, the aggregate market capitalization of shares
not held by officers, directors, employees and affiliates exceeds $25,000 and a
per share market price of at least $12.00 is maintained for 20 consecutive
trading days.
Mandatory Redemption and Accretion to Liquidation Values
The holders of at least two-thirds of each series of preferred stock,
voting as a separate series, may require Intek to redeem their shares at any
time on or after February 20, 2003, for the redemption values described in each
separate series. Offering costs for each series of preferred stock were
initially offset against the proceeds from each offering.
Periodic charges to net loss applicable to common stockholders are being
recognized to accrete the value of each series of preferred stock to its
liquidation and redemption value as of February 20, 2003.
F-20
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
A summary of Intek's mandatorily redeemable, convertible preferred stock
is presented in the table below:
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E
-------------- ------------------- ------------------ ----------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1996........... 20,000 $1,951 -- $ -- -- $ -- -- $ -- -- $ --
Repurchase of
Series A
preferred
stock.......... (5,000) (500) -- -- -- -- -- -- -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of $319.. -- -- 10,475,898 17,920 -- -- -- -- -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred
stock, as
consideration
for purchase of
Protocall...... -- -- 1,863,270 3,244 -- -- -- -- -- --
Issuance of
Series C
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,606......... -- -- -- -- 2,871,913 3,394 -- -- -- --
Accretion to
liquidation and
redemption
value.......... -- 12 -- 66 -- 12 -- -- -- --
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1997........... 15,000 1,463 12,339,168 21,230 2,871,913 3,406 -- -- -- --
Modification of
terms on the
existing Series
C preferred
stock in
connection with
the Exchange
Agreement...... -- -- -- -- (2,871,913) (3,535) -- -- -- --
Issuance of new
Series C
mandatorily
redeemable,
convertible
preferred stock
in Exchange
Agreement...... -- -- -- -- 6,371,913 5,000 -- -- -- --
Issuance of
Series D
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,423......... -- -- -- -- -- -- 8,841,911 10,602 -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- -- (21,539) (38) -- -- -- -- -- --
Deemed
contribution
from majority
common
stockholder.... -- -- -- -- -- (157) -- -- -- --
Accretion to
liquidation and
redemption
value.......... -- 9 -- 72 -- 140 -- 248 -- --
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1998........... 15,000 1,472 12,317,629 21,264 6,371,913 4,854 8,841,911 10,850 -- --
Issuance of
Series E
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $52... -- -- -- -- -- -- -- -- 2,510,683 3,990
Issuance of
Series F
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $603.. -- -- -- -- -- -- -- -- -- --
Reduction of
redemption and
liquidation
value -- (368) -- (1,472) -- (717) -- (253) -- (288)
Beneficial
conversion
feature -- -- -- -- -- -- -- -- -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- -- (11,488) (20) -- -- -- -- -- --
Accrued
dividends...... -- 1,018 -- 4,301 -- 2,227 -- 3,090 -- 633
Accretion to
liquidation and
redemption
value.......... -- 6 -- 53 -- 35 -- 279 -- 13
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1999........... 15,000 $2,128 12,306,141 $24,126 6,371,913 $6,399 8,841,911 $13,966 2,510,683 $4,348
====== ====== ========== ======= ========== ====== ========= ======= ========= ======
<CAPTION>
Series F
-----------------
Shares Amount
--------- -------
<S> <C> <C>
Balances,
December 31,
1996........... -- $ --
Repurchase of
Series A
preferred
stock.......... -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of $319.. -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred
stock, as
consideration
for purchase of
Protocall...... -- --
Issuance of
Series C
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,606......... -- --
Accretion to
liquidation and
redemption
value.......... -- --
--------- -------
Balances,
December 31,
1997........... -- --
Modification of
terms on the
existing Series
C preferred
stock in
connection with
the Exchange
Agreement...... -- --
Issuance of new
Series C
mandatorily
redeemable,
convertible
preferred stock
in Exchange
Agreement...... -- --
Issuance of
Series D
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,423......... -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- --
Deemed
contribution
from majority
common
stockholder.... -- --
Accretion to
liquidation and
redemption
value.......... -- --
--------- -------
Balances,
December 31,
1998........... -- --
Issuance of
Series E
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $52... -- --
Issuance of
Series F
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $603.. 5,210,093 10,495
Reduction of
redemption and
liquidation
value -- --
Beneficial
conversion
feature -- (2,624)
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- --
Accrued
dividends...... -- 92
Accretion to
liquidation and
redemption
value.......... -- 478
--------- -------
Balances,
December 31,
1999........... 5,210,093 $8,441
========= =======
</TABLE>
F-21
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Series A Stock
In August and November of 1996, Intek issued a total of 20,000 shares of
Series A Convertible Preferred Stock, $.001 par value, and received net
proceeds of $1,951.
The Series A Stock is entitled to a preference in liquidation. The
liquidation or redemption price is $74 per share plus the amount of any
cumulative unpaid dividends (as amended). Effective November 19, 1999, Intek
amended its Certificate of Incorporation to provide for cumulative stock
dividends equal to .145 shares for each share of Series A Stock outstanding on
October 15, 1999. Subsequent to October 15, 1999, the cumulative dividend rate
becomes 6% per annum on the stated value through July 31, 2001. The dividends
resulted in 2,390 shares (477,938 common stock equivalent shares) of preferred
stock accrued on December 31, 1999.
Series B Stock
During 1997, Intek issued 12,339,168 shares of Series B Convertible
Preferred Stock, $.001 par value. Series B Stock issued for cash between
February and August of 1997 (10,475,898 shares at $1.741 per share) provided
net proceeds to Intek of $17,920. The offering costs included 10,770 shares of
common stock issued as a consulting fee that was valued at $29. A portion of
those proceeds was used to repurchase and retire 5,000 shares of Series A Stock
for $1,741, which resulted in a loss to the common stockholders of $1,241. The
consideration for the February 1997 acquisition of Protocall described in Note
4 included 1,863,270 shares of Series B Stock. During 1998 and 1999, Intek
received 21,539 and 11,488 shares of Series B Stock from escrow, as adjustments
to the Protocall acquisition, respectively.
The Series B Stock has a stated value per share of $1.611 (as amended).
The Series B Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.611 for each share of
common stock into which the Series B Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series B Stock had been converted into common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Intek amended its Certificate of
Incorporation to provide for cumulative stock dividends equal to .145 shares
for each share of Series B Stock outstanding on October 15, 1999. Subsequent to
October 15, 1999, the cumulative dividend rate becomes 8% per annum on the
stated value through July 31, 2001. The dividends resulted in 2,019,233 shares
of preferred stock accrued on December 31, 1999.
Series C Stock and Exchange Agreement
In December 1997, Intek issued 2,871,913 shares of Series C Convertible
Preferred Stock, $.001 par value to The Beacon Group III--Focus Value Fund,
L.P. for net proceeds of $4,890, or $1.741 per share. Proceeds were used in
part to repay loans advanced to Intek by Beacon during November and December
1997 in the aggregate amount of $3,000, plus accrued interest of $16. At the
date of the Series C Stock closing, Beacon received a five-year warrant to
purchase up to 875,000 shares of common stock at $6.96 per share. This warrant
was not assigned any value as the exercise price of the warrant was
significantly higher than the fair market value of the common stock on the
grant date. The warrant was subsequently cancelled in connection with the
Exchange Agreement discussed below. Beacon also received a warrant which
adjusts its Series B conversion ratio if Intek issues or sells common stock or
equivalents at a price less than the Series B Stock conversion price
(initially, $1.741 per share). This warrant was valued at $1,496 and has been
included in the offering costs of the Series C Stock. Additional offering costs
of $110 in cash was incurred in connection with this offering.
An Exchange Agreement was executed on May 7, 1998, simultaneous with the
Series D Stock closing (see Series D Stock below). Beacon surrendered both
warrants obtained at the time of the Series C Stock
F-22
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
closing and was issued 3,500,000 shares of additional Series C Stock and a new
warrant. The Exchange Agreement was accounted for at estimated fair value and
resulted in a charge to the common stockholders of $1,465. The exchange lowered
Beacon's effective per share cost of its Series C Stock to $.7847 and reduced
the average cost to Beacon of all shares of Series B and Series C Stock held by
Beacon to $1.36 per share, the same per share price paid by Conning for the
Series D Stock. The new warrant adjusts Beacon's conversion ratio in the Series
B Stock if Intek issues or sells common stock or equivalents at a price less
than the Series D Stock conversion price (initially, $1.36 per share).
The Series C Stock has a stated value per share of $.6547 (as amended).
The Series C Stock is entitled to a preference in liquidation at a liquidation
or redemption price of the greater of (i) $.6547 for each share of common stock
into which the Series C Stock could be converted, plus all accrued and unpaid
dividends, or (ii) the per share amount the holders would have received if all
shares of Series C Stock had been converted into common stock immediately prior
to such liquidation or redemption, plus all accrued and unpaid dividends.
Effective November 19, 1999, Intek amended its Certificate of Incorporation to
provide for cumulative stock dividends equal to .145 shares for each share of
Series C Stock outstanding on October 15, 1999. Subsequent to October 15, 1999,
the cumulative dividend rate becomes 8% per annum on the stated value through
July 31, 2001. The dividends resulted in 1,045,525 shares of preferred stock
accrued on December 31, 1999.
In December 1997, in connection with the Series C Stock offering, Intek's
Chief Executive Officer agreed to place into escrow 50,000 shares of his Intek
common stock. The shares were contingently transferable to the holder of
Intek's Series A Stock as consideration for consenting to certain corporate
transactions related to the Series C Stock financing. The shares were to be
returned to the Chief Executive Officer if, prior to September 18, 1998, Intek
received at least $15,000 in net proceeds from issuance of its common stock or
equivalents at a price per share of at least $8.80. As this event did not
occur, the shares were transferred in September 1998 to the Series A Stock
holder, and Intek reflected the value of the escrowed shares as a contribution
to capital and a cost of the Series C Stock financing of $157.
Series D Stock
On May 7, 1998, Intek issued 8,823,529 shares of Series D Convertible
Preferred Stock to Conning Insurance Capital Limited Partnership for net
proceeds $11,812, or $1.36 per share. In connection therewith, Intek amended
and restated its Certificate of Incorporation and executed an Exchange
Agreement with Beacon. An additional 18,382 Series D shares were issued in
November 1998 for $25, resulting in total shares issued of 8,841,911. Proceeds
were used in part to repay loans advanced to Intek during April 1998 by Beacon
($1,400) and certain officers of Intek (in the aggregate, $300), plus accrued
interest. In addition, Conning and Beacon were each granted warrants to
purchase up to $3,000 of additional Series D Stock (in the aggregate, 4,411,764
shares) at $1.36 per share through April 1999. The value of these warrants at
the date of grant was $1,235 using the Black-Scholes pricing model, assuming
volatility of 65%, risk-free interest rate of 5.4%, no expected dividends and a
life of one year. The value of the warrants has been included in the offering
costs of the Series D Stock. None of the warrants were exercised in 1998 or
1999.
The Series D Stock has a stated value per share of $1.23 (as amended). The
Series D Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.23 for each share of
common stock into which the Series D Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series D Stock had been converted to common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Intek amended its Certificate of
Incorporation
F-23
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
to provide for cumulative stock dividends equal to .145 shares for each share
of Series D Stock outstanding on October 15, 1999. Subsequent to October 15,
1999, the cumulative dividend rate becomes 8% per annum on the stated value
through July 31, 2001. The dividend resulted in 1,450,810 shares of preferred
stock accrued on December 31, 1999.
Series E Stock
On April 16, 1999, Intek issued 2,484,472 shares of Series E Convertible
Preferred Stock, $.001 par value for net proceeds of $3,948, or $1.61 per
share. An additional 26,211 shares of Series E Stock were issued within 180
days of initial closing for $42, resulting in total shares issued of 2,510,683.
The Series E Stock has a stated value per share of $1.48 (as amended). The
Series E Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.48 for each share of
common stock into which the Series E Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series E Stock had been converted to common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Intek amended its Certificate of
Incorporation to provide for cumulative stock dividends equal to .1 share for
each share of Series E Stock outstanding on October 15, 1999. Subsequent to
October 15, 1999, the cumulative dividend rate becomes 8% per annum on the
stated value through July 31, 2001. The dividends resulted in 297,098 shares of
preferred stock accrued on December 31, 1999.
Series F Stock
In November and December of 1999, Intek issued 5,210,093 shares of Series
F Convertible Preferred Stock, $.001 par value for net proceeds of $10,495, or
$2.13 per share. The net proceeds are to be used for working capital purposes,
a related party loan and to fund acquisitions.
The Series F Stock has an initial stated value per share of $2.13.
Cumulative dividends will accrue at 8% of the stated value per annum. The
dividends resulted in 43,129 shares of preferred stock accrued on December 31,
1999. The Series F Stock is generally entitled to a preference in liquidation
at a liquidation or redemption price of the greater of (i) $2.13 for each share
of common stock into which the Series F Stock could be converted, plus all
accrued and unpaid dividends, or (ii) the per share amount the holders would
have received if all shares of Series F Stock had been converted to common
stock immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends.
The Series F conversion ratio will be adjusted if Intek issues or sells
common stock or equivalents at a price less than its stated conversion price
then in effect. If the public offering price of common stock issued in Intek's
initial public offering is less than two times the conversion price, the
conversion price is adjusted to 50% of the public offering price. Further, if
an initial public offering is not consummated before July 31, 2000, then the
Series F conversion ratio will be reduced to 75% of the otherwise applicable
conversion price. The minimum 25% beneficial conversion feature of $2,624 has
reduced the Series F preferred stock carrying value and will be accreted
through July 31, 2000. If an initial public offering were to occur prior to
July 31, 2000, an additional charge of approximately $14,000 would be
recognized by Intek. Accrued but unpaid dividends on Series F Stock may also be
converted into common stock at the same effective conversion ratio.
F-24
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
(10) Stock Option Plans
Intek's 1997 Stock Option Plan was approved by the stockholders on
February 3, 1997, as amended, to reserve 1,755,552 shares of common stock for
issuance upon exercise of options granted under this plan.
Intek also adopted the 1998 Stock Option Plan effective May 7, 1998 as
amended, to reserve 1,564,417 common shares for issuance upon exercise of
options granted under this plan.
Generally options have been granted at an exercise price deemed at least
equal to or greater than the fair market value of Intek's common stock at the
date of grant and vest over periods ranging from 36 to 48 months as determined
by the Board of Directors. Options generally have a term of ten years from date
of grant, except for incentive stock options granted to stockholders holding
10% or more of Intek's stock outstanding, in which case the term is five years.
Under the Stock Plans, the Board of Directors has the discretion to set the
exercise price and to accelerate the vesting periods of options.
During 1999, options for 811,000 shares of common stock were granted with
exercise prices below fair market value. Intek will recognize $1,664 as
compensation expense over the vesting period of the options, ranging from three
to four years from the grant date. In 1999, $398 of compensation was
recognized.
The following table summarizes the activity relating to options:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock Options:
Options outstanding, at
beginning of period... -- -- 1,312,394 $6.44 1,710,544 $6.07
Granted................ 1,321,887 $ 6.44 483,375 5.56 1,111,000 6.64
Exercised.............. -- -- (175) 8.00 (1,620) 5.05
Terminated............. (9,493) 7.04 (85,050) 9.20 (489,361) 6.44
--------- ------ --------- ----- --------- -----
Options outstanding, at
end of period......... 1,312,394 $ 6.44 1,710,544 $6.07 2,330,563 6.28
--------- ------ --------- ----- --------- -----
Options exercisable, at
end of period......... -- $ -- 670,883 $5.61 1,214,480 $5.96
========= ====== ========= ===== ========= =====
Weighted average fair
value of options
granted during the
period................ $ 0.96 $1.68 $2.72
====== ===== =====
</TABLE>
The total fair value of options granted was computed to be approximately
$1,283, $813 and $3,022 for the years ended December 31, 1997, 1998 and 1999,
respectively. For purposes of the fair value pro forma disclosures, these
amounts will be amortized ratably over the vesting period of the options.
Cumulative compensation cost recognized in pro forma net income or loss with
respect to options that are forfeited prior to vesting is adjusted as a
reduction of pro forma compensation expense in the period of forfeiture. Pro
forma stock-based compensation, net of the effect of forfeitures and tax, was
approximately $357, $503 and $1,156 for the years ended December 31, 1997, 1998
and 1999, respectively.
If the fair value method were used to account for employee stock option
grants, Intek's net loss applicable to common stockholders and loss per share
would have been increased to the following pro forma amounts:
F-25
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss applicable to common stockholders:
As reported............................... $(13,226) $(11,464) $(25,235)
======== ======== ========
Pro forma................................. $(13,583) $(11,967) $(26,391)
======== ======== ========
Net loss per share:
As reported............................... $ (7.09) $ (6.14) $ (13.50)
======== ======== ========
Pro forma................................. $ (7.28) $ (6.41) $ (14.11)
======== ======== ========
</TABLE>
The fair value of each option grant was determined using the minimum value
method, under which no volatility was assumed. The assumptions used to
determine the fair value of each option grant are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rates......................... 6.17% 5.52% 5.91%
Expected dividend yield rates.................... 0.00% 0.00% 0.00%
Expected lives................................... 4 years 4 years 4 years
Expected volatility.............................. 0.001% 0.001% 0.001%
</TABLE>
The following table summarizes information about the stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------- --------------------
Weighted
Average Weighted- Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.71 to $4.08...... 479,702 7.37 years $ 2.72 436,515 $ 2.72
$5.45 to $6.44...... 911,003 9.50 years $ 3.84 172,135 $ 6.25
$6.97 to $9.00...... 822,101 8.26 years $ 4.93 514,639 $ 7.02
$13.92 to $15.60.... 117,757 7.89 years $13.52 91,191 $15.14
</TABLE>
(11) Major Customers
A significant portion of Intek's revenue is derived from a limited number
of customers. To the extent that any significant customer uses less of Intek's
services or terminates its relationship with Intek, Intek's revenues could
decline substantially and seriously harm Intek's business and results of
operations. Additionally, certain of Intek's contracts with its customers,
including its largest customer, are on a month-to-month basis. Intek's sales to
customers in excess of 10% of revenues for the years ended December 31, 1997,
1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Customer A................................. -- -- $3,486 20% $6,788 27%
Customer B................................. $3,304 35% -- -- $2,930 12%
Customer C................................. -- -- $2,021 12% -- --
Customer D................................. -- -- $1,919 11% -- --
</TABLE>
F-26
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Intek's accounts receivable balances, billed and unbilled, from customers
in excess of 10% of the accounts receivable balance at December 31, 1997, 1998
and 1999, are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Customer A................................. $ 895 27% $1,253 19% $1,867 27%
Customer B................................. $1,409 43% -- -- $ 733 11%
Customer E................................. -- -- $ 653 10% -- --
</TABLE>
(12) Related Party Transactions
Lease
During 1997, Intek leased an aircraft from Mt. Evans Consulting, LLC, a
company owned by the Intek's Chief Executive Officer. Intek had no minimum
commitments under this lease. Rental payments were based on Intek's usage of
the aircraft. Amounts paid or accrued by Intek under this lease agreement
during the year ended December 31, 1997 were $165. During 1998, the lease was
terminated.
Employment Agreements
In conjunction with the purchase of Protocall, Intek entered into
employment agreements with several employees of Protocall. The agreements
provide that one year of salary be paid in the event of involuntary
termination. In December 1997, Intek elected to terminate certain employees
that were employed under the agreements. In accordance with the agreements,
Intek accrued approximately $407 at December 31, 1997 that was charged to
selling, general and administrative expense in the accompanying consolidated
statements of operations.
Related Party Loans
On November 23, 1999, in connection with the Series F Stock issuance,
Intek loaned its Chief Executive Officer $600. The note is full recourse to the
personal assets of the Chief Executive Officer, including his stock in Intek.
The note bears interest at prime plus 1.5% (10.0% at December 31, 1999) and
matures one year from issuance or earlier depending on the successful
registration of Intek's stock with the Securities and Exchange Commission.
In 1999, Intek executed a note with a key employee for $28 bearing
interest at 8% per year. The note is unsecured and matures in November 2003.
Intek has loaned certain key management a total of $62 in 1999 to allow
for a partial payment of taxes and to be used for various other purposes.
Principal and accrued interest are due in full on September 1, 2001. One half
of the loan can be forgiven each year if they are still employed at that time.
The loans bear interest at 7.75%.
Other Transactions
Intek maintains life insurance on the Chief Executive Officer. In the
event of the Chief Executive Officer's death, the first $10,000 of insurance
proceeds are to be applied to repurchase shares
F-27
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
from the Chief Executive Officer's estate with the remaining proceeds
benefiting his estate. In addition, Intek maintains a $2,000 life insurance
policy on the Chief Executive Officer in which his estate is the beneficiary.
In January 1998, Intek's Chief Executive Officer granted an option to a
key employee to purchase 62,500 shares of Intek common stock owned by the Chief
Executive Officer for $6.96 per share. The option has a stated life of ten
years and is fully exercisable. No compensation expense has been recognized for
this transaction as the exercise price was greater than the fair market value
on the date of grant.
(13) Subsequent Events
Employee Stock Purchase Plan
Intek has adopted the 2000 Employee Stock Purchase Plan on January 13
1999. The plan will be implemented in eight semiannual offerings of 250,000
shares of stock for an aggregate of 2,000,000 available shares to be sold under
the plan. Employees can withhold up to 10% of their base salary to be used to
purchase shares under the plan. Employees can purchase shares for the lesser of
85% of the closing price at the beginning or ending of the purchase period or a
price set by the Board of Directors if the stock is not publicly traded.
2000 Stock Incentive Plan
Intek has adopted the 2000 Stock Incentive Plan on January 13 1999 to
reserve 2,750,000 shares of common shares for issuance upon exercise of options
granted under this plan.
Warrant
In January 2000, Intek granted a warrant to a major customer to purchase
181,250 shares of common stock at an exercise price of $8.52 per share. The
value of the warrant at the date of grant was approximately $1.1 million. The
value was determined using the Black-Scholes pricing model, assuming volatility
of 65%, a risk free interest rate of 6.3%, no expected dividends and a
contractual life of three years. The warrant vested immediately upon issuance.
F-28
<PAGE>
INDEX TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Financial Information Basis of
Presentation............................................................. P-2
Pro Forma Condensed Balance Sheet Information (unaudited) at December 31,
1999..................................................................... P-3
Pro Forma Condensed Statement of Operations Information (unaudited) for
the year ended December 31, 1999......................................... P-4
Notes to Unaudited Pro Forma Condensed Financial Information.............. P-5
</TABLE>
P-1
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma condensed financial information gives
effect to (a) the spin-off by Intek of Spider, (b) the acquisition of all the
outstanding common stock of Acorn, and (c) the closing of Intek's initial
public offering. The acquisition of Acorn was accounted for using the purchase
method of accounting. The unaudited pro forma condensed financial information
is derived from the historical financial statements of Intek, Spider and Acorn.
The unaudited pro forma condensed balance sheet information reflects the
automatic conversion of all shares of our preferred stock into common stock
upon completion of this offering. The unaudited pro forma condensed balance
sheet information also reflects our receipt of the estimated net proceeds of
$ million from shares of common stock included in this offering at an
assumed initial public offering price of $ per share, after deducting
estimated underwriting discounts and expenses of $ million.
The unaudited pro forma condensed statement of operations information
gives effect to the Spider spin-off and the Acorn acquisition as if they had
occurred on January 1, 1999. The purchase accounting adjustments made in
connection with the development of the pro forma financial information are
preliminary and have been made solely for purposes of developing such pro forma
financial information and may not be representative of actual future results.
Because the acquisition of Acorn includes a contingent earn-out, future
adjustments to reflect the acquisition of Acorn may be material.
In connection with the spin-off of Spider, Intek has advanced $1 million
to Spider. The $1 million will be repaid in the form of an unconditional
royalty payment due from Spider to Intek. Further, Spider has agreed to share
certain selling, general and administrative costs with Intek. The ability of
Spider to repay the $1 million advance and the shared costs is principally
dependent upon Spider's future operations. Intek will therefore recognize a
valuation allowance against the amounts due from Spider in an amount equal to
Spider's net loss subsequent to the spin-off. As a result, the reductions in
Intek's selling, general and administrative costs reflected in the unaudited
pro forma condensed statement of operations may not materialize if Spider is
unable to fund its share of the costs.
The unaudited pro forma condensed financial information should be read in
conjunction with the separate historical financial statements of Intek and
Acorn included in this registration statement. You should not rely upon the
unaudited pro forma condensed financial information as an indication of the
results of future operations or financial position that would have been
achieved if the transactions described above had taken place on the dates
indicated.
P-2
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET INFORMATION
(UNAUDITED)
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
Intek (1) Adjustments Pro Forma
--------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets............................ $ 14,533 (6) $ $
Property and equipment, net............... 7,982 --
Goodwill and other intangibles, net....... 2,808 --
Other assets.............................. 1,055 (7)
-------- --- ---
Total assets.......................... $ 26,378 $ $
======== === ===
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities....................... $ 7,000 (7) $ $
Deferred rent............................. 245 --
Long-term borrowings...................... 1,722 --
-------- --- ---
Total liabilities..................... 8,967
-------- --- ---
Convertible preferred stock subject to
mandatory redemption..................... 59,408 (4) --
(5)
Stockholders' Equity (Deficit):
Common stock............................ 1 (5)
Additional paid-in capital.............. -- (6)
(4)
(5)
(7)
Unearned compensation................... (1,266) --
Retained earnings (deficit)............. (40,732) --
-------- --- ---
Total stockholders' equity (deficit).. (41,997)
-------- --- ---
Total liabilities and stockholders'
equity (deficit)..................... $ 26,378 $ $
======== === ===
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
P-3
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Offering Pro Forma
Intek(1) Acorn(2) Adjustments Combined Adjustments Adjusted
--------- -------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE................. $ 24,699 $2,008 $ -- $ 26,707 $ -- $
DIRECT COST OF
SERVICES............... (16,986) (978) -- (17,964) --
--------- ------ ------- --------- ------ -----
GROSS PROFIT............ 7,713 1,030 -- 8,743 --
--------- ------ ------- --------- ------ -----
OPERATING EXPENSES:
Selling, general and
administrative........ 15,020 1,313 (3) (1,204) 15,129 --
Depreciation and
amortization.......... 3,533 88 (2) 312 3,933 --
Research and
development........... 1,079 260 (3) (1,061) 278 --
--------- ------ ------- --------- ------ -----
Total operating
expenses.............. 19,632 1,661 (1,953) 19,340
--------- ------ ------- --------- ------ -----
LOSS FROM OPERATIONS.... (11,919) (631) 1,953 (10,597) --
LOSS FROM SPIDER........ (1,055) -- (3) (2,265) (3,320) --
OTHER (EXPENSES)
INCOME................. (36) (44) -- (80) --
--------- ------ ------- --------- ------ -----
NET LOSS................ (13,010) (675) (312) (13,997) --
Accretion of mandatorily
redeemable convertible
preferred stock........ (864) -- -- (864) (8) --
Cummulative dividends to
preferred
stockholders........... (11,361) -- -- (11,361) (8) --
Guaranteed return to
Series F stockholders.. -- -- -- -- (4) --
--------- ------ ------- --------- ------ -----
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS.... $ (25,235) $ (675) $ (312) $(26,222) $ $
========= ====== ======= ========= ====== =====
BASIC AND DILUTED:
Net loss per share..... $ (13.50) $ (13.95) $
========= ========= ====== =====
Weighted average
shares................ 1,869,803 10,257 1,880,060 (8)
========= ====== ========= ====== =====
</TABLE>
See accompanying notes to unaudited pro forma financial information.
P-4
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
(1) Historical Financial Statements
Amounts represent the historical consolidated balance sheet of Intek as
of December 31, 1999 and the historical statement of operations of Intek for
the year ended December 31, 1999.
(2) Acquisition of Acorn
Effective October 1, 1999, Intek purchased all of the common stock of
Acorn. The operations of Acorn have been included in Intek's historical
statement of operations from that date. The unaudited results of operations
for Acorn for the nine months ended September 30, 1999, have been included in
the Acorn column.
The purchase was accounted for under the purchase method of accounting
for initial consideration of cash of $550, $200 payable to the former Acorn
stockholders, $100 from the issuance of 11,737 shares of Intek's common stock,
and acquisition costs of $100. The purchase agreement also includes a three-
year contingent earn-out of up to $1,900 in cash and up to 527,778 shares of
Intek common stock. The contingent earn-out will be recorded as additional
purchase price consideration (additional goodwill) when and if the annual
goals are achieved. The contingent earn-out is based on Acorn's annual targets
of earnings before interest, taxes, depreciation and amortization and could be
earned as follows:
<TABLE>
<CAPTION>
Contingent Earn-
Out
----------------
Cash Stock
------- --------
<S> <C> <C>
Year 1..................................................... $ 600 250,000
Year 2..................................................... 600 166,667
Year 3..................................................... 700 111,111
------- --------
Total earn-out........................................... $ 1,900 527,778
======= ========
</TABLE>
If Acorn achieves less than 100% but greater than 75% of its performance
targets, the above amounts will be reduced for not achieving the estimated
targets. If Acorn achieves less than 75% of its performance targets for any
annual measurement period, then no earn-out payment will be made for that
period.
Additionally, Intek will transfer 1,000,000 shares of Spider to the
former Acorn stockholders if the earn-out conditions are met in Year One.
The initial purchase price of Acorn was allocated to the acquired assets
and liabilities as follows:
<TABLE>
<S> <C>
Initial consideration:
Cash.............................................................. $ 550
Stock............................................................. 100
Advances to Acorn prior to acquisition.............................. 450
Transaction costs................................................... 100
Due to Acorn stockholders........................................... 200
------
Total initial consideration..................................... 1,400
Allocated to:
Property and equipment............................................ (312)
Identifiable intangibles.......................................... (950)
Current working capital deficit................................... 355
------
Goodwill............................................................ $ 493
======
</TABLE>
P-5
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS--
(Continued)
Goodwill will be amortized on a straight-line basis over five years. The
customer list and intellectual property acquired, will be amortized on a
straight-line basis over three years. Annual amortization included in the
unaudited pro forma statement of operations information is $415; an increase of
$312 over the amounts included in the historical financial information.
The contingent earn-out will be recorded using the fair value of Intek's
stock when payment becomes probable. Assuming the estimated initial offering
price of $ per share, the additional goodwill from Acorn could approximate
$ million. This would result in an additional $ million in annual
amortization. This amount is presented to illustrate the significance of the
future adjustments to Acorn's purchase price on Intek's earnings. This should
not be viewed as a projection of the earn-out expected to be paid to the former
Acorn shareholders. The ultimate amount of the Acorn earn-out (if any) will
depend upon Acorn's actual future performance and Intek's stock price at the
time the additional shares are distributed to the former Acorn's shareholders.
(3) Spin-off of Spider
Effective October 1, 1999, Intek distributed 100% of the shares of Spider
to its stockholders on a pro rata basis. In connection with the transaction,
Intek agreed to distribute $1,000 in cash and research and development relating
to the technology that is currently under development to Spider. Intek has the
right to receive an unconditional royalty of $1,450 from Spider plus accrued
interest at 8% over the next five years resulting from the spin-off. The
royalty payments are due by Spider regardless of its future operations.
The costs directly attributable to the operations of Spider prior to the
spin-off, including payroll and payroll benefits for employees that became
Spider employees as a result of the spin-off, are shown as a reduction of
Intek's historical research and development costs. These costs were $1,061 for
the nine-month period ended September 30, 1999. Spider is also charged for
certain shared support services for payroll, financial reporting, accounting
and tax, human resources, treasury and insurance and risk management services
under a transition support agreement. These costs would have been $1,204 for
the nine-month period ended September 30, 1999, and are shown as a reduction of
Intek's historical selling, general and administrative costs.
The repayment of the unconditional royalty obligation and Spider's ability
to fund its shared support costs are principally dependent upon the future
success of Spider's operations or its ability to raise capital. Intek will
provide a valuation allowance against any amounts due from Spider because of
this uncertainty. The amount of the valuation allowance to be charged against
income in any period will be equal to the lesser of (1) Spider's loss for the
period or (2) the amount due from Spider. As a result, the reduction in
research and development costs and the shared support costs discussed above
have been shown as a loss of $2,265 from Spider in the unaudited pro forma
statement of operations information.
As a condition of the spin-off, Intek will be allowed to utilize the
Spider technology for three years without any fee or royalty due to Spider.
Thereafter, Intek will pay for the use of the technology at its most favored
nations pricing if Intek chooses to continue to utilize the Spider software. No
amount has been reflected in the unaudited pro forma statement of operations
information for this future royalty because the amount is not reasonably
determinable at this time and it is uncertain whether Intek will continue to
use the Spider technology beyond the three year period.
P-6
<PAGE>
INTEK INFORMATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS--
(Continued)
(4) Guaranteed Return to Series F Stockholders
The holders of the Series F stock have been guaranteed a minimum return
of 100%, upon successful completion of the offering. This guaranteed return
has been reflected as a $ charge to net income available to common
stockholders and an increase in the Series F preferred stock. Based upon the
assumed initial offering price of $ per share, approximately additional
shares of common stock will need to be issued to the Series F preferred
stockholders to achieve this return.
(5) Conversion of Preferred Stock to Common upon the Completion of the
Offering
Intek's preferred stock will automatically convert to common stock upon
the successful completion of the offering.
(6) Initial Public Offering
Intek plans to issue a minimum of common shares in its initial public
offering. The estimated offering price is $ per share. This will result in
proceeds of $ , net of the 7% underwriters discount.
(7) Offering Costs
Total offering costs, other than the underwriters discount, have been
estimated at $ . Intek has $651 in deferred offering costs included in its
December 31, 1999, historical balance sheet. The remaining $ has been
reflected as a current liability in the accompanying unaudited pro forma
condensed balance sheet information.
(8) Net Loss Per Share
Pro forma net loss per share for the year ended December 31, 1999 assumes
the offering occured on January 1, 1999. Pro forma net loss per share is
computed using the pro forma net loss divided by the weighted average number
of common shares outstanding, including the pro forma effects of the
following:
<TABLE>
<S> <C>
.Shares issued in the initial public offering............. shares
.Conversion of all Intek's convertible preferred stock.... 8,207,418 shares
.Dividends paid in kind on preferred stock................ 287,715 shares
.Additional shares issued to Series F stockholders........ shares
----------------
Total additional shares.................................
================
</TABLE>
The charges to adjust net loss to net loss applicable to common
stockholders have been eliminated.
P-7
<PAGE>
ACORN INFORMATION SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................... A-2
Financial Statements:
Balance Sheet as of December 31, 1998.............................. A-3
Statement of Income for the Year Ended December 31, 1998........... A-4
Statement of Changes in Stockholders' Equity for the Year Ended
December 31, 1998................................................. A-5
Statement of Cash Flows for the Year Ended December 31, 1998....... A-6
Notes to Financial Statements........................................ A-7--A-11
</TABLE>
A-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Acorn Information Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Acorn Information Services,
Inc. at December 31, 1998, and the results of its operations and its cash flows
for the year, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's working capital deficiency and limited
availability to capital financing raises substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
Stamford, Connecticut
June 28, 1999, except for
the second and third paragraphs
of Note 10 referencing the
proposed acquisition by
Intek Information, Inc.,
which is as of July 16, 1999
A-2
<PAGE>
ACORN INFORMATION SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................... $ 10,111
Accounts receivable................................................ 681,175
Loan receivable from employees .................................... 5,820
Other assets....................................................... 6,556
----------
Total current assets............................................. 703,662
Capitalized software................................................. 172,000
Fixed assets, net (Note 4)........................................... 244,533
Other assets......................................................... 17,877
----------
$1,138,072
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 107,519
Accrued sales tax.................................................. 43,969
Other accrued expenses............................................. 51,497
Deferred revenue................................................... 150,000
Current portion of capital lease obligations....................... 54,883
Line of credit facility............................................ 119,065
Deferred tax liability............................................. 100,677
Notes payable--related party (Notes 5 & 6)......................... 197,800
----------
Total current liabilities........................................ 825,410
Capital lease obligations.......................................... 59,648
----------
Total liabilities................................................ 885,058
----------
Commitments (Note 9)
Stockholders' equity:
Class A common stock, no par value, 10,000 shares authorized;
1,800 shares issued and outstanding............................... 151,000
Class B common stock, no par value, 10,000 shares authorized;
no shares issued and outstanding.................................. --
Retained earnings.................................................. 102,014
----------
Total stockholders' equity....................................... 253,014
----------
Total liabilities and stockholders' equity......................... $1,138,072
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Revenues:
Consulting........................................................ $2,812,226
----------
Costs and expenses:
Cost of revenues.................................................. 876,082
Sales and marketing............................................... 348,765
General and administrative........................................ 955,482
Research and development.......................................... 242,707
----------
2,423,036
----------
Income from operations........................................... 389,190
Interest expense.................................................... 53,051
----------
Income before income taxes....................................... 336,139
Provision for income taxes (Note 8)................................. 91,871
----------
Net income....................................................... $ 244,268
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common stock Treasury stock Retained Total
----------------- ---------------- earnings stockholders'
Shares Amount Shares Amount (deficit) equity (deficit)
------ --------- ------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1998................... 1,800 $ 51,000 -- $ -- $(142,254) $(91,254)
Transfer of stock....... (45) -- 45 -- -- --
Issuance of stock....... 45 100,000 (45) -- -- 100,000
Repurchase of stock..... (45) (100,000) 45 100,000 -- --
Issuance of stock....... 45 100,000 (45) (100,000) -- --
Net income.............. -- -- -- -- 244,268 244,268
----- --------- --- --------- --------- --------
Balance at December 31,
1998................... 1,800 $ 151,000 -- -- $ 102,014 $253,014
===== ========= === ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-5
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN CASH
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income........................................................ $ 244,268
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation.................................................... 89,218
Changes in operating assets and liabilities:
Accounts receivable............................................. (489,659)
Loan receivable from employees.................................. (3,575)
Other assets.................................................... (4,579)
Accounts payable................................................ 18,100
Accrued sales tax............................................... 36,556
Other accrued expenses.......................................... 36,358
Deferred revenue................................................ 150,000
Deferred tax liability.......................................... 91,871
---------
Net cash provided by operating activities........................... 168,558
---------
Cash flows from investing activities:
Purchase of property and equipment................................ (87,719)
Capitalized software.............................................. (172,000)
---------
Net cash used in investing activities............................... (259,719)
---------
Cash flows from financing activities:
Principal payments on capital lease obligations................... (48,145)
Proceeds from line of credit...................................... 320,000
Principal payments on line of credit.............................. (271,435)
Proceeds from notes payable....................................... 276,634
Principal payments of notes payable............................... (276,634)
Issuance of common stock.......................................... 200,000
Repurchase of common stock........................................ (100,000)
---------
Net cash provided by financing activities........................... 100,420
---------
Net increase in cash................................................ 9,259
Cash--beginning of year............................................. 852
---------
Cash--end of year................................................... $ 10,111
=========
Supplemental disclosure of cash flow information:
Income taxes paid................................................. $ 5,720
=========
Interest paid..................................................... $ 31,438
=========
Supplemental disclosure of noncash financing activity:
During 1998, the Company entered into capital lease obligations to
purchase $106,675 of furniture and fixtures and computer
equipment.
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-6
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Business
Acorn Information Services, Inc. (formerly Acorn Information Systems,
Inc.) ("Acorn" or the "Company") was incorporated in Conneticut in 1994. Acorn
develops and manages database marketing programs and interactive marketing
solutions for Fortune 1000 companies throughout the United States. Acorn has
developed expertise in the following areas: program management; marketing
database design; database operations; and analytical services.
2. Basis of Preparation
For the year ended 1998, the Company had a working capital deficiency and
had net cash outflows for operating and investing activites. The Company has
limited availability to capital financing. The Company has funded its
operations through shareholder loans and available lines of credit. It is
management's intention to continue to fund the Company's operating loss through
additional shareholder loans in order to meet its strategic objectives. The
Company believes that sufficient funding will be available to meet its planned
business objectives, including anticipated cash needs for working capital for a
reasonable period of time. However, there can be no assurance the Company will
be able to obtain sufficient funds to continue operations. As a result of the
foregoing, there exists substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability of carrying amount of recorded
assets or the amounts of liabilities that might result from the outcome of this
uncertainty.
3. Summary of Significant Accounting Policies
Revenue Recognition and Deferred Revenue
Revenue is derived from consulting services performed relating to software
development and consulting for customers. Revenue from consulting services is
recognized when the services are provided. Revenue generated from fixed fee
custom development contracts is primarily recognized using the percentage of
completion method. Due to the inherent uncertainties in the estimation process,
it is at least reasonably possible that estimates for cost to complete projects
in progress may be revised. Such revisions are recognized in the period in
which the revisions are determined. Revenue is deferred to the extent that cash
is received or fees are billed prior to satisfying obligations to customers.
Losses on contracts are recognized when determinable.
Fixed Assets
Fixed assets are stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets. Assets held under capital
leases are amortized over the shorter of the lease life or the estimated useful
life of the assets. Maintenance and repair costs are expensed as incurred.
Capitalized Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," software development costs for new software products are expensed as
incurred until technological feasibility is established. Software development
costs incurred subsequent to the establishment of technological feasibility and
prior to general release are capitalized. During 1998, the Company capitalized
$172,000 of software development costs. These costs will be amortized over a
three-year period. Amortization commences when the product is available for
general release to customers. Capitalized software costs are stated at the
lower of cost or net realizable value. There was no amortization expense
incurred during 1998 as none of the products which had established
technological feasibility were available for general release to customers.
A-7
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk and Significant Customers
Financial instruments which potentially expose the Company to
concentration of credit risk consist primarily of trade accounts receivable.
The Company sells its services to various companies in the United States across
several industries. The Company performs ongoing credit evaluations of its
customers to ensure reserves for potential credit losses are not warranted.
At December 31, 1998, two of the Company's customers accounted for
approximately 45% and 32% of the Company's accounts receivable and two
customers accounted for approximately 37% and 25% of the Company's revenues for
the year then ended, respectively. No other customer exceeded 10% of revenues.
Financial Instruments
The carrying amounts of the Company's financial instruments, which include
cash, accounts receivable, accounts payable and accrued expenses, capital lease
obligations and line of credit, approximate their fair market values at
December 31, 1998.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at and during the reporting periods of the
financial statements. Actual results could differ from these estimates.l
4. Fixed Assets
Fixed assets consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
Estimated
useful
life
(years)
----------
<S> <C> <C>
Furniture and fixtures................................. $ 45,882 5
Computer equipment..................................... 263,763 3
Leasehold improvements................................. 79,537 Lease life
---------
389,182
Accumulated depreciation............................... (144,649)
---------
$ 244,533
=========
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $89,218.
The balances presented above for furniture and fixtures, computer
equipment and leasehold improvements include assets acquired under capital
leases of $30,206, $138,204 and $35,940, respectively. Accumulated amortization
on assets under capital leases totaled $56,481 as of December 31, 1998.
5. Related Party Transactions
During 1996, the Company issued promissory notes to certain officers and
shareholders of the Company totaling $113,800 (Note 6).
During 1997, the Company issued $84,000 of notes to certain officers and
shareholders of the Company for services rendered.
During 1998, the Company was advanced $276,634 by officers and
shareholders of the Company. Such advances were repaid by the Company during
1998. Interest expense related to these advances totaled $3,375 during 1998.
A-8
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. Debt
Line of Credit Facilities
On March 26, 1996, the Company entered into an agreement with a bank for a
$50,000 line of credit facility (the "Agreement"). At December 31, 1998, the
Company had no outstanding borrowings under the Agreement. This obligation was
guaranteed by certain shareholders of the Company. Under the terms of the
agreements, interest accrues on outstanding borrowings at 12.5% per annum,
interest is payable monthly and principal is payable upon demand. Interest
expense under this credit note totaled $5,174 during 1998.
On November 8, 1997, the Company entered into an agreement with a bank to
provide a $175,000 line of credit facility (the "Agreement"). At December 31,
1998, the Company had outstanding borrowings of $119,065 under the Agreement.
This obligation is guaranteed by certain shareholders of the Company and is
collateralized by all assets of the Company and expires in November 1999.
Interest accrues at a per annum rate of 1% over the bank's prime rate.
Principal and interest are payable monthly. Interest expense under this credit
note totaled $10,579 during 1998.
Notes Payable
During 1997, the Company issued notes totaling $84,000 to certain
shareholders of the Company for services rendered by the shareholders. The
notes bear interest at a rate of 10% per annum and is payable on demand.
Interest expense relating to these notes totaled $8,400 during 1998.
On December 31, 1996, the Company issued $113,800 of promissory notes to
certain officers and shareholders of the Company. The notes are payable on
demand and bear interest at 10% per annum. Interest expense relating to the
notes totaled $11,380 during 1998.
7. Common Stock
Each share of Class A common stock entitles the holder to one vote on all
matters submitted to a vote of the Company's stockholders. The Class B common
stock is non-voting, except as otherwise provided for in the Company's articles
of incorporation. Common stockholders are entitled to receive dividends, if
any, as may be declared by the board of directors on a share-for-share basis,
regardless of the class of common stock held.
During 1998, certain shareholders of the Company entered into treasury
stock sales and repurchase transactions. These transactions were recorded as
treasury stock and were accounted for under the cost method. There were no
outstanding treasury shares at December 31, 1998.
8. Income Taxes
The provision for income taxes for the year ended December 31, 1998 is as
follows:
<TABLE>
<S> <C>
Current tax expense:
U.S. federal....................................................... $ --
State and local.................................................... 816
-------
Total current........................................................ 816
-------
Deferred tax expense:
U.S. federal....................................................... 74,385
State and local.................................................... 16,670
-------
Total deferred....................................................... 91,055
-------
Total provision...................................................... $91,871
=======
</TABLE>
A-9
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company's net deferred tax assets (liabilities) are comprised of the
following at December 31, 1998:
<TABLE>
<S> <C>
Deferred tax assets:
Accounts payable............................................... $ 61,769
Net operating loss............................................. 45,441
Deferred revenue............................................... 43,492
Research and development credits............................... 16,831
Fixed assets................................................... 6,099
---------
173,632
Deferred tax liability:
Accounts receivables........................................... (274,309)
---------
Net deferred tax liability....................................... $(100,677)
=========
</TABLE>
At December 31, 1998, the Company has federal net operating loss
carryforwards of $112,724 and state net operating loss carryforwards of
$113,474. The federal losses will expire in 2012 through 2018 and the state
losses will expire in 2002 and 2003. Additionally, at December 31, 1998, the
Company has federal research and development credits of $16,831 available to
offset future tax liability. These credits will expire in 2018. If certain
substantial changes in the Company's ownership should occur, there would be an
annual limitation on the amount of the net operating loss and research and
development credit carryforwards which can be utilized.
9. Commitments
The Company has entered into noncancelable operating leases for office
space, automobiles and computer equipment and capital leases for furniture and
fixtures, computer equipment and leasehold improvements. The Company's future
minimum lease commitments under these leases are as follows:
<TABLE>
<CAPTION>
Operating Capital
leases leases
--------- --------
<S> <C> <C>
1999..................................................... $182,948 $ 64,457
2000..................................................... 155,457 35,567
2001..................................................... 140,241 18,670
2002..................................................... 134,506 6,598
2003..................................................... 11,209 2,647
-------- --------
Total.................................................... $624,361 127,939
========
Less--Amount representing interest....................... 13,408
--------
Present value of future minimum lease payments........... $114,531
========
</TABLE>
Rent expense under the noncancelable operating leases was approximately
$135,430 for the year ended December 31, 1998.
10. Subsequent Event
During the first quarter of 1999, the Company created a newly formed
Delaware corporation (Acorn Information Services, Inc.) which merged with the
existing Connecticut corporation (Acorn Information Systems, Inc.). In
connection with the merger, the number of authorized shares was reduced from
20,000 (10,000 Class A and 10,000 Class B) to 10,000 (5,000 Class A and 5,000
Class B) and the per share par value was increased from none to $0.01. All
outstanding shares of Acorn Information Systems, Inc. were converted into Acorn
Information Services, Inc. shares at a ratio of one-to-one.
A-10
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In July 1999, the Company signed a letter of intent to enter into a
proposed acquisition by Intek Information, Inc. ("Intek"). In connection with
the proposed acquisition, the Company received a bridge loan in the amount of
$200,000 from Intek. The bridge loan bears interest at a rate of 12% per annum
and will be payable on demand if the acquisition is not successfully completed
or on December 4, 1999. If the acquisition is successfully completed, the
proceeds received by the Company will be reduced by the amount of the bridge
loan.
Also in connection with the proposed acquisition, the Company received
$225,000 from Intek for working capital purposes. If the proposed acquisition
is successfully completed the amount will be forgiven. If the proposed
acquisition is not consummated, the amount will be payable on October 3, 1999.
The loan bears no interest.
A-11
<PAGE>
ACORN INFORMATION SYSTEMS, INC.
BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
-------------
1998 1999
-------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 126 $ 13
Trade receivables, net......................................... 287 658
Prepaid expenses and other..................................... 9 8
----- -------
Total current assets........................................... 422 679
----- -------
PROPERTY AND EQUIPMENT, net..................................... 212 312
OTHER ASSETS.................................................... 18 21
----- -------
Total assets................................................... $ 652 $ 1,012
===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses.......................... $ 174 $ 351
Deferred revenue............................................... -- 55
Current borrowings............................................. 87 759
----- -------
Total current liabilities...................................... 261 1,165
LONG-TERM BORROWINGS, net of current portion.................... -- 340
----- -------
Total liabilities.............................................. 261 1,505
----- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock, no par value, 10,000 shares authorized,
1,800 shares issued and outstanding............................ 51 151
Class B common stock, no par value, 10,000 shares authorized, no
shares issued and outstanding.................................. -- --
Retained earnings (deficit)..................................... 340 (644)
----- -------
Total stockholders' equity (deficit)........................... 391 (493)
----- -------
Total liabilities and stockholders' equity (deficit)........... $ 652 $ 1,012
===== =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these unaudited balance sheets.
A-12
<PAGE>
ACORN INFORMATION SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month
Period Ended
September 30,
--------------
1998 1999
------ ------
<S> <C> <C>
REVENUE........................................................ $2,144 $2,008
DIRECT COST OF SERVICES........................................ (606) (978)
------ ------
GROSS PROFIT................................................... 1,538 1,030
------ ------
OPERATING EXPENSES:
Selling, general and administrative.......................... 889 1,313
Depreciation and amortization................................ 115 88
Research and development..................................... 243 260
------ ------
Total operating expenses................................... 1,247 1,661
------ ------
INCOME (LOSS) FROM OPERATIONS.................................. 291 (631)
OTHER EXPENSES................................................. (29) (44)
------ ------
262 (675)
PROVISION FOR TAXES............................................ 92 --
------ ------
NET INCOME (LOSS).............................................. $ 170 $ (675)
====== ======
</TABLE>
The accompanying notes to financial
statements are an integral part of these unaudited statements.
A-13
<PAGE>
ACORN INFORMATIONSYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month
Period Ended
September 30,
--------------
1998 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operating activities............. 253 (164)
------ ------
Cash flows from investing activities:
Purchase of property and equipment.............................. (202) (50)
------ ------
Net cash used in investing activities........................... (202) (50)
------ ------
Cash flows from financing activities:
Proceeds from debt.............................................. 90 284
Repayments of debt and capital leases........................... (16) (67)
------ ------
Net cash provided by financing activities....................... 74 217
------ ------
Net increase in cash and cash equivalents....................... 125 3
Cash and cash equivalents, beginning of period.................. 1 10
------ ------
Cash and cash equivalents, end of period........................ $ 126 $ 13
====== ======
</TABLE>
The accompanying notes to financial statements
are an integral part of these unaudited statements.
A-14
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(1) Organization and Nature of Business
Acorn Information Services, Inc. was incorporated in Connecticut in 1994.
Acorn develops and manages database marketing programs and interactive
marketing solutions for Fortune 1000 companies throughout the United States.
Acorn has developed expertise in the following areas: program management,
marketing database design, database operations and analytical services.
(2) Unaudited Interim Financial Statements
The interim financial statements have been prepared by Acorn pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures relating to the interim periods normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying unaudited condensed
financial statements of the interim periods contain all adjustments necessary
to present fairly the financial position of Acorn as of September 30, 1999 and
1998 and the results of operations and cash flows for the periods presented.
All such adjustments are of a normal recurring nature. The results of
operations for the nine-month period ended September 30, 1999 and 1998 are not
necessarily indicative of the results that may be achieved for a full fiscal
year and cannot be used to indicate financial performance for the entire year.
(3) Summary of Significant Accounting Policies
Revenue Recognition
Revenue is derived from consulting services performed relating to software
development and consulting for customers. Revenue from consulting services is
recognized when the services are provided. Revenue generated from fixed fee
custom development contracts is primarily recognized using the percentage of
completion method. Due to the inherent uncertainties in the estimation process,
it is at least reasonably possible that estimates for cost to complete projects
in progress may be revised. Such revisions are recognized in the period in
which the revisions are determined. Revenue is deferred to the extent that cash
is received or fees are billed prior to satisfying obligations to customers.
Losses on contracts are recognized when determinable.
Fixed Assets
Fixed assets are stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets. Assets held under capital
lease are amortized over the shorter of the lease life or the estimated useful
life of the assets. Maintenance and repair costs are expensed as incurred.
Use of Estimates
The preparation of Acorn's financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at and during the reporting periods of the
financial statements. Actual results could differ from these estimates.
A-15
<PAGE>
[The inside back cover illustrates that Intek helps its clients meet the needs
of their customers. Placed vertically along the left one-third of the page are
logos of our clients. The "Intek circle logo" is in the center of the page.
The right one-third of the page contains a vertical photograph of a group of
people taken from an overhead point of view. White lines run from the left
portion of the page, through the logo, to the people in the photo on the right
side of the page.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
[LOGO OF INTEK]
Common Stock
------------
PROSPECTUS
------------
Chase H&Q
Robertson Stephens
U.S. Bancorp Piper Jaffray
Wit Capital Corporation
------------
, 2000
------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell, and seeking
offers to buy, shares of common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
Through and including , 2000 (the 25th day after commencement of the
offering), all dealers effecting transactions in the common stock, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses to be paid by the Registrant in connection with this offering
are as follows. All amounts other than the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market
application fee are estimates.
<TABLE>
<S> <C>
Registration Fee................................................ $15,180
National Association of Securities Dealers, Inc. Fee............ 5,755
NASDAQ National Market listing fee.............................. 5,000
Legal Fees and Expenses......................................... *
Accounting Fees and Expenses.................................... *
Printing and Engraving Expenses................................. *
Blue Sky Fees and Expenses...................................... *
Miscellaneous fees and expenses................................. *
-------
Total......................................................... *
=======
</TABLE>
------------------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, and permits a corporation to grant indemnity to current or former
directors and executive officers, and others acting in similar capacities at
the request of the company. This permitted indemnification may extend beyond
the scope of that provided under Delaware law, including under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Securities Act").
As permitted by the Delaware General Corporation Law, our Amended and
Restated Certificate of Incorporation, which will become effective upon the
closing of this offering, includes a provision that eliminates the personal
liability of our directors for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's duty of
loyalty to us or our stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii)
under section 174 of the Delaware General Corporation Law (regarding unlawful
dividends and stock purchases) or (iv) for any transaction from which the
director derived an improper personal benefit. Our Amended and Restated
Certificate of Incorporation permits indemnification of current and former
directors and executive officers to the maximum extent allowed by applicable
law.
Our Bylaws provide that, to the full extent allowed by Delaware General
Corporation Law, (i) we will indemnify our directors and officers, provided
that any indemnified officer and director acted in good faith and in a manner
which such officer and director reasonably believed to be in or not opposed to
our best interests, (ii) we may indemnify our other employees and agents, (iii)
we will advance expenses, as incurred, to our directors and officers in
connection with a legal proceeding, subject to certain very limited exceptions;
and (iv) we may purchase and maintain insurance on behalf of any director or
officer against any liability asserted against them in such capacity. The
rights conferred in the Bylaws are not exclusive of indemnification provided by
law, agreement or otherwise.
As permitted by Delaware General Corporation Law, we intend to enter into
indemnification agreements with each of our current directors and officers to
give such directors and officers additional contractual assurances regarding
the scope of the indemnification set forth in our Amended and Restated
Certificate of Incorporation and to provide additional procedural protections.
These agreements provide for
II-1
<PAGE>
indemnification against claims and liabilities arising as a result of their
service as directors or officers of Intek and the advancement of expenses
incurred by them in defending or litigating such claims. We believe that these
agreements, and the indemnification provisions in our Amended and Restated
Certificate of Incorporation and Bylaws, are sufficiently broad to permit
indemnification against claims involving the negligence or gross negligence of,
and violations of the Securities Act by, the covered directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
We have also, with approval by our Board of Directors, obtained directors'
and officers' liability insurance for our current officers and directors.
Please refer to Section of the Underwriting Agreement (Exhibit 1.1
hereto), which provides for the indemnification of officers, directors and
controlling persons of Intek against certain liabilities. See also the
undertakings set out in response to Item 17 below.
Please refer to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.4 Form of Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to this
Registration Statement
10.26 Form of Indemnification Agreement
</TABLE>
Item 15. Recent Sales of Unregistered Securities.
All sales of common stock made pursuant to the exercise of stock options
were made in reliance on Rule 701 under the Securities Act or on Section 4(2)
of the Securities Act.
All other sales of our securities were made in reliance on Section 4(2) of
the Securities Act and/or Regulation D promulgated under the Securities Act.
These sales were made without general solicitation or advertising. Each
purchaser was a sophisticated investor with access to all relevant information
necessary to evaluate the investment and represented to us that the shares were
being acquired for investment and not for resale.
Since December 1, 1996, we have issued unregistered securities as
described below:
<TABLE>
<C> <S>
February 1997: 10,190,120 shares of Series B preferred stock sold to
three investors for $1.741 per share.
1,863,270 shares of Series B preferred stock issued to
eight shareholders of Protocall as part of the Protocall
acquisition.1
April-May, 1997: 285,778 shares of Series B preferred stock to nine
investors at an average price of $1.74 per share.
December 1997: 2,871,913 shares of Series C preferred stock to Beacon
Group III-Focus Value Fund, L.P. at $1.741 per share.
Series No. 1 warrant issued to Beacon to purchase up to
3,500,000 shares of Series C preferred stock at $1.741
per share for five years./2/
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
Series B anti-dilution warrant issued to Beacon for the
purchase of an indeterminable number of Series B preferred
shares./2/
May 1998: 8,823,529 shares of Series D preferred stock issued to
Conning Capital Limited Partnership V and 18,382 shares
issued to another accredited investor for $1.36 per share
under Regulation D.
Conning and Beacon were each granted a right to purchase up
to $3,000,000 of additional Series D preferred stock at
$1.36 per share through April 1999, which was not
exercised.
Issued to Beacon 3,500,000 shares of Series C preferred
stock and a Series NB-1 warrant to acquire additional
shares of common stock in exchange for the Series No. 1 and
B warrants issued to it in December, 1997.
April 1999: 2,510,691 shares of Series E preferred stock to five
accredited investors for $1.61 per share under Regulation
D.
November 1999: 11,738 shares of common stock issued to Prospero Holdings
LLC in connection with the Acorn acquisition.
5,210,093 shares of Series F preferred stock to 7
accredited investors at $2.13 per share under Regulation D.
January 2000: Issued a warrant to purchase 181,250 shares of our common
stock at $8.52 per share to Sony Electronics, Inc.
</TABLE>
- ------------------
/1/During 1999 and 1998, 11,488 and 21,539 shares of Series B preferred stock
were returned to us as adjustments for the price paid for Protocall in 1997.
/2/Beacon surrendered both warrants at the time of the Series D preferred
stock closing.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1+ Amended and Restated Certificate of Incorporation dated November 22,
1999
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.3+ Restated Bylaws of the Registrant
3.4 Form of Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to this
Registration Statement
4.1* Form of the Registrant's Common Stock Certificate
4.2 Amended and Restated Shareholders' and Voting Agreement dated as of
January 14, 2000
4.3+ Registration Rights Agreement between the Registrant, the former
Acorn shareholders and Prospero L.L.C. dated October 30, 1999
4.3.1 Amendment No. 2 Registration Rights Agreement between the
Registrant, the former Acorn shareholders and Prospero L.L.C.
4.4+ Series A Purchase Agreement between the Registrant and Resource
Bancshares Corporation dated August 2, 1996
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
4.5+ Series B Purchase Agreement between the Registrant and The Beacon
Group III-Focus Value Fund, L.P., Squam Lake Investors II, L.P. and
Bain & Company dated as of February 3, 1997
4.5.1 Amendment to Series B Purchase Agreement between the Registrant and
The Beacon Group III-Focus Value Fund, L.P., Squam Lake Investors
II, L.P. and Bain & Company
4.6+ Series C Purchase Agreement between the Registrant and The Beacon
Group III-Focus Value Fund, L.P. dated December 22, 1997
4.6.1 Amendment to Series C Purchase Agreement between the Registrant and
The Beacon Group III-Focus Value Fund, L.P.
4.7+ Series D Purchase Agreement by and among the Registrant, Conning
Capital Limited Partnership V, The Beacon Group III-Focus Value
Fund, L.P. and Certain Other Investors dated as of May 7, 1998
4.7.1 Amendment to Series D Purchase Agreement between the Registrant,
Conning Capital Limited Partnership V, The Beacon Group III-Focus
Value Fund, L.P. and Certain Other Investors
4.8+ Series E Preferred Stock Purchase Agreement by and among the
Registrant and U.S. Information Technology Financing, L.P.,
Encompass Group, Inc., Trans Cosmos USA, Inc. and Certain Other
Parties dated as of April 16, 1999
4.8.1 Amendment to Series E Preferred Stock Purchase Agreement by and
among the Registrant and U.S. Information Technology Financing,
L.P., Encompass Group, Inc., Trans Cosmos USA, Inc. and Certain
Other Parties
4.9+ Series F Preferred Stock Purchase Agreement by and among the
Registrant and BVCF IV, L.P. and Certain Other Parties dated as of
November 19, 1999
4.9.1 Amendment to Series F Preferred Stock Purchase Agreement by and
among the Registrant and BVCF IV, L.P. and Certain Other Parties
4.10 Amended and Restated Registration Rights Agreement dated January 14,
2000
4.11 Letter Agreement by certain stockholders of the Registrant dated
January 14, 2000
5.1* Opinion of Chrisman, Bynum & Johnson, P.C.
10.1+ 1997 Restated Stock Option Plan
10.2+ 1998 Restated Stock Option Plan
10.3 2000 Stock Incentive Plan
10.4 2000 Employee Stock Purchase Plan
10.5 Contribution Agreement dated October 27, 1999, between the
Registrant and Spider Technologies, Inc.
10.6+ Distribution Plan between the Registrant and Spider Technologies,
Inc. dated November 5, 1999
10.7.1+ Promissory Note dated October 1, 1999, by Timothy C. O'Crowley
10.7.2 Promissory Note Dated October 1, 1999, by Franklin D. Richards
10.7.3+ Promissory note and pledge agreement of Timothy C. O'Crowley dated
November 23, 1999
10.7.4 Promissory Note dated November 20, 1998 by Franklin D. Richards
10.8+ Sublease and Resource Sharing Agreement between the Registrant and
Spider Technologies, Inc. effective October 1, 1999
10.9* Amended and Restated Software Assignment and Grant-Back License,
Maintenance and Support Agreement between the Registrant and Spider
Technologies, Inc. effective November 4, 1999
10.9.1+ Intellectual Property Security Agreement between the Registrant and
Spider Technologies, Inc. dated November 5, 1999
10.9.2 Agreement Regarding Matters between the Registrant and Spider
Technologies, Inc.
10.10+ Transition Support Agreement between the Registrant and Spider
Technologies, Inc. dated November 4, 1999
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.11+ Separation Agreement between the Registrant and Spider Technologies,
Inc. effective October 1, 1999
10.12+ Tax Separation Agreement between the Registrant and Spider
Technologies, Inc. effective
October 1, 1999
10.13* Consulting Agreement between Spider Technologies, Inc. and Timothy
O'Crowley
10.14 Second Restated and Amended Management Employment Agreement of
Timothy O'Crowley
10.15 Second Amended and Restated Employment Agreement of Franklin D.
Richards
10.16+ Building Lease between the Registrant and the City of Fort Scott,
Kansas dated March 8, 1999 (Fort Scott)
10.16.1+ Addendum No. 1 to Building Lease between Registrant and the City of
Fort Scott, Kansas dated March 8, 1999 (Fort Scott)
10.17+ Lease between the Registrant and M&S California Fund, L.P. dated
June 17, 1997 (San Diego)
10.17.1+ First Amendment to Office Building Lease between the Registrant and
M&S California Fund, L.P. dated 10.17.2
10.18+ Office Lease between the Registrant and Westmark Terrace Tower II,
Inc. dated June 9, 1999 (DTC)
10.18.1+ First Amendment to Lease between the Registrant and Westmark Terrace
Tower II dated June 1, 1999 (DTC)
10.19 Lease of Office Space between the Registrant and Brookfield Republic
Inc. dated November 15, 1996 (Republic Plaza)
10.19.1 First Amendment and Lease of Additional Office Space between the
Registrant and Brookfield Republic Inc. dated October 17, 1997
(Republic Plaza)
10.20+ Office Lease between the Registrant and The Equitable Life Assurance
Society dated March 5, 1997 (Hayward)
10.20.1+ Commencement of Term Agreement between the Registrant and The
Equitable Life Assurance Society dated May 2, 1997 (Hayward)
10.20.2+ Estoppel Certificate of the Registrant to ATC Partners LLC dated
September 24, 1998 regarding Office Lease with The Equitable Life
Assurance Society (Hayward)
10.21+ Industrial/ Commercial Multi-Tenant Lease between the Registrant and
Livermore Airway Business Park dated January 14, 1999 (Livermore)
10.22+ Industrial/ Commercial Multi-Tenant Lease between the Registrant and
Livermore Airway Business Park dated January 30, 1999 (Livermore)
10.23+ Commercial Lease between Acorn Information Services, Inc. and Lot 4
LLC dated January 5, 1998 (Shelton)
10.23.1+ First Amendment of Lease between Acorn Information Services, Inc.
and Lot 4 LLC dated April 20, 1998 (Shelton)
10.24 Loan and Security Agreement between the Registrant and Silicon
Valley Bank dated June 10, 1999
10.25 Master Loan and Security Agreement between the Registrant and
Charter Financial, Inc. dated August 26, 1999
10.26+ Agreement and Plan of Reorganization between the Registrant and
Protocall New Business Specialists, Inc. dated February 3, 1997
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.27++ Share Purchase Agreement between Registrant, Acorn Information
Services, Inc. and the Shareholders of Acorn Information Services,
Inc. dated October 30, 1999
10.28 Master Service Agreement between the Registrant and Sony
Electronics, Inc. dated May 1, 1997
10.28.1+ Addendum A to Master Service Agreement between the Registrant and
Sony Electronics, Inc. dated April 1, 1999
10.28.2 Warrant issued to Sony Electronics, Inc. dated January 14, 2000
10.29+ Form of Indemnification Agreement
10.30+ Kansas Economic Opportunity Initiatives Fund Loan Agreement and
Promissory Note
10.31+ Agreement Among the Registrant, Fort Scott Community College and the
Kansas
Department of Commerce and Housing dated March 15, 1999
21.1+ Subsidiaries of the Registrant
23.1* Consent of Chrisman, Bynum & Johnson (included in Exhibit 5.1)
23.2+ Consent of Arthur Andersen LLP
23.3+ Consent of PricewaterhouseCoopers LLP
24.1+ Power of Attorney (see Page II-5 of this Registration
Statement)
27.1+ Financial Data Schedule
</TABLE>
- ------------------
+Confidential treatment requested as to certain portions of this exhibit.
* To be supplied by amendment.
+ Previously filed.
Item 17. Undertakings.
We hereby undertake to provide to the underwriters at the closing
specified in the underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons
pursuant to the provisions described under Item 14 above, or otherwise, we have
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 us 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, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Englewood, State
of Colorado, on the 20th day of January 2000.
INTEK INFORMATION, INC.
By: /s/TIMOTHY C. O'CROWLEY
Timothy C. O'Crowley
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Title Date
/s/ TIMOTHY C. O'CROWLEY Chairman of the
- ------------------------------------- Board, President, January 19,
Timothy C. O'Crowley Chief Executive 2000
Officer and
Director (Principal
Executive Officer)
/s/ STEVEN Q. HANSEN Chief Financial
- ------------------------------------- Officer (Principal January 19,
Steven Q. Hansen Financial and 2000
Accounting Officer)
Director
/s/ STEPHEN Q. HANSEN, POA January 19,
- ------------------------------------- 2000
Stephen S.S. Hyde
Director
/s/ STEVEN Q. HANSEN, POA January 19,
- ------------------------------------- 2000
Steven F. Piaker
Director
/s/ STEVEN Q. HANSEN, POA January 19,
- ------------------------------------- 2000
Harold W. Pote
Director
/s/ STEVEN Q. HANSEN, POA January 19,
- ------------------------------------- 2000
Rick L. Weller
Director
/s/ STEVEN Q. HANSEN, POA January 19,
- ------------------------------------- 2000
Eric R. Wilkinson
</TABLE>
II-7
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INTEK INFORMATION, INC.
INTEK INFORMATION, INC, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies that:
A. The name of this Corporation is: Intek Information, Inc.
B. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of Delaware was June 4, 1996, an
Amended and Restated Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on February 14, 1997, an
Amendment thereto was filed on December 18, 1997, an Amended and Restated
Certificate of Incorporation was filed on December 22, 1997, an Amended and
Restated Certificate of Incorporation was filed on May 7, 1998, an Amendment
thereto was filed on June 23, 1998, an Amended and Restated Certificate of
Incorporation was filed on April 16, 1999, an Amended and Restated Certificate
of Incorporation was filed on November 3, 1999, an Amended and Restated
Certificate of Incorporation was filed November 22, 1999 and an Amendment
thereto was filed on January 14, 2000.
C. This Amended and Restated Certificate of Incorporation has been duly
adopted by written consent pursuant to Sections 228 and 245 of the General
Corporation Law of the State of Delaware. The Corporation certifies that
amendments effected by this Amended and Restated Certificate of Incorporation
have been adopted in accordance with Section 242 of the General Corporation Law
of the State of Delaware.
D. Pursuant to Sections 242 and 245 of the Delaware General Corporation
law, this Amended and Restated Certificate of Incorporation restates, integrates
and amends the provisions of the Corporation's Amended and Restated Certificate
of Incorporation as follows:
FIRST: The name of this Corporation is: Intek Information, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 15 E. North Street, City of Dover, County of Kent, Delaware 19901.
The name of its registered agent at such address is Incorporating Services, Inc.
THIRD: The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: A. This Corporation is authorized to issue two classes of shares
to be designated, respectively, Common Stock and Preferred Stock. The total
number of shares of Common Stock which this corporation is authorized to issue
is 100,000,000 with a par value per share of $0.0001, and the total number of
shares of Preferred Stock which this corporation is authorized to issue is
10,000,000, with a par value per share of $0.001.
B. The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the Board of Directors (authority to do so being hereby expressly
vested in the Board). The Board of Directors is further authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and, to fix the
number of shares of any such series of Preferred Stock and the designation of
any such series of Preferred Stock. The Board of Directors is authorized, within
the limits and restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the
<PAGE>
number of shares constituting any series, to increase or decrease (but not below
the number of shares thereof then outstanding) the number of shares of any such
series subsequent to the issue of shares of that series, to determine the
designation of any series, and to fix the number of shares of any series.
C. Each holder of Common Stock, as such, shall be entitled to one vote
for each share of Common Stock held of record by such holder on all matters on
which stockholders generally are entitled to vote; provided, however, that,
except as otherwise required by law, holders of Common Stock, as such, shall not
be entitled to vote on any amendment to this Certificate of Incorporation
(including any certificate of designations relating to any series of Preferred
Stock) that relates solely to the terms of one or more then outstanding series
of Preferred Stock if the holders of such affected series are entitled, either
separately or together with the holders of one more other such series, to vote
thereon pursuant to this Certificate of Incorporation (including any certificate
of designations relating to any series of Preferred Stock) or pursuant to the
General Corporation Law of the State of Delaware.
Except as otherwise required by law, holders of a series of Preferred Stock,
as such, shall be entitled only to such voting rights, if any, as shall
expressly be granted thereto by this Certificate of Incorporation (including any
certificate of designations relating to such series).
Subject to applicable law and the rights, if any, of the holders of any
outstanding series of Preferred Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the payment of dividends, dividends may be declared and paid on the Common
Stock at such times and in such amounts as the Board of Directors in its
discretion shall determine.
Upon the dissolution, liquidation or winding up of the Corporation, subject
to the rights, if any, of the holders of any outstanding series of Preferred
Stock or any class or series of stock having a preference over or the right to
participate with the Common Stock with respect to the distribution of assets of
the Corporation upon such dissolution, liquidation or winding up of the
Corporation, the holders of the Common Stock, as such, shall be entitled to
receive the assets of the Corporation available for distribution to its
stockholders ratably in proportion to the number of shares held by them.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins or unless the Bylaws of the Corporation shall so provide.
SEVENTH: A. The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
designated in the Bylaws of the Corporation.
B. The Board of Directors shall be divided into three classes designated
as Class I, Class II, and Class III, respectively. Directors shall be assigned
to each class in accordance with a resolution or resolutions adopted by the
Board of Directors. At the first annual meeting of stockholders following the
date hereof, the term of office of the Class I directors shall expire, and Class
I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the date hereof, the term of office of
the Class II directors shall expire, and Class II directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the date hereof, the term of office of the Class III directors shall
expire, and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.
C. Notwithstanding the foregoing provisions of this Article, each
director shall serve until his or her successor is duly elected and qualified or
until his or her death, resignation, or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
2
<PAGE>
D. Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) a plurality of the votes cast at a meeting of the stockholders by the
holders of voting stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock") voting together as a single class; or
(ii) by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors or by a sole
remaining director. Newly created directorships resulting from any increase in
the number of directors elected by all of the stockholders having the right to
vote as a single class shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the directors then in
office, even though less than a quorum of the Board of Directors, or by the sole
remaining director. Any director elected in accordance with the preceding
sentences shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
E. Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately as a series or separately as a class with one or more such other
series, to elect directors at an annual or special meting of stockholders, the
election, term of office, removal, filling of vacancies and other features of
such directorships shall be governed by the terms of this Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock) applicable thereto, and such directors so elected shall not
be divided into classes pursuant to this Article Seventh unless expressly
provided by such terms.
F. The affirmative vote of sixty-six and two-thirds percent (66-2/3%) of
the voting power of the then outstanding shares of Voting Stock, voting together
as a single class, shall be required for the adoption, amendment or repeal of
the following sections of the Corporation's Bylaws by the stockholders of the
Corporation: 2.2 (Annual Meeting) and 2.3 (Special Meeting).
G. No action shall be taken by the holders of the Common Stock except at
an annual or special meeting of the stockholders called in accordance with the
Bylaws.
H. Any director, or the entire Board of Directors, may be removed from
office at any time (i) with or without cause by the affirmative vote of holders
of at least eighty percent (80%) of the voting power of all of the then-
outstanding shares of the Voting Stock, voting together as a single class.
EIGHTH: A. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation or any subsidiary of the Corporation shall not be personally
liable to the Corporation or its stockholders and shall otherwise be indemnified
by the Corporation for monetary damages for breach of fiduciary duty as a
director of the Corporation, any predecessor of the Corporation or any
subsidiary of the Corporation.
B. The Corporation shall indemnify (and advance expenses) to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate is or was a director or
officer of the Corporation, any predecessor of the Corporation or any subsidiary
of the Corporation or serves or served at any other enterprise as a director or
officer at the request of the Corporation, any predecessor to the Corporation or
any subsidiary of the Corporation.
C. Neither any amendment nor repeal of this Article EIGHTH, nor the
adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article EIGHTH, shall eliminate or reduce the effect of
this Article EIGHTH, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article EIGHTH, would
accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
NINTH: Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of
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Incorporation or any rights of designation of Preferred Stock conferred on the
Board of Directors pursuant to Article FOURTH, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Article SEVENTH
or this Article NINTH if such repeal or alteration is recommended by a majority
of the directors, or by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, if not so recommended by a
majority of the directors.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in Article NINTH of this
Certificate, and all rights conferred upon the stockholders herein are granted
subject to this right.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
TWELFTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
THIRTEENTH: Advance written notice of new business and stockholder
nominations for the election of directors shall be given in the manner and to
the extent provided in the Bylaws of the Corporation.
FOURTEENTH: Stockholders shall not be entitled to cumulative voting rights
for the election of directors.
FIFTEENTH: The Corporation hereby elects to be governed by Section 203(a)
of the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, Intek Information, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Timothy O'Crowley, its
President, and attested by _________________its Secretary, this _____ day of
_______________, 2000 .
INTEK INFORMATION, INC.
By: _______________________________
Timothy C. O'Crowley, President
Attested:
________________________
Secretary
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<PAGE>
EXHIBIT 3.4
RESTATED BYLAWS
OF
INTEK INFORMATION, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I............................................................... 1
1.1 REGISTERED OFFICE................................................. 1
1.2 OTHER OFFICES..................................................... 1
ARTICLE II.............................................................. 1
2.1 PLACE OF MEETINGS................................................. 1
2.2 ANNUAL MEETING.................................................... 1
2.3 SPECIAL MEETING................................................... 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.................................. 2
2.5 ADVANCED NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS... 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE...................... 3
2.7 QUORUM............................................................ 3
2.8 ADJOURNED MEETING; NOTICE......................................... 3
2.9 VOTING............................................................ 3
2.10 WAIVER OF NOTICE.................................................. 3
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS....... 4
2.13 PROXIES........................................................... 4
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................. 4
2.15 CONDUCT OF BUSINESS............................................... 5
ARTICLE III............................................................. 5
3.1 POWERS............................................................ 5
3.2 NUMBER............................................................ 5
3.3 CLASSES OF DIRECTORS.............................................. 6
3.4 RESIGNATION AND VACANCIES......................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.......................... 7
3.6 REGULAR MEETINGS.................................................. 7
3.7 SPECIAL MEETINGS; NOTICE.......................................... 7
3.8 QUORUM............................................................ 7
3.9 WAIVER OF NOTICE.................................................. 7
3.10 ADJOURNED MEETING; NOTICE......................................... 8
3.11 CONDUCT OF BUSINESS............................................... 8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 8
3.13 FEES AND COMPENSATION OF DIRECTORS................................ 8
3.14 REMOVAL OF DIRECTORS.............................................. 8
ARTICLE IV.............................................................. 8
4.1 COMMITTEES OF DIRECTORS........................................... 8
4.2 COMMITTEE MINUTES................................................. 9
4.3 MEETINGS AND ACTION OF COMMITTEES................................. 9
ARTICLE V............................................................... 10
5.1 OFFICERS.......................................................... 10
5.2 APPOINTMENT OF OFFICERS........................................... 10
5.3 REMOVAL AND RESIGNATION OF OFFICERS............................... 10
5.4 CHAIRMAN OF THE BOARD............................................. 10
5.5 CHIEF EXECUTIVE OFFICER........................................... 11
5.6 PRESIDENT......................................................... 11
5.7 VICE PRESIDENT.................................................... 11
5.8 SECRETARY......................................................... 11
5.9 CHIEF FINANCIAL OFFICER........................................... 12
5.10 ASSISTANT SECRETARY............................................... 12
5.11 AUTHORITY AND DUTIES OF OFFICERS.................................. 12
5.12 COMPENSATION...................................................... 12
ARTICLE VI.............................................................. 12
6.1 THIRD PARTY ACTIONS............................................... 12
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION..................... 13
</TABLE>
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<TABLE>
<S> <C>
6.3 SUCCESSFUL DEFENSE.............................................. 14
6.4 DETERMINATION OF CONDUCT........................................ 14
6.5 PAYMENT OF EXPENSES IN ADVANCE.................................. 14
6.6 INDEMNITY NOT EXCLUSIVE......................................... 14
6.7 INSURANCE INDEMNIFICATION....................................... 14
6.8 THE CORPORATION................................................. 14
6.9 EMPLOYEE BENEFIT PLANS.......................................... 15
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES..... 15
ARTICLE VII........................................................... 15
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................... 15
7.2 INSPECTION BY DIRECTORS......................................... 15
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................. 15
ARTICLE VIII.......................................................... 16
8.1 CHECKS.......................................................... 16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS................ 16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.......................... 16
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................. 16
8.5 LOST CERTIFICATES............................................... 17
8.6 CONSTRUCTION; DEFINITIONS....................................... 17
8.7 DIVIDENDS....................................................... 17
8.8 FISCAL YEAR..................................................... 17
8.9 SEAL............................................................ 17
8.10 TRANSFER OF STOCK............................................... 17
8.11 STOCK TRANSFER AGREEMENTS....................................... 18
8.12 REGISTERED STOCKHOLDERS......................................... 18
ARTICLE IX............................................................ 18
ARTICLE XI............................................................ 18
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES..................... 18
11.2 DUTIES OF CUSTODIAN............................................. 19
ARTICLE XII........................................................... 19
ARTICLE XIII.......................................................... 19
</TABLE>
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<PAGE>
RESTATED BYLAWS
OF
INTEK INFORMATION, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office and registered agent of the Corporation shall be as
stated in the Corporation's Certificate of Incorporation as amended form time to
time ("Certificate of Incorporation") or in the appropriate filings with the
Office of the Delaware Secretary of State.
1.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at any place
or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors and stated in the notice
of the meeting. In the absence of any such designation, stockholders' meetings
shall be held at the registered office of the Corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the Board of Directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by a
majority of the members of the Board of Directors.
The stockholders may not call a special meeting of the stockholders.
Business conducted at any special meeting shall be limited to the purposes
stated in the notice given pursuant to Section 2.4.
If a special meeting is called by any person other than the Board of
Directors, which person has a right to call such meeting pursuant to the General
Corporation Law of Delaware notwithstanding the provisions of the Corporation's
Certificate of Incorporation or these Bylaws, the request shall be in writing,
specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or sent by
registered mail or by telegraphic, facsimile or other transmission to the
Chairman of the Board, the Chief Executive Officer, the President, or the
Secretary of the Corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
who called the meeting, not less than thirty-five (35) nor more than
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sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this paragraph
of this Section 2.3 shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the Board of Directors
may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these Bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely written notice and in
proper form of his intent to bring such business before such meeting. To be
timely, such stockholder's notice must be delivered to or mailed and received by
the Secretary of the Corporation not less than one hundred twenty (120) days
prior to the date of the Corporation's proxy statement released to stockholders
in connection with the Corporation's previous year's annual meeting of
stockholders. If the Corporation did not hold an annual meeting in the prior
year, or the date of the annual meeting in the current year has been changed by
more than thirty (30) days from the date of the prior year's annual meeting,
then such stockholders notice must be received in a reasonable time before the
Corporation begins to print and mail its proxy materials. To be in proper form,
a stockholder's notice to the Secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations, propose the business, and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the business
to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting, intends to continue
to hold the securities through the date of the meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice or introduce the business specified in the
notice;
(iii) if applicable, a description of all arrangements or
understandings 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;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be nominated,
or the matter been proposed, or intended to be proposed by the Board of
Directors; and
(v) if applicable, the consent of each nominee to serve as director
of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure or with the applicable rules of the Securities and Exchange Commission
then in effect relating to shareholder proposals.
2
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2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the Secretary or an assistant Secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise required by statute or by the Certificate of Incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairman of the meeting, or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these Bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Sections 2.12 and 2.14 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these Bylaws.
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2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Notwithstanding the following provisions of this Section 2.11, effective
upon the listing of the Common Stock of the Corporation on the Nasdaq Stock
Market and the registration of any class of securities of the Corporation
pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the stockholders of the Corporation may not take action by written consent
without a meeting but must take any such actions at a duly called annual or
special meeting.
Except as otherwise provided in this Section 2.11, any action required by
this chapter to be taken at any annual or special meeting of stockholders of a
Corporation, or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. If the action which is consented to is such as would have
required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
If the Board of Directors does not so fix a record date, the fixing of such
record date shall be governed by the provisions of Section 213 of the General
Corporation Law 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 fix a new record date for the
adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the Secretary of the Corporation, but no such
proxy shall be voted or acted upon after 3 years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (by any reasonable means, including
manual signature, typewriting, facsimile, telegraphic or other electronic
transmission or otherwise) by the stockholder or the stockholder's attorney-in-
fact, provided that any facsimile, telegraphic or other electronic transmission
is submitted with or contains information from which it can be determined the
transmission was authorized by the stockholder. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Section 212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
4
<PAGE>
The officer who has charge of the stock ledger of a Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 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 stock ledger 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 be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the President, or in his absence by a vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as Secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
Secretary of the meeting. The Board of Directors may adopt by resolution such
rules and regulations for the conduct of meetings of stockholders as it shall
deem appropriate. To the extent not inconsistent with such rules and regulations
adopted by the Board, the Chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation and procedures of the manner of voting and
conduct of business appropriate for the proper conduct of the meeting.
Such rules, regulations and procedures, whether adopted by the Board of
Directors or prescribed by the presiding officer of the meeting, may include,
without limitation, the following: (a) the establishment of an agenda or order
of business for the meeting; (b) rules and procedures for maintaining order at
the meeting and the safety of those present; (c) limitations on attendance at or
participation in the meeting to stockholders of record of the Corporation, their
duly authorized and constituted proxies or such other persons as the presiding
officer of the meeting shall determine; (d) restrictions on entry to the meeting
after the time fixed for the commencement thereof; and (e) limitations on the
time allotted to questions and/or comments by participants. In addition, the
presiding officer shall have the right and authority to recess or adjourn any
meeting of stockholders to any time and place determined by the presiding
officer. Unless and to the extent determined by the Board of Directors or the
presiding officer of the meeting, meetings of stockholders shall not be required
to be held in accordance with the rules of parliamentary procedure.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the Certificate of Incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
3.2 NUMBER
The authorized number of directors of the Corporation shall be six (6) No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
5
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3.3 CLASSES OF DIRECTORS
At such time as these Bylaws become effective, the Directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the effectiveness of these Bylaws, the term of
office of the Class I Directors shall expire and Class I Directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the effectiveness of these Bylaws, the term of office of
the Class II Directors shall expire and Class II Directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the effectiveness of these Bylaws, the term of office of the Class III
Directors shall expire and Class III Directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, Directors
shall be elected for a full term of three years to succeed the Directors of the
class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each Director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
Notwithstanding any other provisions of these Bylaws or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
Voting Stock required by law, these Bylaws or any rights of designation of
Preferred Stock conferred on the Board of Directors pursuant to the Bylaws, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal Sections 3.3 and 3.4 hereof by stockholder action.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the Corporation.
Stockholders may not remove directors with or without cause except as provided
in Section 3.14. Any vacancy occurring in the Board of Directors may be filled
by a majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least 10%
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of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office as aforesaid, which election shall be governed by
the provisions of Section 211 of the General Corporation Law of Delaware as far
as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the Corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the Chairman of the Board, the Chief Executive Officer,
the President, or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy, or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the Corporation. If the
notice is mailed, it shall be deposited in the United States mail at least 4
days before the time of the holding of the meeting. If the notice is delivered
personally or by telephone, telecopy, or by telegram, it shall be delivered
personally or by telephone, telecopy, or to the telegraph company at least 48
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose or the place of the meeting, if the meeting is to be held at
the principal executive office of the Corporation.
3.8 QUORUM
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
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3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the Board of Directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.11 CONDUCT OF BUSINESS
Meetings of the Board of Directors shall be presided over by the Chairman
of the Board, if any, or in his absence by the Chief Executive Officer, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
Secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as Secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the board or 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 or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance
at each meeting of the Board of Directors. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
compensation for attending committee meetings.
3.14 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the Certificate of Incorporation
or by these Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the affirmative vote of holders of eighty
percent (80%) of the shares then entitled to vote at an election of directors.
If at any time a class or series of shares is entitled to elect one or more
directors, the provisions of this Article 3.14 shall apply to the vote of that
class or series and not to the vote of the outstanding shares as a whole.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the Corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors or in the Bylaws of the Corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
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resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution, or (v) amend the Bylaws of the Corporation; and, unless the
board resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
In addition to the committees of the Board of Directors created herein, the
Board of Directors may create one or more committees and appoint one or more
members of the Board of Directors to serve on them. The creation of a committee
and appointment of members to it shall require the approval of a majority of all
the directors in office when the action is taken.
a. COMPENSATION COMMITTEE. A Compensation Committee of the Board of
Directors shall be established which shall consist of no more than four Board
members, all of whom shall be outside directors. The function of the
Compensation Committee shall be (a) to set salaries for corporate officers of
the Corporation; (b) to establish, maintain and administer equity compensation
plans for directors, officers, employee's and consultants; (c) to recommend to
the complete Board of Directors the amount of fees to be paid to outside Board
members for their Board and Committee service; (c) to set compensation, if any,
for inside Board members for their Board and Committee service; (d) to review
the Corporation's pension plans and their administration; and (e) to review the
compensation programs for all Corporation employees.
b. AUDIT COMMITTEE. An Audit Committee of the Board of Directors shall be
established which shall consist of at least three members, a majority of whom
shall be independent directors as required by rules promulgated by NASDAQ. The
Audit Committee is responsible for overseeing and monitoring the quality of the
Corporation's accounting and auditing practices. The function of the Audit
Committee is to (a) recommend to the Board of Directors a firm of independent
accountants to perform the examination of the annual financial statements of the
Corporation; (b) to review with the independent accountants and with the
Corporation's Chief Financial Officer, the proposed scope of the annual audit,
past audit experience, the Corporation's internal audit program, recently
completed internal audits and other matters bearing upon the scope of the audit;
(c) to review with the independent accountants and with the Chief Financial
Officer significant matters revealed in the course of the audit of the annual
financial statements of the Corporation; (d) to consult with the independent
auditors (periodically, as appropriate, out of the presence of management) with
regard to the adequacy of internal controls; (e) to oversee the quarterly
reporting process to the Securities and Exchange Commission; (f) to review on an
annual basis whether the Corporation's conflict of interest policy has been
complied with; (g) to review with the Chief Financial Officer any suggestions
and recommendations of the independent accountants concerning the internal
control standards and accounting procedures of the Corporation; (h) to report
its activities and action to the Board at least once each fiscal year
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these Bylaws, Section 3.5
(place of meetings and meetings by telephone),
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Section 3.6 (regular meetings), Section 3.7 (special meetings and notice),
Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjourned
meeting and notice of adjournment), Section 3.11 (conduct of business) and 3.12
(action without a meeting), with such changes in the context of those Bylaws as
are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may also be called by resolution of the Board of Directors and
that notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the Corporation shall be a Chief Executive Officer, a
President, one or more Vice Presidents, a Secretary and a Chief Financial
Officer. The Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, a Chief Operating Officer, one or more
Executive, Senior or Assistant Vice Presidents, a Treasurer, Assistant
Treasurers, Assistant Secretaries and any such other officers as may be
appointed in accordance with the provisions of Section 5.2 of these Bylaws. Any
number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
Corporation shall be appointed by the Board of Directors, subject to the rights,
if any, of an officer under any contract of employment. The Board of Directors
may appoint, or empower an officer to appoint, such officers and agents of the
business as the Corporation may require (whether or not such officer or agent is
described in this Article V), each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine. Any vacancy
occurring in any office of the Corporation shall be filled by the Board of
Directors or may be filled by the officer, if any, who appointed such officer.
5.3 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors or, in the case of an officer appointed by
another officer, by such other officer.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these Bylaws. If there is no Chief
Executive Officer, then the Chairman of the Board shall also be the Chief
Executive Officer of the Corporation and shall have the powers and duties
prescribed in Section 5.5 of these Bylaws.
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5.5 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the Corporation shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers of the Corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a Chairman of the Board at all meetings of the Board of Directors. He or she
shall have the general powers and duties of management usually vested in the
Chief Executive Officer of a Corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
5.6 PRESIDENT
Subject to such supervisory powers as may be given by these Bylaws or the
Board of Directors to the Chairman of the Board or the Chief Executive Officer,
if there be such officers, the President shall have general and active
management of the Corporation's business and supervision of other officers of
the Corporation. He or she shall have such other powers and duties as may be
prescribed by the Board of Directors, the Chief Executive Officer or these
Bylaws. In the event a Chief Executive Officer shall not be appointed, the
President shall have the duties of such office.
5.7 VICE PRESIDENT
In the absence or disability of the President, the Vice Presidents, if any,
in order of their rank as fixed by the Board of Directors or, if not ranked, a
Vice President designated by the Board of Directors, shall perform all the
duties of the Chief Executive Officer and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the Chief Executive
Officer. The Vice Presidents shall have such other powers and perform such other
duties as from time to time may be prescribed for them respectively by the Board
of Directors, these Bylaws, the Chief Executive Officer, the President or the
Chairman of the Board.
5.8 SECRETARY
The Secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. He shall keep the seal of the Corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these Bylaws.
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5.9 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
Chief Executive Officer and directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors, the Chief Executive
Officer or these Bylaws.
5.10 ASSISTANT SECRETARY
The Assistant Secretary, or, if there is more than one, the Assistant
Secretaries in the order determined by the stockholders or Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board of
Directors or the stockholders may from time to time prescribe.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
Corporation shall respectively have such authority and perform such duties in
the management of the business of the Corporation as may be designated from time
to time by the Board of Directors or the stockholders.
5.12 COMPENSATION
The compensation of the Chief Executive Officer, President, Chief Financial
Officer, Secretary, any other corporate officer elected by the Board, and the
four most highly compensated employees of the Corporation or its subsidiaries
other than the Chief Executive Officer, shall be fixed from time to time by the
Board of Directors, or if created, by the Compensation Committee of the Board of
Directors. Subject to the discretion of the Board of Directors, if given, the
Chief Executive Officer may fix the compensation of other officers and agents of
the Corporation. An officer of the Corporation shall not be prevented from
receiving compensation by reason of the fact that he or she is also a director
of the Corporation. Compensation for the non-employee members of the Board of
Directors shall be determined by recommendation of the Board of Directors, or if
created, by the Compensation Committee with final approval by the Board of
Directors or as otherwise determined by applicable law.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The Corporation 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
(other than an action by an agent of the Corporation), or is or was serving at
the request of the Corporation, any predecessor of the Corporation, or any
subsidiary of the Corporation, as a director or officer of another Corporation,
partnership, joint venture trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, any
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predecessor of the Corporation, or any subsidiary of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
The Corporation may 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
(other than an action by an agent of the Corporation), or is or was serving at
the request of the Corporation, any predecessor of the Corporation, or any
subsidiary of the Corporation, as an employee or agent of another Corporation,
partnership, joint venture trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The Corporation 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 or
suit by or in the right of the Corporation, any predecessor of the Corporation,
or any subsidiary of the Corporation, to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of Corporation, any
predecessor of the Corporation, or any subsidiary of the Corporation, or is or
was serving at the request of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation, any
predecessor of the Corporation, or any subsidiary of the Corporation, unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
The Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation, any predecessor of the Corporation,
or any subsidiary of the Corporation, to procure a judgment in its favor by
reason of the fact that he is or was an employee or agent of the Corporation,
any predecessor of the Corporation, or any subsidiary of the Corporation, or is
or was serving at the request of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation, any
predecessor of the Corporation, or any subsidiary of the Corporation, unless and
only to the extent that the Delaware Court of Chancery or the court in which
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such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a present or former director, officer, employee or agent
of the Corporation, any predecessor of the Corporation, or any subsidiary of the
Corporation, has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made
(1) by the Board of Directors or the Executive Committee by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) or if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights or limiting any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
Certificate of Incorporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another while holding such office.
6.7 INSURANCE INDEMNIFICATION
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, any predecessor of the Corporation, or any subsidiary of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the Corporation" shall
include, in addition to the resulting Corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
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constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under and subject to the provisions of this Article VI
(including, without limitation the provisions of Section 6.4) with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advanced of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, 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 and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The Corporation shall, either at its principal executive office or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The Court may summarily order the Corporation
to permit the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extracts therefrom. The Court
may, in its discretion, prescribe any limitations or conditions with reference
to the inspection, or award such other and further relief as the Court may deem
just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
15
<PAGE>
The Chairman of the Board, the Chief Executive Officer, President, the
Chief Financial Officer, any Vice President, the Secretary or Assistant
Secretary of this Corporation, or any other person authorized by the Board of
Directors, the Chief Executive Officer, the President, or a Vice President, is
authorized to vote, represent, and exercise on behalf of this Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the Corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the Chairman of the Board of
Directors, Chief Executive Officer, the President or Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of such Corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The Corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the Corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the Corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other
16
<PAGE>
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and cancelled at the same time. The Corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond or personal indemnification sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate or
uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes an entity, an association, a trust,
and a natural person.
8.7 DIVIDENDS
The directors of the Corporation, subject to any restrictions contained in
the Certificate of Incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock.
The directors of the Corporation may set apart out of any of the funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Transfers of shares shall be made on the books of the Corporation only upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer. The Corporation shall
17
<PAGE>
issue a new certificate or uncertificated shares to the person entitled thereto,
cancel the old certificate surrendered to it, and record the transaction in its
books.
8.11 STOCK TRANSFER AGREEMENTS
The Corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
Corporation to restrict the transfer of shares of stock of the Corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other Bylaws of the Corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
Corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of Directors
of the Corporation that the Corporation should be dissolved, the Board, after
the adoption of a resolution to that effect by a majority of the whole Board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the Corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the Corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the Corporation is insolvent, to be
receivers, of and for the Corporation when:
18
<PAGE>
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the Corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the Corporation that the required vote for action
by the Board of Directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the Corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the Corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
ARTICLE XII
LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
ARTICLE XIII
EFFECTIVENESS OF BYLAWS
These Bylaws shall take effect only at such time as a Registration
Statement regarding the sale of the Corporation's Common Stock to the public is
declared effective by the Securities and Exchange Commission and the closing
with the underwriters in such offering has occurred.
19
<PAGE>
Exhibit 4.2
AMENDED AND RESTATED
SHAREHOLDERS' AND VOTING AGREEMENT
by and among
INTEK INFORMATION, INC.
CONNING CAPITAL PARTNERS V, L.P.
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
U.S. INFORMATION TECHNOLOGY FINANCING, L.P.
ENCOMPASS GROUP, INC.
TRANS COSMOS USA, INC.
BVCF IV, L.P.
and
THE OTHER SHAREHOLDERS
THAT ARE SIGNATORIES HERETO
Dated as of January 14, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Section 1. Definitions.......................................................... 1
-----------
Section 2. Methodology for Calculations......................................... 7
----------------------------
Section 3. Corporate Governance................................................. 8
--------------------
3.1. Composition of the Board............................................. 8
------------------------
3.2. Committees; Subsidiaries; Audit Committee; Compensation Committee.... 15
-----------------------------------------------------------------
3.3. Vacancies; Removal................................................... 15
------------------
3.4. Non-Voting Observer.................................................. 17
-------------------
3.5. Representative....................................................... 20
--------------
3.6. Board and Committee Meetings......................................... 21
----------------------------
3.7. Directors' Indemnification........................................... 22
--------------------------
3.8. Irrevocable Proxy................................................... 23
------------------
3.9. Contractual Management Rights........................................ 23
-----------------------------
3.10. Expenses............................................................. 23
--------
3.11. Cooperation.......................................................... 24
-----------
Section 4. Restrictions on Transfers of Stock................................... 24
----------------------------------
4.1. General.............................................................. 24
-------
4.2. Shareholders' Agreement.............................................. 25
-----------------------
4.3. Conflicts with Other Provisions of this Agreement.................... 25
-------------------------------------------------
Section 5. Rights of First Offer................................................ 25
---------------------
5.1. First Offer.......................................................... 25
-----------
5.2. First Offer Obligations.............................................. 26
-----------------------
5.3. Transfer of Subject Stock............................................ 27
-------------------------
5.4. Closing.............................................................. 27
-------
5.5 Rights on Certain Management Sales................................... 27
----------------------------------
5.6. Limitations.......................................................... 28
-----------
Section 6. Tag-Along Rights..................................................... 29
----------------
6.1. Tag-Along............................................................ 30
---------
6.2. Tag-Along Obligations................................................ 29
---------------------
6.3. Closing.............................................................. 30
-------
6.4. Limitations.......................................................... 30
-----------
Section 7. Drag-Along Rights.................................................... 30
-----------------
7.1. Drag-Along........................................................... 30
----------
7.2. Limitations.......................................................... 31
-----------
Section 8. Pre-emptive Rights................................................... 31
------------------
8.1. Pre-emptive Rights................................................... 31
------------------
8.2. Purchase of Pre-Emptive Stock........................................ 32
-----------------------------
8.3. Issuance of Stock.................................................... 32
-----------------
8.4. Closing.............................................................. 32
-------
8.5. Limitations.......................................................... 32
-----------
Section 9. Holdback Agreement; Adjustments...................................... 33
-------------------------------
9.1. General.............................................................. 33
-------
9.2 Adjustments.......................................................... 33
-----------
Section 10. Certain Covenants.................................................... 34
-----------------
10.1. Financial Statements and Other Information........................... 34
------------------------------------------
10.2. Restrictions......................................................... 36
------------
10.3. Reservation of Common Stock.......................................... 38
---------------------------
10.4. Public Disclosures................................................... 39
------------------
Section 11. Conflicting Agreements............................................... 39
----------------------
Section 12. Legend............................................................... 39
------
12.1. Legend............................................................... 39
------
12.2. Termination of Legend................................................ 40
---------------------
</TABLE>
i
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<TABLE>
<S> <C>
Section 13. Representations and Warranties....................................... 40
------------------------------
13.1. Representations and Warranties of Each Party......................... 40
--------------------------------------------
13.2. Representations and Warranties to Conning and Beacon................. 41
----------------------------------------------------
Section 14. Duration of Agreement................................................ 41
---------------------
Section 15. Further Assurances................................................... 41
------------------
Section 16. Increased Authorized Stock........................................... 42
--------------------------
Section 17. Amendment and Waiver................................................. 42
--------------------
Section 18. Severability......................................................... 43
------------
Section 19. Entire Agreement..................................................... 43
----------------
Section 20. Successors and Assigns............................................... 43
----------------------
Section 21. Counterparts......................................................... 43
------------
Section 22. Remedies............................................................. 43
--------
Section 23. Notices.............................................................. 44
-------
Section 24. Governing Law; Consent to Jurisdiction............................... 44
--------------------------------------
Section 25. Miscellaneous........................................................ 45
-------------
Section 26. Construction......................................................... 45
------------
Section 27. Pledges of Shares.................................................... 45
-----------------
Section 28. O'Crowley Life Insurance; Use of Proceeds............................ 45
-----------------------------------------
Section 29. Rule Against Perpetuities............................................ 46
-------------------------
Section 30. Spider Technologies, Inc. Spin Off................................... 46
----------------------------------
30.1 No Application to Spider............................................. 46
------------------------
30.2 Unwind............................................................... 46
------
30.3 Effect on Liquidation Preference..................................... 47
--------------------------------
30.3.2. Spider Excess Preference Distribution................................ 48
-------------------------------------
30.3.3. Spider Deficit Distribution.......................................... 49
---------------------------
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
--------------------
SHAREHOLDERS' AND VOTING AGREEMENT
----------------------------------
THIS AMENDED AND RESTATED SHAREHOLDERS' AND VOTING AGREEMENT (the
"Agreement") is made effective as of January 14, 2000, by and among INTEK
---------
INFORMATION, INC., a Delaware corporation (the "Company"), CONNING INSURANCE
-------
CAPITAL PARTNERS V, L.P. a Delaware limited partnership ("Conning"), THE BEACON
-------
GROUP III - FOCUS VALUE FUND, L.P., a Delaware limited partnership ("Beacon"),
------
U.S. INFORMATION TECHNOLOGY FINANCING, L.P., a Washington limited partnership
("USITF"), ENCOMPASS GROUP, INC., a Washington corporation, ("Encompass"), TRANS
----- ---------
COSMOS USA, INC., a Washington corporation ("TCI"), BVCF IV, L.P., a Delaware
---
limited partnership ("BRINSON"), and each of the stockholders of the Company
-------
executing one of the signature pages attached hereto or who was a party to the
Original Agreement (as defined below) (including by execution of a Joinder
Agreement) and is still a holder of Stock.
W I T N E S S E T H :
--------------------
WHEREAS, the Company, Conning, Beacon, Resource Bancshares Corporation,
a South Carolina corporation ("RBC"), USITF, Encompass, TCI, Timothy O'Crowley
---
("O'Crowley"), and Frank Richards ("Richards", and together with Conning,
--------- --------
Beacon, RBC and O'Crowley, the "Amending Shareholders") are parties to that
---------------------
certain Amended and Restated Shareholders' and Voting Agreement made as of April
16, 1999 (the "Original Agreement"); and
------------------
WHEREAS, the Amending Shareholders, who collectively hold at least a
majority of the outstanding Common Stock, and the Company desire to amend and
restate the Original Agreement in its entirety as set forth herein, as permitted
in Section 17 of the Original Agreement; and
WHEREAS, this Agreement is entered into in contemplation of a public
offering of the Company's Common Stock, and addresses issues between the date
hereof and the closing of that offering and the termination of this Agreement
upon that closing; and
WHEREAS, the parties hereto deem it to be in their best interests to
enter into an agreement establishing and setting forth their agreement with
respect to certain rights and obligations associated with ownership of shares of
capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
Section 1. Definitions.
------------
As used herein, the following terms shall have the following meanings:
1
<PAGE>
"Accepting Shareholder Ratio" means, with respect to an Accepting
---------------------------
Shareholder or Accepting MT Shareholder (as applicable), a fraction, the
numerator of which shall be the number of shares of outstanding Common Stock
(including, but not limited to, shares of the Subject Stock previously
subscribed for pursuant to Section 5.2 or Section 5.5, as applicable) that are
owned, directly or indirectly, by such Accepting Shareholder or Accepting MT
Shareholder (as applicable), and the denominator of which shall be the aggregate
number of shares of outstanding Common Stock (including, but not limited to,
shares of the Subject Stock previously subscribed for pursuant to Section 5.2 or
Section 5.5, as applicable) that are owned, directly or indirectly, by all
Accepting Shareholders or Accepting MT Shareholders (as applicable) who desire
to purchase shares of Excess Subject Stock or Excess MT Stock, as applicable.
"Affiliate" means (i) with respect to any Person, any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (ii) with respect to any natural
Person, shall also mean the spouse, parent, sibling, child, step-child,
grandchild, niece or nephew of such Person, or the spouse thereof, (iii) the
estate of a Shareholder or Affiliate, (iv) any trust created for the benefit of
a Shareholder or by a Shareholder for an Affiliate specified in clause (ii) and
(v) with respect to any Person, any general partner or limited partner of such
Person.
"Agreed Director" has the meaning given it in Section 3.1(a)(v).
---------------
"Bain" means Bain & Company, Inc.
----
"By-laws" means the By-laws of the Company as in effect on the date
-------
hereof, as they may be amended from time to time hereafter.
"Cause" means (a) dishonesty that is not the result of an inadvertent or
-----
innocent mistake of O'Crowley with respect to the Company or any of its
Subsidiaries, (b) willful misfeasance or nonfeasance of duty by O'Crowley
intended to injure or having the effect of injuring in some material fashion the
reputation, business or business relationships of the Company or any of its
Subsidiaries or any of their respective officers, directors or employees, (c)
conviction of O'Crowley upon a charge of any crime involving moral turpitude or
a crime other than a vehicle offense that could reflect in some material fashion
unfavorably upon the Company or any of its Subsidiaries, or (d) willful or
prolonged absence from work by O'Crowley (other than by reason of disability due
to physical or mental illness) or failure, neglect or refusal by O'Crowley to
perform his duties and responsibilities without the same being corrected upon 20
days written notice.
"Certificate" means the Amended and Restated Certificate of
-----------
Incorporation of the Company as in effect on the date hereof and as it may be
amended from time to time hereafter.
2
<PAGE>
"Common Stock" means the Common Stock, par value $.0001 per share, of
------------
the Company and any equity securities issued or issuable with respect to the
Common Stock in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, but does not include capital
stock of Spider Technologies, Inc., including that distributed pursuant to a
Distribution Plan approved by holders of a majority of each of the Series of
Preferred Stock and the Common Stock, each voting as a separate class.
"Common Stock Equivalents" means securities convertible into, or
------------------------
exchangeable or exercisable for, shares of Common Stock.
"Drag-Along Initiator" means (i) Conning and its Affiliates, or (ii)
--------------------
Beacon and its Affiliates, as the case may be.
"Drag-Along Preconditions" mean (i) the delivery of the Drag-Along
------------------------
Notice on or after March 1, 2002, (ii) the consent of the holders of at least a
majority of the then outstanding shares of Stock that have been originally
issued by the Company to Beacon as of the date of the Drag-Along Notice (or
issued and outstanding with respect to such Stock upon the exercise, exchange or
conversion thereof), on an as-converted and as-exercised basis, to the Drag-
Along Initiator's exercise of its drag-along rights pursuant to Section 7, and
(iii) the consent of the holders of at least a majority of the outstanding
shares of Series D Preferred as of the date of the Drag-Along Notice (or issued
and outstanding with respect to Series D Preferred upon the exercise, exchange
or conversion thereof) on an as-converted basis to the Drag-Along Initiator's
exercise of its drag-along rights pursuant to Section 7.
"Exchange Agreement" means the Exchange Agreement dated May 7, 1998__by
------------------
and between the Company and Beacon.
"First Offer Ratio" means, with respect to (a) an Offered Shareholder
-----------------
and (b) determining the rights thereof in connection with an Offer, a fraction,
the numerator of which shall be the aggregate number of shares of outstanding
Common Stock (including, without limitation, all Common Stock Equivalents (other
than options under employee stock option plans or similar stock purchase rights)
on an as-converted, as-exchanged or as-exercised basis, as applicable) owned,
directly or indirectly, by such Offered Shareholder, and the denominator of
which shall be the aggregate number of shares of outstanding Common Stock
(including, without limitation, all Common Stock Equivalents (other than options
under employee stock option plans or similar stock purchase rights) on an as-
converted, as-exchanged or as-exercised basis, as applicable) owned, directly or
indirectly, by all of the Offered Shareholders.
"GAAP" means United States generally accepted accounting principles, as
----
in effect from time to time.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
-------
as amended.
3
<PAGE>
"Independent Director" means a director of the Company or any of its
--------------------
Subsidiaries that is not a Beacon Director, a Conning Director, an O'Crowley
Director, a RBC Director, a TCI Director, a Brinson Director (if appointed) or
a director designated pursuant to Section 3.l(a)(v).
"IPO" means the initial underwritten offering pursuant to which the
---
Common Stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended.
"Major Shareholder" means (a) any of Beacon, Conning, USITF, Encompass,
-----------------
TCI, O'Crowley, Patrick O'Neal, the Eden Financial Group, Inc. Capital
Accumulation Profit Sharing Plan FBO Patrick F. O'Neal, RBC, Frank Richards,
Tyce Fields, Joan M. Fields, James M. Fields, Stephen J. Darnell, Thomas M.
Rocca, Craig Barton, Michael E. Ford, John Steuart, Bain, SLI, Brinson and any
other Shareholder who (i) is a member of the Company's management and (ii) is so
designated by the Board with the consent of Beacon and Conning, (b) any
purchaser of shares of Series E Preferred pursuant to the provisions of the
Purchase Agreement among the Company, USITF, Encompass, TCI and certain other
parties dated April 16, 1999 (unless otherwise agreed in writing with such
purchaser) who purchases Series E Preferred Stock that, in the aggregate on an
as-converted basis, constitutes the greater of (i) 400,000 shares of Common
Stock (adjusted appropriately to reflect stock splits and combinations and stock
dividends other than a Series E PIK Election) and (ii) one percent of the then
outstanding Common Stock, (c) any purchaser of Series F Preferred pursuant to
the provisions of the Purchase Agreement among the Company and Brinson dated
November 19, 1999 (the "Brinson Purchase Agreement") (unless otherwise agreed in
--------------------------
writing with such purchaser) who purchases Series F Preferred Stock that, in the
aggregate on an as-converted basis, constitutes the greater of (i) 400,000
shares of Common Stock (adjusted appropriately to reflect stock splits and
combinations and stock dividends other than a Series F PIK Election) and (ii)
one percent of the then outstanding Common Stock, and (d) any transferee of
Stock who receives pursuant to such Transfer Common Stock and/or Preferred Stock
that, in the aggregate on an as-converted basis, constitutes the greater of (i)
400,000 shares of Common Stock (adjusted appropriately to reflect stock splits
and combinations and stock dividends other than a Preferred Stock PIK Election)
and (ii) one percent of the then outstanding Common Stock.
"Maximum Post-Issuance Amount" means, with respect to a Major
----------------------------
Shareholder and determining the rights thereof in connection with a Pre-emptive
Offer, the product of (a) the number of shares of outstanding Common Stock owned
by such Major Shareholder as of the date of the Pre-emptive Notice delivered in
connection with such Pre-emptive Offer multiplied by (b) a fraction, the
numerator of which shall be the aggregate number of shares of outstanding Common
Stock (including, without limitation, all Common Stock Equivalents on an as-
converted, as-exchanged or as-exercised basis, as applicable) immediately
following the consummation of the proposed Issuance that gave rise to the Pre-
emptive Offer and the denominator of which shall be the aggregate number of
shares of outstanding Common Stock (including, without limitation, all Common
Stock Equivalents on an as-converted, as-exchanged or as-exercised basis, as
applicable) as of the date of such Pre-emptive Notice.
4
<PAGE>
"Person" means any individual, corporation, limited liability company,
------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Stock" means the Series A Preferred, the Series B Preferred,
---------------
the Series C Preferred, the Series D Preferred, the Series E Preferred and the
Series F Preferred.
"Public Sale" means a Transfer pursuant to a bona fide underwritten
-----------
public offering pursuant to an effective registration statement filed under the
Securities Act or pursuant to Rule 144 under the Securities Act.
"Purchase Agreement" means one or more of (i) the Purchase Agreement
------------------
dated as of December 22, 1997, by and among the Company and Beacon, (ii) the
Preferred Stock Purchase Agreement dated as of February 3, 1997, by and among
the Company, Beacon and certain other parties thereto, (iii) the Series D
Preferred Stock Purchase Agreement dated as of May 7, 1998, by and among the
Company, Conning, Beacon and certain other parties thereto, (iv) the Series E
Preferred Stock Purchase Agreement dated as of April 16, 1999, by and among the
Company, USITF, Encompass, TCI and certain other parties, and (v) the Brinson
Purchase Agreement, as the context may require.
"Qualified IPO" means any underwritten public offering of Common Stock
-------------
(pursuant to an effective registration statement filed under the Securities
Act), (a) resulting in at least $25,000,000 of net proceeds to the Company and
(b) reflecting a per share offering price for each share of Common Stock sold in
such offering of no less than $3.00 (subject to adjustment for stock splits and
combinations, recapitalizations and stock dividends of the Common Stock).
"Registration Rights Agreements" mean (i) that certain Registration
------------------------------
Rights Agreements made as of May 7, 1998, by and between the Company and
Conning, as amended by Amendment No. 1 dated as of April 16, 1999, Amendment No.
2 dated as of October 30, 1999, and Amendment No. 3 dated as of November 19,
1999, (ii) that certain Amended and Restated Registration Rights Agreement made
as of February 3, 1997, by and among the Company, RBC and O'Crowley, as amended
by Amendment No. 1 dated May 7, 1998, Amendment No. 2 dated as of April 16,
1999, Amendment No. 3 dated as of October 1, 1999, Amendment No. 4 dated as of
October 30, 1999, and Amendment No. 5 dated as of November 19, 1999, (iii) that
certain Registration Rights Agreement dated as of February 3, 1997, by and among
the Company, Frank Richards, Tyce Fields, Bain, SLI and certain other persons
named therein, as amended by Amendment No. 1 dated May 7, 1998, Amendment No. 2
dated as of April 16, 1999, Amendment No. 3 dated as of October 30, 1999 and
Amendment No. 4 dated as of November 19, 1999, (iv) that certain Registration
Rights Agreement dated as of February 3, 1997, by and between the Company and
Beacon, as amended by Amendment No. 1 dated as of December 22, 1997, Amendment
No. 2 dated May 7, 1998, Amendment No. 3 dated as of April 16, 1999, Amendment
No. 4 dated as of October 30, 1999, and Amendment No. 5 dated as of November 19,
1999, (v) that certain Registration Rights Agreement dated as of April 16, 1999,
by and among the Company, USITF, Encompass, and TCI as amended by Amendment No.
1 dated as of
5
<PAGE>
October 30, 1999 and Amendment No. 2 dated as of November 19, 1999, (vi) the
certain Registration Rights Agreement dated as of October 30, 1999 by and
between the Company and the former shareholders of Acorn Information Systems,
Inc. and one additional party, as amended by Amendment No. 1 dated as of
November 19, 1999 and (vii) that certain Registration Rights Agreement dated as
of November 19, 1999 by and between the Company and Brinson (which may have
added additional parties as contemplated by the Brinson Purchase Agreement).
"Securities Act" means the Securities Act of 1933, as amended, and,
--------------
where applicable, the rules and regulations promulgated thereunder.
"Series A Preferred" means Series A Preferred Stock, par value $.001 per
------------------
share, of the Company.
"Series B Preferred" means Series B Convertible Preferred Stock, par
------------------
value $.001 per share, of the Company.
"Series C Preferred" means Series C Convertible Preferred Stock, par
------------------
value $.001 per share, of the Company.
"Series D Preferred" means Series D Convertible Preferred Stock, par
------------------
value $.001 per share, of the Company.
"Series E Preferred" means Series E Convertible Preferred Stock, par
------------------
value $.001 per share, of the Company.
"Series F Additional Adjustments" has the meaning given it in the
-------------------------------
Certificate.
"Series F Preferred" means Series F Convertible Preferred Stock, par
------------------
value $.001 per share, of the Company.
"Series NB Warrant" means a Series NB Warrant to purchase shares of
-----------------
Common Stock as amended and restated on November 19, 1999.
"Shareholders" means the stockholders party to this Agreement and/or the
------------
Original Agreement, and any other subsequent holder of Stock who agrees to be
bound by the terms of this Agreement.
"SLI" means Squam Lake Investors II, L.P.
---
"Spider Series A Preferred Stock" means Series A Preferred Stock, par
-------------------------------
value $0.0001 of Spider Technologies, Inc., a Delaware corporation.
"Stock" means any shares of Common Stock and any Common Stock
-----
Equivalents (including, without limitation, the Series A Preferred, Series B
Preferred, Series C Preferred,
6
<PAGE>
Series D Preferred, Series E Preferred, Series F Preferred, and the Common Stock
issuable upon conversion or exercise thereof or upon exercise of a Series NB
Warrant), in each case, whether owned on the date hereof or acquired hereafter.
"Subsidiary" means with respect to any Person, (i) any corporation,
----------
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such corporation, partnership or
other entity are at the time owned by such Person, or (ii) the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries by such Person.
"Tag-Along Ratio" means with respect to a Tag Along Offeree, a fraction,
---------------
the numerator of which is the number of shares of outstanding Common Stock owned
by such Tag-Along Offeree as of the date of a proposed Transfer subject to
Section 6 and the denominator of which is the aggregate number of shares of
outstanding Common Stock owned as of the date of the relevant Tag-Along Notice
by each Tag-Along Initiator and by all other Tag-Along Offerees.
"Transfer" as to any Stock, means to sell, or in any other way, directly
--------
or indirectly, transfer, assign, distribute, pledge, encumber or otherwise
dispose of, either voluntarily or involuntarily; provided, however, that the
-------- -------
term "Transfer" shall not include the transfer, assignment, distribution,
pledge, encumbrance or other disposition of all or any part of a Series NB
Warrant in accordance with the terms of such Series NB Warrant.
"Unit" shall have the meaning assigned thereto in the Certificate.
----
"Voting Shares" means any securities of the Company the holders of which
-------------
are generally entitled to vote for members of the Board (including, without
limitation, all outstanding shares of Common Stock and Preferred Stock).
"Warrants" means the Amended and Restated Warrant NB-1 of the Company to
--------
acquire additional Common Stock of the Company.
Section 2. Methodology for Calculations.
----------------------------
For purposes of this Agreement, the Transfer of a Common Stock
Equivalent shall be treated as the Transfer of the shares of Common Stock into
which such Common Stock Equivalent can be converted, exchanged or exercised.
Except as otherwise provided in this Agreement, for purposes of calculating (a)
the amount of outstanding Common Stock as of any date, (b) the amount of Common
Stock owned by a Person hereunder and (c) related percentages and ratios, all
outstanding shares of the Preferred Stock, the Purchase Option and Series NB
Warrants (but no other Common Stock Equivalents) shall be treated as having been
converted, exchanged or exercised. The Series F Additional Adjustments shall
not be deemed to result in an increase in the number of shares of outstanding
Common Stock until such adjustments occur.
7
<PAGE>
Section 3. Corporate Governance.
--------------------
3.1. Composition of the Board.
------------------------
(a) Pre-Qualified IPO. Prior to a Qualified IPO, the Board of
-----------------
Directors of the Company (the "Board") shall include not more than ten members
-----
(except as provided in Section 3.1 (a)(vii)) and shall be composed as follows
and as further described in Section 3.1(a)(xi):
(i) Commencing on the closing of the transactions contemplated by
the Purchase Agreement and for so long thereafter as Conning and its Affiliates,
in the aggregate, hold, directly or indirectly, 5% or more of the outstanding
Common Stock (the "Conning Pre-IPO Threshold"), Conning shall have the right to
-------------------------
designate two persons to serve as members of the Board (each, a "Conning
-------
Director"); provided, however, that if Conning and its Affiliates, in the
- -------- -------- -------
aggregate, hold, directly or indirectly, less than the Conning Pre-IPO
Threshold, then Conning shall not be entitled to designate any directors, and
the Shareholders shall have the right to remove, with or without cause and
without any further action by any Shareholder or director, any and all Conning
Directors and the right to designate, by election, two new directors, each of
whom shall be an Independent Director;
(ii) Commencing on the closing of the transactions contemplated by
the Purchase Agreement and for so long thereafter as Beacon and its Affiliates,
in the aggregate, hold, directly or indirectly, 5% or more of the outstanding
Common Stock (the "Beacon Pre-IPO Threshold"), Beacon shall have the right to
------------------------
designate two persons to serve as members of the Board (each, a "Beacon
------
Director"); provided, however, that if Beacon and its Affiliates, in the
- -------- -------- -------
aggregate, hold, directly or indirectly, less than the Beacon Pre-IPO Threshold,
then Beacon shall not be entitled to designate any directors, and the
Shareholders shall have the right to remove, with or without cause and without
any further action by any Shareholder or director, any and all Beacon Directors
and the right to designate, by election, two new directors, each of whom shall
be an Independent Director;
(iii) As long as he is the Chief Executive Officer or Chairman of the
Board of the Company, O'Crowley shall have the right to designate three persons
to serve as members of the Board (each, an "O'Crowley Director"), one of whom
------------------
shall be O'Crowley as long as he is the Chief Executive Officer or Chairman of
the Board of the Company; provided, however, that (A) if O'Crowley is neither
-------- -------
the Chief Executive Officer nor Chairman of the Board of the Company (other than
by reason of his removal from such position(s) by the Company for Cause) and, in
combination with his Affiliates, continues to own at least 50% of the number of
shares of outstanding Common Stock (adjusted appropriately to reflect stock
splits and combinations and stock dividends) that he and his Affiliates owned,
in the aggregate, as of February 3, 1997, then O'Crowley shall be entitled to
designate two persons to serve as members of the Board (who shall be the only
O'Crowley Directors), and the Shareholders shall have the right to remove, with
or without cause and without further action by any Shareholder or director, any
other O'Crowley Director and the right to designate, by election, one new
director, who shall be an Independent Director, (B) if O'Crowley is neither the
Chief Executive Officer nor Chairman of the Board of
8
<PAGE>
the Company for any reason and he and his Affiliates, in the aggregate, hold,
directly or indirectly, 5% or more of the outstanding Common Stock, O'Crowley
shall have the right to designate one person (who may be himself) to serve as a
member of the Board (who shall be the only O'Crowley Director) and the
Shareholders shall have the right to remove, with or without cause and without
further action by any Shareholder or director, any other O'Crowley Director and
the right to designate, by election, two new directors, who shall be Independent
Directors and (C) except as provided in the preceding clause (B), (I) if
O'Crowley is neither the Chief Executive Officer nor Chairman of the Board of
the Company by reason of his removal by the Company from such position(s) for
Cause or (II) if O'Crowley is neither the Chief Executive Officer nor Chairman
of the Board of the Company for any reason and, in combination with his
Affiliates, does not continue to own, directly or indirectly, at least 50% of
the number of shares of outstanding Common Stock (adjusted appropriately to
reflect stock splits and combinations and stock dividends) that he and his
Affiliates owned, in the aggregate, as of February 3, 1997, then O'Crowley shall
not be entitled to designate any directors, and the Shareholders shall have the
right to remove, with or without cause and without any further action by any
Shareholder or director, any and all O'Crowley Directors and the right to
designate, by election, three new directors, each of whom shall be an
Independent Director;
(iv) As long as RBC and its Affiliates, in the aggregate, own,
directly or indirectly, at least 1,800,000 shares of outstanding Common Stock on
an as-converted basis (adjusted appropriately to reflect stock splits and
combinations and stock dividends, but excluding any received or receivable upon
a Series A PIK Election as defined in the Certificate) RBC shall have the right
to designate one person to serve as a member of the Board (the "RBC Director");
------------
provided, however, that if RBC and its Affiliates, in the aggregate, own,
- -------- -------
directly or indirectly, less than 1,800,000 shares of outstanding Common Stock
on an as-converted basis (adjusted appropriately to reflect stock splits and
combinations and stock dividends, but excluding any received or receivable upon
a Series A PIK Election as defined in the Certificate), then RBC shall not be
entitled to designate any director, and (A) if Conning, Beacon and O'Crowley
each have the right to designate at least two directors pursuant to Sections
3.1(a)(i), 3.1(a)(ii) and 3.1(a)(iii), then O'Crowley, Conning and Beacon shall
have the right to remove, with or without cause and without any further action
by any Shareholder or director, the RBC Director and the right to designate, by
mutual agreement, one new director, who shall be an Independent Director; (B) if
less than all of O'Crowley, Conning or Beacon continue to have the right to
designate at least two directors pursuant to Sections 3.l(a)(i), 3.l(a)(ii) and
3.1(a)(iii), then whichever of them continues to have such rights shall have the
right (acting by mutual agreement if more than one) to remove, with or without
cause and without any further action by any Shareholder or director, the RBC
Director and the right (acting by mutual agreement if more than one) to
designate one new director, who shall be an Independent Director, and (C) if
none of O'Crowley, Conning or Beacon is entitled to designate at least two
directors pursuant to Sections 3.1(a)(i), 3.1(a)(ii) and 3.1(a)(iii), then the
Shareholders voting as a single class on an as-converted to Common Stock basis,
shall have the right to remove, with or without cause and without any further
action by any Shareholder or director, the RBC Director and the right to
designate, by election, one new director, who shall be an Independent Director;
9
<PAGE>
(v) Conning, Beacon and O'Crowley, if he is either Chairman of the
Board or Chief Executive Officer, shall by mutual agreement, or if O'Crowley is
then neither Chairman of the Board nor Chief Executive Officer, the Shareholders
voting as a single class on an as-converted to Common Stock basis, shall have
the right to appoint one director and remove, with or without cause and without
any further action by any Shareholder or director, such director and the right
to designate, by election, one new director, who shall be an Independent
Director (the "Agreed Director"). The initial Agreed Director is Stephen Hyde;
---------------
(vi) Commencing on the closing of the transactions contemplated by
the Purchase Agreement and for so long thereafter as TCI and its Affiliates, in
the aggregate, hold, directly or indirectly, 4% or more of the outstanding
Common Stock (the "TCI Pre-IPO Threshold"),TCI shall have the right to designate
---------------------
one person to serve as a member of the Board (the "TCI Director"); provided,
------------ --------
however, that if TCI and its Affiliates, in the aggregate, hold, directly or
- -------
indirectly, less than the TCI Pre-IPO Threshold, then TCI shall not be entitled
to designate any director, and the Shareholders shall have the right to remove,
with or without cause and without any further action by any Shareholder or
director, the TCI Director and the right to designate, by election, one new
director, who shall be an Independent Director;
(vii) If a Qualified IPO has not closed before July 31, 2000, (A) the
Board shall be expanded to include not more than eleven members and (B) Brinson,
and for so long thereafter as Brinson and its Affiliates, in the aggregate,
hold, directly or indirectly, 4% or more of the outstanding Common Stock (the
"Brinson Pre-IPO Threshold"), shall have the right to designate one person to
-------------------------
serve as a member of the Board (the "Brinson Director"); provided, however, that
---------------- -------- -------
if Brinson and its Affiliates, in the aggregate, hold, directly or indirectly,
less than the Brinson Pre-IPO Threshold, then Brinson shall not be entitled to
designate any director, and the Shareholders shall have the right to remove,
with or without cause and without any further action by any Shareholder or
director, the Brinson Director and shall have the right to designate, by
election, one new director, who shall be an Independent Director;
(viii) Subject to Section 3.1(a)(xi), each action of the Board of
Directors shall require seven affirmative votes except that if there is a
Brinson Director, each such action shall require eight affirmative votes;
(ix) Notwithstanding any other provisions of this Agreement, if the
consolidated financial statements of the Company for the twelve month period
ending March 31, 2001, do not report a positive number for earnings before taxes
and before amortization of goodwill in respect of companies or operations
acquired by the Company or its Subsidiaries after January 1, 1998, (utilizing
the same accounting principles, standards and assumptions as in effect on May 5,
1998 and excluding the effects of (i) performance based compensation paid to
executives of companies or operations acquired by the Company or its
Subsidiaries in an amount (which may be all or a part of such compensation) as
determined by the audit committee of the Board prior to the time of signing of
the letter of intent or term sheet for the acquisition, (ii) such other or
similar charges and costs as the Company's Board of Directors, Conning and
Beacon may agree in writing are appropriate in respect of a particular purchase
of a business, and (iii)
10
<PAGE>
accounting charges in respect of stock options including repriced options if
such option or repricing was approved by the Board); then from and after the
date of such financial statements (regardless of whether the Company
subsequently reports a positive such number with respect to any subsequent
fiscal year), action of the Board shall require twelve affirmative votes, and
(A) each Beacon Director shall be entitled to cast three votes, (B) each Conning
Director shall be entitled to cast three votes, (C) each other director shall be
entitled to cast one vote, and (D) the Beacon Directors and Conning Directors
will use good faith efforts to exercise their voting rights together; and
(x) The number of directors that comprise the Board of Directors may
not be changed (A) without the consent of Conning, so long as Conning and its
Affiliates, in the aggregate, continue to own, directly or indirectly, shares of
Stock comprising on an as-converted and as-exercised basis at least the Conning
Pre-IPO Threshold, (B) without the consent of Beacon, so long as Beacon and its
Affiliates, in the aggregate, continue to own, directly or indirectly, shares of
Stock comprising on an as-converted and as-exercised basis at least the Beacon
Pre-IPO Threshold, (C) without the consent of O'Crowley, so long as O'Crowley is
entitled to designate an O'Crowley Director, and (D) without the consent of RBC,
so long as RBC and its Affiliates, in the aggregate, own, directly or
indirectly, at least 2,900,000 shares of outstanding Common Stock on an as-
converted basis (adjusted appropriately to reflect stock splits and combinations
and stock dividends, but excluding any received or receivable upon a Series A
PIK Election as defined in the Certificate).
(xi) As of the date hereof, the Company is in the process of
preparing a registration statement to register its Common Stock with the SEC for
an IPO. Subsequent to the date hereof and prior to the closing of an IPO, or the
termination without closing of the IPO, the composition of the Board of
Directors will be as follows, subject to the rights in (xii) below. The Board of
Directors shall consist of one (1) Conning Director, two (2) Beacon Directors,
Timothy C. O'Crowley, Rick Weller and Stephen Hyde. The provisions of Sections
3.1(a)(i) (as to the Conning Director), 3.1(a)(ii) (as to the Beacon Directors),
3.1(a)(iii)(as to Timothy C. O'Crowley and Rick Weller, and 3.1(a)(v) (as to
Stephen Hyde) shall apply. Each decision of the Board of Directors shall require
four (4) affirmative votes at all times that there are six (6) directors. This
subsection (xi) shall be of no further force at the earlier of either (i) the
Board of Directors decides to not continue with or close the IPO or (ii) July
31, 2000.
(xii) Notwithstanding subsection (xi) above, during the period
subsection (xi) is applicable, RBC may reappoint an RBC Director (if it has such
right pursuant to Section 3.1(a)(iv), and TCI may reappoint a TCI Director (if
it has such right pursuant to Section 3.1(a)(vi)). At such time as subsection
(xi) is applicable, and there is either (but not both) an RBC Director or TCI
Director, the Board shall consist of seven members and any action shall require
five (5) affirmative votes, and if there is both an RBC Director and TCI
Director, the Board shall consist of eight members and any action shall require
six (6) affirmative votes. The provisions of Subsections (xi) and (xii) do not
supersede the rights to a Non-Voting Observer under Section 3.4.
11
<PAGE>
(b) Post Qualified IPO.
------------------
(i) From and after a Qualified IPO and for so long as Conning and
its Affiliates, in the aggregate, hold (x) 25% or more of the number of shares
of Series D Preferred purchased by Conning pursuant to the Purchase Agreement or
(y) 5% or more of the outstanding Common Stock (the "Conning Post-IPO
----------------
Threshold"), in connection with any election for members of the Board, the
- ---------
Company shall, at the request of Conning, include one representative designated
by Conning in the slate of directors recommended by the Board to stockholders
for election as directors (such representative designated by Conning being
referred to herein as the "Conning Designee"). The Company and the Shareholders
----------------
shall each use their best efforts to cause the Conning Designee to be elected
to, and to be maintained as a member of, the Board (including (a) in the case of
the Company, recommending to the stockholders of the Company the election of the
Conning Designee to the Board and opposing any proposal to remove the Conning
Designee at each meeting of the stockholders of the Company at which the
election or removal of members of the Board is on the agenda and (b) in the case
of the Shareholders, voting all of their Voting Shares in favor of the Conning
Designee, and voting such shares against any person opposing the Conning
Designee), and shall take no action that would diminish the prospects of the
Conning Designee being elected to the Board or increase the prospects of the
Conning Designee being removed from the Board.
(ii) From and after a Qualified IPO and for so long as Beacon and its
Affiliates, in the aggregate, hold (x) 25% or more of the number of shares of
Series B Preferred purchased by Beacon pursuant to the Purchase Agreement, or
(y) 5% or more of the outstanding Common Stock (the "Beacon Post-IPO
---------------
Threshold"), in connection with any election for members of the Board, the
- ---------
Company shall, at the request of Beacon, include one representative designated
by Beacon in the slate of directors recommended by the Board to stockholders for
election as directors (such representative designated by Beacon being referred
to herein as the "Beacon Designee"). The Company and the Shareholders shall
---------------
each use their best efforts to cause the Beacon Designee to be elected to, and
to be maintained as a member of, the Board (including (a) in the case of the
Company, recommending to the stockholders of the Company the election of the
Beacon Designee to the Board and opposing any proposal to remove the Beacon
Designee at each meeting of the stockholders of the Company at which the
election or removal of members of the Board is on the agenda and (b) in the case
of the Shareholders, voting all of their Voting Shares in favor of the Beacon
Designee, and voting such shares against any person opposing the Beacon
Designee), and shall take no action that would diminish the prospects of the
Beacon Designee being elected to the Board or increase the prospects of the
Beacon Designee being removed from the Board. The Beacon Designee shall be Eric
R. Wilkinson as long as he is a partner of The Beacon Group or a member of The
Beacon Group Holdings, L.L.C.
(iii) From and after a Qualified IPO and for so long as O'Crowley (A)
is the Chief Executive Officer or Chairman of the Board of the Company or (B)
(I) owns in combination with his Affiliates, at least 50% of the number of
shares of outstanding Common
12
<PAGE>
Stock (adjusted appropriately to reflect stock splits and combinations and stock
dividends) that he and his Affiliates owned, in the aggregate, as of February 3,
1997, and (II) has for Cause ceased to be both the Chief Executive Officer and
Chairman of the Board of the Company, or (C) owns in conjunction with his
Affiliates 5% or more of the outstanding Common Stock, in connection with any
election for members of the Board, the Company shall, at the request of
O'Crowley, include one representative designated by him (which may be him) in
the slate of directors recommended by the Board to stockholders for election as
directors (such representative designated by O'Crowley being referred to herein
as the "O'Crowley Designee"). The Company and the Shareholders shall each use
------------------
their best efforts to cause the O'Crowley Designee to be elected to, and to be
maintained as a member of, the Board (including (a) in the case of the Company,
recommending to the stockholders of the Company the election of the O'Crowley
Designee to the Board and opposing any proposal to remove the O'Crowley Designee
at each meeting of the stockholders of the Company at which the election or
removal of members of the Board is on the agenda and (b) in the case of the
Shareholders, voting all of their Voting Shares in favor of the O'Crowley
Designee, and voting such shares against any person opposing the O'Crowley
Designee), and shall take no action that would diminish the prospects of the
O'Crowley Designee being elected to the Board or increase the prospects of the
O'Crowley Designee being removed from the Board.
(iv) From and after a Qualified IPO and for so long as RBC and its
Affiliates, in the aggregate, own at least 10% of the outstanding Common Stock,
in connection with any election for members of the Board, the Company shall, at
the request of RBC, include one representative designated by RBC in the slate of
directors recommended by the Board to stockholders for election as directors
(such representative designated by RBC being referred to herein as the "RBC
---
Designee"). The Company and the Shareholders shall each use their best efforts
- --------
to cause the RBC Designee to be elected to, and to be maintained as a member of,
the Board (including (a) in the case of the Company, recommending to the
stockholders of the Company the election of the RBC Designee to the Board and
opposing any proposal to remove the RBC Designee at each meeting of the
stockholders of the Company at which the election or removal of members of the
Board is on the agenda and (b) in the case of the Shareholders, voting all of
their Voting Shares in favor of the RBC Designee, and voting such shares against
any person opposing the RBC Designee), and shall take no action that would
diminish the prospects of the RBC Designee being elected to the Board or
increase the prospects of the RBC Designee being removed from the Board.
(v) The rights under this Section 3.1(b) are specifically subject to
the termination provisions of Section 14, so that if a Qualified IPO closes
prior to July 31, 2000, this Section 3.1 shall be of no further force or effect.
(vi) The parties acknowledge that the Company may enter into separate
agreements, effective upon an IPO, with Conning whereby the Company agrees to
nominate a Conning designee to the Board of Directors, with Beacon whereby the
Company agrees to nominate one or two Beacon designees to the Board of
Directors, and with O'Crowley whereby
13
<PAGE>
the Company agrees to nominate an O'Crowley designee (which may be O'Crowley) to
the Board of Directors in each case subject to its fiduciary duties in respect
of such nomination.
3.2. Committees; Subsidiaries; Audit Committee; Compensation Committee.
-----------------------------------------------------------------
(a) Subject to the provisions set forth in paragraphs (c) and (d) below,
the Company will, to the extent requested by any of Conning, Beacon, O'Crowley,
RBC, TCI or Brinson (if it is entitled to a Brinson Director), take all actions
necessary to cause at least one Conning Director, Conning Designee, Beacon
Director, Beacon Designee, O'Crowley Director, O'Crowley Designee, Agreed
Director, RBC Director, RBC Designee, TCI Director, or Brinson Director (if it
is entitled to a Brinson Director), as the case may be, to be appointed to each
committee of the Board and to each of the boards of directors or other similar
managing bodies (and any committee thereof) of each of the Subsidiaries of the
Company.
(b) Subject to the provisions set forth in paragraphs (c) and (d) below,
the Company shall, to the extent requested by Conning, Beacon, O'Crowley, RBC,
TCI, or Brinson (if it is entitled to a Brinson Director), as the case may be,
elect as the board of directors of each Subsidiary those persons who are at the
time Conning Directors, Beacon Directors, O'Crowley Directors, the RBC Director,
Agreed Director, the TCI Director, a Brinson Director, a Conning Designee, a
Beacon Designee, an O'Crowley Designee or an RBC Designee as provided in Section
3.1. If any Conning Director, Conning Designee, Beacon Director, Beacon
Designee, O'Crowley Director, O'Crowley Designee, Agreed Director, RBC Director,
RBC Designee, TCI Director or Brinson Director serving on any committee of the
Board or on any board of directors or other similar managing body (and any
committee thereof) of any Subsidiary of the Company shall cease to serve as a
member of the Board for any reason or otherwise is unable to fulfill his or her
duties on any such committee, board of directors, or other similar managing
body, as the case may be, he or she shall be succeeded by another Person
designated (i) by Conning (with respect to Conning Directors or Conning
Designees), so long as Conning is entitled to designate Conning Directors or a
Conning Designee, as applicable, (ii) by Beacon (with respect to Beacon
Directors or Beacon Designees), so long as Beacon is entitled to designate
Beacon Directors or a Beacon Designee, as applicable, (iii) by O'Crowley (with
respect to O'Crowley Directors or O'Crowley Designees), so long as O'Crowley is
entitled to designate an O'Crowley Director or an O'Crowley Designee, as
applicable, (iv) by RBC (with respect to the RBC Director or RBC Designee), so
long as RBC is entitled to designate an RBC Director or an RBC Designee, as
applicable, (v) as provided in Section 3.1(a)(v) (with respect to the Agreed
Director), (vi) by TCI (with respect to the TCI Director), so long as TCI is
entitled to designate a TCI Director or (vii) by Brinson (with respect to the
Brinson Director), so long as Brinson is entitled to designate a Brinson
Director.
(c) For so long as requested by Conning or Beacon, there shall be an audit
committee and a compensation committee of the Board of Directors. Each such
committee shall have the scope of responsibilities typical of that type of
committee, but shall only recommend actions to the entire Board of Directors and
shall have no authority to bind the Company. The entire Board of Directors will
not adopt any action contrary to a properly authorized
14
<PAGE>
compensation committee or audit committee decision and if the Board of Directors
disagrees with such a decision then no action on the matter may be taken until
there is agreement between the committee and the Board of Directors (except that
this sentence does not apply to any decision as to a matter: (i) that was not
within the scope of the committee's responsibility or (ii) which the Board of
Directors cannot delegate to a committee pursuant to the Delaware General
Corporation Law). The compensation committee shall, among other things,
recommend whether stock option grants will be incentive stock options or non-
qualified stock options. Except as otherwise provided in Section 3.6, a meeting
of the committee may be called by any two of the committee members upon four (4)
days notice. Each such committee shall have three members, shall act by majority
vote of all the committee members, and each member of the committee must be a
director of the Company. Prior to a Qualified IPO, each such committee shall
consist of a designee appointed by O'Crowley if he is the Chairman of the
Company, or, if he is not, by the Chief Executive Officer of the Company (which
designee may be the Chairman or Chief Executive Officer), a designee appointed
by Beacon so long as Beacon is entitled to designate a Beacon Director under
Section 3.1(a)(ii), and a designee appointed by Conning so long as Conning is
entitled to designate a Conning Director under Section 3.1(a)(i). If Beacon or
Conning do not have a right to appoint a designee, then that committee position
shall be filled by a director of the Company appointed by the Board of Directors
of the Company. The person designating a committee member or observer shall be
entitled to remove and replace its designee from time to time.
The provisions of this paragraph (c) shall terminate upon a Qualified IPO.
(d) Notwithstanding anything in this Section 3.2 to the contrary, no
Shareholder shall be entitled to the rights set forth in paragraphs (a) or (b)
unless such Shareholder is entitled to designate a person to serve as a member
of the Board pursuant to Section 3.1(a) or as a designee as contemplated by
Section 3.1(b).
3.3. Vacancies; Removal.
------------------
(a) If any Conning Director or any Conning Designee shall cease to serve
as a director of the Company for any reason, the vacancy resulting thereby shall
be filled by another person designated by Conning, so long as Conning is
entitled to designate Conning Directors or a Conning Designee, as applicable.
(b) None of the Conning Directors nor any Conning Designee shall be
removed from office without the consent of Conning, so long as Conning is
entitled to designate Conning Directors or a Conning Designee, as applicable.
Each Conning Director and Conning Designee may be removed from office at any
time, with or without cause, at the request of Conning, so long as Conning is
entitled to designate Conning Directors or a Conning Designee, as applicable.
(c) If any Beacon Director or any Beacon Designee shall cease to serve as
a director of the Company for any reason, the vacancy resulting thereby shall be
filled by another
15
<PAGE>
person designated by Beacon, so long as Beacon is entitled to designate Beacon
Directors or a Beacon Designee, as applicable.
(d) None of the Beacon Directors nor any Beacon Designee shall be removed
from office without the consent of Beacon, so long as Beacon is entitled to
designate Beacon Directors or a Beacon Designee, as applicable. Each Beacon
Director and Beacon Designee may be removed from office at any time, with or
without cause, at the request of Beacon, so long as Beacon is entitled to
designate Beacon Directors or a Beacon Designee, as applicable.
(e) If any O'Crowley Director or any O'Crowley Designee shall cease to
serve as a director of the Company for any reason (other than as set forth in
Section 3.1(a)(iii)), the vacancy resulting thereby shall be filled by another
person designated by O'Crowley, so long as and only to the extent that O'Crowley
is entitled to designate an O'Crowley Director or an O'Crowley Designee, as
applicable.
(f) Except as set forth in Section 3.l (a)(iii), none of the O'Crowley
Directors shall be removed from office without the consent of O'Crowley, so long
as and only to the extent that O'Crowley is entitled to designate an O'Crowley
Director or an O'Crowley Designee, as applicable. Each O'Crowley Director may be
removed from office at any time, with or without cause, at the request of
O'Crowley, so long as and only to the extent that O'Crowley is entitled to
designate an O'Crowley Director or an O'Crowley Designee, as applicable.
(g) If any RBC Director or any RBC Designee shall cease to serve as a
director of the Company for any reason (other than as set forth in Section 3.l
(a)(iv)), the vacancy resulting thereby shall be filled by another person
designated by RBC, so long as and only to the extent that RBC is entitled to
designate an RBC Director or an RBC Designee, as applicable.
(h) Except as set forth in Section 3.1(a)(iv), no RBC Director shall be
removed from office without the consent of RBC, so long as and only to the
extent that RBC is entitled to designate an RBC Director or an RBC Designee, as
applicable. Each RBC Director may be removed from office at any time, with or
without cause, at the request of RBC, so long as and only to the extent that RBC
is entitled to designate an RBC Director or an RBC Designee, as applicable.
(i) If the Agreed Director shall cease to serve as a director of the
Company Conning, Beacon and O'Crowley, if he is either Chairman of the Board or
Chief Executive Officer shall by mutual agreement, or if O'Crowley is not then
either Chairman of the Board or Chief Executive Officer, the Shareholders voting
as a single class on an as-converted to Common Stock basis, shall have the right
to remove, with or without cause and without any further action by any
Shareholder or director, the Agreed Director and the right to designate, by
election, one new director, who shall be an Independent Director; and Conning,
Beacon and O'Crowley, if he is either Chairman of the Board or Chief Executive
Officer shall by mutual agreement, or if O'Crowley is not then either Chairman
of the Board or Chief Executive Officer, the Shareholders voting as a single
class on an as-converted to Common Stock basis shall have
16
<PAGE>
the right to remove, with or without cause and without any further action by any
Shareholder or director, any substitute Agreed Director and the right to
designate, by election, one new director, who shall be an Independent Director.
(j) Except as set forth in Section 3.1(a)(v) and in Section 3.3(i), the
Agreed Director (or substitute Agreed Director, if applicable) shall not be
removed from office without the consent of O'Crowley and the other Shareholders,
so long as and only to the extent that the Agreed Director or, under the
circumstances set forth in Section 3.3(i), a substitute Agreed Director is
entitled to serve in such capacity.
(k) If the TCI Director shall cease to serve as a director of the Company
for any reason (other than as set forth in Section 3.l (a)(vi)), the vacancy
resulting thereby shall be filled by another person designated by TCI, so long
as and only to the extent that TCI is entitled to designate a TCI Director.
(l) Except as set forth in Section 3.1(a)(vi), no TCI Director shall be
removed from office without the consent of TCI, so long as and only to the
extent that TCI is entitled to designate a TCI Director. The TCI Director may be
removed from office at any time, with or without cause, at the request of TCI,
so long as and only to the extent that TCI is entitled to designate a TCI
Director.
(m) If the Brinson Director shall cease to serve as a director of the
Company for any reason (other than as set forth in Section 3.1(a)(vii)), the
vacancy resulting thereby shall be filled by another person designated by
Brinson, so long as and only to the extent that Brinson is entitled to designate
a Brinson Director.
(n) Except as set forth in Section 3.1(a)(vii), no Brinson Director shall
be removed from office without the consent of Brinson, so long as and only to
the extent that Brinson is entitled to designate a Brinson Director. The Brinson
Director may be removed from office at any time, with or without cause, at the
request of Brinson, so long as and only to the extent that Brinson is entitled
to designate a Brinson Director.
3.4. Non-Voting Observer.
-------------------
(a) At such time as there is no TCI Director, the Company agrees that TCI,
so long as TCI holds 2% or more of the outstanding Common Stock, will be
entitled to have one observer (a "TCI Non-Voting Observer") selected by TCI
-----------------------
present at all meetings of the Board so long as such TCI Non-Voting Observer
executes a confidentiality agreement in form reasonably satisfactory to the
Board and TCI covering such matters, information and materials as may be
disclosed in connection with such Board meetings and such observer shall have
the same access to information concerning the business and operations of the
Company and at the same time as directors of the Company and shall be entitled
to participate in discussions and consult with, and make proposals and furnish
advice to, the Board, without voting, so long as such TCI Non-Voting Observer
executes a confidentiality agreement in form reasonably satisfactory to the
17
<PAGE>
Board and TCI covering such matters, information and materials as may be
disclosed in connection with such Board meetings; provided, however, that the
-------- -------
Board shall be under no obligation to take any action with respect to any
proposals made or advice furnished by any TCI Non-Voting Observer, other than to
give due consideration thereto. In addition to any requirements specified in the
By-laws, the Company shall notify the TCI Non-Voting Observer, by telecopy, of
every meeting (or action by written consent) of the Board at least 48 hours in
advance of such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable, as soon before the meeting
(or distribution) as is practicable, provided that nothing in this Section 3.4
--------
shall be construed in any way to authorize or allow a party hereto not to comply
with its obligations hereunder or release it from liability and equitable remedy
in the case of a breach.
(b) The Company agrees that if at any meeting for the election of
directors any Conning Director or Conning Designee is not elected to the Board,
or if for any other reason, at any time, neither a Conning Designee nor any
Conning Director is a member of the Board, Conning, so long as Conning holds 10%
or more of the outstanding Common Stock, will be entitled to have one observer
(a "Conning Non-Voting Observer") selected by Conning present at all meetings of
---------------------------
the Board so long as such Conning Non-Voting Observer executes a confidentiality
agreement in form reasonably satisfactory to the Board and Conning covering such
matters, information and materials as may be disclosed in connection with such
Board meetings and such observer shall have the same access to information
concerning the business and operations of the Company and at the same time as
directors of the Company and shall be entitled to participate in discussions and
consult with, and make proposals and furnish advice to, the Board, without
voting, so long as such Conning Non-Voting Observer executes a confidentiality
agreement in form reasonably satisfactory to the Board and Conning covering such
matters, information and materials as may be disclosed in connection with such
Board meetings; provided, however, that the Board shall be under no obligation
-------- -------
to take any action with respect to any proposals made or advice furnished by any
Conning Non-Voting Observer, other than to give due consideration thereto. In
addition to any requirements specified in the By-laws, the Company shall notify
the Conning Non-Voting Observer, by telecopy, of every meeting (or action by
written consent) of the Board at least 48 hours in advance of such meeting (or
distribution of written consents), or, if such notice under the circumstances is
not practicable, as soon before the meeting (or distribution) as is practicable,
provided that nothing in this Section 3.4 shall be construed in any way to
- --------
authorize or allow a party hereto not to comply with its obligations hereunder
or release it from liability and equitable remedy in the case of a breach.
(c) The Company agrees that if at any meeting for the election of
directors any Beacon Director or Beacon Designee is not elected to the Board, or
if for any other reason, at any time, neither a Beacon Designee nor any Beacon
Director is a member of the Board, Beacon, so long as Beacon holds 10% or more
of the outstanding Common Stock, will be entitled to have one observer (a
"Beacon Non-Voting Observer") selected by Beacon present at all meetings of the
--------------------------
Board so long as such Beacon Non-Voting Observer executes a confidentiality
agreement in form reasonably satisfactory to the Board and Beacon covering such
matters, information and materials as may be disclosed in connection with such
Board meetings, and such observer shall
18
<PAGE>
have the same access to information concerning the business and operations of
the Company and at the same time as directors of the Company and shall be
entitled to participate in discussions and consult with, and make proposals and
furnish advice to, the Board, without voting so long as such Beacon Non-Voting
Observer executes a confidentiality agreement in form reasonably satisfactory to
the Board and Beacon covering such matters, information and materials as may be
disclosed in connection with such Board meetings; provided, however, that the
-------- -------
Board shall be under no obligation to take any action with respect to any
proposals made or advice furnished by any Beacon Non-Voting Observer, other than
to give due consideration thereto. In addition to any requirements specified in
the By-laws, the Company shall notify the Beacon Non-Voting Observer, by
telecopy, of every meeting (or action by written consent) of the Board at least
48 hours in advance of such meeting (or distribution of written consents), or,
if such notice under the circumstances is not practicable, as soon before the
meeting (or distribution) as is practicable, provided that nothing in this
--------
Section 3.4 shall be construed in any way to authorize or allow a party hereto
not to comply with its obligations hereunder or release it from liability and
equitable remedy in the case of a breach.
(d) The Company agrees that if an RBC Designee or an RBC Director is a
member of the Board or RBC has a right to appoint an RBC Director, RBC will be
entitled to have one observer (a "RBC Non-Voting Observer") selected by RBC
-----------------------
present at all meetings of the Board so long as such RBC Non-Voting Observer
executes a confidentiality agreement in form reasonably satisfactory to the
Board and RBC covering such matters, information and materials as may be
disclosed in connection with such Board meetings and such observer shall have
the same access to information concerning the business and operations of the
Company and at the same time as directors of the Company and shall be entitled
to participate in discussions and consult with, and make proposals and furnish
advice to, the Board, without voting so long as such RBC Non-Voting Observer
executes a confidentiality agreement in form reasonably satisfactory to the
Board and RBC covering such matters, information and materials as may be
disclosed in connection with such Board meetings; provided, however, that the
-------- -------
Board shall be under no obligation to take any action with respect to any
proposals made or advice furnished by any RBC Non-Voting Observer, other than to
give due consideration thereto. In addition to any requirements specified in the
By-laws, the Company shall notify the RBC Non-Voting Observer, by telecopy, of
every meeting (or action by written consent) of the Board at least 48 hours in
advance of such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable, as soon before the meeting
(or distribution) as is practicable, provided that nothing in this Section 3.4
--------
shall be construed in any way to authorize or allow a party hereto not to comply
with its obligations hereunder or release it from liability and equitable remedy
in the case of a breach. The RBC Non-Voting Observer shall be H. Jackson
Upchurch, Jr., until RBC designates another person.
(e) At such time as there is no Brinson Director, the Company agrees that
Brinson, so long as Brinson holds 2% or more of the outstanding Common Stock,
will be entitled to have one observer (a "Brinson Non-Voting Observer") selected
---------------------------
by Brinson present at all meetings of the Board so long as such Brinson Non-
Voting Observer executes a confidentiality agreement in form reasonably
satisfactory to the Board and Brinson covering such matters,
19
<PAGE>
information and materials as may be disclosed in connection with such Board
meetings and such observer shall have the same access to information concerning
the business and operations of the Company and at the same time as directors of
the Company and shall be entitled to participate in discussions and consult
with, and make proposals and furnish advice to, the Board, without voting, so
long as such Brinson Non-Voting Observer executes a confidentiality agreement in
form reasonably satisfactory to the Board and Brinson covering such matters,
information and materials as may be disclosed in connection with such Board
meetings; provided, however, that the Board shall be under no obligation to take
-------- -------
any action with respect to any proposals made or advice furnished by any Brinson
Non-Voting Observer, other than to give due consideration thereto. In addition
to any requirements specified in the By-laws, the Company shall notify the
Brinson Non-Voting Observer, by telecopy, of every meeting (or action by written
consent) of the Board at least 48 hours in advance of such meeting (or
distribution of written consents), or, if such notice under the circumstances is
not practicable, as soon before the meeting (or distribution) as is practicable,
provided that nothing in this Section 3.4 shall be construed in any way to
- --------
authorize or allow a party hereto not to comply with its obligations hereunder
or release it from liability and equitable remedy in the case of a breach.
3.5. Representative.
--------------
(a) In the event that, after receiving proper notice of a meeting of the
Board, a committee of the Board on which a Conning Director or Conning Designee
serves, or a meeting of any board of directors or similar managing body of any
of the Company's Subsidiaries in accordance with such entity's by-laws, any
Conning Director, Conning Designee or Conning Non-Voting Observer determines
that he or she is unable to attend such meeting, Conning shall have the right to
designate a representative to attend and observe such meeting on behalf of such
Conning Director, Conning Designee or Conning Non-Voting Observer, as the case
may be, who shall be entitled to fully participate (other than the right to
vote) in such meeting as if he were a member of the Board or committee, or a
member of the board of directors or similar managing body of the relevant
Subsidiary of the Company or a Conning Non-Voting Observer, as the case may be,
so long as such representative executes a confidentiality agreement in form
reasonably satisfactory to the Board covering such matters, information and
materials as may be disclosed in connection with such Board or committee
meetings.
(b) In the event that, after receiving proper notice of a meeting of the
Board, a committee of the Board on which a Beacon Director or Beacon Designee
serves, or a meeting of any board of directors or similar managing body of any
of the Company's Subsidiaries in accordance with such entity's by-laws, any
Beacon Director, Beacon Designee or Beacon Non-Voting Observer determines that
he or she is unable to attend such meeting, Beacon shall have the right to
designate a representative to attend and observe such meeting on behalf of such
Beacon Director, Beacon Designee or Beacon Non-Voting Observer, as the case may
be, who shall be entitled to fully participate (other than the right to vote) in
such meeting as if he were a member of the Board or committee, or a member of
the board of directors or similar managing body of the relevant Subsidiary of
the Company or a Beacon Non-Voting Observer, as the case may be, so long as such
representative executes a confidentiality agreement in form reasonably
20
<PAGE>
satisfactory to the Board covering such matters, information and materials as
may be disclosed in connection with such Board meetings.
(c) In the event that, after receiving proper notice of a meeting of the
Board or a meeting of any board of directors or similar managing body of any of
the Company's Subsidiaries in accordance with such entity's by-laws, any RBC
Director, RBC Designee or RBC Non-Voting Observer determines that he or she is
unable to attend such meeting, RBC shall have the right to designate a
representative to attend and observe such meeting on behalf of such RBC
Director, RBC Designee, or RBC Non-Voting Observer as the case may be, who shall
be entitled to fully participate (other than the right to vote) in such meeting
as if he were a member of the Board, or a member of the board of directors or
similar managing body of the relevant Subsidiary of the Company, as the case may
be, so long as such representative executes a confidentiality agreement in form
reasonably satisfactory to the Board covering such matters, information and
materials as may be disclosed in connection with such Board meetings.
(d) In the event that, after receiving proper notice of a meeting of the
Board or a meeting of any board of directors or similar managing body of any of
the Company's Subsidiaries in accordance with such entity's by-laws, a TCI
Director determines that he or she is unable to attend such meeting, TCI shall
have the right to designate a representative to attend and observe such meeting
on behalf of such TCI Director, who shall be entitled to fully participate
(other than the right to vote) in such meeting as if he were a member of the
Board, or a member of the board of directors or similar managing body of the
relevant Subsidiary of the Company, as the case may be, so long as such
representative executes a confidentiality agreement in form reasonably
satisfactory to the Board covering such matters, information and materials as
may be disclosed in connection with such Board meetings.
(e) In the event that, after receiving proper notice of a meeting of the
Board or a meeting of any board of directors or similar managing body of any of
the Company's Subsidiaries in accordance with such entity's by-laws, a Brinson
Director determines that he or she is unable to attend such meeting, Brinson
shall have the right to designate a representative to attend and observe such
meeting on behalf of such Brinson Director, who shall be entitled to fully
participate (other than the right to vote) in such meeting as if he were a
member of the Board, or a member of the board of directors or similar managing
body of the relevant Subsidiary of the Company, as the case may be, so long as
such representative executes a confidentiality agreement in form reasonably
satisfactory to the Board covering such matters, information and materials as
may be disclosed in connection with such Board meetings.
3.6. Board and Committee Meetings.
----------------------------
The Company shall hold regular meetings of its Board on at least a
quarterly basis. The Company agrees, and shall cause the By-laws to be amended
to the extent necessary to provide, that, (i) so long as Conning meets or
exceeds the Conning Pre-IPO Threshold or Conning Post-IPO Threshold, as
applicable, the Conning Designee and each Conning Director shall have the right,
upon reasonable notice, to call meetings of the Board and of each committee
21
<PAGE>
of the Board on which he or she is a member, and (ii) so long as Beacon meets or
exceeds the Beacon Pre-IPO Threshold or Beacon Post-IPO Threshold, as
applicable, the Beacon Designee and each Beacon Director, shall have the right,
upon reasonable notice, to call meetings of the Board and of each committee of
the Board on which he or she is a member. The Company agrees that any Conning
Non-Voting Observer or Beacon Non-Voting Observer shall have the right to
request that the Chairman of the Board or the Chief Executive Officer of the
Company call a meeting of the Board and that, upon such request, the Chairman of
the Board shall promptly call a meeting of the Board to be held at such time
(but not earlier than 48 hours from the date such request is made) as shall be
requested by the Conning Non-Voting Observer or Beacon Non-Voting Observer, as
the case may be.
3.7. Directors' Indemnification.
--------------------------
(a) Unless Conning, Beacon and the Board agree that such insurance as
described herein cannot be obtained at commercially reasonable rates, the
Company shall obtain and cause to be maintained in effect, with financially
sound insurers, a policy of directors' and officers' liability insurance
covering each of the directors of the Company, including, without limitation,
the Conning Designee, the Beacon Designee, the O'Crowley Designee, the RBC
Designee and any TCI Non-Voting Observer, Brinson Non-Voting Observer, Conning
Non-Voting Observer, Beacon Non-Voting Observer, or RBC Non-Voting Observer in
an amount of at least $3 million per occurrence and $5 million in the aggregate.
(b) The Certificate, By-laws and other organizational documents of the
Company and each of its Subsidiaries shall at all times, to the fullest extent
permitted by law, provide for indemnification of, advancement of expenses to and
limitation of the personal liability of the members of the Board and the members
of the boards of directors or other similar managing bodies of each of the
Company's Subsidiaries and such other persons, if any, who, pursuant to a
provision of such Certificates, By-laws or other organizational documents,
exercise or perform any of the powers or duties otherwise conferred or imposed
upon members of the Board or the boards of directors or other similar managing
bodies of each of the Company's Subsidiaries. Any TCI Non-Voting Observer ,
Conning Non-Voting Observer, Beacon Non-Voting Observer, RBC Non-Voting Observer
and Brinson Non-Voting Observer shall be entitled to indemnification from the
Company to the maximum extent permitted by law as though he or she were a
director of the Company and any of its Subsidiaries. Such provisions may not be
amended, repealed or otherwise modified in any manner adverse to any member of
the Board or any member of the boards of directors or other similar managing
bodies of any of the Company's Subsidiaries, until at least six years following
the latest date that any Shareholder is entitled to designate or nominate any
director or designee pursuant to Section 3.1.
(c) Each of the Conning Directors, Conning Designee, Beacon Directors,
Beacon Designee, O'Crowley Director, O'Crowley Designee, RBC Director, RBC
Designee, the Agreed Director, the TCI Director, the Brinson Director (if one)
and any TCI Non-Voting Observer, Conning Non-Voting Observer, Beacon Non-Voting
Observer, RBC Non-Voting Observer and Brinson Non-Voting Observer is intended to
be a third-party beneficiary of the
22
<PAGE>
obligations of the Company pursuant to this Section 3.7, and the obligations of
the Company pursuant to this Section 3.7 shall be enforceable by each Conning
Director, Conning Designee, Beacon Director, Beacon Designee, O'Crowley
Director, O'Crowley Designee, RBC Director, RBC Designee, the Agreed Director,
the TCI Director, the Brinson Director (if one) and any TCI Non-Voting Observer,
Conning Non-Voting Observer, Beacon Non-Voting Observer, RBC Non-Voting Observer
and Brinson Non-Voting Observer.
3.8. Irrevocable Proxy.
-----------------
In order to secure each Shareholder's obligation to vote such Shareholder's
Voting Shares in accordance with the provisions of this Section 3 pursuant to
which each other Shareholder has rights hereunder, each Shareholder hereby
appoints each other Shareholder as his, her or its true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of his Voting
Shares of the Company for the election of each Conning Director, Conning
Designee, Beacon Director, Beacon Designee, O'Crowley Director, O'Crowley
Designee, RBC Director, RBC Designee, the Agreed Director, the TCI Director, and
the Brinson Director (if one) as a member of the Board and to take all such
other actions as are necessary to enforce the rights of the various Shareholders
under this Section 3. Each Shareholder may exercise the irrevocable proxy
granted to it hereunder at any time any Shareholder fails to comply with any
provision of this Agreement granting the Shareholder exercising such proxy
rights under this Section 3. The proxies and powers granted by each Shareholder
pursuant to this Section 3.8 are coupled with an interest and are given to
secure the performance of each of the Shareholders' respective obligations to
the various Shareholders under this Section 3. Such proxies and powers shall
survive the death, incompetency and disability of each Shareholder. Such
proxies and powers will be effective until a Qualified IPO, at which time such
proxies and powers shall terminate.
3.9. Contractual Management Rights.
-----------------------------
The Company and each of the Shareholders acknowledge that the provisions of
this Agreement, including this Section 3, are intended, among other things, to
provide Conning and Beacon with "contractual management rights" within the
meaning of the Employee Retirement Income Security Act of 1974, as amended, and
the regulations promulgated thereunder.
3.10. Expenses.
--------
The Company shall pay the reasonable out-of-pocket expenses incurred by
each of the directors of the Company, including, but not limited to, the Conning
Directors, Conning Designee, Beacon Directors, Beacon Designee, the Agreed
Director, the RBC Director, the RBC Designee, the TCI Director, and the Brinson
Director (if one) and any TCI Non-Voting Observer, the Brinson Non-Voting
Observer, Conning Non-Voting Observer, RBC Non-Voting Observer, and Beacon Non-
Voting Observer in connection with performing his or her duties, including
without limitation the reasonable out-of-pocket expenses incurred by such person
23
<PAGE>
attending meetings of the Board or any committee thereof or meetings of any
board of directors or other similar managing body (and any committee thereof) of
any Subsidiary of the Company.
3.11. Cooperation.
-----------
Each Shareholder shall vote all of its Voting Shares and shall take
all other necessary or desirable actions within its control (including, without
limitation, attending all meetings in person or by proxy for purposes of
obtaining a quorum, executing all written consents in lieu of meetings and
voting to remove members of the Board, as applicable), and the Company shall
take all necessary and desirable actions within its control (including, without
limitation, calling special Board, committee, and shareholder meetings and
voting to remove members of the Board or committee, as applicable), to
effectuate the provisions of this Section 3.
Section 4. Restrictions on Transfers of Stock.
----------------------------------
4.1. General.
-------
No Shareholder shall Transfer any Stock (other than Transfers of Stock
by a Shareholder to its Affiliates, or to the owners or managers of such
Shareholder or its Affiliates, or to the Company pursuant to the Exchange
Agreement), whether owned on the date hereof or acquired hereafter, without
first, if applicable, complying with the provisions of Section 5 hereof and
then, in each case as applicable, complying with the provisions of Section 6
hereof. In addition to, and not in limitation of, the foregoing, so long as the
shares representing at least 25% of the shares of any one of the (i) Series A
Preferred, (ii) Series B Preferred issued to Beacon and its Affiliates, (iii)
Series C Preferred issued to Beacon and its Affiliates or, (iv) Series D
Preferred issued to Conning and its Affiliates outstanding on the date hereof or
purchased pursuant to the Purchase Agreement and the Exchange Agreement, are
outstanding, then until the earliest of (a) a Qualified IPO, (b) a sale of the
Company (whether by sale, merger, consolidation, recapitalization or similar
transaction) of substantially all of its assets or (c) February 3, 2004,
O'Crowley, Patrick F. O'Neal, (and the Eden Financial Group, Inc. Capital
Accumulation Profit Sharing Plan FBO Patrick F. O'Neal), Paul Tartre and Rick L.
Weller and their respective Affiliates who are permitted transferees pursuant to
clause (y) below (collectively "Management Shareholders") shall each not
-----------------------
Transfer more than fifteen percent (15%) of the aggregate number of shares of
Stock held by him or it as of the date hereof or acquired subsequent to such
date other than Stock acquired subsequent to the date hereof other then pursuant
to a Company (or a subsidiary of the Company) benefit plan, including any stock
purchase plan or stock option plan (such a permitted Transfer is referred to as
a "Permitted Management Shareholder Limited Transfer"), except for (x)
-------------------------------------------------
transactions described in items (a), (c), (d), (e), (f), (h), (i) and (k) of
Section 5.6 hereof (y) transfers to Affiliates of the transferee Shareholder for
estate planning purposes and (z) after compliance with Section 5.5, additional
Shares of Stock if Conning and Beacon concur with the Management Shareholder
that an additional Transfer(s) should be allowed to avoid hardship to the
Management Shareholder or his Affiliates. The limit of fifteen percent (15%) in
the preceding sentence shall change to twenty five percent (25%) if either (A)
Conning (together with its Affiliates) owns less than 50% of the
24
<PAGE>
Series D Preferred issued to it pursuant to the Purchase Agreement, or (B)
Beacon (together with its Affiliates) own less than 50% of the shares of Series
B Preferred, Series C Preferred, and Series D Preferred (on an as converted to
common basis) owned by it on May 7, 1998, or acquired by it pursuant to the
Exchange Agreement and the Purchase Agreement.
4.2. Shareholders' Agreement.
-----------------------
Except in connection with a Public Sale, any transferee of Stock
(including Transfers of Stock by a Shareholder to its Affiliates, or to the
owners or managers of such Shareholder or its Affiliate) who is not a
Shareholder shall upon consummation of, and as a condition to, such Transfer
execute and deliver to the Company (which the Company shall then deliver to all
other Shareholders) an agreement in form and substance satisfactory to the
Company, Conning (so long as Conning is a Shareholder) and Beacon (so long as
Beacon is a Shareholder) pursuant to which such transferee agrees to be bound by
the terms of this Agreement for the benefit of the parties hereto and such
transferee shall thereafter be deemed to be a Shareholder for all purposes of
this Agreement.
4.3. Conflicts with Other Provisions of this Agreement.
-------------------------------------------------
Any Transfer or attempted Transfer of Stock in violation of any
provision of this Agreement shall be void, and the Company shall not record such
Transfer on its books or treat any purported transferee of such Stock as the
owner of such Stock for any purpose.
Section 5. Rights of First Offer.
---------------------
In addition to and not in limitation of any other restrictions on
Transfers of Stock contained in this Agreement, any Transfers of Stock by a
Shareholder shall be consummated only in accordance with the following
procedures:
5.1. First Offer.
-----------
The transferring Shareholder shall first deliver to the Company and
each Major Shareholder (the "Offered Shareholders") a written notice (an "Offer
Notice"), that shall (a) state the transferring Shareholder's intention to
- ------
Transfer Stock to one or more Persons in a bona fide, arm's length transaction,
the amount and type of Stock to be Transferred (the "Subject Stock"), the
-------------
purchase price therefor (which shall be payable in cash) and a summary of the
other material terms of the proposed Transfer and (b) offer the Company and the
Offered Shareholders the option to acquire all or a portion of such Subject
Stock upon the terms and subject to the conditions of the proposed Transfer as
set forth in the Offer Notice (the "Offer"); provided that such Offer may
----- --------
provide that it must be accepted by the Company and Offered Shareholders (in the
aggregate) on an all or nothing basis (an "All or Nothing Sale"). The Offer
-------------------
shall remain open and irrevocable for the periods set forth below (and, to the
extent the Offer is accepted during such periods, until the consummation of the
sale contemplated by the Offer). The Company shall have the right and option,
for a period of 30 days after delivery of the Offer Notice (the
25
<PAGE>
"Company Acceptance Period"), to accept all or any part of the Subject Stock at
-------------------------
the cash purchase price and on the terms stated in the Offer Notice. Such
acceptance shall be made by delivering a written notice to the transferring
Shareholder and each of the Offered Shareholders within the Company Acceptance
Period.
5.2. First Offer Obligations.
-----------------------
If the Company shall fail to accept all of the Subject Stock offered
pursuant to, or shall reject in writing, the Offer (the Company being required
to notify in writing to the transferring Shareholder and each of the Offered
Shareholders of its rejection or failure to accept in the event of the same),
then, upon the earlier of the expiration of the Company Acceptance Period or the
date five days immediately after the giving of such written notice of rejection
or failure to accept such offer by the Company, each Offered Shareholder shall
have the right and option, for a period of 10 days thereafter (the "Shareholder
-----------
Acceptance Period"), to accept for purchase at the cash purchase price and on
- -----------------
the terms stated in the Offer Notice up to the number of shares of Subject Stock
so offered and not accepted by the Company (the "Refused Stock") equal to the
-------------
product of (a) the aggregate number of shares of the Refused Stock multiplied by
(b) the First Offer Ratio; provided, however, that, if the Offer contemplated an
--------- -------
All or Nothing Sale, the Offered Shareholders who purchase Refused Stock
pursuant to this Section 5.2 must, in the aggregate, accept the Offer with
respect to all, but not less than all, of the Refused Stock, at the cash
purchase price and on the terms stated in the Offer Notice. Such acceptance
shall be made by an Offered Shareholder by delivering a written notice to the
Company and the transferring Shareholder within the Shareholder Acceptance
Period specifying the number of shares such Offered Shareholder will purchase
(the "First Offer Shares"). If, upon the expiration of the Shareholder
------------------
Acceptance Period, the aggregate number of shares of the Refused Stock exceeds
the aggregate number of First Offer Shares (such excess being referred to herein
as "Excess Refused Stock"), each Offered Shareholder (each, an "Accepting
-------------------- ---------
Shareholder") who, during the Shareholder Acceptance Period, accepted the Offer
- -----------
with respect to the maximum number of shares of the Refused Stock allocable to
such Offered Shareholder pursuant to the first sentence of this Section 5.2,
shall have the right and option to accept within 10 days following conclusion of
the Shareholder Acceptance Period (the "Excess Period") for purchase at the cash
-------------
purchase price and on the terms stated in the Offer Notice up to the number of
shares of Excess Refused Stock equal to the product of (a) the aggregate number
of shares of Excess Refused Stock multiplied by (b) the Accepting Shareholder
Ratio. The process described in the foregoing sentence shall be repeated within
the Excess Period with respect to any shares of Excess Refused Stock not
accepted for purchase until the conclusion of the Excess Period or, with respect
to an All or Nothing Sale, until all shares of Excess Refused Stock have been
accepted for purchase within the Excess Period. All acceptances of Subject Stock
by an Offered Shareholder pursuant to an Offer shall be irrevocable.
26
<PAGE>
5.3. Transfer of Subject Stock.
-------------------------
If effective acceptance shall not be received pursuant to Section 5.2
above or 5.5 below with respect to all of the Subject Stock offered for sale
pursuant to the Offer Notice, then the transferring Shareholder may Transfer all
or any portion of the Subject Stock so offered for sale and not so accepted (or,
in the case of an All or Nothing Sale, all, but not less than all, of the
Subject Stock offered for sale pursuant to the Offer Notice), at a cash price
not less than the price, and on terms not more favorable to the purchaser
thereof than the terms, stated in the Offer Notice at any time within 90 days
after the expiration of the Shareholder Acceptance Period (the "Sale Period").
-----------
In the event that all of the Subject Stock is not sold by the transferring
Shareholder during the Sale Period, the right of the transferring Shareholder to
Transfer such Stock shall expire and the obligations of this Section 5 shall be
reinstated.
5.4. Closing.
-------
All Transfers of Subject Stock to the Offered Shareholders, a Conning
Offeree or a Beacon Offeree, pursuant to this Section 5 shall be made free and
clear of all liens (other than this Agreement and any applicable registration
rights agreement) and shall be consummated contemporaneously at the offices of
the Company on the later of (a) a mutually satisfactory business day within (i)
30 days after the expiration of the Shareholder Acceptance Period or (ii) ten
days after expiration of the Management Transfer Acceptance Period, as
applicable and (b) the fifth business day following the expiration or
termination of all waiting periods under the HSR Act applicable to such
Transfers, or at such other time and/or place as the parties may agree. The
delivery of certificates or other instruments evidencing such Subject Stock duly
endorsed for transfer shall be made on such date against payment of the purchase
price for such Subject Stock.
5.5 Rights on Certain Management Sales. In the case of a Permitted
----------------------------------
Management Shareholder Limited Transfer:
(i) Unless waived by Beacon and Conning, the provisions of Section
5.1 shall apply except that the Offer Notice will be given only to (a) Conning
and its Affiliates who have been Transferred Stock from Conning (collectively
"Conning Offerees"), (b) Beacon and its Affiliates who have been Transferred
-----------------
Stock from Beacon (collectively "Beacon Offerees"), (c) TCI, USITF, Encompass
---------------
and their respective Affiliates to whom they have transferred stock
(collectively "TCI Offerees") and (d) Brinson and its Affiliates who have been
------------
Transferred Stock from Brinson (collectively "Brinson Offerees"). No Offer
----------------
Notice need be given to the Company or any other Shareholder other than Conning
Offerees, Beacon Offerees, Brinson Offerees and TCI Offerees.
(ii) Each Beacon Offeree, Conning Offeree, Brinson Offeree and TCI
Offeree shall have the right and option, for a period of 30 days after the Offer
Notice is given (the "Management Transfer Acceptance Period"), to accept for
-------------------------------------
purchase at the cash purchase price and on the terms stated in the Offer Notice
up to the number of shares of Subject Stock so
27
<PAGE>
offered equal to the product of (a) the aggregate number of shares of the
Subject Stock multiplied by (b) the First Offer Ratio (provided, however, that
-------- -------
only Stock held by Beacon Offerees, Conning Offerees, Brinson Offerees, and TCI
Offerees shall be included in the numerator and denominator of the First Offer
Ratio); provided; however, that, if the Offer contemplated an All or Nothing
-------- -------
Sale, the Beacon Offerees, Conning Offerees, Brinson Offerees, and TCI Offerees
who purchase Subject Stock pursuant to this Section 5.5 must, in the aggregate,
accept the Offer with respect to all, but not less than all, of the Subject
Stock, at the cash purchase price and on the terms stated in the Offer Notice.
Such acceptance shall be made by a Beacon Offeree, Conning Offeree, Brinson
Offeree and TCI Offerees by delivering a written notice to the Company and the
transferring Shareholder within the Management Transfer Acceptance Period
specifying the number of shares such Offeree will purchase (the "First MT Offer
--------------
Shares"). If, upon the expiration of the Management Transfer Acceptance Period,
- ------
the aggregate number of shares of the Subject Stock exceeds the aggregate number
of First MT Offer Shares (such excess being referred to herein as "Excess MT
---------
Stock"), each Beacon Offeree, Conning Offeree, Brinson Offeree and TCI Offeree
- -----
(each, an "Accepting MT Shareholder") who, during the Management Transfer
------------------------
Acceptance Period, accepted the Offer with respect to the maximum number of
shares of the Subject Stock allocable to such Beacon Offeree, Conning Offeree,
Brinson Offeree and TCI Offeree pursuant to the first sentence of this Section
5.5(ii), shall have the right and option to accept within ten days following
conclusion of the Management Transfer Acceptance Period (the "Excess MT Period")
----------------
for purchase at the cash purchase price and on the terms stated in the Offer
Notice up to the number of shares of Excess MT Stock equal to the product of (a)
the aggregate number of shares of Excess MT Stock multiplied by (b) the
Accepting Shareholder Ratio (provided, however, that only Stock held by Beacon
-------- -------
Offerees, Conning Offerees, Brinson Offerees and TCI Offerees shall be included
in the numerator and denominator of the Accepting Shareholder Ratio). The
process described in the foregoing sentence shall be repeated within the Excess
MT Period with respect to any shares of Excess MT Stock not accepted for
purchase until the conclusion of the Excess MT Period or, with respect to an All
or Nothing Sale, until all shares of Excess MT Stock have been accepted for
purchase within the Excess MT Period. All acceptances of Subject Stock by a
Beacon Offeree, Conning Offeree, Brinson Offeree or TCI Offeree pursuant to an
Offer shall be irrevocable.
5.6. Limitations.
-----------
The requirements of this Section 5 shall not apply to (a) any Transfer
of Stock pursuant to Section 7 of this Agreement, (b) any Transfer pursuant to a
Public Sale, (c) cashless exercises of stock options (whether effected by
surrendering stock options or outstanding shares of Stock), (d) repurchases by
the Company of stock options, (e) repurchases by the Company of Stock from
terminated or departing consultants, directors or employees (provided that such
repurchases do not exceed, in the aggregate, one percent of the outstanding
Common Stock), (f) repurchases by the Company of Stock funded by life insurance
proceeds, (g) (subject to written consent of Conning and Beacon, and compliance
with the provisions of Sections 4.2 and 5.5 hereof), Permitted Management
Shareholder Limited Transfers, (h) the Transfer or Transfers of up to 250,000
shares of Common Stock (adjusted appropriately to reflect stock splits and
combinations, and stock dividends), in the aggregate, by O'Crowley to Paul
Tartre, (i) the
28
<PAGE>
Transfer by O'Crowley of up to 200,000 shares of Common Stock (adjusted
appropriately to reflect stock splits and combinations, and stock dividends) to
RBC pursuant to an Escrow Agreement dated December 22, 1997, by and among
O'Crowley, RBC and the McNair Law Firm, P.A. (which transfer has occurred); (j)
the Transfer by a Shareholder to an Affiliate for estate planning purposes, (k)
Transfers to the Company pursuant to the Escrow Agreement or otherwise covering
indemnification claims of the Company in the Protocall Transaction, (l)
Transfers to the Company pursuant to the Stock Purchase Agreement (the "Acorn
-----
Purchase Agreement") between the Company, shareholders of Acorn Information
- ------------------
Services, Inc., and Acorn Information Services, Inc. for indemnification or
similar claims of the Company and Transfers by one such shareholder to another
such shareholder pursuant to specific provisions of the Acorn Purchase Agreement
in substantially the form such agreement is approved by the Company's Board of
Directors and (m) the Transfer by O'Crowley by way of a pledge of 600,000 shares
of Common Stock to secure a loan from the Company, and any foreclosure thereon
or payment of such loan by delivery of such shares. Transfers under one clause
of this Section 5.6 shall not reduce the amount of Stock that may be Transferred
under another clause of this Section 5.6.
Section 6. Tag-Along Rights.
----------------
6.1. Tag-Along.
---------
No Shareholder shall Transfer any Stock owned by such Shareholder
without complying with the terms and conditions set forth in this Section 6
(after having complied with the provisions of Section 5).
6.2. Tag-Along Obligations.
---------------------
Any Major Shareholder (the "Tag-Along Initiator") desiring to Transfer
-------------------
any shares of Stock shall, after expiration of all required notice periods under
Section 5, give not less than 10 days' prior written notice of such intended
Transfer to each Major Shareholder ("Tag-Along Offeree") and to the Company.
-----------------
Such notice (the "Tag-Along Notice") shall set forth the terms and conditions of
----------------
such proposed Transfer, including the name of the proposed transferee, the
number of shares of such Stock proposed to be transferred by the Tag-Along
Initiator (the "Tag-Along Shares"), the purchase price per Tag-Along Share of
----------------
such Stock proposed to be paid therefor and the payment terms and type of
Transfer to be effectuated. Within 10 days after delivery of the Tag-Along
Notice by the Tag-Along Initiator to each Tag-Along Offeree and to the Company,
each Tag-Along Offeree shall, by written notice to the Tag-Along Initiator and
the Company, have the opportunity and right to sell to the transferee in such
proposed Tag Along offer (upon the same terms and conditions as the Tag-Along
Initiator) up to that number of shares of such Stock owned by the Tag-Along
Offeree equal to the product of (x) such Tag-Along Offeree's Tag-Along Ratio
multiplied by (y) the aggregate number of Tag-Along Shares. The amount of Tag-
Along Shares to be sold by any Tag-Along Initiator shall be reduced to the
extent necessary to provide for such sales of shares of such Stock by Tag-Along
Offerees. No
29
<PAGE>
Person may Transfer shares in any transaction that is subject to this Section 6
unless the transferee agrees to be bound by and complies with the terms of this
Agreement.
6.3. Closing.
-------
At the closing of any proposed Transfer in respect of which a Tag-
Along Notice has been delivered, the Tag-Along Initiator together with all Tag-
Along Offerees electing to sell shares, shall deliver, free and clear of all
liens (other than this Agreement and any applicable registration rights
agreement), to the proposed transferee certificates evidencing the shares to be
sold thereto duly endorsed with transfer powers and shall receive in exchange
therefore the consideration to be paid or delivered by the proposed transferee
in respect of such shares as described in the Tag-Along Notice.
6.4. Limitations.
-----------
The provisions of this Section 6 shall not apply to (a) any Public
Sale, (b) any Transfer by a Major Shareholder to the Company, (c) any Transfers
to an Offered Shareholder or the Company pursuant to Section 5, (d) any
Transfers pursuant to Section 7, (e) cashless exercises of stock options
(whether effected by surrendering stock options or outstanding shares of Stock),
(f) repurchases by the Company of stock options, (g) repurchases by the Company
of Stock from terminated or departing consultants, directors or employees
(provided that such repurchases do not exceed, in the aggregate, one percent of
the outstanding Common Stock), (h) repurchases by the Company of Stock funded by
life insurance proceeds, and (i) Transfers described in Sections 5.6(g), 5.6(h),
5.6(i), 5.6(j), 5.6(k), 5.6(l) and 5.6(m). Transfers under one clause of this
Section 6.4 shall not reduce the amount of Stock that may be Transferred under
another clause of this Section 6.4.
Section 7. Drag-Along Rights.
-----------------
7.1. Drag-Along.
----------
If a Drag-Along Initiator determines to Transfer or exchange (in a
business combination or otherwise) in one or a series of related bona fide
arm's-length transactions (collectively, the "Drag-Along Transaction") to an
----------------------
unrelated and unaffiliated third party all of the shares of Stock held by the
Drag-Along Initiator, then, upon 30 days' written notice from the Drag-Along
Initiator to the other Shareholders and the Company (the "Drag-Along Notice"),
-----------------
which notice shall include reasonable details of the proposed transaction,
including the proposed time and place of closing and the consideration to be
received by the Shareholders, each other Shareholder shall be obligated to, and
shall sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such third party, all of his shares of Stock in the same
transaction at the closing thereof (and will deliver certificates for all of his
shares at the closing, free and clear of all liens, claims, or encumbrances
except this Agreement and any registration rights agreement with the Company
applicable to such Stock), and each Shareholder shall receive the same
consideration per share on an as-converted to Common Stock basis upon
consummation of
30
<PAGE>
such Drag-Along Transaction as is received by the Drag-Along Initiator after
giving effect to any liquidation preference to which any Shareholder is entitled
pursuant to the terms of the Certificate; provided, however, that if within 30
-------- -------
days of receipt of a notice from the Drag-Along Initiator as provided in this
Section 7. 1, the Company irrevocably commits, in writing, either (a) to use its
best efforts to complete a Qualified IPO or (b) to purchase all of the shares of
Stock of the Drag-Along Initiator at the Fair Market Value of the consideration
the Drag-Along Initiator would receive in connection with the Drag-Along
Transaction, then the closing of the Drag-Along Transaction shall be suspended
until the earlier of (x) 120 days after the Company so commits or (y) the date
the Company determines that it will be unable to complete the Qualified IPO
within such 120-day period. If the Company fails to either (i) complete the
Qualified IPO within 120 days or (ii) purchase the Drag-Along Initiator's shares
at the Fair Market Value of the consideration the Drag-Along Initiator would
receive in connection with the Drag-Along Transaction, the Drag-Along Initiator
shall have the right to compel the Shareholders to satisfy the general
provisions of this Section 7.1 in order to consummate the Drag-Along Transaction
without further delay. As used in this Section 7.1, "Fair Market Value" means,
-----------------
with respect to the consideration the Drag-Along Initiator would receive in
connection with the Drag-Along Transaction, the value of such consideration,
which, to the extent other than cash, shall take into account, in addition to
the cash value thereof, the assumptions and reasonable expectations underlying
the Drag-Along Transaction, including, without limitation, any anticipated tax
benefit, synergies or other projected economic benefits, as confirmed by an
independent investment bank reasonably satisfactory to Beacon, Conning and the
Company.
7.2. Limitations.
-----------
The provisions of Section 7.l (a) shall only be applicable if (i)
there has been no IPO and (ii) the Drag-Along Preconditions have been satisfied,
and (b) shall not, in any event, apply with respect to (i) any Transfer prior to
February 3, 2002, (ii) any Public Sale or (iii) any Transfer by a Shareholder to
an Affiliate of such Shareholder.
Section 8. Pre-emptive Rights. The Company shall not issue, sell or
------------------
exchange, or agree to issue, sell or exchange (collectively, "Issue," and any
-----
issuance, sale or exchange resulting therefrom, an "Issuance") any shares of
--------
Stock, except as authorized by the Board and in accordance with the following
procedures:
8.1. Pre-emptive Rights.
------------------
The Company shall deliver to each Major Shareholder (other than any
Major Shareholders that are not "accredited investors" as defined in Section 501
of Regulation D under the Securities Act) a written notice (a "Pre-emptive
-----------
Notice") that shall (i) state the Company's intention to Issue Stock to one or
- ------
more Persons, the amount and type of Stock to be Issued (the "Issuance Stock"),
--------------
the purchase price therefor and a summary of the other material terms of the
proposed Issuance and (ii) offer (the "Pre-emptive Offer") each Major
-----------------
Shareholder the option to acquire only that portion of the Issuance Stock as is
set forth in Section 8.2. The Pre-emptive Offer shall remain open and
irrevocable for the periods set forth below (and, to the extent the
31
<PAGE>
Pre-emptive Offer is accepted during such periods, until the consummation of the
Issuance contemplated by the Pre-emptive Offer).
8.2. Purchase of Pre-Emptive Stock.
-----------------------------
Every Major Shareholder shall have the right and option, for a period
of 30 days after delivery of the Pre-emptive Notice (the "Pre-emptive Acceptance
----------------------
Period"), to accept for purchase at the purchase price and on the terms stated
- ------
in the Pre-emptive Notice up to the number of shares of Issuance Stock (such
number being determined on an as-converted basis, if applicable) equal to the
difference between (a) the Maximum Post-Issuance Amount and (b) the number of
shares of outstanding Common Stock owned by such Major Shareholder as of the
date of the Pre-emptive Notice. Such acceptance shall be made by delivering a
written notice to the Company by each Major Shareholder within the Pre-emptive
Acceptance Period specifying the maximum number of shares of the Issuance Stock
such Major Shareholder will purchase.
8.3. Issuance of Stock.
-----------------
After passage of the Pre-emptive Acceptance Period, the Company may
Issue all or any portion of the shares of the Issuance Stock not purchased by a
Major Shareholder pursuant to Section 8.2 at a price not less than the price,
and on terms not more favorable to the purchaser thereof, than the terms stated
in the Pre-emptive Notice at any time within 90 days after the expiration of the
Pre-emptive Acceptance Period (the "Issuance Period"). In the event that all of
---------------
the Issuance Stock is not Issued by the Company during the Issuance Period, the
right of the Company to Issue such unsold Issuance Stock shall expire.
8.4. Closing.
-------
All Sales of Issuance Stock to the Major Shareholders subject to any
Pre-emptive Notice shall be consummated contemporaneously at the offices of the
Company on the later of (a) a mutually satisfactory business day within 30 days
after the expiration of the Pre-emptive Acceptance Period or (b) the fifth
business day following the expiration or termination of all waiting periods
under the HSR Act, applicable to such Issuance, or at such other time and/or
place as the Company and the Major Shareholders may agree. The delivery of
certificates or other instruments evidencing such Issuance Stock shall be made
by the Company on such date against payment of the purchase price for such
Issuance Stock.
8.5. Limitations.
-----------
The provisions of this Section 8 shall not apply to any Issuance by
the Company (a) in connection with an IPO or any subsequent registered public
offering of Stock, (b) pursuant to either (i) any stock option or similar plan
(or shares of the Company's Common Stock issuable thereunder) approved by the
Board or (ii) any employee stock purchase plan approved by the Board, (c) upon
conversion, exchange or exercise of any securities convertible into, or
exchangeable or exercisable for, shares of the Company's Common Stock, (d) in
connection with
32
<PAGE>
(i) an acquisition of a business or the assets of a business (whether by merger
or any other transaction structure with respect to which Stock may be issued in
connection with or as a consequence of such acquisition), (ii) entering into, or
borrowing funds pursuant to, a credit agreement or similar financing agreement,
(iii) entering into or acquiring a financing lease, (e) any issuance of Stock by
the Company as provided in the Purchase Agreement, (f) any PIK Election as
contemplated in the Certificate, (g) any issuance of Stock by the Company
pursuant to the Exchange Agreement, and (h) any issuance of Stock by the Company
upon exercise of any Warrant and (i) any Series F Additional Adjustment if
additional securities are issued as a result thereof.
Section 9. Holdback Agreement; Adjustments.
-------------------------------
9.1. General.
-------
Each Shareholder agrees that (i) to the extent requested in writing by
a managing underwriter of an IPO or any underwritten public offering effected
pursuant to a demand registration request under any of the Registration Rights
Agreements or any other registration rights agreement between such Shareholder
and the Company, it will not Transfer any Stock or any other equity security of
the Company or any security convertible into or exchangeable or exercisable for
any equity security of the Company (other than as part of such underwritten
public offering) during the time period reasonably requested by the managing
underwriter, commencing not more than ten days prior to commencement of such
public offering, not to exceed 180 days, and (ii) to the extent requested in
writing by a managing underwriter of any underwritten public offering effected
by the Company for its own account within three years after an IPO, it will not
Transfer after such offering any of the Stock or any other equity security of
the Company or any security convertible into or exchangeable or exercisable for
any equity security of the Company (other than as part of such underwritten
public offering) during the time period reasonably requested by the managing
underwriter, which period shall (x) not exceed 180 days, in the event that it
participates in such public offering pursuant to "piggyback" registration rights
granted under any of the Registration Rights Agreements, and (y) not exceed 90
days, in the event that the Shareholder does not so participate in such public
offering. The Company and each Shareholder, as applicable, hereby agree to use
their best efforts to obtain a covenant from the managing underwriter in
connection with any underwritten public offering described in this Section 9.1
that provides that a waiver by such underwriter of a "holdback" covenant with
respect to any Shareholder shall apply equally to all Shareholders.
9.2. Adjustments.
-----------
In connection with an IPO initiated pursuant to a demand registration,
the Company agrees that it will take all reasonable steps necessary to effect a
subdivision or combination of shares if, with respect to any demand registration
request under any of the Registration Rights Agreements or any other
registration rights agreement between such Shareholder and the Company, in the
reasonable judgment of the managing underwriter for the offering in respect of
such demand registration, such subdivision or combination would enhance
33
<PAGE>
the marketability of the securities proposed to be registered thereunder. Each
Shareholder agrees to vote all of its shares of capital stock in a manner, and
to take all other actions necessary, to permit the Company, to carry out the
intent of the preceding sentence including, without limitation, voting in favor
of an amendment to the Certificate in order to increase or decrease the number
of authorized shares of capital stock of the Company.
Section 10. Certain Covenants.
-----------------
10.1. Financial Statements and Other Information.
------------------------------------------
(a) Prior to an IPO, the Company shall deliver to each Shareholder
(so long as (i) such Shareholder and its Affiliates, in the aggregate, hold at
least 5% of the outstanding Common Stock (provided, however, that TCI and its
-------- -------
Affiliates need only hold, in the aggregate, at least 4% of the outstanding
Common Stock or 80% of the Common Stock (on an as-converted basis) purchased by
them pursuant to a Purchase Agreement) and Brinson and its Affiliates need only
hold, in the aggregate, at least 4% of the outstanding Common Stock or 20% of
the Common Stock (on an as-converted basis) purchased by them pursuant to a
Purchase Agreement) or (ii) such Shareholder or its Affiliate is entitled
hereunder to designate a director or (iii) with respect to Bain or SLI so long
as such party owns at least 50% of the Stock purchased thereby pursuant to a
Purchase Agreement):
(i) within 45 days after the end of each of the first three
quarterly accounting periods in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Company for such fiscal
quarter, and unaudited consolidating and consolidated balance sheets of the
Company as of the end of such fiscal quarter, setting forth in each case
comparisons to the same quarter of the preceding fiscal year, all prepared in
accordance with GAAP, consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments;
(ii) within 90 days after the end of each fiscal year, audited
consolidated statements of income and cash flows of the Company for such fiscal
year, and consolidated balance sheets of the Company as of the end of such
fiscal year, setting forth in each case comparisons to the preceding fiscal
year, all prepared in accordance with GAAP, consistently applied, and
accompanied by, with respect to the consolidated portions of such statements, an
opinion of a "Big Six" independent accounting firm that is unqualified with
respect to the scope of such firm's examination;
(iii) at least 30 days prior to the commencement of each fiscal year,
a business plan and quarterly operating budget approved by the Board for such
fiscal year;
(iv) promptly (but in any event within five business days) after the
end of each month, copies of all reports, financial statements, or other
information provided to the members of the Board and/or senior management of the
Company during such month;
34
<PAGE>
(v) promptly (but in any event within five business days) after the
discovery or receipt of notice of any default under any material agreement to
which the Company and/or any of its Subsidiaries is a party, which default could
have a material adverse effect on the Company or any Subsidiary, a certificate
of an officer of the Company specifying the nature and period of existence
thereof and what actions the Company has taken and proposes to take with respect
thereto;
(vi) promptly (but in any event within three business days) after
transmission thereof, copies of all financial statements, proxy statements,
reports and any other general written communications that the Company sends to
its shareholders and copies of all registration statements and all regular,
special or periodic reports that it files, or any of its officers or directors
file with respect to the Company, with the Securities and Exchange Commission or
with any securities exchange on which any of its securities are then listed; and
(vii) with reasonable promptness, such other information and financial
data concerning the Company as any Person entitled to receive information under
this Section 10.1 may reasonably request;
provided, however, that the Company shall not be obligated to deliver or
- -------- -------
otherwise disclose any information or materials to a Shareholder pursuant to
this Section 10.1(a) if and for so long as the disclosure or delivery of such
information or materials to such Shareholder would (x) breach or otherwise
violate a confidentiality agreement that governs the disclosure or delivery by
the Company of such information or materials or (y) result in the loss of
attorney-client privilege with respect to such information or materials.
(b) Each of the financial statements referred to in this Section
10.1 shall be true and correct in all material respects and shall fairly and
accurately reflect the financial condition and operating results of the Company
as of the dates and for the periods stated therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
adjustments.
(c) As a condition to, and in consideration of, being furnished with
any information and/or materials described in Section 10.l(a) ("Confidential
------------
Information"), each Shareholder hereby agrees that the Confidential Information
- -----------
is highly confidential and that unauthorized disclosure of Confidential
Information would be harmful to the Company and the other Shareholders. Any
Confidential Information provided to a Shareholder by the Company, its
directors, officers, Affiliates, advisers, agents or other representatives
(collectively, "Representatives") will be kept confidential by such Shareholder;
---------------
provided, however, that Confidential Information may be disclosed by such
- -------- -------
Shareholder (i) to its Representatives who need to know such Confidential
Information acting in such capacity, so long as such Representatives agree to
abide by the terms hereof as if a party hereto, or (ii) if the Company consents
in writing. If a Shareholder is required by a court or administrative agency to
disclose any Confidential Information, such Shareholder shall promptly notify
the Company of such requirement so that the Company may oppose such requirement
or seek a protective order and
35
<PAGE>
request confidential treatment of such information. If such Shareholder is
ultimately compelled by a court or administrative agency to disclose
Confidential Information, it may only disclose without liability hereunder
Confidential Information the disclosure of which is so compelled. In addition to
the foregoing, each Shareholder hereby acknowledges and agrees that its
unauthorized disclosure of Confidential Information or its use of Confidential
Information in trading in the securities of the Company may, under certain
circumstances, result in a violation of the federal securities laws, and such
Shareholder and its Representatives shall not take any action in respect of such
matters in violation of the federal securities laws. Notwithstanding anything in
this Section 10.1(c) to the contrary, Confidential Information shall not include
information that (i) has not been provided by the Company, has not been derived
from information constituting Confidential Information and has not otherwise
been acquired in violation of this Section 10.1(c) or any other applicable
confidentiality agreement, (ii) was publicly available at the time of disclosure
by such Shareholder or (iii) was known (but only to the extent of such
knowledge) by such Shareholder prior to disclosure as Confidential Information
to such Shareholder by the Company.
(b) If at any time after the date hereof a registration statement
under the Securities Act of 1933, as amended, relating to the Company's initial
public offering is declared effective by the Securities and Exchange Commission
(the date on which such registration statement is declared effective being
referred to herein as the "Effective Date"), which registration statement covers
--------------
the offer and sale of Common Stock for the account of the Company with an
initial public offering price to the public of less than two times the Series F
Conversion Price (as such term is defined in the Certificate) in effect
immediately prior to the Effective Date, then the Company shall, within two (2)
business days of the Effective Date, deliver to the transfer agent of the Series
F Preferred and to each of the holders of shares of Series F Preferred a written
notice describing such event and a certificate of adjustment (as described in
Section 3.6.11 of the Certificate).
10.2. Restrictions.
------------
Prior to a Qualified IPO, the Company shall not, directly or
indirectly, and shall not permit any of its Subsidiaries to, take any of the
following actions without the prior written consent of Beacon (as long as Beacon
holds, directly or indirectly, at least 5% of the outstanding Common Stock) and
Conning (as long as Conning holds, directly or indirectly, at least 5% of the
outstanding Common Stock):
(a) consolidate or merge with or into any Person or enter into any
similar business combination transaction (including a sale of substantially all
of its assets) or effect any transaction or series of transactions in which more
than 33-1/3% of its voting securities are transferred to another Person, except
a Qualified IPO or any such transaction or series of transactions, as the case
may be, involving only wholly-owned Subsidiaries of the Company;
(b) amend or repeal any provisions of, or add any provisions to, the
Certificate or the By-laws;
36
<PAGE>
(c) alter or change the preferences, rights, privileges or powers of
the Preferred Stock so as to affect adversely the Series B Preferred or Series C
Preferred (which requires Beacon's consent only) or the Series D Preferred
(which requires Conning's consent only);
(d) create or designate, authorize the issuance of, or issue or sell,
any new series or class of securities (or warrants, options or convertible into
or exchangeable securities) or increase the authorized number of, authorize the
issuance of, or issue, any additional shares of Common Stock or Preferred Stock,
except (i) pursuant to a Qualified IPO, (ii) as consideration for an acquisition
approved by the Board and which securities are valued at less than $1,000,000,
or (iii) pursuant to transactions described in subparagraph (o);
(e) increase the number of authorized members of the Board above ten,
except for an increase to eleven if a Qualified IPO has not closed before July
31, 2000;
(f) voluntarily liquidate, dissolve or wind up;
(g) pay, declare or set aside any sums for the payment of any
dividends, or make any distributions, on any shares of its capital stock or
other equity securities except as required by the terms of the Preferred Stock;
(h) redeem, repurchase or otherwise acquire, any of its capital stock
or other equity securities (including, without limitation, warrants, options and
other rights to acquire any of its capital stock or other equity securities
directly or indirectly) or redeem, purchase or make any payments with respect to
any stock appreciation rights, phantom stock plans or similar rights or plans
relating to the Company or its Subsidiaries, except for (i) redemptions or
repurchases of Preferred Stock permitted under the Certificate, (ii) cashless
exercises of options or warrants, (iii) repurchases of Stock from departing or
terminated consultants, directors or employees of the Company pursuant to the
terms (including price) of pre-existing agreements approved by the Board with
such terminated consultants, directors and employees (not to exceed $1 million,
in the aggregate), (iv) repurchases of Stock from O'Crowley or his Affiliates
solely from the proceeds of life insurance on the life of O'Crowley pursuant to
this Agreement, (v) repurchases of Stock from Frank Richards or his Affiliates
approved by the Board (including by way of the Board approving an agreement to
repurchase such Stock) and funded solely from the proceeds of life insurance on
the life of Frank Richards and (vi) foreclosure upon or payment of the loan to
O'Crowley described in Section 5.6(m);
(i) purchase, acquire or obtain any capital stock or other
proprietary interest, directly or indirectly, in any other entity or all or
substantially all of the business or assets of another Person for consideration
(including assumed liabilities) in excess of $250,000;
(j) enter into or commit to enter into any joint ventures (other than
in the ordinary course of business) or partnerships or establish any non-wholly-
owned Subsidiaries, in
37
<PAGE>
each case, where the contributions or investments by the Company exceed $400,000
in cash or assets;
(k) sell, lease, transfer or otherwise dispose of any asset or group
of assets, for consideration in an annual aggregate amount (as to the Company
and any and all of its Subsidiaries), in excess of $500,000;
(l) create, incur or assume any indebtedness of the Company or any
of its Subsidiaries for borrowed money (which shall include for purposes hereof
capitalized lease obligations and guarantees or other contingent obligations for
indebtedness for borrowed money) in an annual aggregate net incurred amount (as
to the Company and all of its Subsidiaries) in excess of $1,000,000, excluding
indebtedness that exists as of the date hereof;
(m) mortgage, encumber, create or incur liens on its assets, in an
annual aggregate amount (as to the Company and all of its Subsidiaries) in
excess of $1,000,000, excluding liens on assets that exist as of the date
hereof;
(n) in the case of the Company's executive officers, amend, modify
or grant any waiver under any material provisions of any employment agreement or
under any non-competition provision or agreement to which the Company is a party
or is bound;
(o) create or issue any stock options, warrants or other securities
convertible into, or exchangeable or exercisable for shares of the Company's
Common Stock, other than (i) options issued pursuant to any stock option or
similar plan (or shares of the Company's Common Stock issuable thereunder)
approved by the Board, (ii) shares of the Company's Common Stock issuable upon
conversion, exchange or exercise of any securities convertible into, or
exchangeable or exercisable for shares of the Company's Common Stock, or modify,
amend or grant any waiver of any provision of, any stock options, warrants or
other Common Stock Equivalents outstanding as of the date hereof, (iii) pursuant
to transactions described in subparagraph (d) of this Section, (iv) pursuant to
the Purchase Agreement or Exchange Agreement; and (v) pursuant to a Series A PIK
Election, Series B PIK Election, Series C PIK Election, Series D PIK Election,
Series E PIK Election, or Series F PIK Election, each as defined in the
Certificate; or
(p) agree or otherwise commit to take any actions set forth in the
foregoing subparagraphs (a) through (o).
10.3. Reservation of Common Stock.
---------------------------
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of the Preferred Stock and upon exercise of the
Warrants, such number of shares of Common Stock issuable upon the conversion of
all outstanding shares of the Preferred Stock and upon exercise of the Warrants.
All shares of Common Stock that are so issuable shall, when issued, be duly
38
<PAGE>
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges. The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance that shall be immediately transmitted by
the Company upon issuance).
10.4. Public Disclosures.
------------------
The Company shall not, nor shall it permit any of its Subsidiaries to,
disclose any Shareholder's name or identity as an investor in the Company or any
material information related to this Agreement in any press release or other
public announcement or in any document or material filed with any governmental
entity, without the prior written consent of such Shareholder, unless such
disclosure is required by applicable law or governmental regulations or by order
of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to such Shareholder describing
in reasonable detail the proposed content of such disclosure and shall permit
such Shareholder to review and comment upon the form and substance of such
disclosure.
Section 11. Conflicting Agreements.
----------------------
Each Shareholder represents and warrants that such Shareholder has not
granted and is not a party to any proxy, voting trust or other agreement that is
inconsistent with or conflicts with any provision of this Agreement, and no
holder of Stock shall grant any proxy or become party to any voting trust or
other agreement that is inconsistent with or conflicts with any provision of
this Agreement.
Section 12. Legend.
------
12.1. Legend.
------
Each Shareholder and the Company shall take all such action necessary
(including exchanging with the Company certificates representing shares of Stock
issued prior to the date hereof) to cause each certificate representing
outstanding shares of Stock to bear a legend containing the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR
OTHERWISE DISPOSED OF (i) UNLESS (A) REGISTERED UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES AND "BLUE SKY" LAWS OR (B) AN OPINION OF COUNSEL
SATISFACTORY TO INTEK INFORMATION, INC. (THE "COMPANY") THAT SUCH REGISTRATION
IS NOT NECESSARY HAS BEEN DELIVERED TO THE
39
<PAGE>
COMPANY OR (ii) UNLESS SOLD PURSUANT TO AND IN COMPLIANCE WITH RULE 144 OF SUCH
ACT AND APPLICABLE SECURITIES OR "BLUE SKY" LAWS."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND TO THE VOTING AGREEMENTS SET FORTH IN THE AMENDED
AND RESTATED SHAREHOLDERS' AND VOTING AGREEMENT DATED AS OF JANUARY __, 2000, AS
AMENDED FROM TIME TO TIME BY THE COMPANY AND THE PARTIES THERETO, A COPY OF
WHICH IS ON FILE IN THE OFFICE OF THE COMPANY."
12.2. Termination of Legend.
---------------------
The requirement that the above securities legend be placed upon
certificates evidencing shares of Stock shall cease and terminate upon the
earliest of the following events: (i) when such shares are transferred in an
underwritten public offering, (ii) when such shares are transferred pursuant to
Rule 144 under the Securities Act or (iii) when such shares are transferred in
any other transaction if the seller delivers to the Company an opinion of its
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company to the effect that such legend is no longer necessary in order to
protect the Company against a violation by it of the Securities Act upon any
sale or other disposition of such shares without registration thereunder. The
requirement that the above legend regarding this Agreement be placed upon
certificates evidencing shares of Stock shall cease and terminate upon the sale
of such shares of Stock pursuant to a Public Sale. Upon the consummation of any
event requiring the removal of a legend hereunder, the Company, upon the
surrender of certificates containing such legend, shall, at its own expense,
deliver to the holder of any such shares as to which the requirement for such
legend shall have terminated, one or more new certificates evidencing such
shares not bearing such legend.
Section 13. Representations and Warranties.
------------------------------
13.1. Representations and Warranties of Each Party.
--------------------------------------------
Each party hereto represents and warrants to the other parties hereto
as follows:
(a) It has full power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) This Agreement has been duly and validly authorized, executed
and delivered by it and constitutes a valid and binding obligation of it,
enforceable against it in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally.
(c) The execution, delivery and performance of this Agreement by it
does not (i) violate, conflict with or constitute a breach of or default under
its organizational documents, if
40
<PAGE>
any, or any material agreement to which it is a party or by which it is bound or
(ii) violate any law, regulation, order, writ, judgment, injunction or decree
applicable to it.
(d) Except as set forth in Schedule 13.1(d), no consent or
----------------
approval of, or filing with, any governmental or regulatory body is required to
be obtained or made by it in connection with the transactions contemplated
hereby.
(e) It is not a party to any agreement that is inconsistent with
the rights of any party hereunder or otherwise conflicts with the provisions
hereof.
13.2. Representations and Warranties to Conning and Beacon.
----------------------------------------------------
Each Shareholder (but limited to Shareholders who are signatories
hereto as to changes from the Schedules 13.2(a) or 13.2(b) to the February 3,
1997 Shareholders' and Voting Agreement which is superseded by this Agreement
(other than Conning, Beacon, Bain and SLI)) severally but not jointly represents
and warrants to each of Conning and Beacon as follows:
(a) Schedule 13.2(a) hereto sets forth a list of all securities
of the Company (including, without limitation, shares of capital stock,
convertible securities, debentures, etc.) held of record or beneficially owned
by it immediately after the date hereof. All such securities are free and clear
of any liens, encumbrances, rights of first refusal or other rights of third
parties of any nature with respect thereto other than those set forth in
Schedule 13.2(b).
(b) Except as set forth on Schedule 13.2(b) hereto and other than
this Agreement it is not a party to any contract or agreement written or oral,
(i) with respect to the securities of the Company (including, without
limitation, any voting agreement, voting trust, stockholder's agreement,
registration rights agreement, etc.) or (ii) otherwise with or relating to the
Company, except for employment agreements entered into in the ordinary course of
business.
Section 14. Duration of Agreement.
---------------------
The rights and obligations of a Shareholder under this Agreement
shall terminate at such time as such Shareholder no longer is the beneficial
owner of any shares of Stock. Except as provided below in this Section 14, this
Agreement shall terminate upon the consummation of an IPO, except that the terms
of Sections 3.1(b) to 3.11, 9, 10.3, 10.4, 12, 16, 17, 24 and 30 shall survive
until, by their respective terms, they are no longer operative. NOTWITHSTANDING
ANY OTHER PROVISION OF THIS AGREEMENT, INCLUDING PROVISIONS WHICH STATE THAT
THEY APPLY AFTER AN IPO OR QUALIFIED IPO, IF A QUALIFIED IPO CLOSES BEFORE JULY
31, 2000, THIS AGREEMENT SHALL TERMINATE IN ITS ENTIRETY. HOWEVER, AFTER
TERMINATION THE COMPANY SHALL NEVERTHELESS REMOVE LEGENDS ON CERTIFICATES AS
PROVIDED IN SECTION 12.2
Section 15. Further Assurances.
------------------
41
<PAGE>
At any time or from time to time after the date hereof the parties
agree to cooperate with each other, and at the request of any other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby and to
otherwise carry out the intent of the parties hereunder.
Section 16. Increased Authorized Stock
--------------------------
Each Shareholder hereby agrees, upon such matters being submitted by
the Board to a vote or consent of the stockholders of the Company, to vote (or
execute a consent with respect to) the Shareholder's Voting Shares (and other
securities issued by the Company, if necessary) in favor of any amendment to the
Company's Certificate (or other governing document) so that there is a
sufficient number authorized of each type of security to be issued upon exercise
of a Series A PIK Election, Series B PIK Election, Series C PIK Election, Series
D PIK Election, Series E PIK Election, Series F PIK Election, Series F
Additional Adjustments, or Warrants (as each such term is defined in the
Certificate) (or conversion or exercise of a security issuable upon such an
exercise). Each Shareholder hereby grants an irrevocable proxy to the Board
solely to vote the Shareholder's securities in favor of such an amendment. The
proxies and powers granted by each Shareholder pursuant to this Section 16 are
coupled with an interest and are given to secure the performance of each of the
Shareholders' respective obligations to the various Shareholders and the Company
under this Section 16. Such proxies and powers shall survive the death,
incompetency and disability of each Shareholder. Such proxies and powers will be
effective until a Qualified IPO, at which time such proxies and powers shall
terminate.
Section 17. Amendment and Waiver.
--------------------
Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement shall be effective against the Company
or any Shareholder unless such modification, amendment or waiver is approved in
writing by the Company, Shareholders holding at least a majority of the
outstanding Common Stock, and, (a) so long as Conning holds 5% or more of the
outstanding Common Stock, by Conning, (b) so long as Beacon holds 5% or more of
the outstanding Common Stock, by Beacon, (c) so long as RBC has the right to
designate an RBC Director, by RBC, and (d) so long as O'Crowley has the right to
designate an O'Crowley Director, by O'Crowley; provided, however, that the
-------- -------
addition of new parties in accordance with the provisions of the Purchase
Agreement among the Company, USITF, Encompass, TCI and certain other parties
dated April 16, 1999 herewith and pursuant to the Brinson Purchase Agreement
shall not be deemed an amendment hereof and shall not require the consent of any
party hereto. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
42
<PAGE>
Section 18. Severability.
------------
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
Section 19. Entire Agreement.
----------------
Except as otherwise expressly set forth herein, this Agreement and the
other documents dated the date hereof embody the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersede and pre-empt any prior understandings, agreements or
representations by or among the parties, written or oral, that may have related
to the subject matter hereof in any way, including, without limitation, that
certain Shareholders' Agreement made as of August 2, 1996, by and between the
Company, O'Crowley, RBC and certain other stockholders of the Company. Without
limiting the generality of the foregoing, to the extent that any of the terms
hereof are inconsistent with the rights or obligations of any Shareholder under
any other agreement with the Company, the terms of this Agreement shall govern.
Section 20. Successors and Assigns.
----------------------
Except as otherwise provided herein, this Agreement shall bind and
inure to the benefit of and be enforceable by the Company and its successors and
assigns and each Shareholder and their respective successors, assigns, heirs and
personal representatives, so long as they hold Stock and are or become parties
to this Agreement. Except pursuant to a Transfer of Stock in compliance with
Section 4, no Shareholder shall have the right to assign its rights and
obligations under this Agreement without the consent of (i) the Shareholders who
hold a majority of the shares of the then outstanding Common Stock, (ii) Beacon
(so long as Beacon is a Shareholder) and (iii) Conning (so long as Conning is a
Shareholder).
Section 21. Counterparts.
------------
This Agreement may be executed in separate counterparts each of which
shall be an original and all of which taken together shall constitute one and
the same agreement.
Section 22. Remedies.
--------
Each Shareholder shall be entitled to enforce its rights under this
Agreement specifically to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in their
favor. The parties hereto agree and acknowledge that
43
<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that each party may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
Section 23. Notices.
-------
Any notice provided for in this Agreement shall be in writing and
shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Company at the address set forth below and to any other recipient at the address
indicated on Schedule 23 hereto and to any subsequent holder of Stock subject to
-----------
this Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service. The Company's address is:
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111-3017
Telephone: (303) 357-3000
Facsimile: (303) 405-8421
Attention: Chief Executive Officer
with a copy to:
Chrisman, Bynum & Johnson, P.C.
1900 Fifteenth Street
Boulder, CO 80302
Telephone: (303) 546-1300
Facsimile: (303) 449-5426
Attention: G. James Williams, Jr.
Section 24. Governing Law; Consent to Jurisdiction.
--------------------------------------
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware without giving effect to the
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware, the State of New York and of the United States
of America, in each case located in either the County of New Castle, Delaware or
the County of New York, New York for any action, proceeding or investigation in
any court or before any governmental authority ("Litigation") arising out of or
----------
relating to this Agreement and the transactions contemplated hereby (and agrees
not
44
<PAGE>
to commence any Litigation relating thereto except in such courts). Each of
the parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of Delaware, the
State of New York or the United States of America, in each case located in
either the County of New Castle, Delaware or the County of New York, New York
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum. Each of the parties
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any and all rights to trial by jury in connection with any
Litigation arising out of or relating to this Agreement or the transactions
contemplated hereby.
Section 25. Miscellaneous.
-------------
The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. This Agreement
is intended to be a voting agreement among stockholders as permitted by Section
218(c) of the Delaware General Corporation Law.
Section 26. Construction.
------------
Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Section 27. Pledges of Shares.
-----------------
Any Shareholder exercising his, her or its right under Sections 5
and/or 8 may, in connection with obtaining financing therefor pursuant to a bona
fide recourse loan from a bank or similar financial institution approved by
Beacon and Conning (which approval will not be unreasonably withheld), pledge
some or all of such Shareholder's Stock as collateral for such financing;
provided that, to the extent the lenders secured by such pledge have rights in
- --------
the Stock (including, without limitation, upon foreclosure), such lender agrees
in writing to be bound by this Agreement in its entirety and that the foregoing
is incorporated into the agreements governing such financing and pledge.
Section 28. O'Crowley Life Insurance; Use of Proceeds.
-----------------------------------------
As soon as reasonably practicable following the Closing, the Company
shall purchase (if it has not already done so) a term life insurance policy
providing for a $20,000,000 payment to the Company (as the named beneficiary of
such policy) if O'Crowley dies, and the Company shall thereafter keep such
policy in effect. The first $10,000,000 of proceeds of such insurance shall,
first, be used to repurchase shares of Stock, valued on a per share as-converted
- -----
basis, from O'Crowley's estate and, second (to the extent any proceeds of the
------
first $10,000,000 of
45
<PAGE>
such insurance remain after repurchasing all of the capital stock of the Company
held by O'Crowley's estate at such time), be distributed to O'Crowley's estate.
With respect to the foregoing, if, within 10 days following receipt of such
insurance proceeds by the Company, the repurchase price of each share of Common
Stock cannot be agreed upon among Conning, Beacon, RBC and, with respect to
O'Crowley and his Affiliates, the Person (the "O'Crowley Representative") that
------------------------
has voting control with respect to the largest portion of the Stock owned by
O'Crowley and his Affiliates, then (w) each of Conning, Beacon, RBC and the
O'Crowley Representative shall select an independent appraiser skilled in such
valuations, (x) the Company shall make all books, records and other data and
documents available to such appraisers, (y) such appraisers shall simultaneously
render their reasoned written appraisals within 30 days after their selection,
and (z) the mathematical average of the four appraisals, stated on a per share
as-converted basis taking into account all of the outstanding Common Stock,
shall establish the repurchase price of each share of Common Stock. For the
purposes of this Section 28, the determination of the repurchase price of each
share of Common Stock shall not include a discount for a minority position or
liquidity, shall value the Company as a going concern and shall be based upon
the equity value of the Company. Repurchases of Stock and any distributions from
insurance proceeds as contemplated by this Section 28 shall be made promptly
after the later of the date such proceeds are received by the Company and the
date the reasoned written appraisals are provided to the Company pursuant to
clause (y) of the foregoing sentence.
Section 29. Rule Against Perpetuities.
-------------------------
The term of this Agreement shall be 21 years from February 3, 1997,
unless terminated earlier.
Section 30. Spider Technologies, Inc. Spin Off.
-----------------------------------
30.1 No Application to Spider.
-------------------------
The Company, as of November 5, 1999, distributed capital stock (the
"Spider Spin Off") of its wholly owned subsidiary, Spider Technologies, Inc., a
---------------
Delaware corporation ("Spider") to holders of capital stock of the Company. This
Agreement and the Registration Rights Agreements have no application to
securities issued by Spider.
30.2 Unwind.
------
Notwithstanding the intended simultaneous effectiveness of this
Agreement and the Spider Spin Off, if for any reason the Spider Spin Off does
not occur on or before November 30, 1999, or is unwound before January 1, 2000,
each Shareholder shall vote all its Stock and other Voting Shares in favor of
amendments to this Agreement, the Certificate, and such other agreements and
documents which were entered into in contemplation of the Spider Spin Off, so
that each will read as it would have in the absence of the Spider Spin Off. The
PIK Election Dividend and liquidation preference (other than adjustments to the
fixed dollar amount of the liquidation preference) are not dependent on the
Spider Spin Off.
46
<PAGE>
30.3 Effect on Liquidation Preference.
---------------------------------
30.3.1 If subsequent to the Spider Spin Off, Spider (which term
for purposes of this Section 30.3 includes the successors and assigns of Spider)
engages in a "Liquidation" (for purposes of this Section 30 "Liquidation" means
-----------
a distribution of the proceeds of a sale or lease of assets of Spider
outside the ordinary course of business, a liquidation, winding up or
dissolution as provided in Section 3.1.4 of the Certificate of Incorporation of
Spider as first amended to create the Series A Preferred Stock of Spider and
excluding later amendments, or an exchange or sale of 90% or more of the capital
stock of Spider to accomplish an acquisition of Spider in a single or related
transaction, [any sale, lease, exchange, merger or consolidation as provided in
such Section, or an exchange or sale of 90% or more of the capital stock of
Spider to accomplish an acquisition of Spider in a single or related transaction
is deemed a Liquidation even if holders of Spider capital stock elect, waive, or
vote to not treat it as a Liquidation]), or an initial public offering of its
equity securities which is registered pursuant to the Securities Act ("Spider
------
IPO") then the Shareholders shall vote all their Stock and other Voting
- ---
Shares in favor of an amendment to the Certificate (and amend such other
agreements and documents as appropriate) to accomplish the following:
(a) The Series A Redemption Price and Series A Liquidation Value,
and the Series A Original Purchase Price solely for the purpose of computing the
amount of the dividend thereon pursuant to Section 3.1.3.(b) of the Certificate,
will be reduced by an amount equal to the Spider Excess Preferred Distribution
and increased by an amount equal to a Spider Deficit Distribution, in respect of
a share of Spider Series A Preferred issued pursuant to the Spin Off and Spider
securities issued in respect of such share of Spider Series A Preferred Stock by
way of exchange, exercise, conversion, stock split, stock dividend, distribution
or otherwise (collectively "Series A Spin Off Securities").
----------------------------
(b) The Series B Redemption Price and Series B Liquidation Value,
and the Series B Stated Value solely for the purpose of computing the amount of
the dividend thereon pursuant to Section 3.2.3.(a) of the Certificate, will be
reduced by an amount equal to the Spider Excess Preferred Distribution and
increased by an amount equal to a Spider Deficit Distribution, in respect of a
share of Spider Series A Preferred issued pursuant to the Spin Off and Spider
securities issued in respect of such share of Spider Series A Preferred Stock by
way of exchange, exercise, conversion, stock split, stock dividend, distribution
or otherwise (collectively "Series B Spin Off Securities").
----------------------------
(c) The Series C Redemption Price and Series C Liquidation Value,
and the Series C Stated Value solely for the purpose of computing the amount of
the dividend thereon pursuant to Section 3.3.3.(a) of the Certificate, will be
reduced by an amount equal to the Spider Excess Preferred Distribution and
increased by an amount equal to a Spider Deficit Distribution, in respect of a
share of Spider Series A Preferred issued pursuant to the Spin Off and Spider
securities issued in respect of such share of Spider Series A Preferred Stock by
way of exchange,
47
<PAGE>
exercise, conversion, stock split, stock dividend, distribution or otherwise
(collectively "Series C Spin Off Securities").
----------------------------
(d) The Series D Redemption Price and Series D Liquidation Value,
and the Series D Stated Value solely for the purpose of computing the amount of
the dividend thereon pursuant to Section 3.4.3.(a) of the Certificate, will be
reduced by an amount equal to the Spider Excess Preferred Distribution and
increased by an amount equal to a Spider Deficit Distribution, in respect of a
share of Spider Series A Preferred issued pursuant to the Spin Off and Spider
securities issued in respect such share of Spider Series A Preferred Stock by
way of exchange, exercise, conversion, stock split, stock dividend, distribution
or otherwise (collectively "Series D Spin Off Securities").
----------------------------
(e) The Series E Redemption Price and Series E Liquidation Value,
and the Series E Stated Value solely for the purpose of computing the amount of
the dividend thereon pursuant to Section 3.5.3.(a) of the Certificate, will be
reduced by an amount equal to the Spider Excess Preferred Distribution and
increased by an amount equal to a Spider Deficit Distribution, in respect of a
share of Spider Series A Preferred issued pursuant to the Spin Off and Spider
securities issued in respect of such share of Spider Series A Preferred Stock by
way of exchange, exercise, conversion, stock split, stock dividend, distribution
or otherwise (collectively "Series E Spin Off Securities").
----------------------------
Equitable adjustments to the foregoing will be made in the event that
prior to a Liquidation or a Spider IPO and the making of the adjustments
provided for in Section 30.3.1.( a) through (e) dividends or distributions are
made by Spider on or in respect of Series A Spin Off Securities, Series B Spin
Off Securities, Series C Spin Off Securities, Series D Spin Off Securities, or
Series E Spin Off Securities (collectively "Spin Off Securities").
-------------------
The parties recognize that the foregoing adjustments in this Section
30.3.1 will not affect the amount receivable by a holder of Preferred Stock in
respect of shares of Common Stock received on conversion of Preferred Stock to
Common Stock prior to a Liquidation.
No such adjustments shall be made in respect of the Series F Preferred
as Spin Off Securities were not issued in respect of Series F Preferred.
No adjustments shall be made pursuant to this Section 30.3 in respect
of any Preferred stock that converts to Common Stock prior to either a
Liquidation or a Spider IPO.
30.3.2. "Spider Excess Preference Distribution", subject to
---------------------------------------
Section 30.3.4., means an amount equal to: (A) in the case of a Liquidation, the
amount by which (i) the Fair Market Value (as defined below) of the amount
received by the holders of Spin Off Securities (in respect of one share of
Spider Series A Preferred and all other Spin Off Securities issued in respect
thereof) pursuant to the Liquidation in respect of the applicable Spin Off
Securities exceeds (ii) $.13; or (B) in the case of a Spider IPO, the amount by
which (i) eighty-two and one-half percent (82.5%) of the average closing price
(or if no closing price is reported, the
48
<PAGE>
average of the last reported bid and ask prices) per share of Spider common
stock on the principal United States exchange or market on which Spider's common
stock is then traded, for the thirty (30) trading days commencing 180 calendar
days after the Spider IPO (or the 30 [or fewer if there has been fewer than 30]
trading days preceding a redemption of a majority [calculated as a single class
on an as converted to common basis] of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred), (ii)
exceeds $.13. The end of such 30 trading day period for purposes of this
definition and the definition of Spider Deficit Distribution is referred to as
the "Trading Period End."
-------------------
30.3.3. "Spider Deficit Distribution," subject to Section 30.3.4.,
----------------------------
means an amount equal to: (A) in the case of a Liquidation, the amount by which
(i) the Fair Market Value (as defined below) of the amount received by the
holders of Spin Off Securities (in respect of one share of Spider Series A
Preferred and all other Spin Off Securities issued in respect thereof) pursuant
to the Liquidation in respect of the applicable Spin Off Securities is less than
(ii) $.13; or (B) in the case of a Spider IPO, the amount by which (i) eighty-
two and one-half percent (82.5%) of the average closing price (or if no closing
price is reported, the average of the last reported bid and ask prices) per
share of Spider common stock on the principal United States exchange or market
on which Spider's common stock is then traded, for the thirty (30) trading days
commencing 180 calendar days after the Spider IPO (or the 30 [or fewer if there
has been fewer than 30] trading days preceding a redemption of a majority
[calculated as a single class on an as converted to common basis] of the Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred), is less than (ii) $.13. In the case of a Liquidation, the
Spider Deficit Distribution will be calculated only upon a Liquidation in which
all remaining Spider assets are directly or indirectly transferred (including by
merger, consolidation or stock exchange).
30.3.4. The calculation of Spider Excess Preferred Distribution or
Spider Deficit Distribution, including the $.13 amount referenced in this
Section 30, shall be equitably adjusted for stock splits, stock dividends other
than PIK Election dividends (except as PIK Election dividends are addressed in
the following portions of this Section 30.3.4), stock combinations, and
recapitalizations of Spin Off Securities, Spider common stock, and Preferred
Stock. No further calculation of Spider Excess Preference Distribution or Spider
Deficit Distribution shall be made after a Liquidation (other than a Liquidation
consisting only of a partial distribution of the assets of Spider) or the
Trading Period End, whichever occurs first. The calculation of the Spider Excess
Preference Distribution shall be equitably adjusted to take into account stock
received pursuant to dividends, stock splits, stock combinations and
recapitalizations so that the aggregate decrease in the Series A Original
Purchase Price, Redemption Price, Liquidation Value, and Stated Value, of all
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
and Series E Preferred does not exceed the difference between: (i) the
$4,901,925.70 amount of the adjustment in respect of the Spider Spin Off as of
the date of the Spider Spin Off and (ii) the aggregate amount received in
respect of Spin Off Securities excluding Spin Off Securities issued pursuant to
a Series A PIK Election, Series B PIK Election, Series C PIK Election, Series D
PIK Election or Series E PIK Election.
49
<PAGE>
For example, using hypothetical numbers, assume that: (i) there were
50,000,000 shares of Series A Preferred Stock outstanding on the date of the
Liquidation of Spider (10,000,000 of which had been received upon a PIK
Election); (ii) the Spider Series A Preferred Stock received $.20 per share in
the Liquidation; (iii) the Liquidation Value of the Spider Series A Preferred
Stock was $.13 per share; and (iv) at the time of the Spider Liquidation there
were a total of 70,000,000 shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock outstanding. The aggregate excess would be 50,000,000 x $.07 =
$3,500,000, not 40,000,00 x $.07 ($2,800,000) plus 10,000,000 x $.20
($2,000,000) = $4,800,000. The $3,500,000 aggregate would then be allocated
among the 70,000,000 shares of Intek for a per share adjustment of $.05
($3,500,000 / 70,000,000 = $.05). Subject to the $.13 per share limitation of
Section 30.3.5, the same equitable adjustment principles shall apply in the case
of a Spider Deficit Distribution.
30.3.5 In no event shall the adjustments provided for in this Section
30.3 result in an increase in the Series A Redemption Price, Series A
Liquidation Value, Series A Original Purchase Price, Series B Redemption Price,
Series B Liquidation Value, Series B Stated Value, Series C Redemption Price,
Series C Liquidation Value, Series C Stated Value, Series D Redemption Price,
Series D Liquidation Value, Series D Stated Value, Series E Redemption Price,
Series E Liquidation Value, or Series E Stated Value of more than $.13, subject
to adjustment as to such $.13 for stock splits, stock dividends, stock
combinations and recapitalizations of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred.
30.3.6 The "Fair Market Value" of any amount received other than in
----------------------
the form of immediately available funds is: (i) if a security traded on the New
York Stock Exchange, American Stock Exchange, NASDAQ National Market System, or
a foreign exchange of prominence similar to the foregoing, the average closing
price (or if not so quoted the average of the last quoted bid and ask prices)
during the fifteen (15) trading days preceding the closing of the transaction
whereby the Shareholders receive such security; and, otherwise (ii) the fair
market value of such other property as determined by mutual agreement among
O'Crowley, the Company, and the holders of not less than 50% of the Series B
Preferred, Series C Preferred and Series D Preferred, each treated as a separate
class on an as-converted basis, or, if the parties are unable to agree, as
determined based upon what a seller under no compulsion to sell would receive
from a willing buyer by a nationally recognized independent investment banking
firm selected by mutual agreement among O'Crowley, the Company and the holders
of not less than 50% of the Series B Preferred (including in such as converted
amount Common Stock issuable on the exercise of the Series NB Warrant), Series C
Preferred and Series D Preferred, each treated as a separate class on an as-
converted basis.
30.3.7. Except in the case of a Spider Deficit Distribution, this
Section 30 shall not reduce the amount receivable by holders of Common Stock,
including Common Stock issued upon conversion of Preferred Stock, in a
liquidation of the Corporation. If a Liquidation of Spider or Trading Period End
has not then occurred, this Section 30 shall terminate upon the earlier of a
dissolution, liquidation or winding up of the Corporation or an initial public
offering
50
<PAGE>
of the Corporation's Common Stock pursuant to which all Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred is converted to Common Stock.
30.3.8. For purposes of Sections 30.3.2(a) and 30.3.6., when referring
to Intek, the terms "dissolution," "liquidation," and "winding up" are used as
such terms are used in Sections 3.1.4, 3.2.4, 3.3.4, 3.4.4., and 3.5.4. of the
Certificate and the term "redemption" refers to a redemption pursuant to
Sections 3.1.6(c), 3.2.6, 3.3.6., 3.4.6 or 3.5.6. of the Certificate.
This Amended and Restated Shareholders' and Voting Rights Agreement
shall become effective upon execution by those persons whose execution is
required by Section 17 of the Original Agreement (as this Agreement has the
effect of an amendment thereof), notwithstanding that all current shareholders
of the Company are listed below as signatories hereto.
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed Intek Information,
Inc.'s Amended and Restated Shareholders' and Voting Agreement on the day and
year first above written.
/s/ Timothy C. O'Crowley /s/ Franklin D. Richards
- ---------------------------- ------------------------------------
Timothy C. O'Crowley* Franklin D. Richards
/s/ Patrick F. O'Neal
____________________________ ------------------------------------
Tyce M. Fields Patrick F. O'Neal, on behalf of Eden
Financial Group, Inc., Capital Accumulation
and Profit Sharing Plan FBO
____________________________ Patrick F. O'Neal
James M. Fields
/s/ Patrick F. O'Neal
____________________________ ------------------------------------
Joan M. Fields Patrick F. O'Neal
____________________________ ____________________________________
Stephen J. Darnell Michael E. Ford
____________________________ ____________________________________
Thomas M. Rocca John Steuart
____________________________ ____________________________________
Craig Barton Jeffrey B. Hanes
____________________________ ____________________________________
Jeffrey Martin, Trustee Thomas Dennard
The Jeffrey B. Martin
Revocable Trust Dated
June 14, 1994
____________________________ ____________________________________
Lock W. Ireland Joseph A. Shaffer
____________________________ ____________________________________
H. Jackson Upchurch, Jr. Bradley Norton
/s/ Stephen S. Hyde
- ---------------------------- ____________________________________
Stephen S. Hyde Douglas Scott
____________________________ ____________________________________
Jeanette H. Fairbairn, as JTWROS Roger A. Frasier, as JTWROS
with Ralph R. Fraiser and with Gary E. Fraiser and
Gary E. Fraiser Jeanette H. Fairbairn
52
<PAGE>
________________________________ ____________________________________
Lawrence Glaze Gary E. Frasier, as JTWROS
with Jeanette H. Fairbairn and
Roger A Fraiser
________________________________ ____________________________________
Jack C. Ellsworth, JTWROS Mary L. Ellsworth, JTWROS
with Mary L. Ellsworth with Jack C. Ellsworth
/s/ Rick L. Weller
- -------------------------------- ____________________________________
Rick L. Weller Jonathan H. Yellen
________________________________ ____________________________________
Paul A. Tartre Loretta K. Yellen
BAIN & COMPANY, INC.
By: /s/ Colin F. Anderson
----------------------------- ____________________________________
Name: Colin F. Anderson Richard D. Yellen
Title: Finance Director
SQUAM LAKE INVESTORS II, L.P.
By: GPI, Inc., its managing general
partner
By: Colin F. Anderson
----------------------------- ____________________________________
Name: Colin F. Anderson Mark Parfrey
Title: President of GPI, Inc.
Managing General Partner
RESOURCE BANCSHARES CORPORATION*
By: /s/ D. W. Johnson
----------------------------- ____________________________________
Name: D. W. Johnson Jim Diaz
Title: President and C.E.O.
Address: 1901 Main Street, Suite 650
Columbia, SC 29201 ____________________________________
Linda Maes
INTEK INFORMATION, INC.*
By: /s/ Timothy C. O'Crowley
------------------------------ ____________________________________
Timothy C. O'Crowley Sharon L. Miller
Chief Executive Officer and
President
Amended and Restated Shareholders' and Voting Agreement
53
<PAGE>
CONNING CAPITAL* PARTNERS V, L.P.
By: Conning Investment Partners V, LLC, its General Partner
By: Conning & Company, its Manager Member
By: /s/ Gregory L. Batton
------------------------------------
Title: Vice President
---------------------------------
Address: City Place II, 185 Asylum Street,
Hartford CT 06103-4105
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.*
By: Focus Value GP, Inc., its member
By: Beacon Focus Value Investors, LLC, its general partner
By: /s/ Eric Wilkinson
------------------------------------
Title: Managing Director
---------------------------------
Address: 399 Park Avenue,
New York, New York 10022
U.S. INFORMATION TECHNOLOGY FINANCING, L.P.*
By: /s/ Shozo Okuda
------------------------------------
Name: Shozo Okuda
----------------------------------
Title: Managing Director
---------------------------------
Address: 777 108/th/ Avenue NE, Suite 2300
Bellevue, WA 98004
ENCOMPASS GROUP, INC.*
By: /s/ Shozo Okuda
------------------------------------
Name: Shozo Okuda
----------------------------------
Title: Chairman
---------------------------------
Address: 777 108/th/ Avenue NE, Suite 2300
Bellevue, WA 98004
TRANS COSMOS USA, INC.*
By: /s/ Shozo Okuda
------------------------------------
Name: Shozo Okuda
----------------------------------
Title: Chairman
---------------------------------
Address: 777 108/th/ Avenue NE, Suite 2300
Bellevue, WA 98004
Amended and Restated Shareholders' and Voting Agreement
54
<PAGE>
BVCF IV, L.P. *
By: J.W. Path Associates, LLC,
its General Partner
By: Brinson Venture Management, LLC,
its Attorney-in-fact
By: Brinson Partners, Inc.,
its Managing Member
By: /s/ Thomas D. Berman
-----------------------------------
Thomas D. Berman
Executive Director
Address: 209 S. LaSalle Street
Chicago, IL 60604
SONY ELECTRONICS, INC.
By: /s/ MICHAEL EHLERS
----------------------------------
Vice President, Sony Electronics, Inc.
Address: 16450 W. Bernardo Drive
San Diego, CA 92127
PROSPERO HOLDINGS, LLC
By: ________________________________
Name: ________________________________
Dan Donovan
Title: ________________________________
Address: 103 North Park Avenue
Easton, CT 06612
______________________________________
Paul Cameron Brown
10257 Jeraback Drive
San Diego, CA 92131
55
<PAGE>
CBJ HOLDINGS FIVE, LLC
By: ________________________________
Name: ________________________________
David J. Cook
Title: ________________________________
Address: 1900 15/th/ Street
Boulder, CO 80302
GALLAGHER ENTERPRISES, INC.
By: ________________________________
Name: ________________________________
K.C. Gallagher
Title: ________________________________
Address: 370 17/th/ Street, Suite 5600
Denver, CO 80202
THE HAMILTON COMPANIES, LLC
By: ________________________________
Name: ________________________________
Frederic C. Hamilton
Title: ________________________________
Address: 1560 Broadway, Suite 2200
Denver, CO 80202
_______________________________________
Stanley A. Jorgenson
3645 Elliott Street
San Diego, CA 92106
MARKET STREET PARTNERS
By: _________________________________
Name: _________________________________
Title: ________________________________
Address: 1401 17/th/ Street, Suite 750
Denver, CO 80202
________________________________________
Benny Barco
20 Cali Court
Pleasanton, CA 94566
Amended and Restated Shareholders' and Voting Agreement
56
<PAGE>
SCHEDULE 13.1(d)
CONSENTS REQUIRED BY SHAREHOLDER
57
<PAGE>
SCHEDULE 13.2(a)
CAPITALIZATION TABLE LISTING SECURITYHOLDERS
(Attached)
58
<PAGE>
SCHEDULE 13.2(b)
The Registration Rights Agreements
The agreements referred to in sections 5.6(h), (i), (k), (l) and (m)
59
<PAGE>
SCHEDULE 23
ADDRESS FOR SHAREHOLDERS NOTICES IF NOT ON SIGNATURE PAGE
<TABLE>
<S> <C>
Timothy C. O'Crowley Douglas D. Scott
Intek Information, Inc. 1705 Viewpoint Road
5619 DTC Parkway, 12/th/ Floor Boulder, CO 80303
Englewood, CO 80111
John Steuart
Frank D. Richards 2033 Hearst Avenue
Intek Information, Inc. Berkeley, CA 94709
5619 DTC Parkway, 12/th/ Floor
Englewood, CO 80111 Craig Barton
525 Vista Rio Court
Tyce M. Fields Woodbridge, CA 95258
270 Redwood Shores Pkwy. PMB#710
Redwood City, CA 94065 Jeffrey B. Hanes
6420 Wenoga Road
Patrick F. O'Neal Mission Hills, KS 66208
Intek Information, Inc.
5619 DTC Parkway, 12/th/ Floor Jeffrey Martin
Englewood, CO 80111 67 Glenmoor
Englewood, CO 80110
Patrick F. O'Neal, on behalf
of Eden Financial Group, Inc. Sharon L. Miller
2397 Daisy Lane 189 Hampton Road
Golden, CO 80401 Hayward, CA 94541
Joan M. and James M. Fields Thomas Dennard
4053 Walnut Drive c/o Laureate Capital Corporation
Pleasanton, CA 94566 227 W. Trade Street, Suite 400
Charlotte, NC 28202
Stephen J. Darnell
7501 Driftwood Way Lock W. Ireland and Anne F. Ireland
Pleasanton, CA 94566 2211 Alicia Lane
Atlantic Beach, FL 32233
Michael E. Ford
190 Eudora Street Joseph A. Shaffer
Denver, CO 80220 c/o Laureate Capital Corp.
227 West Trade Street, Suite 400
Thomas M. Rocca Charlotte, NC 28202
9568 E. Hidden Hill Lane
Littleton, CO 80124 Bradley S. Norton
999 Morewood Parkway
Rocky River, OH 44116
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
Steven Hyde
IG Ventures, Ltd. Loretta K. and Richard D. Yellen
31 Broadmoor Avenue 103 Surrey Run
Colorado Springs, CO 80906 Williamsville, NY 14221
H. Jackson Upchurch, Jr. Paul A. Tartre
and Donna W. Upchurch Intek Information, Inc.
c/o Resource Bancshares Corp. 1455 Frazee Rd., Suite 220
1901 Main Street, Suite 650 San Diego, CA 92108
Columbia, SC 29201
BAIN & COMPANY, INC.
Jeanette H. Fairbairn Gary Wilkinson, Treasurer
2439 MacArthur Parkway 2 Copley Place
Lodi, CA 95242 Boston, MA 02116
Roger A. Frasier SQUAM LAKE INVESTORS II, L.P.
45780 Indian Canyon Road By: GPI, Inc., its managing general partner
Indian Wells, CA 92210 c/o Bain & Company, Inc.
Attn: Gary Wilkinson, Treasurer
Gary E. Frasier 2 Copley Place
45780 Indian Canyon Road Boston, MA 02116
Indian Wells, CA 92210
RESOURCE BANCSHARES CORPORATION
Lawrence C. Glaze D.W. Johnson, Chairman and CEO
800 W. 47/th/ Street, #300 1901 Main Street, Suite 650
Kansas City, MO 64112 Columbia, SC 29201
Jack C. and Mary L. Ellsworth INTEK INFORMATION, INC.
180 Knob Road Timothy C. O'Crowley, President
Tisgah Forest, NC 28768 5619 DTC Parkway, 12/th/ Floor
Englewood, CO 80111
Mark Parfrey
2135 1/2 Froude Street CONNING CAPITAL PARTNERS V, L.P.
San Diego, CA 92107 Attn: Steve Piaker
City Place II, 9/th/ Floor
Linda Maes 185 Asylum Street,
3839 Brookdale Blvd. Hartford CT 06103-4105
Castro Valley, CA 94546
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
Jim Diaz Attn: Harold (Hal) Pote
3150 S. Jasmine Way 399 Park Avenue
Denver, CO 80222 New York, NY 10022
Rick L. Weller U.S. Information Technology Financing, L.P.
8548 Colonial Drive Attn: Stephen Knight
Littleton, CO 80124 777 108/th/ Avenue NE, Suite 2300
Bellevue, WA 98004
Jonathan H. Yellen
1349 Lexington Avenue, Apt. 5B
New York, NY 10128
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
CBJ Holdings Five, LLC
Encompass Group, Inc. c/o David J. Cook
Attn: Stephen Knight 1900 15/th/ Street
777 108/th/ Avenue NE, Suite 2300 Boulder, CO 80302
Bellevue, WA 98004
Gallagher Enterprises, Inc.
Trans Cosmos USA, Inc. c/o K.C. Gallagher
Attn: Stephen Knight 370 17/th/ Street, Suite 5600
777 108/th/ Avenue NE, Suite 2300 Denver, CO 80202
Bellevue, WA 98004
The Hamilton Companies, LLC
BVCF IV, L.P. c/o Frederic C. Hamilton
Attn: Thomas Berman 1560 Broadway, Suite 2200
209 S. LaSalle StreetChicago, IL 60604 Denver, CO 80202
Prospero Holdings, LLC Stanley A. Jorgenson
Attn: Dan Donovan 3645 Elliott Street
103 North Park Avenue San Diego, CA 92106
Easton, CT 06612
Market Street Partners
Paul Cameron Brown 1401 17/th/ Street, Suite 750
10257 Jeraback Drive Denver, CO 80202
San Diego, CA 92131
</TABLE>
62
<PAGE>
Exhibit 4.3.1
Amendment No. 2
To
Registration Rights Agreement
(Acorn)
This Amendment No. 2 by and between Intek Information Inc., a Delaware
corporation (the "Company"), the former owners of all the outstanding capital
-------
stock of Acorn Information Services, Inc., ("Acorn") and Prospero, LLC (the
-----
"Acorn Shareholders") is made effective upon the Company's IPO (as defined
------------------
below).
Whereas, the Company and the Acorn Shareholders are parties to a
Registration Rights Agreement dated as of October 30, 1999 (the "Acorn
-----
Registration Rights Agreement"), pursuant to which the Company has agreed to
- -----------------------------
provide the Acorn Shareholders with certain rights relating to the registration
of the shares of Common Stock issuable in connection with the acquisition of
Acorn by the Company (capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Registration Rights Agreement);
and
Whereas, Section 4.4 of the Acorn Registration Rights Agreement permits
amendments without the consent of the Acorn Shareholders if the same amendments
are made in respect of Other Registration Rights Agreements; and
Whereas, the Company has agreed to provide certain of its other
shareholders with rights relating to the registration of the shares of its
common stock and has determined to consolidate such registration rights into an
Amended and Restated Registration Rights Agreement (the "Amended and Restated
--------------------
Rights Agreement") upon the closing of the initial public offering of the
- ----------------
Company's common stock under Section 12 of the Securities Exchange Act of 1934,
as amended (the "IPO"); and
---
Whereas, the Amended and Restated Rights Agreement necessitates that
certain modifications be made to the Acorn Registration Rights Agreement, and
the Company and the Acorn Shareholders desire to make such modifications.
Now, therefore, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:
The following term as set forth, used or otherwise defined in the
Registration Rights Agreement are hereby amended as follows:
"Other Registration Rights Agreements" means that certain Amended and
------------------------------------
Restated Registration Rights Agreement made as of the closing of the
Company's initial public offering, by and among the Company and THE BEACON
GROUP III-FOCUS VALUE FUND, L.P., a Delaware limited partnership, SQUAM
LAKE INVESTORS II, L.P., a Delaware limited partnership, BAIN & COMPANY,
INC., a Massachusetts corporation, CONNING CAPITAL LIMITED PARTNERSHIP V, a
Delaware limited partnership, U.S.
<PAGE>
INFORMATION TECHNOLOGY FINANCING, L.P., a Washington corporation, ENCOMPASS
GROUP, INC., a Washington corporation, TRANS COSMOS USA, INC., a Washington
corporation, BVCF IV, L.P., a Delaware limited partnership, TIMOTHY C.
O'CROWLEY, TYCE FIELDS, FRANK RICHARDS and the stockholders of the Company
listed on the Schedule of Investors thereto.
2
<PAGE>
In Witness Whereof, the undersigned have executed this Amendment No.2 to
Registration Rights Agreement as of the date set forth above.
Intek Information Inc.
By:___________________________
Name:_________________________
Title:________________________
3
<PAGE>
Exhibit 4.5.1
This Amendment (the "Amendment") to that certain Preferred Stock Purchase
---------
Agreement dated as of February 3, 1997 (the "Agreement"), by and among Intek
---------
Information, Inc., a Delaware corporation (the "Company"), and The Beacon Group
-------
III - Focus Value Fund, L.P., a Delaware limited partnership, Squam Lake
Investors II, L.P., a Delaware limited partnership, and Bain & Company, Inc., a
Massachusetts corporation (collectively the "Investors") is made effective upon
---------
the closing of the Company's IPO (as defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and the Investors are each parties to the Agreement;
and
WHEREAS, the Company and the Investors desire to amend certain provisions
of the Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definition.
----------
As used in this Amendment, the following term shall have the meaning
ascribed to it below:
"IPO" means the initial underwritten offering pursuant to which the
Company's common stock, $.0001 par value per share, becomes registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
2. Termination of Sections of the Agreement.
----------------------------------------
The following sections of the Agreement shall be of no further force and
effect:
"4.6 (a) Access to Records."
-----------------
"4.6 (h) Directors' and Officers' Insurance."
----------------------------------
3. Modification of Section 8.4.
---------------------------
The following language shall be added to the end of the second sentence of
Section 8.4 of the Agreement:
"except a holder who shall have acquired such Conversion Shares pursuant to
a registration statement under the Securities Act of 1933, as amended,
pursuant to Rule 144 promulgated under the Securities Act, on a national
securities exchange or the National Association of Securities Dealers
Automated Quotation System or similar organization, or in any other
transaction not constituting a 'private offering' under the Securities Act
as such term is commonly understood."
<PAGE>
4. Miscellaneous.
-------------
(a) This Amendment shall be binding upon and inure to the befit of and be
enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto.
(b) This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(c) This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to become
effective as set forth above.
INTEK INFORMATION INC.
By: /s/ Timothy C. O'Crowley
------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
THE BEACON GROUP III-FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, LLC, its general partner
By: Focus Value GP, Inc., its member
By: /s/ Eric Wlkinson
-----------------
Name: Eric Wilkinson
Title: Managing Director
BAIN & COMPANY, INC.
By: /s/ Colin F. Anderson
---------------------
Colin F.Anderson
Finance Director
<PAGE>
SQUAM LAKE INVESTORS II, L.P.
By: GPI, Inc., its managing general partner
By: /s/ Colin F. Anderson
---------------------
Colin F. Anderson
President of GPI, Inc.
<PAGE>
Exhibit 4.6.1
This Amendment (the "Amendment") to that certain Purchase Agreement dated
---------
as of December 22, 1997 (the "Agreement"), by and between A Information,
---------
Inc., a Delaware corporation (the "Company"), and The Beacon Group III - Focus
-------
Value Fund, L.P., a Delaware limited partnership ("Beacon"), is made effective
------
upon the closing of the Company's IPO (as defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and Beacon are each parties to the Agreement; and
WHEREAS, the Company and Beacon desire to amend a provision of the
Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definition.
----------
As used in this Amendment, the following term shall have the meaning
ascribed to it below:
"IPO" means the initial underwritten offering pursuant to which the
Company's common stock, $.0001 par value per share, becomes registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
2. Modification of Section 7.4.
---------------------------
The following language shall be added to the end of the second sentence of
Section 7.4 of the Agreement:
"except a holder who shall have acquired such Conversion Shares pursuant to
a registration statement under the Securities Act of 1933, as amended,
pursuant to Rule 144 promulgated under the Securities Act, on a national
securities exchange or the National Association of Securities Dealers
Automated Quotation System or similar organization, or in any other
transaction not constituting a 'private offering' under the Securities Act
as such term is commonly understood."
3. Miscellaneous.
-------------
(a) This Amendment shall be binding upon and inure to the befit of and be
enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto.
(b) This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
<PAGE>
(c) This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to become
effective as set forth above.
INTEK INFORMATION INC.
By: /s/ Timothy C. O'Crowley
---------------------------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
THE BEACON GROUP III-FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, LLC, its general partner
By: Focus Value GP, Inc., its member
By: /s/ Eric Wilkinson
---------------------------------------------
Name: Eric Wilkinson
Title: Managing Director
<PAGE>
Exhibit 4.7.1
This Amendment (the "Amendment") to that certain Series D Preferred Stock
---------
Purchase Agreement dated as of May 7, 1998 (the "Agreement"), by and among Intek
---------
Information, Inc., a Delaware corporation (the "Company"), and Conning Insurance
-------
Capital Limited Partnership V, a Delaware limited partnership ("Conning"), The
-------
Beacon Group III - Focus Value Fund, L.P., a Delaware limited partnership
("Beacon"), and certain other parties who were signatories thereto (collectively
------
the "Investors") is made effective upon the closing of the Company's IPO (as
---------
defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and the Investors are each parties to the Agreement;
WHEREAS, the Agreement may be amended with the written consent of the
Company, Conning and Beacon pursuant to Section 8.7 thereof; and
WHEREAS, the Company, Conning and Beacon desire to amend certain provisions
of the Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definition.
----------
As used in this Amendment, the following term shall have the meaning
ascribed to it below:
"IPO" means the initial underwritten offering pursuant to which the
Company's common stock, $.0001 par value per share, becomes registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
2. Termination of Sections of the Agreement.
----------------------------------------
The following sections of the Agreement shall be of no further force and
effect:
"4.6 (a) Access to Records."
-----------------
The last sentence of "4.6 (f) Insurance."
---------
"4.6 (h) Directors' and Officers' Insurance."
----------------------------------
3. Modification of Section 8.4.
---------------------------
The following language shall be added to the end of the second sentence of
Section 8.4 of the Agreement:
"except a holder who shall have acquired such Conversion Shares pursuant to
a registration statement under the Securities Act of 1933, as amended,
pursuant to Rule 144 promulgated
<PAGE>
under the Securities Act, on a national securities exchange or the National
Association of Securities Dealers Automated Quotation System or similar
organization, or in any other transaction not constituting a 'private
offering' under the Securities Act as such term is commonly understood."
4. Miscellaneous.
-------------
(a) This Amendment shall be binding upon and inure to the befit of and be
enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto.
(b) This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(c) This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to become
effective as set forth above.
INTEK INFORMATION INC.
By: /s/ Timothy C. O'Crowley
----------------------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
THE BEACON GROUP III-FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, LLC, its general partner
By: Focus Value GP, Inc., its member
By: /s/ Eric Wilkinson
-----------------------------------------
Name: Eric Wilkinson
Title: Managing Director
2
<PAGE>
CONNING INSURANCE CAPITAL LIMITED PARTNERSHIP V
By: Conning Investment Partners V, LLC, its General Partner
By: Conning & Company, its Member/Manager
By: /s/ Gregory L. Batton
----------------------------------------------------
Name: Gregory L. Batton
Title: Vice President
3
<PAGE>
Exhibit 4.8.1
This Amendment (the "Amendment") to that certain Series E Preferred Stock
---------
Purchase Agreement dated as of April 16, 1999 (the "Agreement"), by and among
---------
Intek Information, Inc., a Delaware corporation (the "Company"), and U.S.
-------
Information Technology Financing, L.P., a Washington limited partnership,
Encompass Group, a Washington corporation, Trans Cosmos USA Inc., a Washington
corporation ("TCI"), and certain other signatories thereto is made effective
---
upon the closing of the Company's IPO (as defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and TCI are each parties to the Agreement;
WHEREAS, the Agreement may be amended with the written consent of the
Company and TCI pursuant to Section 8.7 thereof; and
WHEREAS, the Company and TCI desire to amend certain provisions of the
Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definition.
----------
As used in this Amendment, the following term shall have the meaning
ascribed to it below:
"IPO" means the initial underwritten offering pursuant to which the
Company's common stock, $.0001 par value per share, becomes registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
2. Modification of Section 8.4.
---------------------------
The following language shall be added to the end of the second sentence of
Section 8.4 of the Agreement:
"except a holder who shall have acquired such Conversion Shares pursuant to
a registration statement under the Securities Act of 1933, as amended,
pursuant to Rule 144 promulgated under the Securities Act, on a national
securities exchange or the National Association of Securities Dealers
Automated Quotation System or similar organization, or in any other
transaction not constituting a 'private offering' under the Securities Act
as such term is commonly understood."
3. Miscellaneous.
-------------
(a) This Amendment shall be binding upon and inure to the befit of and be
enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto.
<PAGE>
(b) This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(c) This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to become
effective as set forth above.
INTEK INFORMATION INC.
By:/s/ Timothy C. O'Crowley
------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
TRANS COSMOS USA, INC.
By:/s/ Shozo Okuda
---------------
Name:Shozo Okuda
Title: Chairman
<PAGE>
Exhibit 4.9.1
This Amendment (the "Amendment") to that certain Series F Preferred Stock
---------
Purchase Agreement dated as of November 19, 1999 (the "Amendment"), by and among
---------
Intek Information, Inc., a Delaware corporation (the "Company"), and BVCF IV, a
-------
Delaware limited partnership ("Brinson"), and certain other signatories thereto
-------
is made effective upon the closing of the Company's IPO (as defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and Brinson are each parties to the Agreement;
WHEREAS, the Agreement may be amended with the written consent of the
Company and Brinson pursuant to Section 8.7 thereof; and
WHEREAS, the Company and the Investors desire to amend certain provisions
of the Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definition.
----------
As used in this Amendment, the following term shall have the meaning
ascribed to it below:
"IPO" means the initial underwritten offering pursuant to which the
Company's common stock, $.0001 par value per share, becomes registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
2. Modification of Section 8.4.
---------------------------
The following language shall be added to the end of the second sentence of
Section 8.4 of the Agreement:
"except a holder who shall have acquired such Conversion Shares pursuant to
a registration statement under the Securities Act of 1933, as amended,
pursuant to Rule 144 promulgated under the Securities Act, or on a national
securities exchange or the National Association of Securities Dealers
Automated Quotation System or similar organization."
3. Miscellaneous.
-------------
(a) This Amendment shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and the respective successors,
personal representatives and assigns of the parties hereto.
<PAGE>
(b) This Amendment shall be construed and enforced in accordance with and
governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(c) This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
become effective as set forth above.
INTEK INFORMATION INC.
By: /s/ Timothy C. O'Crowley
-------------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
BVCF IV, L.P.
By: J. W. Puth Associates, LLC, its general partner
By: Brinson Venture Management, LLC, its Attorney-in-Fact
By: Brinson Partners, Inc., its Managing Member
By: /s/ Thomas D. Berman
-------------------------------
Thomas D. Berman
Executive Director
<PAGE>
Exhibit 4.10
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
by and among
INTEK INFORMATION, INC.
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
SQUAM LAKE INVESTORS II, L.P.
BAIN & COMPANY, INC.
CONNING INSURANCE CAPITAL LIMITED PARTNERSHIP V
U.S. INFORMATION TECHNOLOGY FINANCING, L.P.
ENCOMPASS GROUP, INC.
TRANS COSMOS USA, INC.
BVCF IV, L.P.
TIMOTHY O'CROWLEY
TYCE FIELDS
FRANK RICHARDS
and
THE OTHER PARTIES HERETO
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement")
dated as of January 14, 2000 by and among INTEK INFORMATION, INC., a Delaware
corporation (the "Company"), THE BEACON GROUP III- FOCUS VALUE FUND, L.P., a
-------
Delaware limited partnership ("Beacon"), SQUAM LAKE INVESTORS II, L.P., a
------
Delaware limited partnership ("SLI"), BAIN& COMPANY, INC., a Massachusetts
---
corporation ("Bain"), CONNING INSURANCE CAPITAL LIMITED PARTNERSHIP V, a
----
Delaware limited partnership ("Conning"), U.S. INFORMATION TECHNOLOGY FINANCING,
-------
L.P., a Washington corporation ("USITF"), ENCOMPASS GROUP, INC., a Washington
-----
corporation ("Encompass"), TRANS COSMOS USA, INC., a Washington corporation
---------
("TCI"), BVCF IV, L.P., a Delaware limited partnership ("Brinson), TIMOTHY C.
- ----- -------
O'CROWLEY ("O'Crowley"), TYCE FIELDS ("Fields"), FRANK RICHARDS ("Richards") and
--------- ------ --------
the stockholders of the Company listed on the Schedule of Investors hereto, each
of whom was a party to one of the Original Registration Rights Agreements (as
defined below), (collectively, the "Investors").
---------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, Resource, Beacon, SLI, Bain, Conning, USITF,
Encompass, TCI, Brinson, O'Crowley, Fields and Richards (collectively, the
"Amending Stockholders") are each parties to one of Original Registration Rights
- ----------------------
Agreements; and
WHEREAS, the Amending Shareholders, who hold the requisite percentages of
Registrable Securities (as defined below) necessary to amend the respective
Original Registration Rights Agreement to which each of them was a party, and
the Company desire to amend and restate the Original Registration Rights
Agreements in their entireties into a single agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Acorn Registration Rights Agreement" means that certain Registration
-----------------------------------
Rights Agreement made as of October 30, 1999 by and among the Company, the
former shareholders of Acorn Information Systems, Inc. ("Acorn Holders") and
-------------
Prospero LLC, a Connecticut limited liability company ("Prospero"), as amended
--------
by that certain Amendment No. 1 to Registration Rights Agreement made as of
November 19, 1999.
"Affiliate" means (i) with respect to any Person, any other Person directly
---------
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, (ii) with respect to any natural Person,
shall also mean the spouse, sibling, child, step-child, grandchild, niece,
nephew or parent of such Person, or the spouse thereof; (iii) the estate of
1
<PAGE>
a Shareholder or Affiliate, (iv) any trust created for the benefit of a
Shareholder or by a Shareholder for an Affiliate of such Shareholder specified
in clause (ii), and (v) with respect to any Person, any general partner or
limited partner of such Person.
"Common Stock" means the common stock, $.0001 par value per share, of the
------------
Company and any equity securities of the Company issued or issuable with respect
to the Common Stock in connection with a reclassification, recapitalization,
stock combination, stock dividend, merger, consolidation or other
reorganization.
"Common Stock Equivalents" means securities convertible into, exchangeable
------------------------
or exercisable for, shares of Common Stock.
"Conversion Shares" means the shares of Common Stock or other equity
-----------------
securities issued or issuable upon conversion of Preferred Stock.
"Holder" or "Holders" means any Investor who holds Registrable Securities
------ -------
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with Section
4.1.
"IPO" means the initial underwritten offering pursuant to which the Common
---
Stock becomes registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
------------
"Major Holder" means with respect to any registration the Holder that,
------------
together with its Affiliates, includes the largest number of Registrable
Securities in such registration.
"Original Registration Rights Agreement(s)" mean (i) that certain
-----------------------------------------
Registration Rights Agreement made as of February 3, 1999, by and between the
Company and Beacon, as amended by (a) that certain Amendment No. 1 to
Registration Rights Agreement made as of December 22, 1997, (b) that certain
Amendment No. 2 to Registration Rights Agreement made as of May 7, 1998, (c)
that certain Amendment No. 3 to Registration Rights Agreement made as of April
16, 1999, (d) that certain Amendment No. 4 to Registration Rights Agreement made
as of October 30, 1999, and (e) that certain Amendment No. 5 to Registration
Rights Agreement made as of November 19, 1999; (ii) that certain Amended and
Restated Registration Rights Agreement made as of February 3, 1997, by and among
the Company, Resource and O'Crowley, as amended by (a) that certain Amendment
No. 1 to Amended and Restated Registration Rights Agreement made as of May 7,
1998, (b) that certain Amendment No. 2 to Amended and Restated Registration
Rights Agreement made as of April 16, 1999, (c) that certain Amendment No. 3 to
Amended and Restated Registration Rights Agreement made as of October 1, 1996,
(d) that certain Amendment No. 4 to Amended and Restated Registration Rights
Agreement made as of October 30, 1999, and (e) that certain Amendment No. 5 to
Amended and Restated Registration Rights Agreement made as of November 19, 1999;
(iii) that certain Registration Rights Agreement made as of February 3, 1997, by
and among the Company, Richards, Fields, Bain, SLI and certain other persons
named therein, as amended by (a) that certain Amendment No. 1 to Registration
Rights Agreement made as of May 7, 1998, (b) that certain Amendment No. 2 to
Registration Rights Agreement made as of April 16, 1999, (c) that certain
Amendment No. 3 to
2
<PAGE>
Registration Rights Agreement as of October 30, 1999, and (d) that certain
Amendment No. 4 to Registration Rights Agreement made as of November 19, 1999;
(iv) that certain Registration Rights Agreement made as of May 7, 1998, by and
between the Company and Conning, as amended by (a) that certain Amendment No. 1
to Registration Rights Agreement made as of April 16, 1999, (b) that certain
Amendment No. 2 to Registration Rights Agreement made as of October 30, 1999,
and (c) that certain Amendment No. 3 to Registration Rights Agreement made as of
November 19, 1999; (v) that certain Registration Rights Agreement by and among
the Company, USITF, Encompass, TCI and certain other parties thereto, as amended
by (a) that certain Amendment No. 1 to Registration Rights Agreement made as of
October 30, 1999, and (b) that certain Amendment No. 2 to Registration Rights
Agreement made as of November 19, 1999; and (vi) that certain Registration
Rights Agreement made as of November 19, 1999 by and among the Company, Brinson
and certain other parties thereto.
"Person" means any individual, corporation, limited liability company,
------
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Stock" means the Preferred Stock, $.001 par value per share, of
---------------
the Company.
"Protocall Shareholder(s)" means John Steurt, John M. Fields, James M.
------------------------
Fields, Stephen J. Darnell, Michael E. Ford, Thomas M. Rocca and Craig Barton.
"Purchase Agreement(s)" mean (i) that certain Securities Purchase Agreement
---------------------
made as of August 2, 1996, by and between the Company and Resource; (ii) that
certain Preferred Stock Purchase Agreement made as of February 3, 1997, by and
among the Company, Beacon, SLI and Bain; (iii) that certain Purchase Agreement
made as of December 22, 1997 by and between the Company and Beacon; (iv) that
certain Series D Preferred Stock Purchase Agreement made as of May 7, 1998 by
and among the Company, Beacon, Conning and certain other signatories thereto, as
amended by (a) that certain Amendment No. 1 to Series D Preferred Stock Purchase
Agreement made as of May 7, 1998, and (b) that certain Amendment No. 2 to Series
D Preferred Stock Purchase Agreement made as of September 1, 1998; (v) that
certain Exchange Agreement made as of May 7, 19998 by and between the Company
and Beacon; (vi) that certain Series E Preferred Stock Purchase Agreement made
as of April 16, 1999, by and among the Company, USTIF, Encompass, TCI and
certain other signatories thereto; and (vii) that certain Series F Preferred
Stock Purchase Agreement made as of November 19, 1999 by and among the Company,
Brinson and certain other signatories thereto.
"Registrable Securities" means any (i) Conversion Shares owned by the
----------------------
Investors, (ii) shares of Common Stock acquired by any Person after the date
hereof pursuant to rights granted to the Investors under the Purchase Agreements
or the Shareholders' Agreement, (iii) Conversion Shares acquired by any Person
after the date hereof pursuant to rights granted to the Investors under the
Purchase Agreements or the Shareholders' Agreement and (iv) shares of Common
Stock issued or issuable, directly or indirectly, with respect to the Common
Stock referenced in clauses (ii) and (iii) above or any Preferred Stock or
Conversion Shares owned by the Investors, whether acquired on the date hereof or
hereafter acquired by way of stock dividend, stock split or combination of
shares; provided, however, that with respect to
-------- -------
3
<PAGE>
O'Crowley, Registrable Securities means (i) 764,416 shares of Common Stock or
(ii), starting one year after O'Crowley is not substantially a full-time
employee of the Company and is also not a director of the Company, 1,528,832
shares of Common Stock. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) such securities shall
have been sold (other than in a privately negotiated sale) pursuant to Rule 144
(or any successor provision) under the Securities Act, or (iii) such securities
shall have been sold in a private transaction in which the transferor's rights
under this Agreement are not assigned.
"Requisite Amount of Outstanding Holders" means the Holders of Registrable
---------------------------------------
Securities holding an aggregate of at least 92,500 Conversion Shares (as
adjusted for any reclassification, recapitalization, stock combination, stock
dividend, merger, consolidation or other reorganization).
"Requisite Percentage of Participating Holders" means Holders of
---------------------------------------------
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Preferred Stock into Conversion Shares, would
hold a majority of the total Conversion Shares that would then be held by all
Holders participating in the registration.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shareholders' Agreement" means that certain Amended and Restated
-----------------------
Shareholders' and Voting Agreement made as of November 19, 1999, by and among
the Company, Resource, Beacon, SLI, Bain, Conning, USITF, Encompass, TCI,
O'Crowley, Fields, Richards and certain other equity holders of the Company.
2. Registration Rights.
-------------------
2.1. Demand Registrations.
--------------------
(a) Request for Registration. Subject to Section 2.1(d), at any time and
------------------------
from time to time after twelve months after an IPO, one or more Holders of
Registrable Securities (other than O'Crowley, SLI, Bain, Fields and the
Protocall Shareholders) representing the Requisite Amount of Outstanding Holders
shall have the right to require the Company to file a registration statement
under the Securities Act covering all or any part of their respective
Registrable Securities, by delivering a written request therefor to the Company
specifying the number of Registrable Securities to be included in such
registration by such Holder(s) and the intended method of distribution thereof.
All such requests pursuant to this Section 2.1(a) are referred to herein as
"Demand Registration Requests," and the registrations so requested are referred
----------------------------
to herein as "Demand Registrations" (with respect to any Demand Registration,
--------------------
the Holder(s) making such demand for registration being referred to as the
"Initiating Holder(s)"). As promptly as practicable, but no later than 15 days
--------------------
after receipt of a Demand Registration
4
<PAGE>
Request, the Company shall give written notice (the "Demand Exercise Notice")
----------------------
of such Demand Registration Request to all Holders of record of Registrable
Securities.
(b) Registration of Other Securities. Subject to Section 2.1(e), the
--------------------------------
Company shall include in a Demand Registration (i) the Registrable Securities of
the Initiating Holder and (ii) the Registrable Securities of any other Holder
that shall have made a written request to the Company for inclusion thereof in
such registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder(s)) within 30 days after
the receipt of the Demand Exercise Notice and may include securities of the
Company to be sold for its own account; provided, however, that, if the Company
-----------------
includes any shares to be sold for its own account in such registration, such
registration shall not count as a Demand Registration.
(c) Registration. The Company shall, as expeditiously as possible
------------
following a Demand Registration Request, use its best efforts to (i) effect such
registration under the Securities Act of the Registrable Securities that the
Company has been so requested to register, for distribution in accordance with
such intended method of distribution, and (ii) if requested by the Initiating
Holder or Major Holder, obtain acceleration of the effective date of the
registration statement relating to such registration.
(d) Limitations on Requested Registrations. The rights of Holders of
--------------------------------------
Registrable Securities to request Demand Registrations pursuant to Section
2.1(a) are subject to the following limitations: (i) the Company shall not be
obligated to cause a Demand Registration to become effective within six months
after the effective date of any other registration of securities (other than
pursuant to a registration on Form S-8 or any successor or similar form that is
then in effect), (ii) (except as set forth below) in no event shall the Company
be required to effect, in the aggregate, without regard to the Holder of
Registrable Securities making such request, more than three Demand Registrations
(it being agreed that any Demand Registration that does not become effective
shall not count toward the foregoing limitation unless at the request of the
Requisite Percentage of Participating Holders such Demand Registration has been
withdrawn after the relevant registration statement has been filed but prior to
it becoming effective); provided however, that if Brinson has not been among the
----------------
Initiating Holders requesting any of the three Demand Registrations; the Company
shall be required to effect one additional Demand Registration at the request of
Brinson, and (iii) the Company shall not be obligated to effect a Demand
Registration having an aggregate anticipated offering price of less than
$5,000,000 unless such offering shall cover all remaining Registrable
Securities. Notwithstanding any other provision of this Section 2.1(d), any
Holder participating in a Demand Registration who is unable to register all of
the Registrable Securities that such Holder sought to register because of the
"cutback" provision set forth in the proviso in Section 2.1(e) shall be entitled
to an additional Demand Registration solely with respect to such Holder's shares
of Registrable Securities not registered because of the proviso in Section
2.1(e), and such additional Demand Registration shall not count toward the three
Demand Registrations contemplated in clause (ii) of the foregoing sentence.
(e) Cutbacks. If the managing underwriter of any underwritten offering
--------
shall advise the Holders participating in a Demand Registration that the
Registrable Securities covered
5
<PAGE>
by the registration statement cannot be sold in such offering within a price
range acceptable to the Requisite Percentage of Participating Holders, then the
Holders representing the Requisite Percentage of Participating Holders shall
have the right to notify the Company in writing that they have determined that
the registration statement be abandoned or withdrawn, in which event the Company
shall abandon or withdraw such registration statement. If the managing
underwriter of any underwritten offering shall advise the Company in writing
that, in its opinion, the number of securities requested to be included in a
Demand Registration exceeds the number that can be sold in such offering within
a price range acceptable to the Requisite Percentage of Participating Holders,
the Company will include in such registration, to the extent of the number that
the Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration, first, pro rata among the Holders
-----
requesting such registration in accordance with the number of Registrable
Securities held by and issuable upon conversion of Common Stock Equivalents to
each such Holder, and, second, securities to be sold for the account of the
------
Company; provided, however, that if, pursuant to Section 2.2, any of O'Crowley,
-------- -------
SLI, Bain, Fields and the Protocall Shareholders exercise "piggy-back" rights in
connection with a Demand Registration that is governed by the general provisions
of this sentence, then the Company will include in such registration, to the
extent of the number that the Company is so advised can be sold in such
offering, Registrable Securities requested to be included in such registration,
pro rata among the Holders participating in such offering in accordance with the
number of Registrable Securities held by and issuable upon conversion of such
Common Stock Equivalents to each such Holder.
(f) Selection of Underwriters. The managing underwriter or underwriters of
-------------------------
each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Requisite Percentage of Participating Holders (and
shall be reasonably acceptable to the Company).
(g) Postponement; Suspension. The Company shall be entitled to postpone or
------------------------
suspend for a reasonable period of time (but not to exceed, in the aggregate, 90
days in any 365 day period) the filing or effectiveness of any registration
statement required to be prepared and filed by it pursuant to this Section 2.1
if, (i) the postponement or suspension is necessary due to circumstances that
would require disclosure that would materially and adversely affect a material
acquisition, divestiture or financial transaction of the Company, (ii) such
postponement or suspension is necessary to prepare financial statements of an
acquired company required to be included in such registration statement pursuant
to the requirements of Regulation S-X of the SEC or (iii) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Company furnishes to the
participating Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the Company
it would be seriously detrimental to the Company for such registration statement
to be filed in the near future and that it is, therefore, essential to defer the
filing of such registration statement. The Company shall give the participating
Holders prompt written notice of its determination to postpone or suspend the
filing of any registration statement, and an approximation of the anticipated
delay. If the Company shall so postpone or suspend the filing of a registration
statement, the participating Holders representing the Requisite Percentage of
Participating Holders shall have the right to withdraw the request for
registration by giving written notice to the Company within 20 days after
receipt
6
<PAGE>
of the notice of postponement or suspension (as the case may be) and, in the
event of such withdrawal, such request shall not be counted toward the number of
Requested Registrations (including for purposes of paragraph (d) of this Section
2.1).
2.2. Piggyback Registrations.
-----------------------
(a) Piggyback Registrations. If, at any time, the Company proposes or
-----------------------
is required to register any of its equity securities under the Securities Act
(other than pursuant to registrations on such form or similar form(s) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger, consolidation or acquisition) on a
registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent
general registration form then in effect), whether or not for its own account,
the Company shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request of
any Holder, made within 15 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall use its best efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof, to be registered under the Securities Act (with the securities that the
Company at the time proposes to register) to permit the sale or other
disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. There
is no limitation on the number of such piggyback registrations pursuant to the
preceding sentence that the Company is obligated to effect. No registration
effected under this Section 2.2(a) shall relieve the Company of its obligations
to effect Demand Registrations.
(b) Abandonment or Delay. If, at any time after giving written
--------------------
notice of its intention to register any equity securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may, at its election,
give written notice of such determination to all Holders of record of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such abandoned registration, without prejudice, however, to the
rights of Holders under Section 2.1, and (ii) in the case of a determination to
delay such registration of its equity securities, shall be permitted to delay
the registration of such Registrable Securities for the same period as the delay
in registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have the right to
--------------------------
withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw; provided, however, that (i) such request
-------- -------
must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of the custody agreement with respect
to such registration and (ii) such withdrawal shall be irrevocable and, after
making such withdrawal, a Holder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal was made.
7
<PAGE>
(d) Cutbacks. If the managing underwriter of any underwritten
--------
offering shall inform the Company by letter of its belief that the number of
Registrable Securities requested to be included in a registration under this
Section 2.2 would materially adversely affect such offering, then the Company
will include in such registration, first, the securities proposed by the Company
-----
to be sold for its own account and, second, the Registrable Securities and all
------
other securities of the Company to be included in such registration to the
extent of the number and type, if any, that the Company is so advised can be
sold in (or during the time of) such offering, first, pro rata among the Holders
-----
of Registrable Securities in accordance with the number of shares of Registrable
Securities held by and issuable upon conversion of Common Stock Equivalents to
each such Holder, and second, pro rata among the holders of any other securities
------
of the Company with respect to which the holders thereof are entitled to and
desire "piggy-back" or similar registration rights.
Notwithstanding anything to the contrary herein, pursuant to Section 2.1.5
of the Acorn Registration Rights Agreement, if the managing underwriter of any
underwritten demand offering under the Acorn Registration Rights Agreement
limits the number of Registrable Securities to be sold under such registration,
the Registrable Securities held by the Acorn Holders shall be included first,
and after all such Registrable Securities of the Acorn Holders are included, the
Other Registrable Securities (as defined in the Acorn Registration Rights
Agreement) shall be included on a pro rata basis among such holders
participating in such offering.
2.3. S-3 Registrations. If at any time (i) one or more Holders of
-----------------
Registrable Securities representing the Requisite Amount of Outstanding Holders
request that the Company file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of the shares of
Registrable Securities held by such Holder or Holders, the reasonably
anticipated aggregate price to the public of which would exceed $2,500,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such notice.
Whenever the Company is required by this Section 2.3 to use its best efforts to
effect the registration of Registrable Securities, each of the procedures and
requirements of Section 2.1 (including but not limited to the requirement that
the Company notify all Holders of Registrable Securities from whom notice has
not been received and provide them with the opportunity to participate in the
offering) shall apply to such registration. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 2.3 within
six months (or three months for purposes of clause (ii) below for all periods
through December 31, 2001) after the effective date of a registration statement
filed by the Company (i) covering a firm commitment underwritten public offering
in which the holders of Registrable Securities shall have been entitled to join
pursuant to Sections 2.1 and 2.2 or (ii) pursuant to this Section 2.3, in each
case in which there shall have been effectively registered all shares of
Registrable Securities as to which registration shall have been requested.
There is no limitation on the number of registrations pursuant to this Section
2.3 that the Company is obligated to effect.
8
<PAGE>
2.4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of this Agreement to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement on an
appropriate registration form of the SEC for the disposition of such Registrable
Securities in accordance with the intended method of disposition thereof, which
form (i) shall be selected by the Company and (ii) shall, in the case of a shelf
registration, be available for the sale of the Registrable Securities by the
selling Holders thereof and such registration statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
the Company shall use its best efforts to cause such registration statement to
become effective (provided, however, that before filing a registration statement
or prospectus or any amendments or supplements thereto, or comparable statements
under securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel for the Holders participating in the planned offering (selected
by the Major Holder) and the underwriters, if any, copies of all such documents
proposed to be filed (including all exhibits thereto), which documents will be
subject to the reasonable review and, in the case of a registration pursuant to
Section 2.1 or Section 2.3, reasonable comment of such counsel, and the Company
shall not file any registration statement or amendment thereto or any prospectus
or supplement thereto pursuant to Sections 2.1 or 2.3 to which the holders of a
majority of the Registrable Securities covered by such registration statement or
the underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
(which shall not be required to exceed 90 days in the case of a registration
pursuant to Section 2.1, 2.2 or 2.3) as any seller of Registrable Securities
pursuant to such registration statement shall request and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with applicable law of each such registration statement (or amendment
or post-effective amendment thereto) and each such prospectus (or preliminary
prospectus or supplement thereto) by each such seller of Registrable Securities
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such registration statement or prospectus);
9
<PAGE>
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as any sellers of Registrable Securities
or any managing underwriter, if any, shall reasonably request in writing, and do
any and all other acts and things that may be reasonably necessary or advisable
to enable such sellers or underwriter, if any, to consummate the disposition of
the Registrable Securities in such jurisdictions, except that in no event shall
the Company be required to qualify to do business as a foreign corporation in
any jurisdiction where it would not, but for the requirements of this paragraph
(d), be required to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) promptly notify each Holder selling Registrable Securities covered by
such registration statement and each managing underwriter, if any: (i) when the
registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v) of the
existence of any fact of which the Company becomes aware that results in the
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated by Section 3 below cease to be
true and correct in all material respects; and, if the notification relates to
an event described in clause (v), the Company shall promptly prepare and furnish
to each such seller and each underwriter, if any, a reasonable number of copies
of a prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein in the light of
the circumstances under which they were made not misleading;
(f) comply with all applicable rules and regulations of the SEC, and make
generally available to its security holders, as soon as reasonably practicable
after the effective date of the registration statement (and in any event within
16 months thereafter), an earnings statement (which need not be audited)
covering the period of at least twelve consecutive months beginning with the
first day of the Company's first calendar quarter after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(g) (i) use its best efforts to cause all such Registrable Securities
covered by such registration statement to be listed on the principal securities
exchange on which similar securities issued by the Company are then listed (if
any), if the listing of such Registrable
10
<PAGE>
Securities is then permitted under the rules of such exchange, or (ii) if no
similar securities are then so listed, use its best efforts to either cause all
such Registrable Securities to be listed on a national securities exchange or to
secure designation of all such Registrable Securities as a National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") "national
--------
market system security" within the meaning of Rule 11Aa2-1 of the SEC or,
failing that, secure NASDAQ authorization for such shares and, without limiting
the generality of the foregoing, take all actions that may be required by the
Company as the issuer of such Registrable Securities in order to facilitate the
managing underwriter's arranging for the registration of at least two market
makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. (the "NASD");
----
(h) provide and cause to be maintained a transfer agent and registrar for
all such Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable, an
underwriting agreement) and take such other actions as the Holders of a majority
of the Registrable Securities or the Major Holder participating in such offering
shall reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(j) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants in customary form and
covering such matters as are customarily covered by such opinions and "cold
comfort" letters delivered to underwriters in underwritten public offerings,
which opinion and letter shall be reasonably satisfactory to the underwriters,
if any, and to the Major Holder participating in such offering, and furnish to
each Holder participating in the offering and to each underwriter, if any, a
copy of such opinion and letter addressed to such Holder (in the case of the
opinion) and underwriter (in the case of the opinion and the "cold comfort"
letter);
(k) deliver promptly to the Major Holder and counsel for the selling
Holders participating in the offering and each underwriter, if any, copies of
all correspondence between the Commission and the Company, its counsel or
auditors and any memoranda relating to discussions with the Commission or its
staff with respect to the registration statement, other than those portions of
any such memoranda that contain information subject to attorney-client privilege
with respect to the Company, and, upon receipt of such confidentiality
agreements as the Company may reasonably request, make reasonably available for
inspection by any seller of such Registrable Securities covered by such
registration statement, by any underwriter, if any, participating in any
disposition to be effected pursuant to such registration statement and by any
attorney, accountant or other agent retained by any such seller or any such
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause all of the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement;
(l) use its best efforts to promptly obtain the withdrawal of any order
suspending the effectiveness of the registration statement;
11
<PAGE>
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of the registration statement;
(n) make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into account the needs
of the Company's businesses and the requirements of the marketing process) in
the marketing of Registrable Securities in any underwritten offering;
(o) promptly prior to the filing of any document that is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel for the selling holders of Registrable Securities and to
each managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such changes in
such document concerning the selling holders prior to the filing thereof as
counsel for such selling holders or underwriters may reasonably request;
(p) furnish to each Holder participating in the offering, upon such
Holder's written request, and the managing underwriter, without charge, at least
one signed copy of the registration statement and any post-effective amendments
thereto (which may be facsimiles thereof in the case of the Holders), including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable Securities and the
managing underwriter, if any, to facilitate the timely preparation and delivery
of certificates not bearing any restrictive legends representing the Registrable
Securities to be sold, and cause such Registrable Securities to be issued in
such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities; and
(r) take all such other commercially reasonable actions as are necessary
or advisable in order to expedite or facilitate the disposition of such
Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.4 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(e) of this Section 2.4 and, if so directed by the Company, will deliver to the
Company
12
<PAGE>
(at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period mentioned in
paragraph (b) of this Section 2.4 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (e) of this Section 2.4.
If any such registration statement or comparable statement under
"blue sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require (i)
the insertion therein of language, in form and substance satisfactory to such
Holder and the Company, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.
2.5. Registration Expenses.
---------------------
(a) "Expenses" shall mean any and all fees and expenses incident to
the Company's performance of or compliance with this Article 2, including,
without limitation: (i) SEC, stock exchange or NASD registration, listing and
filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses of compliance with state securities
or "blue sky" laws and in connection with the preparation of a "blue sky"
survey, including without limitation, reasonable fees and expenses of blue sky
counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) expenses incurred in connection with any road show, (vi) fees and
disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Major Holder), (viii) fees and disbursements
of all independent public accountants (including the expenses of any audit
and/or "cold comfort" letter) and fees and expenses of other persons, including
special experts, retained by the Company, (ix) fees and expenses payable to a
Qualified Independent Underwriter (as defined in NASD Conduct Rule 2720(b)(15)),
(x) fee s and expenses payable to the underwriters referred to in Section 2.1(f)
and (xi) any other fees and disbursements of underwriters, if any, customarily
paid by issuers or sellers of securities (collectively, "Expenses").
--------
(b) The Company shall pay all Expenses with respect to any Demand
Registration whether or not it becomes effective or remains effective for the
period contemplated by Section 2.4(b) and with respect to up to two
registrations effected under Sections 2.2 or 2.3. Notwithstanding the
foregoing, if, with respect to a Demand Registration or a registration under
Section 2.3, at the request of the Requisite Percentage of Participating Holders
such registration has been withdrawn after the relevant registration statement
has been filed but prior to its
13
<PAGE>
becoming effective, then the Company, on the one hand, and the Holders
participating in such registration, on the other hand, shall each bear one-half
of the Expenses incurred by the Company in connection with such registration,
and any Expenses to be borne hereunder by such Holders shall be borne by them
pro rata in accordance with the number of shares of Registrable Securities that,
with respect to each such Holder, were included in such registration.
(c) Notwithstanding the foregoing, (x) the provisions of this Section
2.5 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state in which the offering is
made and (y) in connection with any registration hereunder, each Holder of
Registrable Securities being registered shall pay all underwriting discounts and
commissions and any transfer taxes, if any, attributable to the sale of such
Registrable Securities, pro rata with respect to payments of discounts and
--------
commissions in accordance with the number of shares sold in the offering by such
Holder, and (z) the Company shall, in the case of all registrations under this
Article 2, be responsible for all its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties).
2.6. Certain Limitations on Registration Rights.
------------------------------------------
(a) In the case of any registration under Section 2.1 pursuant to an
underwritten offering, or in the case of a registration under Sections 2.2 or
2.3 if the Company has determined to enter into an underwriting agreement in
connection therewith, all securities to be included in such registration shall
be subject to an underwriting agreement and no Person may participate in such
registration unless such Person agrees to sell such Person's securities on the
basis provided therein and completes and executes all reasonable questionnaires
and other documents (including custody agreements and powers of attorney) that
must be executed in connection therewith, and provides such other information to
the Company or the underwriter as may be necessary to register such Person's
securities.
(b) No Holder shall have any right to demand or participate in a
registration under this Section 2 if such Holder (i) may sell all its
Registrable Securities under Rule 144(k) or successor provision under the
Securities Act, or (ii) may sell all its Registrable Securities in a five (5)
month period (such period commencing on the date of the notice under Section
2.1(a), 2.2(a) or 2.3 as the case may be) under Rule 144 under the Securities
Act.
2.7 Limitations on Sale or Distribution of Other Securities.
-------------------------------------------------------
(a) To the extent requested in writing by a managing underwriter, if
any, of any registration effected pursuant to Section 2.1, each Holder of
Registrable Securities agrees not to sell, transfer or otherwise dispose of,
including any sale pursuant to Rule 144 under the Securities Act, any Common
Stock, or any other equity security of the Company or any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than as part of such underwritten public offering) during the time period
reasonably requested by the managing underwriter, not to exceed 180 days (and
the Company hereby also so agrees (except that the Company may effect any sale
or distribution of any such securities pursuant to a registration on Form S-4
(if reasonably acceptable to such managing underwriter) or Form S-8,
14
<PAGE>
or any successor or similar form that is then in effect or upon the conversion,
exchange or exercise of any then outstanding Common Stock Equivalent) to use its
reasonable best efforts to cause each holder of any equity security or any
security convertible into or exchangeable or exercisable for any equity security
of the Company purchased from the Company at any time other than in a public
offering so to agree). Each managing underwriter shall be entitled to rely on
the agreements of each Holder of Registrable Securities set forth in this
Section 2.7(a) and shall be a third party beneficiary of the provisions of this
Section 2.7(a).
(b) The Company hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 2.1, and if such
previous registration shall not have been withdrawn or abandoned, the Company
shall not sell, transfer, or otherwise dispose of, any Common Stock, or any
other equity security of the Company or any security convertible into or
exchangeable or exercisable for any equity security of the Company (other than
as part of a private sale pursuant to a transaction for which Form S-4 would be
used if such sale were registered, an underwritten public offering pursuant to
such request for registration pursuant to Section 2.2 or 2.3, a registration on
Form S-4 or Form S-8 or any successor or similar form that is then in effect,
upon the conversion, exchange or exercise of any then outstanding Common Stock
Equivalent or in connection with the issuance or exercise of options pursuant to
a stock option plan or pursuant to an employee stock purchase plan), for a
period of 100 days commencing on the date 10 days prior to the effective date of
such previous registration, and the Company shall so provide in any registration
rights agreements hereafter entered into with respect to any of its securities.
2.8. No Required Sale. Nothing in this Agreement shall be deemed to
----------------
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.9. Indemnification.
---------------
(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to this Article 2, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, each Holder of Registrable Securities, its directors, officers, Affiliates,
employees, stockholders, members and partners (and the directors, officers,
Affiliates, employees, stockholders, members and partners thereof), each other
Person who participates as an underwriter or a Qualified Independent
Underwriter, if any, in the offering or sale of such securities, each officer,
director, employee, stockholder, member or partner of such underwriter or
Qualified Independent Underwriter, and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
actions or proceedings (whether commenced or threatened) in respect thereof
("Claims") and expenses (including reasonable fees of counsel and any amounts
- --------
paid in any settlement effected with the Company's consent, which consent shall
not be unreasonably withheld or delayed) to which each such indemnified party
may become subject under the Securities Act or otherwise, insofar as such Claims
or expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such securities were registered under the Securities Act, together
with the documents incorporated by therein or the omission or alleged
15
<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus or any amendment or supplement thereto,
together with the documents incorporated by reference therein, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (iii) any
violation or alleged violation by the Company of any federal, state or common
law, rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such registration;
provided, however, that the Company shall not be liable to any such indemnified
- -------- -------
party in any such case to the extent such Claim or expense arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact made in such registration
statement or amendment thereof or supplement thereto or in any such prospectus
or any preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1, 2.2 or 2.3 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1, 2.2 or 2.3, any underwriter and Qualified Independent Underwriter,
if any) shall, severally and not jointly, indemnify and hold harmless (in the
same manner and to the same extent as set forth in paragraph (a) of this Section
2.9) to the fullest extent permitted by law, on an after-tax basis, the Company,
its officers, directors, Affiliates, employees and stockholders, members and
partners (and the directors, officers, Affiliates, employees, stockholders,
members and partners thereof), each Person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
Persons with respect to any untrue statement or alleged untrue statement of any
material fact in, or omission or alleged omission of any material fact from,
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or underwriter or Qualified
Independent Underwriter, if any, specifically for use therein and reimburse such
indemnified party for any legal or other expenses reasonably incurred in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, however, that the aggregate amount that any such Holder
-------- -------
shall be required to pay pursuant to this Section 2.9(b) and Sections 2.9(c) and
(e) shall in no case be greater than the amount of the net proceeds received by
such person upon the sale of the Registrable Securities pursuant to the
registration statement giving rise to such claim. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such Holder.
16
<PAGE>
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 2.9, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.9, except to the
extent the indemnifying party is materially prejudiced thereby and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Article 2. In case any action or
proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party that it so chooses, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that (i) if the
-------- -------
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within 20 days after receiving notice from such
indemnified party that the indemnified party believes it has failed to do so; or
(ii) if such indemnified party who is a defendant in any action or proceeding
that is also brought against the indemnifying party reasonably shall have
concluded that there may be one or more legal defenses available to such
indemnified party that are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction who shall be reasonably approved by the Major
Holder of the registration in respect of which such indemnification is sought),
and the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.9(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party,
17
<PAGE>
on the one hand, and the indemnified party, on the other hand, with respect to
such offering of securities. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative faults but also the relative
benefits of the indemnifying party and the indemnified party as well as any
other relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 2.9(e) were
to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
preceding sentences of this Section 2.9(e). The amount paid or payable in
respect of any Claim shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such Claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this Section 2.9(e) to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 2.9(e) to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate, less the amount of any indemnification
payment made by such indemnifying party pursuant to Sections 2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in addition
to any other rights to indemnification or contribution that any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.
(g) The indemnification and contribution required by this Section
2.9 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
3. Underwritten Offerings.
----------------------
3.1. Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by the Holders pursuant to a registration
requested under Section 2.1 or 2.3, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement shall
be satisfactory in form and substance to the Major Holder and shall contain such
representations and warranties by, and such other agreements on the part of, the
Company and such other terms as are generally included in the standard
underwriting agreement of such underwriters, including, without limitation,
indemnities and contribution agreements. Any Holder participating in the
offering shall be a party to such underwriting agreement and may, at its option,
require that any or all of the representations and warranties by,
18
<PAGE>
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Holder and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.
3.2. Piggyback Underwritten Offerings. In the case of a registration
--------------------------------
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into an underwriting agreement in connection therewith, all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration may,
at its option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such Holder and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.
4. General.
-------
4.1 Limitations on Transfer.
--- -----------------------
(a) Restrictions on Transfer. Each Investor agrees not to make any
------------------------
disposition of all or any portion of the Registrable Securities unless (i) there
is then in effect a registration statement under the Securities Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement or (ii) such Registrable Securities may be disposed of
without registration under the Securities Act and, if reasonably requested by
the Company, such Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances. Notwithstanding the provisions of
paragraphs (i) and (ii) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by an Investor which is (A) a
partnership to its partners or retired partners in accordance with partnership
interests, (B) a corporation to its shareholders in accordance with their
interest in the corporation, (C) a limited liability company to its members or
former members in accordance with their interest in the limited liability
company, or (D) to the Investor's family member or trust for the benefit of an
individual Investor, provided the transferee will be subject to the terms of
this Section 4.1 to the same extent as if such transferee were an original
Investor hereunder.
(b) Transfer or Assignment of Registration Rights. The rights to
---------------------------------------------
cause the Company to register securities granted to an Investor by the Company
under this Agreement may be transferred or assigned by an Investor or its
permitted assigns (i) which is a partnership to its partners or retired partners
in accordance with their partnership interests (ii) a corporation to its
shareholders in accordance with their interest in the corporation, (iii) a
limited liability company
19
<PAGE>
to its members or former members in accordance with their interest in the
limited liability company or (iv) only to a transferee or assignee of not less
than 75,000 shares of Registrable Securities (adjusted for any reclassification,
recapitalization, stock combination, stock dividend, merger, consolidation or
other reorganization), provided that the Company is given written notice at the
time of or within a reasonable time after said transfer or assignment, stating
the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned, and, provided further, that, except in the case of transfers by a
partnership, corporation or limited liability company as provided in this
section 4.1(b), the transferee or assignee of such rights assumes in writing the
obligations of such Investor under this Section 4.1.
4.2. Rule 144. If the Company shall have filed a registration statement
--------
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of the
Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, the Company covenants that (i) so long as it
remains subject to the reporting provisions of the Exchange Act, it will timely
file the reports required to be filed by it under the Securities Act or the
Exchange Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under
the Securities Act), and (ii) will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (A) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (B) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
4.3. Amendments and Waivers. This Agreement may be amended,
----------------------
modified, supplemented or waived only upon the written agreement of the Company
and the holders of not less than seventy-five percent (75%) of the shares of
Registrable Securities (excluding for such purposes, Holders of Registrable
Securities representing less than two percent (2%) of the Company's issued and
outstanding Common Stock on an as-converted basis and, for purposes of
calculating the 75%, the Registrable Securities held by such Holders), except
that no provision of this Agreement shall be amended, modified, supplemented or
waived if such amendment, modification, supplement or waiver would adversely
affect any Holder and would not have the same effect on all Holders without the
prior written consent of each Holder that would be so adversely affected.
4.4. Notices. Except as otherwise provided in this Agreement, all
-------
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or in a counterpart
hereto (as the case may be ) or such other address as may hereafter be
designated in writing by such party to the other parties:
20
<PAGE>
(i) if to the Company, to:
Intek Information Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Telecopy: (303) 323-4212
Attention: Chief Executive Officer
with a copy to:
Chrisman, Bynum & Johnson, P.C.
1900 Fifteenth Street
Boulder, Colorado 80302
Telecopy: (303) 449-5426
Attention: G. James Williams, Jr.
(ii) if to Beacon, to:
The Beacon Group III - Focus Value Fund, L.P.
399 Park Avenue
New York, New York 10152
Telecopy: (212) 339-9109
Attention: Eric R. Wilkinson
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8586
Attention: David N. Shine, Esq.
(iii) if to Bain or SLI, to:
Bain & Company, Inc.
2 Copley Place
Boston, Massachusetts 02116
Telecopy: (517) 572-3266
Attention: Treasurer
(iv) if to Conning, to:
Conning & Company
City Place II, 9th Floor
185 Asylum Street
Hartford, Connecticut 06107
21
<PAGE>
Telecopy: (860) 530-1299
Attention: Steven F. Piaker
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, LLP
Goodwin Square, 13th Floor
25 Asylum Street
Hartford, Connecticut 06103
Telecopy: (860) 293-3555
Attention: Charles F. Vandenburgh
(v) if to USITF, Encompass or TCI, to:
Trans Cosmos USA
Trans Cosmos
777 108th Avenue, N.E.
Suite 2300
Bellevue, Washington 98004
Telecopy: (425) 468-3901
Attention: Stephen Knight
With a copy to:
Foster, Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Telecopy: (206) 749-1975
Attention: Robert Diercks
(vi) if to BVCF IV, L.P., to:
Brinson Partners, Inc.
209 S. LaSalle Street
Chicago, Illinois 6069
Telecopy: (312) 220-7110
Attention: Thomas D. Berman
With a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Telecopy: (617) 248-7100
Attention: Mark H. Burnett, Esq.
22
<PAGE>
(vii) if to O'Crowley, to:
Timothy C. O'Crowley
c/o Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, Colorado 80111
Telecopy: (303) 323-4212
(viii) if to Richards, Fields or any Protocall Shareholder, to:
c/o Frank Richards
c/o Intek Information, Inc.
5619 DTC Parkway, 12th floor
Englewood, CO 80111
Telecopy: (303) 323-4212
(ix) if to any other Investor, to the individual at the address
set forth in the Schedule of Investors attached hereto.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
4.5. No Inconsistent Agreements. Without the prior written consent of
--------------------------
holders of not less than seventy-five percent (75%) of the shares of Registrable
Securities (excluding for such purposes, Holders of Registrable Securities
representing less than two percent (2%) of the Company's issued and outstanding
Common Stock on an as-converted basis and, for purposes of calculating the 75%,
the Registrable Securities held by such Holders), the Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted in this Agreement or
otherwise conflicts with the provisions hereof, other than any lock-up agreement
with the underwriters in connection with any registered offering effected
hereunder, pursuant to which the Company shall agree not to register for sale,
and the Company shall agree not to sell or otherwise dispose of, Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
for a specified period following the registered offering.
4.6. Miscellaneous.
-------------
(a) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and the respective successors, personal representatives and
assigns of the parties hereto. If any Holder shall acquire additional
Registrable Securities, such Registrable Securities shall be subject to all of
the terms, and entitled to all the benefits, of this Agreement. No Person other
than a Holder shall be entitled to any benefits under this Agreement, except as
otherwise expressly provided herein.
23
<PAGE>
(b) Except as set forth in Section 4.8, this Agreement (with the
documents referred to herein or delivered pursuant hereto) embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. All section
references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
(f) Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no adequate
remedy at law if any party fails to perform any of its obligations hereunder,
and accordingly agree that each party, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to injunctive relief,
including specific performance, to enforce such obligations without the posting
of any bond, and, if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
(h) Each party hereto shall take all such action necessary to cause
each certificate of the Company's securities to bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT, BY AND AMONG INTEK INFORMATION, INC. AND
CERTAIN OTHER PARTIES, A COPY OF WHICH IS AVAILABLE AT THE OFFICES OF THE
ISSUER.
(i) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
24
<PAGE>
4.7. Termination. This Agreement shall terminate and be of no further
---- -----------
force and effect seven years from the date it shall be come effective, provided,
however, that Sections 2.9, 4.6(c) and 4.6(g) shall survive termination of this
Agreement.
4.8 Effectiveness of the Agreement. Notwithstanding anything to the
------------------------------
contrary set forth in this Agreement, until the Company's IPO shall have been
completed in a manner that causes all of the then outstanding Preferred Stock to
be converted automatically into shares of Common Stock in accordance with the
Company's Certificate of Incorporation, (i) this Agreement shall not be
effective and (ii) the Original Registration Rights Agreements shall remain in
full force and effect. When the Company's IPO shall have been completed in a
manner that causes all of the then outstanding Preferred Stock to be converted
automatically into shares of Common Stock in accordance with the Company's
Certificate of Incorporation, this Agreement shall become effective and shall
supersede the Original Registration Rights Agreements.
25
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Registration Rights Agreement to become effective as set forth above
INTEK INFORMATION, INC.
By: /s/ Timothy C. O'Crowley
---------------------------
Timothy C. O'Crowley
Chief Executive Officer and President
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: Focus Value Investors, L.L.C.,
Its general partner
By: Focus Value GP, Inc.,
Its managing partner
By: /s/ Eric Wilkinson
---------------------------
Name: Eric Wilkinson
-------------------------
Title: Managing Director
------------------------
SQUAM LAKE INVESTORS II, L.P.
By: /s/ Colin F. Anderson
---------------------------
Colin F. Anderson
President of GPI, Inc., its
Managing General Partner
BAIN & COMPANY, INC.
By: /s/ Colin F. Anderson
----------------------------
Colin F. Anderson
Finance Director
CONNING INSURANCE CAPITAL LIMITED PARTNERSHIP V
By: /s/ Gregory L. Batton
----------------------------
Name: Gregory L. Batton
--------------------------
Title: Vice President
-------------------------
26
<PAGE>
U.S. INFORMATION TECHNOLOGY FINANCING, L.P.
By: /s/ Shozo Okuda
----------------------------
Name: Shozo Okuda
--------------------------
Title: Managing Director
-------------------------
ENCOMPASS GROUP, INC.
By: /s/ Shozo Okuda
----------------------------
Name: Shozo Okuda
--------------------------
Title: Managing Director
------------------------
TRANS COSMOS USA, INC.
By: /s/ Shozo Okuda
----------------------------
Name: Shozo Okuda
--------------------------
Title: Managing Director
------------------------
BVCF IV, L.P.
By: J.W. Path Associates, LLC,
its General Partner
By: Brinson Venture Management, LLC,
its Attorney-in-fact
By: Brinson Partners, Inc.,
its Managing Member
By: /s/ Thomas D. Berman
-----------------------------
Thomas D. Berman
Executive Director
O'CROWLEY
By: /s/ Timothy C. O'Crowley
------------------------------
Timothy C. O'Crowley
FIELDS
By: /s/ Tyce Fields
-----------------------------
Tyce Fields
RICHARDS
By: /s/ Frank Richards
-----------------------------
Frank Richards
27
<PAGE>
Exhibit 4.11
January 14, 2000
Hambrecht & Quist LLC
Robertson Stephens Inc.
U.S. Bancorp Piper Jaffray Inc.
Wit Capital Corporation
As Representatives of the
Several Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Ladies and Gentlemen:
The undersigned is a security holder of Intek Information, Inc. (the "Company")
and wishes to facilitate the public offering (the "Offering") of Common Shares
of the Company ("Common Stock") pursuant to a Registration Statement on Form S-1
(the "Registration Statement") to be transmitted for filing with the Securities
and Exchange Commission.
In consideration of the foregoing, and in order to induce you to act as
underwriters in the Offering, the undersigned hereby irrevocably agrees as a
holder of the shares of the Company indicated below, and any other voting
securities of the Company, that:
It will vote, and consent in respect of, all its securities of the
Company, (whether preferred stock or Common Stock, and whether at a
meeting or by way of execution of a written consent) to amend the
Company's:
(I) Amended and Restated Certificate of Incorporation (without
inclusion of underlining) to:
amend the lead in sentence in Section 3.2.13 so it reads in its
entirety as follows:
"In addition to any other terms defined herein, the following
terms shall have the meanings indicated for purposes of this
Section 3.2, Section 3.3, Section 3.4, Section 3.5 and Section
-----------------------
3.6:"
-----
and amend the definition of "Qualified IPO" in Section 3.2.13 so it
reads in its entirety as follows:
"Qualified IPO" means a bona fide, firm commitment,
underwritten public offering of Common Stock pursuant to an
effective registration statement under the Securities Act of
1933, as amended, (i) resulting in at least $25,000,000 of net
proceeds to the Corporation after deducting underwriting
discounts and commissions and offering expenses, and (ii)
reflecting a per share offering price for each share of Common
Stock sold in such offerings of at least $2.50 per share
---------------------------
(subject to adjustment for stock splits and combinations,
---------------------------------------------------------
recapitalizations and stock dividends of the Common Stock) if
-------------------------------------------------------------
the closing of the public offering occurs during the period
-----------------------------------------------------------
from January 13, 2000 through July 31, 2000, and thereafter of
-----------------------------------------------------------
at least $3.00 per share (subject to adjustment for stock
splits and combinations, recapitalizations and stock dividends
of the Common Stock).
<PAGE>
Hambrecht & Quist LLC
Robertson Stephens Inc.
U.S. Bancorp Piper Jaffray Inc.
Wit Capital Corporation
January 14, 2000
Page 2
(II) Amended and Restated Shareholders' and Voting Agreement dated
November 19, 1999, (without inclusion of underlining) to amend the
definition of "Qualified IPO" in Section 1 so it reads in its entirety
as follows:
"Qualified IPO" means any underwritten public offering of
Common Stock (pursuant to an effective registration statement
filed under the Securities Act) (a) resulting in at least
$25,000,000 of net proceeds to the Company and (b) reflecting
a per share offering price for each share of Common Stock sold
in such offering of no less than $2.50 (subject to adjustment
--------------------------------------------
for stock splits and combinations, recapitalizations and stock
--------------------------------------------------------------
dividends of the Common Stock) if the closing of the public
-----------------------------------------------------------
offering occurs during the period from January 13, 2000
-------------------------------------------------------
through July 31, 2000, and thereafter no less than $3.00
-------------------------------------
(subject to adjustment for stock splits and combinations,
recapitalizations and stock dividends of the Common Stock).
The undersigned agrees to sign such consents and vote such shares as
necessary to cause the amendments described above to be effective by
January 20, 2000.
The undersigned agrees each dollar amount specified above does not
reflect the reverse stock splits that occurred on December 29, 1999 and
on or about January 14, 2000, and that with the application of such
splits the amount $2.50 would be $10.00.
The undersigned understands that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Very truly yours,
Holder of Majority of Common Stock:
----------------------------------
/s/ Timothy C. O'Crowley
------------------------
Timothy C. O'Crowley
Holder of Majority of Series A Preferred Stock:
----------------------------------------------
Resource Bankshares Corporation
By: /s/ Melissa A. Mendenall
-------------------------
Its: Senior Vice President
Date of Signing: January 14, 2000
<PAGE>
Hambrecht & Quist LLC
Robertson Stephens Inc.
U.S. Bancorp Piper Jaffray Inc.
Wit Capital Corporation
January 14, 2000
Page 3
Holder of Majority of Series B Preferred and of
-----------------------------------------------
Series C Preferred Stock:
------------------------
The Beacon Group III - Focus Value Fund, L.P.
By: Beacon Focus Value Investors, LLC,
its general partner
By: Focus Value GP, Inc., its member
By: /s/ Eric Wilkinson
-------------------
Its: Managing Director
Date of Signing: January 14, 2000
Holder of Majority of Series D Preferred Stock:
----------------------------------------------
Conning Capital Partners V, L.P.
By: Conning Investment Partners V, LLC, its
General Partner
By: Conning & Company, its Member/Manager
By: /s/ Gregory L. Batton
----------------------
Its: Vice President
Date of Signing: January 14, 2000
Holders of Majority of Series E Preferred Stock:
-----------------------------------------------
U.S. Information Technology Financing, L.P.
By: /s/ Yasuki Matsumoto
----------------------
Its: ____________________________
Date of Signing:_________________
Encompass Group, Inc.
By: /s/ Yasuki Matsumoto
---------------------
Its: ____________________________
Date of Signing:_________________
Trans Cosmos USA, Inc.
By: /s/ Yasuki Matsumoto
---------------------
Its:____________________________
Date of Signing:_________________
<PAGE>
Hambrecht & Quist LLC
Robertson Stephens Inc.
U.S. Bancorp Piper Jaffray Inc.
Wit Capital Corporation
January 14, 2000
Page 4
Holder of Majority of Series F Preferred Stock:
-----------------------------------------------
BVCF IV, L.P.
By: J.W. Puth Associates, LLC,
its General Partner
By: Brinson Venture Management, LLC
its Attorney in Fact
By: Brinson Partners, Inc.
it Managing Member
By: /s/ Thomas D. Berman
--------------------
Thomas D. Berman
Executive Director
Date of Signing: January 14, 2000
<PAGE>
Exhibit 10.3
INTEK INFORMATION, INC.
2000 STOCK INCENTIVE PLAN
1. Purpose
The purpose of the Plan is to provide a means through which the Company may
attract able persons to enter and remain in the employ of the Company and its
Subsidiaries and to provide a means whereby they can acquire and maintain Common
Stock ownership, thereby strengthening their commitment to the welfare of the
Company and promoting an identity of interest between stockholders of the
Company and these employees and consultants.
So that the appropriate incentive can be provided, the Plan allows for
granting Incentive Stock Options, Nonqualified Stock Options, and Stock Grants,
or any combination thereof to employees, directors and consultants, and stock
grants to directors who are not employees of the Company or a Subsidiary.
2. Definitions
(a) The following definitions shall be applicable throughout the Plan.
(1) "Board" means the Board of Directors of the Company.
(2) "Cause" means the Company or a Subsidiary (as the case may be) having
cause to terminate an Optionee's employment or service in accordance with the
provisions of any then existing employment, consulting or any other agreement
between the Optionee and the Company or a Subsidiary (as the case may be) or, in
the absence of such an employment, consulting or other agreement, upon (i) the
determination by the Company or a Subsidiary (as the case may be) that the
Optionee (A) has committed an act of personal dishonesty, embezzlement, gross
negligence or gross misconduct in the course of employment or service with the
Company or a Subsidiary (as the case may be), (B) has ceased to perform his
duties to the Company or a Subsidiary (as the case may be)(other than as a
result of his incapacity due to physical or mental illness or injury), which
failure amounts to intentional and extended neglect of his duties, (C) has
engaged in or is about to engage in conduct materially injurious to the Company
or a Subsidiary (unless when informed that the proposed conduct would be so
injurious he immediately ceases and corrects such proposed conduct), or (D) has
willfully failed to follow the lawful directions of the Board or a superior
officer of the Company or a Subsidiary (as the case may be) ( without the same
being corrected upon five (5) days notice); or (ii) the Optionee having pled no
contest or guilty to a criminal charge or having been convicted of a crime
(other than a minor traffic violation) which could reasonably be expected to
have a material adverse impact on the reputation and standing of the Company or
a
<PAGE>
Subsidiary in the community or in its business relationships. For purposes of
the Plan, the Committee shall determine whether Cause exists. No Option may be
exercised during any cure period provided above unless the cure has been
accomplished.
(3) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
(4) "Committee" (subject to the third sentence of Section 4) means a
committee of at least two members appointed by the Board to administer the Plan,
each of whom shall be both a Non-Employee Director and an Outside Director.
(5) "Common Stock" means the common stock, par value $0.01 per share, of
the Company.
(6) "Company" means Intek Information, Inc., a corporation organized under
the laws of the State of Delaware.
(7) "Disability" means an Optionee's disability within the meaning of
Section 22(e)(3) of the Code.
(8) "Eligible Person" means any (i) person regularly employed by the
Company or a Subsidiary; provided, however, that no such employee covered by a
-------- -------
collective bargaining agreement shall be an Eligible Person unless and to the
extent that such eligibility is set forth in such collective bargaining
agreement or in an agreement or instrument relating thereto; (ii) consultant to
the Company or a Subsidiary; or (iii) member of the Board or the board of
directors of a Subsidiary.
(9) "Exchange Act" means the Securities Exchange Act of 1934.
(10) "Fair Market Value" on a given date means (i) if the Common Stock is
listed on a national securities exchange, the closing sales prices of the Stock
reported as having occurred on the primary exchange with which the Stock is
listed and traded on the date prior to such date, or, if there is no such sale
on that date, then on the last preceding date on which such a sale was reported;
or (ii) if the Common Stock is not listed on any national securities exchange
but is quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System the average between the high and
low sales price of the Common Stock on the date prior to such date, or, if there
is no such sale on that date, then on the last preceding date on which a sale
was reported; or (iii) if the Common Stock is not listed on a national
securities exchange nor quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System on a last sale
basis, the amount determined by the Committee to be the fair market value based
upon a good faith attempt to value the Stock accurately.
<PAGE>
(11) "Incentive Stock Option" means an Option granted by the Committee to
an Optionee under the Plan which is designated by the Committee as an "incentive
stock option" within the meaning of Section 422 of the Code.
(12) "Non-Employee Director" means a "non-employee director" within the
meaning of Rule 16b-3 of the Exchange Act or any successor rule or regulation.
(13) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.
(14) "Normal Termination" means termination of employment or service with
the Company or a Subsidiary:
(a) Upon retirement from active employment or service with the
Company or a Subsidiary (as the case may be) at or after ago 60.
(b) On account of Disability;
(c) By the Company or a Subsidiary (as the case may be) without
Cause; or
(d) With the specific written consent of the Committee.
(15) "Option" means the right and option granted hereunder to purchase any
one share of Stock from the Company, at the per share Option Price.
(16) "Optionee" means the holder of an Option.
(17) "Option Agreement" means the agreement between the Company and an
Optionee who has been granted an Option which defines the rights and obligations
of the parties with respect to such Option.
(18) "Option Period" means the period of time set by the Committee after
which time an Option will expire.
(19) "Option Price" means the exercise price set for an Option.
(20) "Outside Director" means an "outside director" within the meaning of
Section 162(m) of the Code.
(21) "Plan" means the Company's 2000 Stock Incentive Plan.
(22) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under the
Plan.
(23) "Subsidiary" means a corporation which is a "subsidiary corporation"
of the Company as defined in Section 424 of the Code.
-3-
<PAGE>
3. Effective Date, Duration
The Plan is effective upon approval of the Plan by the stockholders and
Board.
The expiration date of the Plan, after which no Options may be granted
hereunder, shall be February 1, 2010; provided, however, that the administration
-------- -------
of the Plan shall continue in effect until all matters relating to the
settlement of Options previously granted have been settled.
4. Administration
The Board or the Committee shall administer the Plan. The Company shall
take into account that under current law Options will not be exempt from the
application of Section 162(m) of the Code unless granted by the Committee
serving as a Compensation Committee as provided in Section 162(m)(4)(C) of the
Code. All references in the Plan to the "Committee" shall be deemed to refer to
the Board whenever the Board is discharging the powers and responsibilities of
administering the Plan. The majority of the members of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present or acts approved in writing by a majority
of the Committee shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, and except for varying the terms of
options granted to Eligible Non-Employee Directors pursuant to Section 5, the
Committee shall have exclusive power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Options to be granted to
each Optionee;
(c) Determine the time or times when Options will be granted to
Optionees;
(d) Determine the duration of each Option Period;
(e) Determine the Option Price for each Option and reprice any
outstanding Option;
(f) Determine the vesting schedule, if any, for each Option and
accelerate the vesting for any outstanding Option;
(g) Determine all conditions to which Options may be subject;
(h) Prescribe the form of Option Agreement;
(i) Make stock grants pursuant to Section 9 to members of the Board
who are not employees of the Company or a Subsidiary, determine the amount and
terms of such grants, and modify such terms;
-4-
<PAGE>
(j) Provide for the transferability of Nonqualified Stock Options,
(but not Incentive Stock Options except as provided in Section 7(d)(2));
(k) Cause records to be established in which there shall be entered,
from time to time as Options are granted to Optionees, the date of each Option
grant, the number of Incentive Stock Options or Nonqualified Stock Options
granted by the Committee to each Optionee, the expiration date and the duration
of each Option Period and the number of shares of Stock underlying each Option;
(l) At any time prior to, after, or in connection with, any
termination of employment or service of an Optionee with the Company or its
Subsidiaries, provide for a longer post-termination exercise or survival period
with respect to any Option (not to exceed three years) or modify any forfeiture
provisions with respect to any Option; except to the extent that the ability to
so modify an Option shall cause an Option intended to qualify as "performance-
based" under Section 162(m) of the Code to not so qualify; and
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, and revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Options granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
(m) Create additional committees composed of one or more Board
members with the limited authority to grant Options in specified limited amounts
to Eligible Persons who are not subject to Section 16(b) of the Exchange Act or
its successor, not subject to Section 162(m) of the Code, or directors of the
Company or a Subsidiary. Any act of such additional committee shall be acts of
the Committee for purposes of this Plan.
5. Grant of Options; Shares Subject to the Plan
(a) The Committee may, from time to time, grant one or more Options to any
one or more Eligible Persons; provided, however, that:
-------- -------
(1) Subject to Section 11, the aggregate number of shares of Stock
made subject to all awards (including Options and grants of
Stock) may not exceed Two Million Seven Hundred Fifty Thousand
(2,750,000);
(2) In the event any unexercised Option shall be surrendered,
terminate, expire, or be forfeited, the share of Stock no longer
subject thereto shall thereupon be released and shall thereafter
be available for new Options under the Plan;
(3) Stock delivered by the Company in settlement of Options under the
Plan may be authorized and unissued Stock or Stock held in the
treasury of the Company or may be purchased on the open market or
by private purchase;
-5-
<PAGE>
(4) No Eligible Person may receive Options under the Plan with
respect to more than Seven Hundred Fifty Thousand (750,000)
shares of Stock in any one year; and
(5) The Committee may, in its sole discretion, require an Optionee to
pay consideration for an Option in an amount and in a manner as
the Committee deems appropriate.
(b) Options will be granted to Board directors: Each existing and new Non-
Employee Director will receive an initial option to purchase Ten Thousand
(10,000) shares at the time of his or her appointment to the position of
director (the "Initial Grant") and each Non-Employee Director will receive
annual option grants of Five Thousand (5,000) shares on the day after the
regular annual stockholders' meeting if the director has served continuously as
a member of the Board since the prior annual meeting (the "Annual Grant"). The
Committee will have no discretion to select which Non-Employee Directors will be
granted options or to determine the number of option shares, price, vesting
schedule or any other term of the options granted to Non-Employee Directors. All
options granted to Non-Employee Directors will be non-qualified stock options
and will have a term of ten years. The options will terminate one year after the
Non-Employee Director ceases to provide services to the Company either as a
director or consultant. The exercise price of the Initial Grant and the Annual
Grant must equal the fair market value of the common stock on the date of grant.
6. Fractional Shares
No fractional shares will be issued upon exercise of any Option and any
fractional shares will be rounded down to the nearest whole share.
7. Option Terms
The Committee is authorized to grant one or more Incentive Stock Options or
Nonqualified Stock Options to any Eligible Person; provided, however, that no
-------- -------
Incentive Stock Options shall be granted to any Eligible Person who is not an
employee of the Company or a Subsidiary. Each Option so granted shall be
subject to the following conditions, or to such other conditions as may be
reflected in the applicable Option Agreement.
(a) Option price. The Option Price per share of Stock for each Option
------------
shall be set by the Committee at the time of grant, but, in the case of an
Incentive Stock Option or a Nonqualified Stock Option to a Non-Employee
Director, shall not be less than the Fair Market Value of a share of Stock at
the date of grant, or in the case of a Nonqualified Stock Option, eighty-five
percent (85%) of the Fair Market Value on the date of grant.
(b) Manner of exercise and form of payment. Options which have become
--------------------------------------
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall be
payable in cash or by certified check or, in the discretion of the Committee,
(i) in shares of Stock, valued at the Fair Market Value at the time the Option
is exercised, in sufficient amount to cover the aggregate
-6-
<PAGE>
exercise price (provided that such Stock must have been held by the Optionee for
at least six months prior to exercise of the Option), (ii) by withholding shares
of Stock, valued at the Fair Market Value at the time the Option is exercised,
otherwise deliverable upon exercise of the Options, in sufficient amount to
cover the aggregate exercise price; (iii) in other property having a fair market
value on the date of exercise equal to the Option Price; (iv) by delivering to
the Committee a copy of irrevocable instructions to a stockbroker acceptable to
the Company to deliver promptly to the Company an amount of sale or loan
proceeds sufficient to pay the aggregate exercise price; or (v) by delivery of a
promissory note if in accordance with applicable state and federal law.
(c) Option Period and Vesting. Options shall vest and become exercisable
-------------------------
in such manner and on such date or dates as shall be determined by the
Committee. The Committee shall also establish an Option Period which shall not
exceed ten years. If an Option is exercisable in installments, exercise of one
installment shall not affect the Optionee's ability to exercise unexercised
installments in accordance with the terms of the Plan and the applicable Option
Agreement. Unless otherwise stated in the applicable Option Agreement, the
Option shall expire upon an Optionee's termination of employment or service with
the Company or a Subsidiary at such times as are set forth in Section 8.
Each Initial Grant shall be immediately exercisable. Each subsequent Five
Thousand (5,000) share option granted to a Non-Employee Director will become
exercisable beginning one (1) year from the date of the annual meeting of
stockholders after which date the options were granted. If a Board Director is
elected by the Board of Directors to begin serving as a director on a date not
coincident with an annual meeting date, that director will be granted the
initial Five Thousand (5,000) share option as of the date of the first meeting
at which he serves as director and shall be immediately exercisable.
(d) Other Terms and Conditions. Options granted under the Plan shall be
--------------------------
evidenced by an Option Agreement, which shall contain such provisions as may be
determined by the Committee and, except as may be specifically stated otherwise
in such Option Agreement, be subject to the following terms and conditions:
(1) Each share of Stock purchased through the exercise of an Option
shall be paid for in full at the time of the exercise. Each
Option shall cease to be exercisable when the Optionee purchases
the underlying share of Stock or when the Option expires.
(2) Options shall not be transferable by the Optionee except by will
or the laws of descent and distribution and shall be exercisable
during the Optionee's lifetime only by the Optionee.
(3) Subject to any accelerated vesting, each Option shall vest and
become exercisable by the Optionee in accordance with the vesting
schedule established by the Committee and set forth in the Option
Agreement.
(4) Each Option Agreement covering Incentive Stock Options shall
contain a provision requiring the Optionee to notify the Company
in writing
-7-
<PAGE>
immediately after the Optionee makes a disqualifying disposition
of any Stock acquired pursuant to the exercise of any such
Incentive Stock Option. A disqualifying disposition is any
disposition (including any sale) of such Stock before the later
of (a) two years after the date of grant of the Incentive Stock
Option or (b) one year after the date the Optionee acquired the
Stock by exercising the Incentive Stock Option.
(5) Each Option Agreement may contain such other provisions (whether
or not applicable to an Option granted to any other Optionee) as
the Committee determines appropriate including, without
limitation, provisions to assist the Optionee in financing the
purchase of Stock upon the exercise of Options which are
consistent with applicable state and federal law, provisions for
the forfeiture of shares of Stock or restrictions on resale or
other disposition of shares of Stock acquired under any Option,
provisions giving the Company the right to repurchase shares of
Stock acquired under any Option in the event the Optionee elects
to dispose of such shares or employment with the Company and its
Subsidiaries terminates, and provisions to comply with Federal
and state securities laws and Federal and state tax withholding
requirements. Any such provisions shall be reflected in the
applicable Option Agreement.
(e) Anything to the contrary in this Section 7, if an Incentive Stock
Option is granted to an Optionee who owns stock representing more than ten
percent of the voting power of all classes of stock of the Company, its parent
or a subsidiary (as provided in Section 422(b) of the Code), the Option Period
shall not exceed five years from the date of grant of such Option and the Option
Price shall be at least 110 percent of the Fair Market Value (on the Date of
Grant) of the Stock subject to the Option.
(f) $100,000 Per Year Limitation for Incentive Stock Options. To the
--------------------------------------------------------
extent the aggregate Fair Market Value (determined as of the date of grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, the portion of the Options with respect to which
such excess arises shall be treated as a Nonqualified Stock Options.
(g) Voluntary Surrender. The Committee may permit the voluntary surrender
-------------------
of any Nonqualified Stock Option to be conditioned upon the granting to the
Optionee of a new Option for the same or a different number of shares as the
Option surrendered or require such voluntary surrender as a condition precedent
to a grant of a new Option to such Optionee. Such new Option shall be
exercisable at an Option Price, during an Option Period, and in accordance with
any other terms or conditions specified by the Committee at the time the new
Option is granted, all determined in accordance with the provisions of the Plan
without regard to the Option Price, Option Period, or any other terms and
conditions of the Nonqualified Stock Option surrendered.
8. Termination of Employment or Service
(a) Termination of Employment. Except as otherwise determined by the
-------------------------
Committee and set forth in an Option Agreement, the following provisions will
apply to all Options granted
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<PAGE>
to Optionees who are either employers or employees who also serve on the Board.
Upon such an Optionee's (other than a Non-Employee Director) termination of
employment with the Company or a Subsidiary:
(1) If prior to the end of the Option Period the Optionee shall
undergo a Normal Termination, all unvested Options then held by
such Optionee shall expire on the date of Normal Termination and
all vested Options then held by such Optionee shall expire on the
earlier of the last day of the respective Option Period or the
date that is three (3) months after the date of such Normal
Termination. All vesting with respect to Options shall cease on
the date of Normal Termination and all Options which are vested
as of such date shall remain exercisable by the Optionee until
their expiration as provided above.
(2) If the Optionee dies prior to the end of the Option Period and
while still in the employ or service of the Company or a
Subsidiary or within three (3) months following a Normal
Termination, all unvested Options then held by such Optionee
shall expire on the date of death and all vested Options then
held by such Optionee shall expire on the earlier of the last day
of the respective Option Period or the date that is one (1) year
after the date of death of the Optionee. All vesting with respect
to Options shall cease on the earlier of the date of Normal
Termination or the date of death and all such Options which are
vested as of such date shall remain exercisable by the
beneficiary chosen by the Optionee pursuant to Section 10(e) or,
if none has been chosen, by the person or persons to whom the
Optionee's rights under the Options pass by will or the
applicable laws of descent and distribution until their
expiration as provided above.
(3) If an Optionee voluntarily ceases employment or service with the
Company or a Subsidiary under circumstances where the Company or
the Subsidiary could terminate the Optionee's employment or
service for Cause or the Company or a Subsidiary terminates
Optionee's employment or service for Cause, all Options then held
by such Optionee, whether vested or unvested, shall expire
immediately upon such cessation of employment or service.
(4) If an Optionee voluntarily ceases employment or service with the
Company or a Subsidiary other than as provided in other
provisions of Section 8, all unvested Options then held by such
Optionee shall expire on the date of cessation of employment or
service and all vested Options then held by such Optionee shall
expire on the earlier of the last day of the respective Option
Period or the date that is three (3) months after the date of
such cessation.
(b) Termination of Non-Employee Director's Service. Subject to Section
----------------------------------------------
7.(c), upon the termination of the service of a Non-Employee Director, his or
her rights to exercise an option then held shall be only as follows:
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<PAGE>
(1) Death. Upon the death of a Non-Employee Director while in
service as a Non-Employee Director of Company, the Non-
Employee Director's rights will be exercisable by his or her
estate or beneficiary at any time during the twelve (12)
months next succeeding the date of death. The number of
shares exercisable by the estate or beneficiary will be the
total number of unexercised shares under the Non-Employee
Director's option on the date of his or her death. If a Non-
Employee Director should die within three (3) months of his
or her termination of service as a Non-Employee Director
with Company, an option will be exercisable by his or her
estate or beneficiary at any time during the twelve (12)
months succeeding the date of termination, but only to the
extent of the number of shares as to which such option was
exercisable as of the date of such termination. A Non-
Employee Director's estate shall mean his or her legal
representative or other person who so acquires the right to
exercise the option.
(2) Normal Termination. Upon Normal Termination of a Non-
Employee Director, the Non-Employee Director's rights to any
non-qualified stock options vested on the date of
termination may be exercised for a period of twelve (12)
months after such Normal Termination.
(3) Other Reasons. Upon termination of a Non-Employee Director's
service as a Non-Employee Director for any reason other than
those stated above, the Non-Employee Director may, within
ninety (90) days following such termination exercise the
option to the extent such option was exercisable on the date
of termination.
9. Stock Grants.
The Committee may, in its sole discretion, make grants of Stock to Eligible
Persons, including to Non-Employee Directors, whether or not in lieu of cash
compensation for their services as members of the Board. Such grants shall be
on such terms as determined by the Committee, but shall be valued at Fair Market
Value. Grants of Stock under this Section 9 shall be in such amounts and have
such terms as the Committee deems appropriate at the time of grant. All the
terms, conditions, limitations, restrictions, and procedures herein applicable
to Options, which are intended to ensure compliance with Section 162(m) of the
Code, apply to Stock grants under this Section 9, and for purposes of Section
162(m) to the extent applicable thereunder, stock grants shall be aggregated
with Options, including the limitation on Options in Section 5(a).
10. General
(a) Privileges of Stock Ownership. Except as otherwise specifically
-----------------------------
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Options hereunder
until such shares have been issued to that person.
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<PAGE>
(b) Government and Other Regulations. The obligation of the Company to
--------------------------------
deliver shares of Stock upon the exercise of Options shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Option to the contrary, the Company shall be under no obligation to offer to
sell or to sell and shall be prohibited from offering to sell or selling any
shares of Stock pursuant to an Option unless such shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall
be under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
(c) Tax Withholding. Notwithstanding any other provision of the Plan, the
---------------
Company or a Subsidiary, as appropriate, shall have the right to deduct from the
number of shares of Stock issued upon the exercise of Options such number of
shares of Stock, valued at Fair Market Value on the date of payment, in an
amount necessary to satisfy all Federal, state or local taxes as required by law
to be withheld with respect to such Options. In the alternative, at the sole
discretion of the Committee, an Optionee or other person receiving Stock upon
exercise of an Option may be required to pay to the Company or a Subsidiary, as
appropriate, prior to delivery of such Stock, the amount of any such taxes which
the Company or a Subsidiary, as appropriate, is required to withhold, if any,
with respect to such Stock. Subject in particular cases to the disapproval of
the Committee, the Company may accept shares of Stock of equivalent Fair Market
Value in payment of such withholding tax obligations if the Optionee elects to
make payment in such manner. In furtherance of the foregoing, the Company may
require that (i) shares of Stock surrendered have been owned by the Optionee for
at least six months prior to the exercise or (ii) the Optionee, attesting in
writing to the Company ownership of shares of Stock having a Fair Market Value
at the time of attestation equal to such additional withholding obligations and
allowing the Company to withhold from the shares such Optionee would otherwise
receive an equal number of shares of Stock.
(d) Claim to Options, and Employment Rights. No employee or other person
----------------------------------------
shall have any claim or right to be granted an Option under the Plan or, having
been selected for the grant of an Option, to be selected for a grant of any
other Option. Neither the Plan nor any action taken hereunder shall be
construed as giving any Optionee any right to be retained in the employ or
service of the Company or any Subsidiary. The grant of an Option does not imply
that the Company or any Subsidiary does not anticipate either a general
reduction in force or the termination of the employment, directorship or
consulting position of an Optionee.
The grant of a Stock Option does not create a fiduciary relationship
between the Optionee and the Company or any other person or entitle the Optionee
to require the Company or any other person to provide any information except as
required by applicable securities or employee
-11-
<PAGE>
benefits statutes and rules and regulations issued thereunder. An Optionee shall
have no rights as a Stockholder with respect to any shares of Common Stock
subject to an Option.
(e) Designation and Change of Beneficiary. Each Optionee may file with
-------------------------------------
the Committee a written designation of one or more persons as the beneficiary
who shall be entitled to exercise the rights with respect to an Option granted
under the Plan upon the Optionee's death. An Optionee may, from time to time,
revoke or change his beneficiary designation without the consent of any prior
beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
-------- -------
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Optionee's death, and in no event shall
it be effective as of a date prior to such receipt.
(f) Payments to Persons Other Than Optionees. If the Committee shall find
----------------------------------------
that any person entitled to exercise an Option granted under the Plan is unable
to care for his affairs because of illness or accident, or is a minor, then the
delivery of shares of Stock due to such person or his estate upon such exercise
(unless a prior claim therefor has been made by a duly appointed legal
representative) may, if the Committee so directs the Company, be made to his
spouse, child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper recipient on
behalf of such person otherwise entitled to delivery. Any such delivery shall
be a complete discharge of the liability of the Committee and the Company
therefor.
(g) Time of Exercise. Unless an earlier time is determined by the
----------------
Committee, all exercises of Options during or within ten (10) days after the end
of employment or service, may be processed by the Company five (5) days after
notice of exercise is given by the Optionee. If prior to the processing of any
Option exercise the Company determines that it had as of the time of the end of
employment or service or has as of the time of processing grounds to terminate
the Option under Section 8(c), the Option may be canceled without exercise.
(h) No Liability of Company or Committee Members. No member of the
--------------------------------------------
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
-------- -------
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or By-Laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or hold
them harmless. The Company, Subsidiaries, the Board and the Committee
(including any additional committee) shall have no liability to the Optionee, or
the Optionee's estate or transferee if: (i) an Option intended to be an
Incentive Stock Option does not at any time qualify as an incentive stock option
under the Code; (ii) an Option grant or
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<PAGE>
exercise, or the subsequent sale of securities received on such exercise, does
not qualify as exempt from the application of Section 16(b) of the Exchange Act;
or (iii) an Option grant or exercise, or the subsequent sale of securities
received on such exercise, is subject to Section 162(m) or 280G of the Code; in
each case even if the Optionee, estate to transferee was informed it would
qualify or not be so subject.
(i) Governing Law. The Plan shall be governed by and construed in
-------------
accordance with the internal laws of the State of Delaware applicable to
contracts made and performed within such state, without regard to the principles
of conflicts of law thereof, except as such laws may be supplanted by the
federal laws of the United States of America, which laws shall then govern its
effect and its construction to the extent they supplant Delaware law.
(j) Reliance on Reports. Each member of the Committee and each member of
-------------------
the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself.
(k) Relationship to Other Benefits. No payment under the Plan shall be
------------------------------
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company except as
otherwise specifically provided in such other plan.
(l) Expenses. The expenses of administering the Plan shall be borne by the
--------
Company.
(m) Pronouns. Masculine pronouns and other words of masculine gender shall
--------
refer to both men and women.
(n) Titles and Headings. The titles and headings of the sections in the
-------------------
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
11. Changes in Capital Structure
Options granted under the Plan and any agreements evidencing such Options
shall be subject to equitable adjustment or substitution, as determined by the
Committee in its sole discretion, as to the number of shares, the exercise
price, the price or kind of a share of Stock or other consideration subject to
such Options (i) in the event of changes in the outstanding Common Stock or in
the capital structure of the Company by reason of stock dividends paid in
securities of the Company, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant of any such Option, (ii) in the event of any change in applicable laws
or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Optionees in the Plan, or (iii) upon the occurrence of any other event which
otherwise warrants equitable adjustment because it interferes with the intended
operation of the Plan. In addition, upon any such event, the
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<PAGE>
aggregate number of shares of Stock available under the Plan and the maximum
number of shares of Stock with respect to which any one person may be granted in
connection with Options during any year, if applicable, shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. With respect
to Options intended to qualify as "performance-based compensation" under Section
162(m) of the Code, such adjustments or substitutions shall be made only to the
extent that the Committee determines that such adjustments or substitutions may
be made without a loss of deductibility for such Options under Section 162(m) of
the Code. The Company shall give each Optionee notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding for all
purposes.
Notwithstanding the above, in the event of any of the following:
(1) The Company is merged or consolidated with another corporation or
entity and, in connection therewith, consideration is received by Stockholders
of the Company in a form other than stock or other equity interests of the
surviving entity;
(2) All or substantially all of the assets of the Company are acquired by
another person; or
(3) The reorganization or liquidation of the Company;
then the Committee may, in its sole discretion and upon at least 10 days advance
notice to the affected persons, immediately prior to and subject to the
consummation of such event cancel any particular or all outstanding Options
(vested or unvested) and pay to the Optionees thereof, in cash, the value of
such Options vested as of such cancellation (taking into account any
acceleration of vesting as a result of such event) based upon the price per
share of Stock received or to be received by other Stockholders of the Company
in the event, less the exercise price. The terms of this Section 10 may be
varied by the Committee in any particular Option Agreement.
12. Change in Control
(a) Except to the extent reflected in a particular Option Agreement, in
the event of a "Change in Control" (as defined below), notwithstanding any
vesting schedule with respect to any Options, all then unexercised and unexpired
Options which would otherwise be vested and exercisable within twelve (12)
months after the Change in Control, assuming a continuation of employment or
service had occurred, shall become immediately vested and exercisable.
(b) For purposes of the Plan, Change in Control shall, unless the Board
otherwise directs by resolution adopted prior thereto or, in the case of a
particular Option, the particular Option Agreement states otherwise, be deemed
to occur if:
(1) Any person, entity or group (within the meaning of Section
13(d)(3) of the Exchange Act) becomes, directly or indirectly, by
way of merger, consolidation or other business combination, or
otherwise, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of the capital stock of the Company entitled to
more than 50% of the aggregate votes represented by the capital
stock of all classes of common stock of the
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<PAGE>
Company entitled to vote generally in the election of directors
("Outstanding Voting Securities"); provided, however, that the
-------- -------
following acquisitions will not constitute a Change in Control:
(i) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary
or (ii) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described
in clauses (A) and (B) of clause (3) of this definition are
satisfied;
(2) Individuals who, as of the effective date of the Plan, constitute
the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Company's Board of Directors; provided, however, that any
individual becoming a director subsequent to the effective date
of the Plan whose election, or nomination for election by the
Company's Stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board,
will be considered as though such individual were a member of the
Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule 14
a-11 under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Board (a "Proxy Contest"), included by reason of
any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(3) The occurrence of a reorganization, merger or consolidation
involving the Company or in which securities of the Company are
issued, in each case, unless, following such reorganization,
------
merger or consolidation, (A) more than 50% of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Voting Securities, and (B) at least a majority of the members of
either, (x) the board of directors of the corporation resulting
from such reorganization, merger or consolidation (the "Surviving
Corporation") if 50% or more of the combined voting power of the
then outstanding voting securities of the Surviving Corporation
is not beneficially owned, directly or indirectly, by another
corporation (a "Parent Corporation"), or, (y) the board of
directors of the Parent Corporation, if 50% or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities is
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<PAGE>
beneficially owned, directly or indirectly, by a Parent
Corporation, were members of the Board at the time of the
execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(4) Approval by the Stockholders of the Company of (A) a complete
liquidation or dissolution of the Company, as applicable, or (B)
the sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
----- ----
respect to which following such sale or other disposition, (1)
more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively of the Outstanding Voting
Securities immediately prior to such sale or other disposition,
in substantially the same proportion as their ownership
immediately prior to such sale or other disposition, of the
Outstanding Voting Securities, and (2) at least a majority of the
members of the board of directors of such corporation were
members of the Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of the Company; provided, however, that no
transaction resulting in the disposition of one or more
subsidiaries or other business units of the Company will be
treated as substantially all of the assets of the Company unless
the assets so disposed of comprise more than 70% of all assets of
the Company measured by fair market value
13. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
14. Amendments and Termination
The Board may at any time terminate the Plan. With the express written
consent of an individual Optionee, the Board or the Committee may cancel or
reduce or otherwise alter outstanding Options. The Board or the Committee may,
at any time, or from time to time, amend or suspend and, if suspended,
reinstate, the Plan in whole or in part; provided, however, that no amendment
which requires stockholder approval in order for Options granted pursuant to the
Plan to be exempt from the application of Section 162(m) of the Code or for
Options which are Incentive Stock Options to continue to meet the requirements
of Section 422 of the Code, shall be effective unless the same shall be approved
by the requisite vote of the stockholders of the Company.
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<PAGE>
15. Effect of Section 162(m) of the Code
The Plan, and all Options issued thereunder, are intended to be exempt from
the application of Section 162(m) of the Code, which restricts under certain
circumstances the Federal income tax deduction for compensation paid by a
publicly held corporation to named executives in excess of $1 million per year.
One of the requirements for such exemption is that the Plan be approved by the
stockholders of the Company. To the extent that the Committee determines as of
the date of grant of an Option that (i) the Option is intended to comply with
Section 162(m) of the Code and (ii) the exemption described above is not
available with respect to such Option because the stockholders have not approved
the Plan, such Option shall not be effective until such stockholder approval
required under Section 162(m) of the Code has been obtained.
Options may be granted prior to the date of such stockholder approval made
subject to stockholder approval. In such event and prior to such grant, the
Committee shall consult with the Company's accountants as to the accounting
implications thereof and, if Incentive Stock Options are to be granted, the
Company's legal counsel as to the requirements for such grants.
* * *
As adopted by the Board of Directors of
Intek Information, Inc. as of
January 14, 2000
By: /S/ KRIS DANIELSON
--------------------------------
Assistant Secretary
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<PAGE>
Exhibit 10.4
INTEK INFORMATION, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE: CONDITION TO EFFECTIVENESS
The INTEK INFORMATION, INC. Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby employees of INTEK INFORMATION, INC. and
its Subsidiary Corporations (hereinafter referred to, unless the context
otherwise requires, as the "Company") will have an opportunity to acquire a
proprietary interest in the Company through the purchase of shares of the Common
Stock of INTEK INFORMATION, INC. It is the intention of the Company to have the
Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
Plan shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that Section of the Code.
This Plan shall become effective upon and contingent approval by the Board
and Shareholders ("Offering Condition").
ARTICLE II
DEFINITIONS
2.1 Base Pay means the regular straight-time earnings excluding payments for
--------
overtime, shift premium, bonuses and other special payments, commissions
and other marketing incentive payments. In the case of a part-time hourly
employee, base pay shall be determined by multiplying such employee's
hourly rate of pay in effect on the Offering Commencement Date by the
number of regularly scheduled hours of work for such employee during such
Offering.
2.2 Board means the Board of Directors of Intek Information, Inc.
-----
2.3 Code means the Internal Revenue Code of 1986, as amended.
----
2.4 Committee means the individuals described in Article XI.
---------
2.5 Employee means any person who is customarily employed on a full-time or
--------
part-time basis by the Company and is regularly scheduled to work more than
twenty (20) hours per week and customarily works for more than five (5)
months per year. A person who is employed by a "temporary agency" and
works off or on the premises of the Company is not an Employee.
<PAGE>
2.6 Stock means the common stock of the Company, par value $0.0001.
-----
2.7 Subsidiary Corporation means any present or future corporation which (i)
-----------------------
would be a "subsidiary corporation" of Intek Information, Inc. as that term
is defined in Section 424 of the Code and (ii) is designated as a
participant in the Plan by the Board or the Committee (and by adoption of
this Plan by the Board, Intek Teleservices, Inc., Brokerage Administrators
Corporation, Acorn Information Services, Inc., and Intek Insurance, Inc.
are so designated).
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Initial Eligibility. Any employee who shall have completed six (6) months
-------------------
of continuous employment and shall be employed by the Company on the date
her or his participation in the Plan is to become effective shall be
eligible to participate in offerings under the Plan which commence on or
after such six month period has concluded.
3.2 Leave of Absence. For purposes of participation in the Plan, a person on
----------------
leave of absence shall be deemed to be an employee for the first 90 days of
such leave of absence and such employee's employment shall be deemed to
have terminated at the close of business on the 90th day of such leave of
absence unless such employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on
such 90th day. Termination by the Company of any employee's leave of
absence, other than termination of such leave of absence on return to full
time or part time employment, shall terminate an employee's employment for
all purposes of the Plan and shall terminate such employee's participation
in the Plan and right to exercise any option.
3.3 Restrictions on Participation. Notwithstanding any provisions of the Plan
-----------------------------
to the contrary, no Employee shall be granted an option to participate in
the Plan:
3.3.1 if, immediately after the grant, such Employee would own stock,
and/or hold outstanding options to purchase stock, possessing five
percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company (for purposes of this
paragraph, the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any employee); or
3.3.2 which permits her or his rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiary
Corporations and parents (as provided in Code Section 4231(b)(8))
and to accrue at a rate which exceeds the lesser of 1,500 shares of
Stock or $25,000 in fair market value of the stock of the Company
and its Subsidiary Corporations and parents (determined at the time
such option is granted) for each calendar year in which such option
is outstanding.
2
<PAGE>
3.4 Commencement of Participation. An eligible employee may become a
-----------------------------
participant by completing an authorization for a payroll deduction on the
form provided by the Company ("Authorization") and filing it with the
office of the Treasurer of the Company on or before the date set therefor
by the Committee, which date shall be prior to the Offering Commencement
Date for the Offering (as such terms are defined below). Payroll deductions
for a participant shall commence on the applicable Offering Commencement
Date when her or his Authorization becomes effective and shall end on the
Offering Termination Date of the Offering to which such Authorization is
applicable, unless sooner terminated by the participant as provided in
Article VIII.
ARTICLE IV
OFFERINGS
4.1 Semi-Annual Offerings. The Plan will be implemented in eight offerings of
---------------------
the Company's Stock (the "Offerings"), or, if less, in such number of
offerings in which options are exercised to purchase the maximum number of
shares of Stock reserved for the Plan by the Company pursuant to this
Section. The first Offering under the Plan shall commence on the 1st day
of the month after both: (i) approval of the Plan by a majority of the
stockholders of the Company, and (ii) the Offering Condition has been met,
or subject to any requirements of the Code such later date as the Board may
at its discretion determine, and shall terminate six (6) or fewer months
thereafter, at the Board's discretion. Each subsequent Offering shall
commence on the first business day after the termination of the prior
Offering and shall terminate six (6) months thereafter ("Offering Period").
The maximum number of shares of Stock reserved by the Company for the Plan
shall be 2,000,000 shares and the maximum number of shares of Stock issued
in each respective Offering Period shall be 250,000 shares plus unissued
shares, if any, from the prior Offerings, whether offered or not.
As used in the Plan, "Offering Commencement Date" means the day on which
the particular Offering begins and "Offering Termination Date" means the
day on which the particular Offering terminates.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Amount of Deduction. At the time a participant files her or his
-------------------
Authorization for payroll deduction, she or he shall elect to have
deductions made from her or his pay on each payday during the time he is a
participant in an Offering at the rate of up to ten percent (10%) of her or
his Base Pay in effect at the Offering Commencement Date of such Offering
("Contribution Rate"). A participant may not authorize payroll deductions
for an amount less than $10.00 per month.
3
<PAGE>
5.2 Participant's Account. All payroll deductions made for a participant shall
---------------------
be credited to her or his account under the Plan. A participant may not
make any separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.4.
5.3 Changes in Payroll Deductions. A participant may discontinue her or his
-----------------------------
participation in the Plan as provided in Article VIII, but no other change
can be made during an Offering and, specifically, a participant may not
alter the amount of her or his payroll deductions for that Offering.
5.4 Leave of Absence. If a participant goes on a leave of absence, such
----------------
participant shall have the right to elect: (a) to withdraw the balance in
her or his account pursuant to Section 7.2, (b) to discontinue
contributions to the Plan but remain a participant in the Plan, or remain a
participant in the Plan during such leave of absence, authorizing
deductions to be made from payments by the Company to the participant
during such leave of absence and undertaking to make cash payments to the
Plan at the end of each payroll period to the extent that amounts payable
by the Company to such participant are insufficient to meet such
participant's authorized Plan deductions.
ARTICLE VI
GRANTING OF OPTION
6.1 Number of Option Shares. On the Commencement Date of each Offering, and
-----------------------
subject to the limitations in Article III herein, a participating employee
shall be deemed to have been granted an option to purchase a maximum number
of shares of Stock in an amount equal to that participant's Contribution
Rate multiplied by her or his Base Pay during the Offering Period and
divided by the Option Price (as defined in Section 6.2 herein).
6.1.1 An Employee's Base Pay during a six-month Offering Period shall be
determined by multiplying her or his normal weekly rate of pay (as in
effect on the last day prior to the Commencement Date of the
particular offering) by 26 or the hourly rate by 1,040, (and for any
Offering Period of less than six months a pro rata adjustment shall
be made), provided that, in the case of a part time hourly Employee,
the Employee's base pay during the period of an Offering shall be
determined by multiplying such Employee's hourly rate by the number
of regularly scheduled hours of work for such Employee during such
Offering.
6.2 Option Price. Unless the Board or Committee determines at its discretion a
------------
higher price to apply to all participants during the Offering Period (but
not more than 100% of the closing or fair market value prices described
below), the option price of stock purchased with payroll deductions made
during an Offering Period for a participant therein shall be the lesser of:
4
<PAGE>
6.2.1 85% of the closing price of the stock on the Offering Commencement
Date, or the nearest prior business day on which trading occurred on
the NASDAQ National Market System; or
6.2.2 85% of the closing price of the stock on the Offering Termination
Date, or the nearest prior business day on which trading occurred on
the NASDAQ National Market System.
If the Common Stock of Intek Information, Inc. is not admitted to trading on the
NASDAQ National Market System any of the aforesaid dates for which closing
prices of the stock are to be determined, then reference shall be made to the
fair market value of the stock on that date, as determined on such basis as
shall be established or specified for the purpose by the Board of Directors or
the Committee.
ARTICLE VII
EXERCISE OF OPTION
7.1 Automatic Exercise. Unless a participant gives written notice to the
------------------
Company as hereinafter provided, her or his option for the purchase of
Stock made during any Offering pursuant to this Plan will be deemed to have
been exercised automatically on the Offering Termination Date of such
Offering for the purchase of the number of full shares of Stock which the
accumulated payroll deductions in her or his account at that time will
purchase at the applicable Option Price (but not in excess of the number of
shares for which options have been granted to the employee pursuant to
Section 6.1), and any excess funds in her or his account at that time will
be returned to her or him.
7.2 Withdrawal of Account. By written notice to the Offices of the Treasurer
---------------------
of the Company, at any time prior to the Offering Termination Date for any
Offering, a participant may elect not to exercise her or his options under
the Plan and to withdraw the accumulated payroll deductions in her or his
account at such time.
7.3 Fractional Shares. Fractional shares will not be issued under the Plan and
-----------------
any accumulated payroll deductions which would have been used to purchase
fractional shares will be returned to any employee promptly following the
termination of an Offering, without interest.
7.4 Transferability of Option. During a participant's lifetime, any and all
-------------------------
options held by such participant shall be exercisable only by that
participant and may not be sold, assigned, transferred, or otherwise
disposed of to any other person or entity, except by will or the laws of
descent and distribution. Any such transfer or assignment of options held
by participants under the Plan in violation of this Section shall have no
effect and shall be null and void.
5
<PAGE>
7.5 Delivery of Stock. As promptly as practicable after the Offering
-----------------
Termination Date of each Offering, the Company will issue and deliver to
each participant, as appropriate, stock certificates for Stock purchased
under the Plan, which at the Board's direction may bear a legend stating
certain resale restrictions provided for in Article XII herein.
ARTICLE VIII
WITHDRAWAL
8.1 In General. As provided in Section 7.2, a participant may withdraw payroll
----------
deductions credited to her or his account under the Plan at any time by
giving written notice to the Offices of the Treasurer of the Company. All
of the participant's payroll deductions credited to her or his account will
be paid to her or him promptly after receipt of her or his notice of
withdrawal, and no further payroll deductions will be made from her or his
pay during such Offering. The Company may, at its option, treat any
attempt by an Employee to borrow on the security of her or his accumulated
payroll deductions as an election, under Section 7.2, to withdraw such
deductions.
8.2 Effect on Subsequent Participation. A participant's withdrawal from any
----------------------------------
Offering will not have any effect upon her or his eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company.
8.3 Termination of Employment. Upon termination of the participant's
-------------------------
employment for any reason, including retirement (but excluding death while
in the employ of the Company or continuation of a leave of absence for a
period beyond 90 days), the payroll deductions credited to her or his
account will be returned to her or him, or, in the case of her or his death
subsequent to the termination of her or his employment, to the person or
persons entitled thereto under Section 13.1.
8.4 Termination of Employment Due to Death. Upon termination of the
--------------------------------------
participant's employment because of her or his death, her or his
beneficiary (as defined in Section 13.1) shall have the right to elect, by
written notice given to the Offices of the Treasurer of the Company prior
to the earlier of the Offering Termination Date or the expiration of a
period of sixty (60) days commencing with the date of the death of the
participant, either:
8.4.1 to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
8.4.2 to exercise the participant's option for the purchase of stock on the
Offering Termination Date next following the date of the
participant's death for the purchase of the number of full shares of
stock which the accumulated payroll deductions in the participant's
account at the date of the participant's death will
6
<PAGE>
purchase at the applicable Option Price, and any excess in such
account will be returned to said beneficiary, without interest.
In the event that no such written notice of election shall be duly received
by the Offices of the Treasurer of the Company, the beneficiary shall
automatically be deemed to have elected, pursuant to Section 8.4.2, to
exercise the participant's option.
8.5 Leave of Absence. A participant on leave of absence shall, subject to the
----------------
election made by such participant pursuant to Section 5.4, continue to be a
participant in the Plan so long as such participant is on continuous leave
of absence. A participant who has been on leave of absence for more than
90 days and who therefore is not an employee for the purpose of the Plan
shall not be entitled to participate in any offering commencing after the
90th day of such leave of absence. Notwithstanding any other provisions of
the Plan, unless a participant on leave of absence returns to regular full-
time or part-time employment with the Company at the earlier of: (a) the
termination of such leave of absence or (b) three months from the 90th day
of such leave of absence, such participant's participation in the Plan
shall terminate on whichever of such dates first occurs.
ARTICLE IX
INTEREST
9.1 No Payment of Interest. No interest will be paid or allowed on any money
----------------------
paid into the Plan or credited to the account of any participant Employee.
ARTICLE X
STOCK
10.1 Maximum Shares. The maximum number of shares which shall be issued under
--------------
the Plan, subject to adjustment upon changes in capitalization of Intek
Information, Inc. as provided in Section 13.4 shall not exceed 2,000,000
shares for all Offerings under the Plan (250,000 shares in each of the
eight semi-annual Offering Periods plus all unissued shares from prior
Offerings). If the total number of shares for which options are exercised
on any Offering Termination Date in accordance with Article VI exceeds the
maximum number of shares for the applicable offering, the Company shall
make a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as
it shall determine to be equitable, and the balance of payroll deductions
credited to the account of each participant under the Plan shall be
returned to her or him as promptly as possible.
10.2 Participant's Interest in Option Stock. The participant will have no
--------------------------------------
interest in stock covered by her or his option until such option has been
exercised.
7
<PAGE>
10.3 Registration of Stock. Stock to be delivered to a participant under the
---------------------
Plan will be registered on the books of the Company in the name of the
participant, or, if the participant so directs by written notice to the
Treasurer of the Company prior to the Offering Termination Date applicable
thereto, in the names of the participant and one such other person as may
be designate by the participant, as joint tenants with rights of
survivorship or as tenants by the entireties, to the extent permitted by
applicable law.
10.4 Restrictions on Exercise. The Board may, in its discretion, require as
------------------------
conditions to the grant or exercise of any option that the shares of Common
Stock reserved for issuance upon the exercise of the option shall have been
duly listed, upon official notice of issuance, upon a stock exchange or the
NASDAQ trading system, and that a Registration Statement under the
Securities Act of 1933, as amended, with respect to said shares shall be
effective and all state securities laws shall be complied with.
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Committee. The Board may at its discretion appoint a
------------------------
committee (the "Committee") to administer the Plan, which shall consist of
no fewer than three members of the Board. No member of the Committee shall
be eligible to purchase stock under the Plan.
11.2 Authority of Committee. Subject to the express provisions of the Plan, the
----------------------
Board or the Committee, if one is appointed, shall have plenary authority
in its discretion to interpret and construe any and all provisions of the
Plan, to adopt rules and regulations for administering the Plan, and to
make all other determinations deemed necessary or advisable for
administering the Plan. If no committee is appointed, the Board shall
constitute the "Committee." The Committee's determination on the foregoing
matters shall be conclusive.
11.3 Rules Governing the Administration of the Committee. The Board may from
---------------------------------------------------
time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee may select one of its members as
its Chairman and shall hold its meetings at such times and places as it
shall deem advisable and may hold telephonic meetings. A majority of its
members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan, in the
manner and to the extent it shall deem desirable. Any decision or
determination reduced to writing and signed by a majority of the members of
the Committee shall be as fully effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint
a secretary and shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
8
<PAGE>
ARTICLE XII
LIMITATIONS ON SALE OF STOCK PURCHASED
UNDER THE PLAN; TAX MATTERS
12.1 Resale Restrictions. Each participant who is subject to Section 16(a)
-------------------
promulgated under the Securities Exchange Act of 1934 (e.g., officers,
employee directors, and employees holding 10% or more of any class of stock
of the Company), will agree upon entering the Plan to hold the Stock for a
period of six (6) months after its acquisition. All other participants
will agree upon entering the Plan to hold the Stock for a period of two (2)
months after its acquisition. Because of certain federal tax law
requirements, each participant will agree upon entering the Plan, promptly
to give the Chief Financial Officer of the Company notice of any Stock
disposed of within two (2) years after the Offering Commencement Date or
one (1) year after the Offering Termination Date (the "Holding Period").
The Employee understands that disposing of the Stock during the Holding
Period may have adverse tax consequences to the Employee. The Employee
assumes the risk of any fluctuations in the price of such Stock.
12.2 Satisfaction of Withholding Obligations. The Company may take such steps
---------------------------------------
as it may deem necessary or appropriate for the withholding of any taxes or
funds which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Company stock received
hereunder (collectively, "Withholding Obligations"). Such steps may
include, by way of example only and not limitation, (i) requiring a
participant to remit to the Company in cash an amount sufficient to satisfy
such Withholding Obligations; (ii) allowing the participant to tender to
the Company shares of Company stock, the fair market value of which at the
tender date the Committee determines to be sufficient to satisfy such
Withholding Obligations; (iii) withholding shares of Company stock
otherwise issuable upon the exercise of a stock option and which have a
fair market value at the Offering Termination Date sufficient to satisfy
such Withholding Obligations; (iv) allowing the participant to authorize
the Company to make payroll deductions; or (v) any combination of the
foregoing.
12.3 Notification of Inquiries and Agreements. Each participant shall notify
----------------------------------------
the Company in writing within ten (10) days after the date such participant
(i) first obtains knowledge of any Internal Revenue Service inquiry, audit,
assertion, determination, investigation, or question relating in any manner
to the value of Company stock or options purchased or granted hereunder;
(ii) includes or agrees (including, without limitation, in any settlement,
closing or other similar agreement) to include in gross income with respect
to any Company stock or option received under this Plan (A) any amount in
excess of the amount reported on Form 1099 or Form W-2 to such participant
by the Company, or (B) if no such Form was received, any amount; (iii)
sells, disposes of, or otherwise transfers an option acquired pursuant to
this Plan; or (iv) sells, disposes of, or otherwise transfers,
9
<PAGE>
within the Holding Period, Stock acquired under the Plan. Upon request, a
participant shall provide to the Company any information or document
relating to any event described in the preceding sentence which the Company
(in its sole discretion) requires in order to calculate and substantiate
any change in the Company's tax liability or withholding obligations as a
result of such event.
ARTICLE XIII
MISCELLANEOUS
13.1 Designation of Beneficiary. A participant may file a written designation
--------------------------
of a beneficiary who is to receive any stock and/or cash. Such designation
of beneficiary may be changed by the participant at any time by written
notice to the Treasurer of the Company. Upon the death of a participant
and upon receipt by the Company of proof of identity and existence at the
participant's death of a beneficiary validly designated by her or him under
the Plan, the Company shall deliver such stock and/or cash to such
beneficiary. In the event of the death of a participant and in the absence
of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the company shall deliver such stock
and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver
such stock and/or cash to the spouse or to any one or more dependents of
the participant as the Company may designate. No beneficiary shall, prior
to the death of the participant by whom he has been designated, acquire any
interest in the stock or cash credited to the participant under the Plan.
13.2 Transferability. Neither payroll deductions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to
receive stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or
the laws of descent and distribution. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect, except that
the Company may treat such act as an election to withdraw funds in
accordance with Section 7.2.
13.3 Use of Funds. All payroll deductions received or held by the Company under
------------
this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
13.4 Adjustment Upon Changes in Capitalization. (a) If, while any options are
-----------------------------------------
outstanding, the outstanding shares of Common Stock of Intek Information,
Inc. have increased, decreased, changed into, or been exchanged for a
different number or kind of shares or securities of Intek Information, Inc.
through reorganization, merger, recapitalization, reclassification, stock
split, reverse stock split, stock dividend paid on Stock in the form of
Stock, or similar transaction, appropriate and proportionate adjustments
may be made
10
<PAGE>
by the Board or by the Committee in the number and/or kind of shares which
are subject to purchase under outstanding options and on the option
exercise price or prices applicable to such outstanding options. In
addition, in any such event, the number and/or kind of shares which may be
offered in the Offerings described in Article IV and Section 3.3.2 hereof
shall also be proportionately adjusted. For the purposes of this Paragraph,
any distribution of shares to stockholders in an amount aggregating 20% or
more of the outstanding shares shall be deemed a stock split and any
distributions of shares aggregating less than 20% of the outstanding shares
shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of Intek Information, Inc., or upon
a reorganization, merger or consolidation of Intek Information, Inc. with
one or more corporations as a result of which Intek Information, Inc. is
not the surviving corporation, or upon a sale of substantially all of the
property or stock of Intek Information, Inc. to another corporation, the
holder of each option then outstanding under the Plan will thereafter be
entitled to receive at the next Offering Termination Date upon the exercise
of such option for each share as to which such option shall be exercised,
as nearly as reasonably may be determined, the cash, securities and/or
property which a holder of one share of the Common Stock was entitled to
receive upon and at the time of such transaction. The Board shall take
such steps in connection with such transactions as the Board shall deem
necessary to assure that the provisions of this Section 13.4 shall
thereafter be applicable, as nearly as reasonably may be determined, in
relation to the said cash, securities and/or property as to which such
holder of such option might thereafter be entitled to receive. Without
limiting any other right of the Company, and subject to any requirements of
the Code, the Board or Committee may terminate an Offering early at or
within 90 days before the expected effective date of such a transaction.
13.5 Amendment and Termination. The Board shall have complete power and
-------------------------
authority to terminate or amend the Plan at any time; provided, however,
that the Board shall not, without the approval of the stockholders of the
Company (i) increase the maximum number of shares which may be issued under
any Offering (except pursuant to Section 13.4); or (ii) amend the
requirements as to the class of employees eligible to purchase stock under
the Plan or permit the members of the Committee to purchase stock under the
Plan. No termination, modification, or amendment of the Plan may, without
the consent of an Employee then having an option under the Plan to purchase
stock, adversely affect the rights of such Employee under such then
outstanding option.
13.6 Effective Date. The Plan shall become effective upon the approval of the
--------------
Plan by a majority of the stockholders of the Company entitled to vote,
which approval must occur within twelve (12) months after the date the Plan
is adopted by the Board. Anything to the contrary notwithstanding, no
Stock may be issued under the Plan until such stockholder approval is
obtained.
11
<PAGE>
13.7 No Employment Rights. The Plan does not, directly or indirectly, create
--------------------
any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the
Company, and it shall not be deemed to interfere in any way with the
Company's right to terminate, or otherwise modify, an employee's
employment at any time. This Plan shall not be deemed to be a contract for
employment between an Employee and the Company or to be a consideration or
an inducement for the employment of any participant or Employee. Nothing
in this Plan shall be deemed to give any participant or Employee the right
to be retained in the service of the Company or to interfere with the
right of the Company to discharge any participant or Employee at any time
regardless of the effect such discharge shall have upon her or him or her
as a participant in the Plan. The participation by Employees is not an
indication that the Company does not anticipate layoffs.
13.8 Effect of Plan. The provisions of the Plan shall, in accordance with its
--------------
terms, be binding upon, and inure to the benefit of, all successors of
each Employee participating in the Plan, including, without limitation,
such Employee's estate and the executors, administrators or trustees
thereof, heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
13.9 Governing Law. The law of the State of Delaware, notwithstanding the
-------------
choice of law rules therein, will govern all matters relating to this Plan
except to the extent it is superseded by the laws of the United States.
13.10 No Liability. No liability whatsoever shall attach to or be incurred by
------------
any past, present or future stockholders, officers, employees, advisors,
or directors of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, or implied therefrom. Any
and all liabilities of, and any and all rights and claims against, the
Company or any stockholder, officer, employee, advisor, or director of the
Company, whether arising at common law or in equity or created by statute
or constitution or otherwise, pertaining to this Plan, are hereby
expressly waived and released by every participant as a part of the
consideration for any benefits by the Company under this Plan. This
specifically includes participant not receiving any expected tax treatment
in regards to her or his participation.
13.11 Government Regulation. The Company's obligation to sell and deliver
---------------------
shares of Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization,
issuance or sale of such stock.
13.12 Notice. Any notice required or permitted to be given under this Plan must
------
be in writing and may be delivered in person, by facsimile capable of
confirming receipt, or by deposit with the U.S. Postal Service, postage
prepaid, to the following address:
12
<PAGE>
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Attn: Offices of the Treasurer
or at such other address as the Company may specify in writing from time
to time. Such notice will be deemed effective on the day of receipt if
personally delivered, on the next business day if sent by facsimile, or
three (3) business days after deposit with the U.S. Postal Service,
postage prepaid and properly addressed.
13
<PAGE>
INTEK INFORMATION, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
AUTHORIZATION
The undersigned Employee of Intek Information, Inc. (the "Company"), or a
Subsidiary Corporation of the Company, pursuant to the Company's 1999 Stock
Purchase Plan (the "Plan"), hereby agrees to purchase from the Company shares of
its Common Stock, par value $0.0001, in each Offering Period in accordance with
the terms of the Plan.
In accordance with the provisions of Article III of the Plan, the
undersigned authorizes:
(1) The following deduction in each
payroll period $____________________
or
(2) I elect NOT to participate in the Plan __________
(Note: This amount must be an even dollar amount not less than $10.00 per month
or more than 10% of the undersigned's regular base pay in each payroll period).
The name or names in which stock purchased for me pursuant to the Plan
shall be issued is as follows (please print):
_______________________________________ _____________________
(Full Name) (Social Security No.)
_______________________________________ _____________________
(Name of one other person of legal (Social Security No.)
age, as joint tenant or tenants by the
entirety, if desired)
________________________________________________________________________________
(Address of Employee)
I acknowledge that I have received a copy of the Plan, and that this
document shall constitute my authorization for participation in the Plan and
shall supersede any previous authorizations for participation in the Plan. I
agree to the requirements of me as stated in the Plan, and I agree to indemnify
the Company for any tax or withholding obligations arising as a result of a
disposition prior to the dates permitted by the Plan of shares acquired by me
under the Plan.
This Authorization shall be effective in accordance with the Plan on
___________, _____.
___________________ ___________________________
Date Signature
This document must be delivered to the offices of the Treasurer of the
Company at least ten (10) days prior to the Offering Commencement Date for the
first Offering in which you desire to participate.
14
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INTEK INFORMATION, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
WITHDRAWAL NOTICE
The undersigned Employee of Intek Information, Inc. (the "Company"), or a
Subsidiary Corporation of the Company, in accordance with the provisions of
Article VIII of the Company's 1999 Employee Stock Purchase Plan (the "Plan"),
hereby withdraws from participation in the Plan.
The undersigned understands that, upon filing this Withdrawal Notice with
the offices of the Treasurer of the Company, payroll deductions from her or his
regular Base Pay pursuant to the Plan will be discontinued, effective
immediately, and the entire balance of the account containing such deductions
not theretofore used to purchase the Company's Common Stock, par value $0.0001,
pursuant to the Plan will be paid to the undersigned as promptly as
practicable.
_______________________________________ _________________________
Full Name (please print) Social Security Number
_______________________________________ _________________________
Date Signature
<PAGE>
Exhibit 10.5
CONTRIBUTION AGREEMENT
Intek Information, Inc., a Delaware corporation ("Intek") has developed and
-----
operates a business based on a web-based software product used in call centers
("TelWeb Business").
---------------
1. Intek hereby contributes, assigns and transfers unto Spider
Technologies, Inc., a Delaware corporation ("Spider"), its successors, legal
------
representatives and assigns, as a capital contribution in return for 7,475, 890
(less the 100 shares of Spider Common Stock previously issued by Spider to
Intek) shares of Spider Common Stock and 37,707,124 shares of Spider Series A
Preferred Stock, issuable pursuant to the Distribution Plan attached hereto,
the following assets, properties, rights, and obligations of Intek used in the
TelWeb Business, and Spider hereby accepts and assumes such:
(a) Assigned Contracts listed on Exhibit A;
(b) Real Property interests listed on Exhibit B;
(c) Leases and Licenses listed on Exhibit C;
(d) Personal Property listed on Exhibit D;
(e) Intangible Assets listed on Exhibit E;
(f) Computer and Other Services and Utilities Agreements listed on
Exhibit F;
(g) Claims and causes of action related to any of the foregoing,
including those listed on Exhibit G;
(h) One Million Dollars ($1,000,000) in cash, $300,000 of which shall
be delivered on the date hereof and the balance within sixty (60)
days; and
(i) The organizational costs of forming Spider, prepaid rent or lease
payments on the foregoing for the month of October, 1999, if
already paid by Intek, and bills for the TelWeb Business paid by
Intek in the month of October, 1999, in the ordinary course of
business.
The assets, properties, rights and obligations contributed and transferred by
Intek to Spider pursuant to this Section 1 are collectively referred to as the
"Assets."
1
<PAGE>
The above numbers of shares of capital stock of Spider are based upon the
calculation of both the number of shares of outstanding Intek capital stock and
the theoretical PIK Election calculation set forth in the Distribution Plan of
Intek. If there is a mathematical error in such calculations, the number of
shares of Spider capital stock issued hereunder shall be automatically
correspondingly adjusted up to the date of physical distributions of Spider
stock certificates issued pursuant to the Distribution Plan.
2. Intek specifically does not hereby contribute, transfer or assign, and
Spider does not hereby accept or assume the following: (i) the TelWeb name, and
goodwill, marks and logos associated with "TelWeb"; (ii) assets which are
assigned to Spider by Intek pursuant to the Software Assignment and Grant Back
License, Maintenance and Support Agreement dated on or about the date hereof;
(iii) accounts receivable, debts and accounts payable accrued or due prior to
the date hereof including the disputed invoice of Thomas Gray and the litigation
with Davox Corporation; (iv) rights, obligations, or assets which are allocated
between Intek and Spider in a different fashion than set forth herein pursuant
to the Tax Separation Agreement, Separation Agreement, Transition Support
Agreement or Sublease and Resource Sharing Agreement, of even date, between
Intek and Spider (the "Related Agreements"); (v) furniture, fixtures and
------------------
equipment subject to the Sublease and Resource Sharing Agreement dated on or
about the date hereof; (vi) the "Integration Business" of Intek as defined
below; or (vii) any liabilities, contingent or otherwise, not expressly set
forth in Section 1 or the Exhibits thereto (provided, however, that Spider may
have assumed liabilities, contingent or otherwise, pursuant to the Related
Agreements).
The parties recognize that there are two sometimes related, but distinct,
functions concerning software. One is the core development of the software,
including code and manuals related to the code. The other is the integration of
the code so that it operates on, and with, a company's (including customer's and
licensee's) hardware and software platforms. Such integration may involve the
development of software code and manuals solely to permit such efficient
interoperability. The later function performed by Intek is the "Integration
Business" as defined above. However, the retention by Intek of the Integration
Business does not expressly or impliedly prevent Spider from performing similar
or the same functions for any person, including Intek customers or sublicensees
of software from Intek.
3. EXCEPT AS PROVIDED IN THE RELATED AGREEMENTS OR ANOTHER WRITTEN
AGREEMENT BETWEEN INTEK AND SPIDER, INTEK MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, BY SAMPLE, OR AS TO QUALITY, AS TO THE ASSETS, OR ANY PART
THEREOF, AS TO THE CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, OR INFRINGEMENT ON THE RIGHTS OF OTHERS WHETHER LATENT OR
PATENT, IT BEING UNDERSTOOD THAT THE ASSETS ARE TO BE CONTRIBUTED HEREUNDER "AS
2
<PAGE>
IS, WHERE IS" ON THE DATE HEREOF IN THEIR PRESENT CONDITION. REPRESENTATIONS AND
WARRANTIES OF INTEK MAY EXIST IN RELATED AGREEMENTS OR OTHER WRITTEN AGREEMENTS
BETWEEN INTEK AND SPIDER.
4. At or after the date hereof, Intek shall prepare, execute and deliver,
at Intek's expense, such further instruments of conveyance, sale, assignment or
transfer, and shall take or cause to be taken such other or further action, as
Spider shall reasonably request at any time or from time to time and which are
reasonably acceptable in form and substance to Intek in order to perfect,
confirm or evidence in Spider title to all or any part of the Assets or to
consummate, in any other manner, the terms and provisions of this Contribution
Agreement. Spider and Intek shall use their respective best efforts to secure
any consents and approvals required to effect the assignment of the contracts
transferred to Spider and release of Intek from future obligations thereunder.
Intek agrees that, upon written request, it will execute and return to Spider
any reasonable assignment, novation or transfer form to effect the transfer of
any contract. With respect to any contract conveyed to Spider by Intek for
which Spider is unable to obtain an assignment, novation or other transfer,
Spider shall nevertheless be deemed to be entitled to all beneficial interest in
such contract and be responsible for all duties thereunder and upon request
Intek shall provide cooperation to Spider as reasonably required to facilitate
the assignment and transfer of all contracts to Spider.
5. The covenants in Section 4 shall terminate three years after the date
hereof.
Dated: October 27, 1999 INTEK INFORMATION, INC.
By: /s/ Timothy C. O'Crowley
-------------------------
Its: Chief Executive Officer
------------------------
AGREED TO:
SPIDER TECHNOLOGIES, INC.
By: /s/ Timothy C. O'Crowley
--------------------------
Its: Authorized Officer
-------------------------
3
<PAGE>
EXHIBIT A
ASSIGNED CONTRACTS
------------------
Contracts to be contributed by Intek to Spider including, among other
things, contracts with customers, contracts with vendors and/or suppliers: None.
However, customer relationships and goodwill related to TelWeb software (other
than Integration Business) are being transferred in respect of the following
contracts.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Contract Description
<S> <C>
- -------------------------------------------------------------------------------
3DO Master Service Agreement dated 7/1/97 to 7/1/98 which
specifically prohibits Subcontracting without consent
- -------------------------------------------------------------------------------
AMEX (Copy of Contract Requested)
- -------------------------------------------------------------------------------
BLUE SHIELD Master Service Agreement dated 5/7/98 to 5/7/99
prohibiting assignment without consent
- -------------------------------------------------------------------------------
CELL ONE Letter of Intent for 4/25/98 to Present
- -------------------------------------------------------------------------------
CFG Campaign Services Agreement dated 3/1/97 to 3/1/98
- -------------------------------------------------------------------------------
CONSECO Master Service Agreement dated 7/1/98 to 7/1/00
prohibiting assignment without consent
- -------------------------------------------------------------------------------
NORWEST Master Service Agreement dated 5/1/98 to 5/11/01
prohibiting assignment without consent
- -------------------------------------------------------------------------------
ORACLE Letter of Intent (limited info)
- -------------------------------------------------------------------------------
SAFEWAY Master Service Agreement dated 9/17/97 to 9/17/98
prohibiting assignment without consent
- -------------------------------------------------------------------------------
SEGA USA Master Service Agreement dated 4/8/97 to 4/8/99
prohibiting assignment without consent
- -------------------------------------------------------------------------------
SEGA ENT Telephone Marketing Agreement dated 8/18/96 to 8/17/97
prohibiting assignment without consent
- -------------------------------------------------------------------------------
SONY Services Agreement dated 5/1/97 to 3/31/99 prohibiting
assignment without consent
- -------------------------------------------------------------------------------
US WEST Agreement for Services dated 1/27/99 to 12/31/99
specifically stating subcontracting is not allowed without
consent
- -------------------------------------------------------------------------------
WALL STREET Memo and Vendor Confidentiality Agreement dated 7/30/96
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
EXHIBIT B
REAL PROPERTY
-------------
Owned real property to be contributed by Intek to Spider: None.
5
<PAGE>
EXHIBIT C
LEASES AND LICENSES (AMENDED)
-----------------------------
Leases and licenses to be contributed by Intek to Spider including software
licenses and equipment leases such as photocopiers, telephones, computer
equipment, etc. NONE.
6
<PAGE>
EXHIBIT D
PERSONAL PROPERTY
(FURNITURE, FIXTURES AND EQUIPMENT)
-----------------------------------
Furniture, fixtures, equipment and supplies to be contributed by Intek to
Spider consisting of approximately $10,000 by fair market value of furniture,
fixtures, equipment and supplies used by Spider and located in the Denver
metropolitan area.
7
<PAGE>
EXHIBIT E
INTANGIBLE ASSETS
-----------------
None, except customer relationships and goodwill, as detailed in Exhibit A,
and going concern value.
8
<PAGE>
EXHIBIT F
COMPUTER AND OTHER
------------------
SERVICES AND UTILITIES AGREEMENTS
---------------------------------
Service and utility contracts such as telecommunications, computer
maintenance, electricity, lighting, heat and air, gas, water, fuel, oil,
sanitary facilities, maintenance and cleaning service agreements to be
contributed to Intek to Spider: None. Addressed by Sublease and Resource
Sharing Agreement.
9
<PAGE>
EXHIBIT G
CLAIMS AND CAUSES OF ACTION
---------------------------
Claims and causes of action related to the contributions listed on Section
1 to be contributed by Intek to Spider: None currently known.
10
<PAGE>
Exhibit 10.7.2
PROMISSORY NOTE
(Franklin D. Richards)
$33,000.00 Denver, Colorado
October _____, 1999
FOR VALUE RECEIVED, the undersigned ("Maker"), for itself, its successors and
assigns, promises to pay to the order of INTEK INFORMATION, INC., a Delaware
corporation ("Intek"), its successors and assigns, at 5619 DTC Parkway, 12th
Floor, Englewood, CO 80111, the full sum of Thirty-three Thousand and 00/100
($33,000.00) plus interest as hereinafter provided.
The outstanding principal balance hereof shall bear interest prior to maturity
at the simple interest rate equal to seven and three-fourths percent ( 7.75%).
The outstanding principal balance, together with any accrued and unpaid
interest, shall be due and payable in full on September 1, 2001 (the "Maturity
Date"); provided, however, that in the event that Maker is employed by Intek as
of September 1, 2000 (approximately the first anniversary of the date of this
Note), and has been continuously employed since the date of this Note, then the
lesser of (i) one-half of the original principal balance of this Note, or (ii)
the outstanding principal balance of this Note, shall be forgiven and shall not
be due from Maker. In the event that Maker is employed by Intek as of the
Maturity Date (approximately the second anniversary of the date of this Note),
then the remaining outstanding principal balance of this Note, and any unpaid
interest thereon, shall be forgiven and shall not be due from Maker.
Notwithstanding any provision in this Note to the contrary, in the event that
- -----------------------------------------------------------------------------
Maker is no longer an employee of Intek, all amounts outstanding under this Note
- --------------------------------------------------------------------------------
shall become immediately due and payable in full and to the extent permitted by
- -------------------------------------------------------------------------------
law, Intek may offset any payment Intek may owe Maker and apply such offset
- ---------------------------------------------------------------------------
towards payment of this Note. Notwithstanding any provision of this Note to the
- ----------------------------
contrary, including the above provisions on forgiveness of any amount, Maker
shall pay to Intek on November 1, 2000 a principal amount, and accrued interest
thereon, equal to the excess of the original principal amount of this Note over
the amount of federal, state and local income taxes paid or payable by Maker in
respect of the distribution to Maker by Intek of stock of Spider Technologies,
Inc. ("Spider Stock") in the "spin off" of Spider Stock to stockholders of
Intek. The Spider Stock will be deemed taxed at 25% (20% federal, 6% Colorado
state, with a corresponding reduction in federal taxes) for long term capital
gains purposes and at the highest marginal federal, state and local income tax
rate in fact paid by the Maker as to short term capital gain and ordinary
income. Maker will certify such tax rates to Intek.
Interest which accrues hereunder shall be paid in full on the Maturity Date. If
not paid when due, the interest shall be added to the principal balance and
shall thereafter accrue interest at the rate provided herein. Payments
hereunder shall be applied first to outstanding and unpaid interest, and then to
principal.
<PAGE>
Promissory Note - Page 2
If any payment on this Note is not paid when due, whether maturing by lapse of
time or by reason of the failure of the Maker hereof to pay when due or because
of a default in the performance of any of the covenants contained in this Note,
this Note shall thereafter bear simple interest at the rate of fifteen percent
(15%) per annum until paid in full.
This Note, at the option of Maker, may be prepaid in whole or in part at any
time without additional interest or penalty, with any such prepayment being
applied first to outstanding and unpaid interest, and then applied to principal
in the inverse order of maturity.
Maker and any guarantors or endorsers hereof severally waive presentment,
demand, protest, notice of nonpayment and of protest and agreement to any
extension of time for payment, the acceptance of any partial payments before, at
or after maturity, and if this note, or any interest due thereunder, is not paid
when due, or a suit is brought thereon, Maker agrees to pay all costs of
collection, including, without limitation, reasonable attorneys' fees.
This note shall be governed by and construed in accordance with the laws of the
State of Colorado, without regard to its choice of law rules.
Maker acknowledges that in the event amounts due hereunder are forgiven, as set
- -------------------------------------------------------------------------------
forth above, then such forgiven amounts will be taxable to Maker as ordinary
- ----------------------------------------------------------------------------
income.
- -------
MAKER:
/s/ Franklin D. Richards
----------------------------------
Franklin D. Richards
<PAGE>
Exhibit 10.7.4
PROMISSORY NOTE
$29,027.80 Denver County, CO November 20, 1998
Frank D. Richards
For value received, I promise to pay to the order of
Intek Information, Inc.
370 Seventeenth Street, Suite 3950*
Denver, CO
Twenty-Nine Thousand Twenty-Seven and 80/100 dollars, with interest at the rate
of 8% per cent per annum, payable as follows:
*or such other address as noticed by Intek Information, Inc.
All interest will accrue and be due at maturity.
This Promissory Note will be due and payable in full upon the earliest of the
following:
1. The end of Frank Richard's employment with Intek Information, Inc. for any
reason;
2. If $29,027.80 or more aggregate amount from the sale (on one or more
occasions) of stock of Intek Information, Inc. is received by or for the
benefit of Frank Richards or his spouse or family members; or
3. November 20, 2003.
If this promissory note is not paid when due, subject to applicable laws Intek
Information, Inc. may apply as payment to this Promissory Note any amounts owing
to Frank Richards or his estate, including, but not limited to, in respect of
stock, options, bonus payments, life insurance proceeds, and salary).
Subject to applicable law and agreements to which Frank Richards, Intek
Information, Inc. or the shares of stock may be subject, Frank Richards or his
estate may pay this Promissory Note in full (but not in part) by delivery of
Intek Information, Inc. Preferred Stock or Common Stock valued at the delivered
stock's fair market value as determined in good faith by the Board of Directors
of Intek Information, Inc. at the time of delivery.
IT IS AGREED that if this note is not paid when due or declared due hereunder,
the entire principal and accrued interest thereon shall draw interest at the
rate of fourteen per cent (14%) per annum, and that failure to make any payment
of principal or interest when due or any default under any encumbrance or
agreement securing this note shall cause the whole note to become due at once,
or the interest to be counted as principal, at the option of the holder of the
note. The makers and endorsers hereof severally waive presentment for payment,
protest, notice of non-payment and of protest, and agree to any extension of
time of payment and partial payments before, at or after maturity, and if this
note or interest thereon is not paid when due or suit is brought, agree to pay
all reasonable costs of collection including reasonable attorney's fees..
/s/ Frank Richards
------------------
Frank Richards
Due: November 20, 2003
This note is Unsecured
<PAGE>
Exhibit 10.9.2
AGREEMENT
REGARDING MATTERS
BETWEEN
INTEK INFORMATION, INC.
AND
SPIDER TECHNOLOGIES, INC.
This Agreement is entered into by and between Intek Information, Inc.
("Intek") and Spider Technologies, Inc. ("Spider").
The parties entered into various agreements in respect of the spin off of
Spider from Intek.
1. In consideration of the entering into, delivery and performance of the
Amended and Restated Software Assignment and Grant-Back License,
Maintenance and Support Agreement between the parties hereto, Intek hereby
agrees to pay Spider $75,000 in readily available funds within one hundred
twenty (120) days of the date hereof plus, at such time, the actual cost of
any third party licenses acquired by Intek from Spider in the twenty (20)
days after the date of execution hereof.
2. The parties each represent and warrant to the other that they have
obtained all necessary authorizations, corporate and other, to enter
into, deliver and perform this Agreement.
DATED: January 13, 2000
INTEK INFORMATION, INC.
By: /s/ Timothy C. O'Crowley
------------------------
Title: Chief Executive Officer
-----------------------
SPIDER TECHNOLOGIES, INC.
By: /s/ Timothy C. O'Crowley
------------------------
Title: Appointed signatory
-------------------
<PAGE>
Exhibit 10.14
SECOND RESTATED AND AMENDED
MANAGEMENT EMPLOYMENT AGREEMENT
(Timothy C. O'Crowley)
This SECOND RESTATED AND AMENDED MANAGEMENT EMPLOYMENT AGREEMENT (the
"Agreement") is made as of October 1, 1999, and restates and amends the August
2, 1996 Agreement as restated and amended as of February 3, 1997, by and between
Intek Information, Inc., a Delaware corporation (the "Company"), and Timothy C.
O'Crowley ("Employee").
WHEREAS, the Company desires to employ the Employee to perform the duties
of Chief Executive Officer and President of the Company as such duties may be
appropriately designated by the Board of Directors from time to time; and
WHEREAS, the Employee desires to be employed by the Company to perform such
duties upon the following terms and conditions.
RECITALS
A. On August 2, 1996 (the "Original Agreement") (as amended and restated
as of February 3, 1997), as further amended as of October 1, 1999 the Company
and the Employee entered into a Management Employment Agreement; and
B. Each of the Company and the Employee desires to restate and amend the
Employment Agreement as amended in accordance with the terms and conditions of
this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein, the
parties agree as follows:
1. Salary. The Company shall employ the Employee as its Chief Executive
------
Officer and President to perform the above described duties on a six-year basis
starting August 1, 1996, and ending August 1, 2002, at a gross salary of $20,000
per month payable in accordance with the customary practices of the Company plus
such salary increases and bonuses as approved by the Board of Directors. The
monthly gross salary, excluding all bonus plan payments, as in effect from time
to time, is referred to as the "Base Salary". After such six-year period, this
Agreement will continue on a month-to-month basis until terminated as provided
herein. Employee agrees to accept the above amounts and the benefits described
in Section 5 in full payment for the services to be rendered by him hereunder,
provided, however, that the Board of Directors Compensation Committee and
Employee will meet no later than six (6) months after
<PAGE>
the date of the Original Agreement, and at each anniversary of the Original
Agreement, and determine if an increase in Base Salary is appropriate, and if
appropriate agree upon the new Base Salary, with the view to setting Employee's
Base Salary to the base salary that would be paid to a similarly skilled and
experienced executive in similar companies performing at comparable levels,
taking into consideration the skills and experience of Employee and the
financial results, performance, growth, and profits of the Company. The Company,
by action of a majority of its Board of Directors and the consent of The Beacon
Group III -Focus Value Fund, L.P. so long as it has a right to appoint a
director to the Company's Board of Directors pursuant to the Shareholders' and
Voting Agreement (the "Shareholders Agreement"), and Conning Insurance Capital
Limited Partnership V for as long as it has the rights, provided in Section
3.4.11 (n) of the Company's Amended and Restated Certificate of Incorporation as
in effect on the date hereof, may adopt additional compensation arrangements
with Employee.
2 Duties. The Employee shall during the term of his employment
------
hereunder:
A. devote his full normal working time, energies and attention to
the duties of his employment, as they may be established from
time to time by the Board of Directors consistent with the
position and office occupied by Employee, provided, however,
that Employee shall at all times have complete control (subject
to general direction from the Board of Directors) over the day-
to-day operations of the Company;
B. comply with all reasonable rules, regulations and
administrative directions now or hereafter established by the
Company;
C. be reimbursed by the Company from time to time (but at least
monthly) for all reasonable and necessary business expenses
incurred by him in the performance of his duties hereunder,
provided that Employee shall render to the Company such
accounts and vouchers covering expenditures as the Company
reasonably requires and as are necessary for tax purposes, and
shall follow normal Company policy on expenses; and
D. not engage in any activity or employment which would reasonably
be expected to materially conflict with or have a material
adverse affect on, the present or prospective business of the
Company.
3. Termination.
-----------
A. Mutual Agreement. This Agreement may be terminated at any time
----------------
by the mutual agreement of the Company and Employee, expressed in writing.
B. Voluntary. Employee may terminate this Agreement with or without
---------
the consent of the Company by giving written notice of his intent to terminate
with the effective date of termination at least one hundred (100) days after the
effective date of the notice of
<PAGE>
termination. After such notice the Company may accelerate the date of
termination without being in breach hereof.
C. Without Cause. The Company may terminate this Agreement at any
-------------
time without Cause upon twenty (20) days prior notice.
D. Disability or Death. The Company may terminate this Agreement
-------------------
upon the death or disability of Employee. For purposes of this Agreement,
Employee shall be considered disabled if he is unable to perform his duties
under this Agreement as a result of injury, illness or other disability for a
period of one hundred eighty (180) consecutive days, or one hundred eighty (180)
days in a three hundred sixty-five (365) day period, and the Board of Directors
of the Company reasonably determines that Employee has been unable to perform
his duties for the one hundred eighty (180) day period as a result of injury,
illness or other disability.
E. For Cause by the Company.
------------------------
The Company may terminate this Agreement for "Cause", as defined
below, immediately upon written notice to Employee. "Cause" shall mean:
(i) If Employee materially violates any term of this Agreement
and such action or failure is not substantially remedied or reasonable steps to
effect such substantial remedy are not commenced within twenty (20) days of
written notice from the Company to Employee.
(ii) Dishonesty which is not the result of an inadvertent or
innocent mistake of Employee with respect to the Company or any of its
subsidiaries;
(iii) Willful misfeasance or nonfeasance of duty by Employee
intended to injure or having the effect of injuring in some material fashion the
reputation, business or business relationships of the Company or any of its
subsidiaries or any of their respective officers, directors or employees;
(iv) Conviction of Employee upon a charge of any crime involving
moral turpitude or a crime other than a vehicle offense which could reflect in
some material fashion unfavorably upon the Company or any of its subsidiaries;
or
(v) Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon twenty (20) days prior
written notice.
F. For Cause by the Employee. If the Company materially violates
-------------------------
any term of this Agreement or moves the Company's headquarters from the Denver,
Colorado
3
<PAGE>
metropolitan area and such action or failure is not remedied after twenty (20)
days written notice, Employee may terminate this Agreement immediately upon
written notice to the Company. Such termination is a termination by Employee for
cause.
4. Payments at Termination.
-----------------------
A. Upon (i) termination of this Agreement by the Company under
Subsection 3.C. titled "Without Cause" or (ii) termination of this Agreement by
Employee under Subsection 3.F. titled "For Cause by the Employee," Employee
shall receive monthly payments equal to his last Base Salary prior to
termination ("Applicable Base Salary") for a period of eighteen (18) months,
beginning in the month next following such termination, provided, however, if
termination is Without Cause under Section 16 Employee shall only receive
monthly payments equal to his Applicable Base Salary for a period of twelve (12)
months beginning in the month next following such termination. In either case
Employee shall receive all accrued compensation and unreimbursed expenses to the
date of termination as provided herein. The monthly payments provided for in
this Subsection shall be paid on a monthly basis on the first of each month and
shall not be reduced by compensation the Employee may receive from other
sources. In either such case of termination, all unexercised options granted
pursuant to the Incentive Stock Option Agreement dated February 14, 1997 and the
Non-Statutory Stock Option Agreement dated February 14, 1997 (collectively the
"Option Agreements") shall vest and become exercisable on the day of
termination. For any such Non-Statutory Stock Option or Incentive Stock Option,
the period for exercise of the option shall continue for the shorter of the
maximum length of time the option is exercisable under the Company's 1997 Stock
Option Plan as though the employment of Employee had not terminated, and three
(3) years after the date of termination of employment, provided, however, that
if the existence of this sentence would cause any Incentive Stock Option not to
qualify as an incentive stock option pursuant to Section 422 of the Internal
Revenue Code of 1986, as amended, ("Section 422") at any time prior to ninety
(90) days after termination of employment as provided in Section 422, this
sentence shall be null and void as to such Incentive Stock Option.
B. The Company shall provide life insurance on Employee as provided
in Subsection 5.B. hereof. If the Company terminates this Agreement upon the
death of Employee, under Subsection 3.D. titled "Disability or Death," the
entire proceeds of such insurance shall be payable to the beneficiary designated
by Employee, or to Employee's estate, plus all accrued compensation and
unreimbursed expenses to the date of termination as provided herein. The
payments provided for in this Subsection shall not be reduced by compensation
the Employee may receive from other sources.
C. If the Company terminates this Agreement due to disability, under
Subsection 3.D. titled "Disability or Death," Employee or his estate shall
receive the disability payments provided for by the Company's disability
insurance policy. The Company shall maintain a disability insurance policy
providing for payments at the rate of sixty percent (60%) of his Applicable Base
Salary or the maximum legal amount, whichever is less, until the earlier
4
<PAGE>
of the end of disability, Employee's death or the date Employee attains 65 years
of age. If the Company terminates this Agreement due to disability, under
Subsection 3.D. titled "Disability or Death," the Company shall also pay all
accrued compensation and unreimbursed expenses to the date of termination as
provided herein. The monthly payments provided for in this Subsection shall be
paid at such times payments are made under the disability policy provided for in
this Subsection. Except as required by such policy or applicable law, payments
shall not be reduced by compensation the Employee may receive from other
sources.
D. If Employee terminates this Agreement without cause under
Subsection 3.B., titled "Voluntary", or if this Agreement is terminated under
Subsection 3.A., titled "Mutual Agreement," or if this Agreement is terminated
by the Company under Subsection 3.E. titled "For Breach or Cause by the
Company," Employee shall not be entitled to any further payments except
unreimbursed expenses to the date of termination as provided herein and any
accrued compensation and as provided in Section 4.E.
E. In each of the foregoing cases, termination is the date of actual
termination, not the date notice of termination is given. Other than payments
owing under a provision providing for payments at a different time, all payments
for accrued unpaid monthly compensation shall be made within ten (10) days after
the end of the month following the month in which termination occurred and all
payments for reimbursement shall be made within forty-five (45) days after the
end of the month following the month in which termination occurred.
F. Unless specified otherwise in the bonus plan or bonus agreement,
if termination occurs during the bonus period pursuant to Subsection 3.C. titled
"Without Cause" or Subsection 3.F. titled "For Cause by the Employee," or
Subsection 3.D. titled "Disability or Death," and based upon the results of the
full bonus period the bonus would have been earned, any bonus which would have
been earned shall be based upon the number of calendar days in such bonus period
which have elapsed at the date of termination. Unless specified otherwise in the
bonus plan or bonus agreement, if Employee is terminated "For Cause by the
Company" (Subsection 4.E.), or Employee terminates without Cause (Subsection
4.C.) or Employee after termination violates a confidentiality, covenant not to
compete, or "no hire" or "no raid" agreement with the Company, its parent (if
any) or a direct or indirect Company subsidiary or affiliate, then the Company
shall have no obligation to pay any earned or unearned bonus or the payments
provided for in the first sentence of Section 4.A. hereof.
G. If this Agreement is operating under the month-to-month provision
of Section 1, any payment for unpaid future compensation shall in any case be
limited to the remainder of the month in which termination occurs, except as
provided in Subsections 4.A., 4.B., 4.C. or 4.F.
H. The foregoing rights in this Section 4 are Employee's exclusive
rights to payment from the Company in the event of termination of this Agreement
except for amounts
5
<PAGE>
which the Company is required to pay under applicable statute or regulation,
payments under insurance policies, and payments owing under other written
agreement(s) (if any) between the Company and Employee.
5. Vacation; Benefits; Location.
----------------------------
A. Employee shall be entitled to such vacation time, in Employees'
discretion, as does not materially interfere with Employee's duties and
responsibilities hereunder.
B. The Company shall maintain and pay premiums for term insurance on
the life of Employee, in the amount of at least $2,000,000. Employee, in his
sole discretion, shall designate the beneficiary of such policy. An initial
quote for a five year policy has been delivered to the Company and Resource
Bancshares Corporation. This insurance is in addition to any insurance provided
for in the Shareholders Agreement.
C. Employee will receive an automobile allowance of $500 per month,
and in addition to the insurance provided for by Subsections 5.B. and 4.C., will
receive insurance (to the extent not redundant of the insurance provided for by
Subsections 5.B. and 4.C.) and other benefits, including participation in stock
option plans taking into account the aggregate of all options from time to time
granted to Employee and acknowledging the option grants to Employee on or about
the date of amendment hereof do not preclude future grants), as received by
employees with similar responsibility and compensation levels.
D. If this Agreement is in effect at and for six (6) months after
the time of the Company's initial public offering or at the time the Company is
a reporting company, pursuant to the Securities and Exchange Act of 1934, under
circumstances that would permit mandatory conversion of the Company's Series B
Preferred Stock pursuant to the Company's Amended and Restated Certificate of
Incorporation as in effect on February 10, 1997, then all options granted
pursuant to the Option Agreements (as defined above) shall vest and become
exercisable one day after the end of such six (6) month period.
6. Non-Competition.
---------------
A. The Company and the Employee recognize that the Employee has been
retained to occupy a position that constitutes part of the professional,
management and executive staff of the Company whose duties will include the
formulation and execution of management policy. The Employee, for and in
consideration of the payments, rights and benefits provided herein, agrees that
so long as he is employed by the Company and during the 18 month period
immediately thereafter, the Employee shall not, anywhere within the continental
United States or in any other market in which the Company is conducting business
at the time the Employee's employment with the Company is terminated, (i) work,
(ii) assist, (iii) own any interest, directly or indirectly and whether
individually or as a joint venturer, partner, member, officer, director,
shareholder, consultant, employee or otherwise, in or (iv) make a financial
investment, whether
6
<PAGE>
in the form of equity or debt, in any business other than Spider Technologies,
Inc. if an affiliate of the Company, that is in the business of (i) inbound or
outbound telemarketing or teleservicing, (ii) outsourced teleservicing, and/or
(iii) such other business in which the Employee is actively involved with the
Company at or within six months before the termination of his employment (the
"Business"). The parties agree that, during such period, they shall not make
public statements in derogation of each other, except as may be required by law.
For the purposes of this Section 6 and Sections 7, 8, 9 and 10, the term "the
Company" shall be deemed to include any direct or indirect subsidiaries, parents
and affiliates of the Company other than Spider Technologies, Inc. if an
affiliate of the Company. This Subsection 6.A. shall no longer apply if both (i)
(A) the Employee has terminated this Agreement for Cause under Subsection 3.F.,
or the Company has terminated this Agreement, and (B) the Company has
obligations to make post-termination payments under this Agreement, and (ii)
after twenty (20) days notice by the Employee to the Company that the Company
has failed to make such post-termination payments, the Company has not cured
such failure to make payments.
B. Notwithstanding the foregoing, nothing herein shall prohibit the
Employee from holding 5% or less of any class of voting securities of any entity
whose equity securities are listed on a national securities exchange or
regularly traded in The Nasdaq National Market.
C. Upon the termination of the Employee's employment with the
Company, and for 18 months thereafter, the Employee shall immediately notify the
Company of each employment or agency relationship entered into by the Employee,
and each corporation, proprietorship or other entity formed or used by the
Employee, the business of which is directly or indirectly similar to or in
competition with the Business. The provisions of this Subsection 6.C. shall
survive termination of this Agreement for any reason.
D. The Employee agrees that the restrictions contained in this
Section 6 are reasonable as to time and geographic scope because of the nature
of the Business and the Employee agrees, in particular, that the geographic
scope of this restriction is reasonable because companies engaged in the
Business compete on a nationwide basis. The Employee acknowledges that the
Company is in direct competition with all other companies engaged in the
Business throughout the continental United States and other markets in which the
Company may be conducting business at the time the Employee's employment with
the Company is terminated, and because of the nature of the Business, the
Employee agrees that the covenants contained in this Section 6 cannot reasonably
be limited to any smaller geographic area.
7. Non-Raid.
--------
A. The Employee acknowledges that the Company has invested
substantial time and effort in assembling its present staff of personnel. The
Employee agrees that so long as he is employed by the Company and during the 18
month period immediately thereafter, the Employee shall not either directly or
indirectly employ, solicit for employment, or advise or
7
<PAGE>
recommend to any other person that such other person employ or solicit for
employment, any of the Company's employees.
B. The Employee acknowledges that all customers of the Company,
which the Employee has serviced or hereafter shall service during the Employee's
employment by the Company and all prospective customers from whom the Employee
has solicited or may solicit business while in the employ of the Company, shall
be solely the customers of the Company. The Employee agrees that so long as he
is employed by the Company and during the 18 month period immediately
thereafter, the Employee shall not either directly or indirectly solicit
business, as to products or services competitive with the Business of the
Company, from any of the Company's customers with whom the Employee had contact
during his employment with the Company.
C. The Employee agrees that so long as he is employed by the Company
and during the 18 month period immediately thereafter, the Employee shall not
either directly or indirectly interfere with any relationship between the
Company and any of its suppliers, clients or the Employees. The Employee agrees
that during such 18 month period, he will not influence or attempt to influence
any of the customers or clients of the Company not to do business with the
Company.
D. The Employee agrees that the restrictions contained in this
Section 7 are reasonable as to time and geographic scope because of the nature
of the Business and the Employee agrees, in particular, that the geographic
scope of this restriction is reasonable because companies engaged in the
Business compete on a nationwide basis. The Employee acknowledges that the
Company is in direct competition with all other companies engaged in the
Business throughout the continental United States and other markets in which the
Company may be conducting business at the time the Employee's employment with
the Company is terminated, and because of the nature of the Business, the
Employee agrees that the covenants contained in this Section 7 cannot reasonably
be limited to any smaller geographic area.
8. Blue Pencil Provision. Employee acknowledges that the periods, scope
---------------------
and geographic area of restriction imposed by Section 6 and Section 7 are fair
and reasonable and are reasonably required for the protection of the Company. If
any part or parts of Section 6 or Section 7 shall be held to be unenforceable or
invalid, the remaining parts thereof shall nevertheless continue to be valid and
enforceable as though the invalid portion or portions were not a part hereof. If
any of the provisions of Section 6 or Section 7 relating to the scope, periods
of time or geographic area of restriction shall be deemed to exceed the maximum
scope, periods of time or geographic area which a court of competent
jurisdiction would deem enforceable, the scope, times and geographic area shall,
for the purposes of Section 6 and Section 7, be deemed to be the maximum scope,
time periods and geographic area which a court of competent jurisdiction would
deem valid and enforceable in any state in which such court of competent
jurisdiction shall be convened. The invalidity or unenforceability of any
provision of Section 6 or 7 in one jurisdiction shall not affects its validity
or enforceability in another jurisdiction.
8
<PAGE>
9. Confidentiality. Employee acknowledges that he has had and will have
---------------
access to certain information related to the business, operations, future plans
and customers of the Company, the disclosure or use of which could cause the
Company substantial losses and damages. Accordingly, Employee covenants that
during the term of his employment with the Company and thereafter he will keep
confidential all information and documents furnished to him by or on behalf of
the Company and not use the same to his advantage, except to the extent such
information or documents are lawfully obtained from other sources on a non-
confidential (as to the Company) basis or are in public domain through no fault
on his part or is consented to in writing by the Company. Upon termination of
his employment, Employee shall return to the Company all records, lists, files
and documents, or media and other Company property which are in his possession
and which relate to the Company.
10. Right to Injunctive Relief. Employee agrees and acknowledges that a
--------------------------
violation of the covenants contained in Sections 6, 7 and 9 of this Agreement
will cause irreparable damage to the Company, and that it is and may be
impossible to estimate or determine the damage that will be suffered by the
Company in the event of a breach by Employee of any such covenant. Therefore,
Employee further agrees that in the event of any violation or threatened
violation of such covenants, the Company shall be entitled as a matter of course
to an injunction out of any court of competent jurisdiction restraining such
violation or threatened violation by Employee, such right to an injunction to be
cumulative and in addition to whatever other remedies the Company may have.
11. Exceptions. Employee may continue his activities with the following
----------
companies: Eden Financial Services, Inc. and its subsidiaries, and Trust Bank of
Colorado, each of which Employee is a shareholder and a director, and may invest
in and/or serve as a director for any other company, provided that such
activities do not materially interfere with Employee's duties and
responsibilities hereunder and such activities do not otherwise violate this
Agreement. All future Board of Director positions other than with the Company or
its subsidiaries must be approved by the Company's Board of Directors (which
approval will not be unreasonably withheld).
12. Delivery of Files. At or immediately after termination hereof
-----------------
Employee will deliver all files, records, disks, and other media with Company
information, to the Company.
13. Life Insurance.
--------------
A. Prior to and after termination of his employment hereunder, the
Company shall permit Employee to assume premium payments on or to purchase any
life insurance policy on the life of Employee (whether or not issued in
connection with this Agreement) if the Company has decided to terminate such
policy or let such policy terminate and not immediately replaced such policy
with another policy. The Company shall provide Employee at least 30 days written
notice prior to such termination, during which time Employee may elect to
purchase the policy.
9
<PAGE>
B. Upon termination of his employment hereunder, for any reason, for
a period of thirty (30) days after such termination Employee shall have the
right to assume premium payments on or to purchase from the Company the
$2,000,000 life insurance policy on the life of the Employee described in
Section 5.B.
C. The cost of purchase under subparagraph 13.A. or 13.B. shall be
the cash value of the policy (which in the case of normal term insurance will be
zero), plus all costs of transferring the policy, plus $100. If termination of
the Employee has been by the Company without Cause or by Employee for Cause,
then the Company shall continue to pay the policy premiums on such $2,000,000
policy for the same period as the Company is required to make payments under
Section 4.A.
D. The Company shall have no liability for a delay in transfer
caused by the insurance company, insurance agent, or Employee, and the Company
shall be entitled to all proceeds of any policy for death prior to the actual
date of transfer unless another person is named as beneficiary pursuant to a
right of designation granted to the Employee. The Company shall pay all premiums
during the period that the Company retains the policy as permitted by this
Section and shall make a good faith effort to obtain all consents to assign the
policy to Employee. The Company shall not be liable for premiums for periods
beyond the date that the policy would have been transferred to Employee if
Employee had cooperated in the transfer process, but shall give at least 10 days
notice advance notice of failure by the Company to pay any such premium.
14. Integration. This Agreement shall constitute the entire Agreement
-----------
relating to the employment of Employee. This Agreement shall be governed by the
laws of Colorado, excluding laws on choice of law. Any litigation regarding this
Agreement shall only be brought and heard in the federal or state courts located
in Denver, Colorado and no transfer of venue outside such area shall be
permitted.
15. Unenforceability. If any paragraph or subparagraph of this Agreement
----------------
or any part thereof shall be unenforceable under any applicable laws,
notwithstanding such unenforceability the remainder of this Agreement shall
remain in full force and effect.
16. Binding. This Agreement shall inure to the benefit of and be binding
-------
upon, the Company and 80% or more owned subsidiaries of the Company. It may be
terminated by the Employee upon any merger, consolidation, sale of 90% or more
of the outstanding voting capital stock of the Company to one other person and
its affiliates, or a sale of 80% or more by fair market value of the assets of
the Company, and such termination shall be considered to be a termination by the
Company without Cause; provided, however, that this Agreement shall not
terminate upon a merger or consolidation, sale of assets, sale of shares, or
share exchange, pursuant to which shareholders of the Company receive or hold
51% or more of the voting capital stock of the combined entities or purchaser.
Employee acknowledges that the issuance by the Company of Series B Preferred
Stock in January or February 1997, issuance of stock of the
10
<PAGE>
Company in connection with the acquisition of Protocall New Business
Specialists, Inc., and the issuance in January or February, 1997 of stock
options pursuant to the Company's 1997 Stock Option Plan, do not constitute a
termination under this Section.
17. Attorneys' Fees. In the event of any legal or arbitration action or
---------------
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees and costs, whether or not the
proceeding results in a final judgment.
18. Survival. Terms which by their terms or sense are to survive
--------
termination hereof shall so survive.
19. Notice. Notices hereunder shall be in writing and sent to the
------
residence address of the Employee last provided to the Company, and to the then
current business address of the Company. Notices may be sent by first class U.S.
mail and shall be effective three (3) days after deposit. Notices sent by other
means shall be effective when actually delivered to the above-described address.
20. The Company acknowledges Employee's employment agreement with Spider
Technologies, Inc. ("Spider") and his contemplated equity interests in Spider.
That employment agreement as it exists on the date hereof or within 20 days
after the date hereof, and the performance of Employee's duties thereunder, and
Employee holding an equity position in Spider, does not violate the Employment
Agreement including any obligation of Employee to devote his full normal working
time to the Company or non-competition provisions. The Company will consult with
Employee if it believes Employee is devoting too much of his time, energy and
attention to the activities of Spider.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this SECOND RESTATED AND
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT as of the date first above written.
INTEK INFORMATION, INC.
By:/S/ PATRICK O'NEAL
-----------------------------
Title:__________________________
EMPLOYEE
/S/ TIMOTHY C. O'CROWLEY
--------------------------
Timothy C. O'Crowley
12
<PAGE>
Exhibit 10.15
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(FRANK RICHARDS)
This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of January
13, 2000, and restates and amends the October 1, 1999 First Restated and Amended
Employment Agreement by and between Intek Information, Inc., a Delaware
corporation (the "Company"), and Franklin Richards ("Employee"). The term
"Intek" when used herein means Intek Information, Inc., a Delaware corporation,
and the term "Protocall" when used herein means the Intek subsidiary previously
known as Protocall New Business Specialists, Inc., a California corporation.
WHEREAS, the Company previously employed Employee as its Chief Operations
Officer; and
WHEREAS, Company desires to continue employ the Employee to perform the
duties of Strategic Operations Analyst of the Company as such duties may be
appropriately designated by the CEO of the Company from time to time; and
WHEREAS, the Employee desires to be employed by the Company to perform such
duties upon the following terms and conditions.
RECITALS
A. On February 14, 1997, as further amended as of October 1, 1999, the
Company and the Employee entered into an Employment Agreement (as amended, the
"First Amended and Restated Employment Agreement"); and
B. The Company and the Employee desire to amend and restate the First
Amended and Restated Employment Agreement in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, the
parties agree as follows:
1. Salary. The Company shall employ the Employee as its Strategic
------
Operations Analyst and Employee shall perform the herein described duties on a
nine (9) month basis starting January 1, 2000, and ending September 30, 2000
(the "Term"), at a gross salary of $13,750 per month in arrears, less
withholding, payable in accordance with the customary practices of the Company,
but not less than monthly. The gross monthly salary, as in effect from time to
time, is referred to as the "Base Salary". The Company will not pay Employee a
performance bonus during the Term or Extended Term (as hereinafter defined). In
the event the Company has not completed an initial public offering on or before
the expiration of the Term, Employee shall continue to be employed by Company
for a period of three (3) months (the "Extended Term"). During the Extended
Term, Employee shall by paid $13,750 per month in arrears, less withholding.
Employee will not receive any compensation or benefits from any subsidiary of
Intek unless so provided in a written agreement signed by the Chief Executive
Officer of Intek.
2. Duties. The Employee shall during the term of his employment
------
hereunder:
A. devote his time, energies and attention to the duties of his
employment as will be agreed upon by Frank Richards and the CEO
or the CEO's designee, as may be consistent with the position and
office occupied by
<PAGE>
Employee;
B. comply with all reasonable rules, regulations and administrative
directions now or hereafter established by the Company;
C. be reimbursed by the Company from time to time (but at least
monthly) for all reasonable and necessary business expenses
incurred by him in the performance of his duties hereunder,
provided that Employee shall render to the Company such accounts
and vouchers covering expenditures as the Company reasonably
requires or as are necessary for tax purposes, and shall follow
normal Company policy on expenses;
D. not engage in any activity or employment which would reasonably
be expected to materially conflict with or have a material
adverse affect on, the present or prospective business of the
Company; and
E. if requested by the Company, perform services for one or more
Intek subsidiaries.
3. Termination.
-----------
A. Mutual Agreement. This Agreement may be terminated at any time by
----------------
the mutual agreement of the Company and Employee, expressed in
writing.
B. Without Cause. The Company may terminate this Agreement at any
-------------
time without Cause upon twenty (20) days prior notice.
C. Disability or Death. The Company may terminate this Agreement
-------------------
upon the death or disability of Employee. For purposes of this
Agreement, Employee shall be considered disabled if he is unable
to perform his duties under this Agreement as a result of injury,
illness or other disability for a period of one hundred eighty
(180) consecutive days, or one hundred eighty (180) days in a
three hundred sixty-five (365) day period, and the Board of
Directors of the Company reasonably determines that Employee has
been unable to perform his duties for the one hundred eighty
(180) day period as a result of injury, illness or other
disability.
D. For Cause by the Company. The Company may terminate this
------------------------
Agreement for "Cause", as defined below, immediately upon written
notice to Employee. "Cause" shall mean:
(i) If Employee materially violates any term of this Agreement
and such action or failure is not remedied or reasonable
steps to fully effect such remedy are not commenced within
twenty (20) days of written notice;
-2-
<PAGE>
(ii) Dishonesty which is not the result of an inadvertent or
innocent mistake of Employee with respect to the Company or
any of its subsidiaries;
(iii) Willful misfeasance or nonfeasance of duty by Employee
intended to injure or having the effect of injuring in some
material fashion the reputation, business or business
relationships of the Company or any of its subsidiaries or
any of their respective officers, directors or employees;
(iv) Conviction or indictment of Employee upon a charge of any
crime involving moral turpitude or a crime other than a
vehicle offense which could reflect in some material
fashion unfavorably upon the Company or any of its
subsidiaries; or
(v) Failure, neglect or refusal by the Employee to perform his
duties and responsibilities without the same being
corrected upon twenty (20) days prior written notice.
E. For Cause by the Employee. If the Company materially violates any
-------------------------
term of this Agreement and such action or failure is not remedied
after twenty (20) days written notice, Employee may terminate his
employment immediately upon written notice to the Company. Such
termination is a termination by Employee for Cause.
4. Payments at Termination.
-----------------------
A. Upon termination of this Agreement by Employee pursuant to
Subsection 3.E. titled "For Cause by the Employee," or by Company
pursuant to Subsection 3.B. titled "Without Cause," Employee
shall receive monthly payments at the rate of his last Base
Salary prior to termination ("Applicable Base Salary") through
the scheduled termination date of this Agreement, beginning in
the month of such termination. Employee shall also receive all
accrued compensation and unreimbursed expenses to the date of
termination as provided herein. The monthly payments provided for
in this Subsection shall be paid on a monthly basis at the time
of the Company's regular payroll and shall not be reduced by
compensation the Employee may receive from other sources.
B. If the Company terminates this Agreement due to disability under
Subsection 3.C. titled "Disability or Death," Employee shall
receive the disability payments provided for by the Company's
disability insurance policy. The Company shall maintain a
disability insurance policy providing for annual payments at the
rate of sixty percent (60%) of
-3-
<PAGE>
Employee's Base Salary or the maximum legal amount, whichever is
less, until the earliest of the end of disability, Employee's
death or the date Employee attains 65 years of age, provided that
such disability policy can be obtained without unreasonable
expense to the Company. The Company shall also pay all accrued
compensation and unreimbursed expenses to the date of termination
as provided herein. The monthly payments provided for in this
subsection shall be paid at such times payments are made under
the disability policy provided for in this Subsection. Except as
required by such policy or applicable law, payments shall not be
reduced by compensation the Employee may receive from other
sources.
C. If this Agreement is terminated under Subsection 3.A., titled
"Mutual Agreement," or if this Agreement is terminated by the
Company under Subsection 3.D. titled "For Cause by the Company,"
Employee shall not be entitled to any further payments except
unreimbursed expenses to the date of termination as provided
herein, any accrued compensation and as provided in Section 4.F.
D. In each of the foregoing cases, termination is the date of actual
termination, not the date notice of termination is given. Other
than payments owing under a provision providing for payments at a
different time, all payments for accrued unpaid monthly
compensation shall be made within ten (10) days after the end of
the month following the month in which termination occurred and
all payments for reimbursement shall be made within fifteen (15)
days after the end of the month following the month in which
termination occurred. Payments not made when due shall bear
interest at the rate of 15% per annum.
E. The foregoing rights in this Section 4 are Employee's exclusive
rights to payment from the Company in the event of termination of
this Agreement except for amounts which the Company is required
to pay under applicable statute or regulation, payments under
insurance policies, and payments owing under other written
agreement(s), if any, between the Company and Employee.
5. Vacation; Benefits.
------------------
A. Employee is currently making premium payments on the life
insurance policy referred to in Paragraph 5(B) of the First
Amended and Restated Employment Agreement and has been reimbursed
on a regular basis by Company for that expense. Employee shall no
longer be entitled to reimbursement for those premium payments.
B. Employee will not receive an automobile allowance or receive
additional
-4-
<PAGE>
vacation benefits during the Term or Extended Term of this
Agreement.
C. Notwithstanding the foregoing, Employee shall continue to
participate in Company health benefit plans at the level he is
currently participating for the duration of the Term and any
Extended Term.
6. Non-Competition.
---------------
A. The Company and the Employee recognize that, to date, the
Employee has occupied a position that constitutes part of the
professional, management and executive staff of the Company,
whose duties will include the formulation and execution of
management policy. The Employee, for and in consideration of the
payments, rights and benefits provided herein, agrees that so
long as he is employed by the Company and during the two-year
period immediately thereafter, the Employee shall not, anywhere
within the continental United States or in any other market in
which the Company is conducting business at the time the
Employee's employment with the Company is terminated, (i) work,
(ii) assist, (iii) own any interest, directly or indirectly and
whether individually or as a joint venturer, partner, member,
officer, director, shareholder, consultant, employee or
otherwise, in or (iv) make a financial investment (except as
outlined below in Section 6.B.) whether in the form of equity or
debt, in any business that is in the business of (i) inbound or
outbound telemarketing or teleservicing, (ii) outsourced
teleservicing, and/or (iii) such other business in which the
Employee is actively involved with the Company at or within six
months before the termination of his employment (the "Business").
The parties agree that, during such period, they shall not make
public statements in derogation of each other, except as may be
required by law. For the purposes of this Section 6 and Sections
7, 8, 9 and 10, the term "the Company" shall be deemed to include
any direct or indirect subsidiaries, parents and affiliates of
the Company other than Spider Technologies, Inc. if Employee has
a non-compete agreement with Spider Technologies, Inc. This
Subsection 6.A. shall no longer apply to the period after
termination if both (i) (A) the Employee has terminated this
Agreement for Cause under Subsection 3.E., or the Company has
terminated this Agreement, and (B) the Company has obligations to
make post-termination payments under this Agreement, and (ii)
after twenty (20) days notice by the Employee to the Company that
the Company has failed to make such post-termination payments,
the Company has not cured such failure to make payments.
B. Notwithstanding the foregoing, nothing herein shall prohibit the
Employee from holding 5% or less of any class of voting
securities of any entity whose equity securities are listed on a
national securities exchange or regularly traded in The Nasdaq
National Market. In addition, nothing
-5-
<PAGE>
herein shall prohibit Employee from holding 10% or less of any
class of voting securities of any private entity, provided such
investment does not provide Employee with an effective
controlling interest in the entity. Employee shall be entitled to
hold an unlimited number of non-voting securities of any private
entity, provided such investment does not provide Employee with
an effective controlling interest in the entity.
C. Upon the termination of the Employee's employment with the
Company, and for one year thereafter, the Employee shall
immediately notify the Company of each employment or agency
relationship entered into by the Employee, and each corporation,
proprietorship or other entity formed or used by the Employee,
the business of which is directly or indirectly similar to or in
competition with the Business. The provisions of this Subsection
6.C. shall survive termination of this Agreement for any reason.
D. The Employee agrees that the restrictions contained in this
Section 6 are reasonable as to time and geographic scope because
of the nature of the Business and the Employee agrees, in
particular, that the geographic scope of this restriction is
reasonable because companies engaged in the Business compete on a
nationwide basis. The Employee acknowledges that the Company is
in direct competition with all other companies engaged in the
Business throughout the continental United States and other
markets in which the Company may be conducting business at the
time the Employee's employment with the Company is terminated,
and because of the nature of the Business, the Employee agrees
that the covenants contained in this Section 6 cannot reasonably
be limited to any smaller geographic area.
E. For purposes of this Section 6, Company shall be defined as Intek
Information, Inc. and its business operations and activities as
they presently exist.
7. Non-Raid.
--------
A. The Employee acknowledges that the Company has invested
substantial time and effort in assembling its present staff of
personnel. The Employee agrees that so long as he is employed by
the Company and during the two-year period immediately
thereafter, the Employee shall not either directly or indirectly
employ, solicit for employment, or advise or recommend to any
other person that such other person employ or solicit for
employment, any of the Company's employees.
B. The Employee acknowledges that all customers of the Company,
which the Employee has serviced or hereafter shall service during
the
-6-
<PAGE>
Employee's employment by the Company and all prospective
customers from whom the Employee has solicited or may solicit
business while in the employ of the Company, shall be solely the
customers of the Company. The Employee agrees that so long as he
is employed by the Company and during the two-year period
immediately thereafter, the Employee shall not either directly or
indirectly solicit business, as to products or services
competitive with the Business of the Company, from any of the
Company's customers with whom the Employee had contact during his
employment with the Company.
C. The Employee agrees that so long as he is employed by the Company
and during the two-year period immediately thereafter, the
Employee shall not either directly or indirectly interfere with
any relationship between the Company and any of its suppliers,
clients or the Employees. The Employee agrees that during such
two-year period, he will not influence or attempt to influence
any of the customers or clients of the Company not to do business
with the Company.
D. The Employee agrees that the restrictions contained in this
Section 7 are reasonable as to time and geographic scope because
of the nature of the Business and the Employee agrees, in
particular, that the geographic scope of this restriction is
reasonable because companies engaged in the Business compete on a
nationwide basis. The Employee acknowledges that the Company is
in direct competition with all other companies engaged in the
Business throughout the continental United States and other
markets in which the Company may be conducting business at the
time the Employee's employment with the Company is terminated,
and because of the nature of the Business, the Employee agrees
that the covenants contained in this Section 7 cannot reasonably
be limited to any smaller geographic area."
E. For purposes of this Section 7, Company shall be defined as Intek
Information, Inc. and its business operations and activities as
they presently exist.
8. Blue Pencil Provision. Employee acknowledges that the scope, periods
---------------------
and geographic area of restriction imposed by Section 6 and Section 7 are fair
and reasonable and are reasonably required for the protection of the Company.
If any part or parts of Section 6 or Section 7 shall be held to be unenforceable
or invalid, the remaining parts thereof shall nevertheless continue to be valid
and enforceable as though the invalid portion or portions were not a part
hereof. If any of the provisions of Section 6 or Section 7 relating to the
scope, periods or geographic area of restriction shall be deemed to exceed the
maximum scope, periods of time or area which a court of competent jurisdiction
would deem enforceable, the scope, times and area shall, for the purposes of
Section 6 and Section 7, be deemed to be the maximum scope, time periods and
area which a court of competent jurisdiction would deem valid and enforceable
-7-
<PAGE>
in any state in which such court of competent jurisdiction shall be convened.
The invalidity or unenforceability of any provision hereof in one jurisdiction
shall not affect its validity or enforceability in another jurisdiction.
9. Confidentiality. Employee acknowledges that Employee has had and will
---------------
have access to certain information related to the business, operations, future
plans and customers of the Company, the disclosure or use of which could cause
the Company substantial losses and damages. Accordingly, Employee covenants
that during the term of Employee's employment with the Company and thereafter
Employee will keep confidential all information and documents furnished to
Employee by or on behalf of the Company and not use the same to Employee's
advantage, except to the extent such information or documents are lawfully
obtained from other sources on a non-confidential (as to the Company) basis or
are in the public domain through no fault on Employee's part or is consented to
in writing by the Company. Upon termination of Employee's employment, Employee
shall return to the Company all records, lists, files, disks, documents, media
and other Company property which are in Employee's possession and which relate
to the Company or its business.
10. Right to Injunctive Relief. Employee agrees and acknowledges that a
--------------------------
violation of the covenants contained in Sections 6, 7 or 9 of this Agreement
will cause irreparable damage to the Company, and that it may be impossible to
estimate or determine the damage that will be suffered by the Company in the
event of a breach by Employee of any such covenant. Therefore, Employee further
agrees that in the event of any violation or immediately threatened violation of
such covenants, the Company shall be entitled as a matter of course to an
injunction from any court of competent jurisdiction restraining such violation
or threatened violation by Employee, such right to an injunction to be
cumulative and in addition to whatever other remedies the Company may have.
11. Life Insurance; Stock Repurchase. Employee hereby is on notice that
--------------------------------
the Company shall give Employee the opportunity to assume premium payments for
and have assigned to him (provided he qualifies as an assignee) that insurance
policy described in Paragraph 12D of the First Amended and Restated Employment
Agreement. Within 30 days of this Agreement, Company shall have no obligation
to maintain or continue to pay for such policy.
12. Company Performance Bonus. If the 20 day average trading price on the
-------------------------
principal market for Intek's common stock has exceeded $10.00 per share (the
"Trigger Value") then the Company shall pay a one-time cash bonus to Employee of
$380,472. If prior to the end of such 20 day period Intek subdivides or
combines its common stock or pays a dividend or makes any other distribution
with respect to common stock payable in common stock or securities convertible
into common stock, the Company shall make appropriate adjustment to the Trigger
Value. The trading price of a share of common stock on any date shall be the
average of the representative closing bid and asked prices, as quoted by the
National Association of Securities Dealers through NASDAQ (its automated system
for reporting quotes) for the date in question or, if the common stock is listed
on the NASDAQ National Market System or is listed on a national stock exchange,
the officially quoted closing price on NASDAQ or such exchange, as
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<PAGE>
the case may be, on the date in question.
13. Integration; Forum. This Agreement together with the Merger Agreement
------------------
(as defined below) and the Employee's Stock Option Agreement shall constitute
the entire Agreement relating to the employment of Employee. This Agreement
shall be governed by the laws of Colorado, excluding laws on choice of law.
This Agreement specifically supersedes any employment arrangements, or other
compensation arrangement (including bonus, option, appreciation, benefit or
commission arrangements) including but not limited to any employment related
agreement with Protocall New Business Specialists, Inc., a California
corporation. Any litigation regarding this Agreement shall only be brought and
heard in the federal or state courts located in Denver, Colorado and no transfer
of venue outside such area shall be permitted. If the Company is enforcing any
provision hereof which is similar to a provision in the Agreement and Plan of
Reorganization ("Merger Agreement") between Intek and Protocall (including, but
not limited to, non-compete, confidentiality and no-hire provisions) and
Employee was a party to such Merger Agreement, the Company may require the
resolution of such issues to be decided in the arbitration or litigation
conducted under such Merger Agreement. Termination of this Agreement or any
provision hereof, including Sections 6, 7 and 9, does not effect any similar
provision in the Merger Agreement, including any non-compete covenant, provided,
however, that the provisions of Sections 6 and 7 hereof relating to the time
periods for the effectiveness of the agreements addressed in such sections,
shall control over a longer time period in the corresponding provision of the
Merger Agreement. In all other respects the agreements in the Merger Agreement
(including, but not limited to, non-compete, confidentiality and no-hire
provisions) are separate and independent of this Agreement.
14. Unenforceability. If any paragraph or subparagraph of this Agreement
----------------
or any part thereof shall be unenforceable under any applicable laws,
notwithstanding such unenforceability the remainder of this Agreement shall
remain in full force and effect.
15. Merger or Sale. This Agreement shall inure to the benefit of and be
--------------
binding upon the Company and may be assigned by the Company to a parent or
subsidiary of the Company and by such an entity to the Company or a parent or
subsidiary of the Company. It may be terminated by the Company or by the
Employee upon any merger, consolidation, or sale or exchange of 90% or more of
the outstanding voting capital stock of the Company to one other person and its
affiliates, or a sale of 80% or more by fair market value of the consolidated
assets of the Company, and such termination shall be considered to be a
termination by the Company (and with termination payments to be made under
Section 4.A.); provided, however, that this Section 15 shall not apply to a
merger or consolidation, sale of assets, sale of shares, or share exchange,
pursuant to which shareholders of the Company receive or hold 51% or more of the
voting capital stock of the combined entities or purchaser. The vesting of
Employee's options upon such an event shall be governed by the Company's stock
option plan and not Subsection 4.A. hereof. Employee acknowledges that the
issuance by the Company of Series B Preferred Stock in January and February
1997, issuance of stock of the Company in connection with the acquisition of
Protocall New Business Specialists, Inc., and the issuance in January and
February 1997 of stock options pursuant to the Company's 1997 Stock Option Plan,
do not constitute a termination under this Section.
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<PAGE>
16. Attorneys' Fees. In the event of any legal or arbitration action or
---------------
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees and costs, and other costs and
expenses incurred in the action or proceeding, whether or not the proceeding
results in a final judgment.
17. Survival. Terms which by their terms or sense are to survive
--------
termination hereof shall so survive.
18. Notice. Notices hereunder shall be in writing and sent to the
------
residence address of the Employee last provided to the Company, and to the
Company at the then current business address of Intek. Notices may be sent by
first class U.S. mail and shall be effective three (3) days after deposit.
Notices sent by other means shall be effective when actually delivered to the
above-described address.
19. Inventions. Employee agrees that any invention made or conceived by
----------
him during his employment with Company and any improvement on any such
invention, during or subsequent to his employment, shall be assigned to Company
and shall become the sole and exclusive property of Company; PROVIDED, however,
that this agreement to assign rights to certain inventions to Company does not
apply to any invention for which no equipment, supplies, facility or trade
secret information of Company was used and which was developed entirely on
Employee's own time, and (1) which does not relate (a) directly to the business
of Company or (b) to Company's actual or demonstrably anticipated research or
development, or (2) which does not result from any work performed by Employee
for Company. Employee further agrees to assist Company during and subsequent to
his employment entirely at Company's expense in obtaining patents or
intellectual property rights for his inventions in any and all countries and to
execute all patent applications and assignments relating to his inventions. For
purposes of this Section 19, Company shall be defined as Intek Information, Inc.
and its business operations and activities as they presently exist.
20. Stock Options. Employee, over the course of his employment, has had
-------------
several grants of options from the Company.
A. Employee was granted an option to purchase 525,000 shares of
common stock as evidenced by the Incentive Stock Option
Agreement, dated February 14, 1997 ("First Option Agreement").
Employee was also granted an additional option to purchase 30,208
shares of common stock as evidenced by the Incentive Stock Option
Agreement (the "Second Option Agreement") and 19,792 shares of
common stock as evidenced by the Non-Statutory Stock Option
Agreement (the "Third Option Agreement"), both of which are dated
May 7, 1998. Such option shall continue to vest as scheduled in
the respective option agreements.
B. Employee was granted an additional option to purchase 300,000
shares of common stock on or about September 1, 1999. No options
have vested
-10-
<PAGE>
pursuant to that grant. The parties agree that this grant made by
the Company on or about September 1, 1999 is rescinded and
Company shall have no further obligation to Employee for that
grant.
21. Notes.
-----
A. On or about November 20, 1996, Employee gave Company a Promissory
Note in the Principal amount of $29,027.80 (the "First Promissory
Note"). The parties hereto agree that such First Promissory Note
is hereby amended such that Paragraph Numbers 1, 2, and 3 shall
be replaced with the following provision:
This Promissory Note will be due and payable in full upon
the earliest of the following: (1) November 20, 2003; or (2)
whenever employee is permitted to sell his stock under Rule
144 in an amount equal to or greater than the principal
balance, regardless of whether he in fact sells any stock or
options in the Company. The note shall not be due and
payable upon termination of employment and thus Paragraph
No. 1 is hereby deleted.
All other terms and conditions set forth in the First Promissory
Note shall remain in full force and effect.
B. On or about September 21, 1999, Employee gave Company a
Promissory Note in the Principal amount of $33,000.00 (the
"Second Promissory Note"). The parties hereto agree that the
Second Promissory Note is hereby amended such that the third full
paragraph shall be deleted and replaced with the following
language:
The outstanding principal balance, together with any accrued
and unpaid interest, shall be due and payable in full on the
earlier of: (1) November 30, 2003 (the "Maturity Date"); or,
(2) whenever employee is permitted to sell his stock under
Rule 144 in an amount equal to or greater than the principal
balance, regardless of whether he in fact sells any stock or
options in Intek.
All other terms and conditions set forth in the Second Promissory
Note shall remain in full force and effect.
22. Release. In consideration of the creation of this Agreement and the
-------
benefits contained herein, Employee fully and finally releases, waives and
discharges all claims, and causes of action of any sort which he may have as an
employee of the Company against the Company, known or unknown, including but not
limited to, claims arising from or related to his relationship with the Company
from the beginning of time through the date of this Agreement. This release
includes but is not limited to claims arising under any federal, state, local,
common,
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<PAGE>
tort or other laws or regulations, specifically Title VII of the Civil Rights
Act of 1964, breach of express or implied contract claims, fraud, intentional
infliction of emotional distress and breach of an express or implied covenant of
good faith and fair dealing.
23. Resignation as Officer and Director. Employee hereby resigns as an
-----------------------------------
officer and director of the Company effective immediately. No further document
evidencing such resignation shall be necessary.
24. Headings. The headings of paragraphs herein are intended solely for
--------
the convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this agreement.
25. Amendment. The terms of the First Amended and Restated Employment
---------
Agreement shall be of no further force or effect.
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Employment Agreement as of the date first above written.
INTEK INFORMATION, INC.
By: /S/ TIMOTHY C. O'CROWLEY
-------------------------
Timothy C. O'Crowley
Title: Chief Executive Officer
EMPLOYEE
/S/ FRANKLIN D. RICHARDS
- ------------------------
Franklin D. Richards
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<PAGE>
EXHIBIT 10.19
LEASE OF OFFICE SPACE
LANDLORD:
BROOKFIELD REPUBLIC INC.
TENANT:
INTEK INFORMATION, INC.
PREMISES
IN
REPUBLIC PLAZA
DENVER,COLORADO
1
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1.00 DEFINITIONS........................................................................... 1
1.01 Definitions.......................................................................... 1
ARTICLE 2.00 GRANT OF LEASE........................................................................ 2
2.01 Grant................................................................................ 2
2.02 Quiet Enjoyment...................................................................... 2
2.03 Covenants of Landlord and Tenant..................................................... 2
ARTICLE 3.00 TERM AND POSSESSION................................................................... 3
3.01 Term................................................................................. 3
3.02 Early Occupancy...................................................................... 3
3.03 Delayed Possession................................................................... 3
3.04 Acceptance of Premises............................................................... 3
ARTICLE 4.00 RENT AND OCCUPANCY COSTS.............................................................. 4
4.01 Annual Rent.......................................................................... 4
4.02 Occupancy Costs...................................................................... 4
4.03 Other Charges........................................................................ 4
4.04 Payment of Rent-General.............................................................. 4
4.05 Annual Rent-Early Termination........................................................ 4
4.06 Payment-Occupancy Costs.............................................................. 4
ARTICLE 5.00 USE OF PREMISES....................................................................... 6
5.01 Use.................................................................................. 6
5.02 Compliance with Laws................................................................. 6
5.03 Abandonment.......................................................................... 6
5.04 Nuisance............................................................................. 6
5.05 Sale of Goods from Premises.......................................................... 6
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE 6.00 SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD.............................. 6
6.01 Operation of Building................................................................ 6
6.02 Services to Premises................................................................. 6
6.03 Building Service..................................................................... 7
6.04 Maintenance, Repair and Replacement.................................................. 7
6.05 Additional Services and Utilities.................................................... 8
6.06 Alterations by Landlord.............................................................. 9
6.07 Access by Landlord................................................................... 9
6.08 Energy, Conservation and Security.................................................... 9
ARTICLE 7.00 MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY TENANTS........................... 9
7.01 Condition of Premises................................................................ 9
7.02 Failure to Maintain Premises......................................................... 10
7.03 Alterations by Tenant................................................................ 10
7.04 Trade Fixtures and Personal Property................................................. 11
7.05 Mechanic's Liens..................................................................... 11
7.06 Signs................................................................................ 11
ARTICLE 8.00 TAXES................................................................................. 12
8.01 Tenant's Pro Rata Share.............................................................. 12
8.02 Other Tenant's Taxes................................................................. 12
8.03 Right to Contest..................................................................... 12
ARTICLE 9.00 INSURANCE............................................................................. 12
9.01 Landlord's Insurance................................................................. 12
9.02 Tenant's Insurance................................................................... 13
ARTICLE 10.00 INJURY TO PERSON OR PROPERTY......................................................... 13
10.01 Indemnity by Tenant................................................................. 13
10.02 Subrogation......................................................................... 14
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE 11.00 ASSIGNMENT AND SUBLETTING............................................................ 14
11.01 Assignment.......................................................................... 14
11.02 Subleasing.......................................................................... 14
11.03 First Offer to Landlord............................................................. 15
11.04 Limitation.......................................................................... 15
11.05 Tenant's Obligations Continue....................................................... 16
11.06 Subsequent Assignments.............................................................. 16
ARTICLE 12.00 SURRENDER............................................................................ 16
12.01 Possession.......................................................................... 16
12.02 Trade Fixtures, Personal Property and Improvements.................................. 16
12.03 Merger.............................................................................. 16
12.04 Payments After Termination or Notice............................................... 16
ARTICLE 13.00 HOLDING OVER......................................................................... 17
13.01 Month to Month Tenancy.............................................................. 17
13.02 Tenancy at Sufferance............................................................... 17
13.03 General............................................................................. 17
ARTICLE 14.00 RULES AND REGULATIONS................................................................ 17
14.01 Purpose............................................................................. 17
14.02 Observance.......................................................................... 17
14.03 Modification........................................................................ 18
14.04 Non-Compliance...................................................................... 18
ARTICLE 15.00 EMINENT DOMAIN....................................................................... 18
15.01 Taking of Premises.................................................................. 18
15.02 Partial Taking of Building.......................................................... 18
15.03 Surrender........................................................................... 19
15.04 Partial Taking of Premises.......................................................... 19
15.05 Awards.............................................................................. 19
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE 16.00 DAMAGE BY FIRE OR OTHER CASUALTY..................................................... 20
16.01 Limited Damage to Premises.......................................................... 20
16.02 Major Damage to Premises............................................................ 20
16.03 Abatement........................................................................... 20
16.04 Major Damage to Building............................................................ 20
16.05 Limitation on Landlord's Liability.................................................. 21
16.06 Demolition or Substantial Renovation................................................ 21
ARTICLE 17.00 TRANSFERS BY LANDLORD................................................................ 21
17.01 Sale, Conveyance and Assignment..................................................... 21
17.02 Effect of Sale, Conveyance, or Assignment........................................... 21
17.03 Subordination....................................................................... 21
17.04 Attomment........................................................................... 22
17.05 Non-disturbance..................................................................... 22
17.06 Effect of Attomment..... ........................................................... 22
17.07 Execution of Instruments............................................................ 23
ARTICLE 18.00 NOTICES, ACKNOWLEDGEMENTS, AUTHORITIES FOR ACTION.................................... 23
18.01 Notices............................................................................. 23
18.02 Acknowledgements.................................................................... 23
18.03 Authorities for Action.............................................................. 24
ARTICLE 19.00 TENANT'S DEFAULT AND LANDLORD'S REMEDIES............................................. 24
19.01 Interest and Costs.................................................................. 24
19.02 Events of Default................................................................... 24
19.03 Landlord's Remedies................................................................. 25
19.04 Effect on Subleases................................................................. 28
ARTICLE 20.00 BANKRUPTCY........................................................................... 28
20.01 Bankruptcy.......................................................................... 28
ARTICLE 21.00 MISCELLANEOUS........................................................................ 31
21.01 Relationship of Parties............................................................. 31
</TABLE>
iv
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<TABLE>
<S> <C>
21.02 Consent Not Unreasonably Withheld................................................... 31
21.03 Name of Building and Project........................................................ 31
21.04 Applicable Law and Construction..................................................... 31
21.05 Entire Agreement.................................................................... 31
21.06 Offer Irrevocable................................................................... 31
21.07 Amendment or Modification........................................................... 32
21.08 Construed Covenants and Severability................................................ 32
21.09 No Implied Surrender or Waiver...................................................... 32
21.10 Successors Bound.................................................................... 32
21.11 Relocation-Substitute Premises...................................................... 32
21.12 Lease Approval...................................................................... 33
21.13 Nondiscrimination................................................................... 33
21.14 Deposit............................................................................. 33
21.15 {INTENTIONALLY DELETED}
21.16 Personal Liability.................................................................. 34
21.17 Brokerage Commission................................................................ 34
21.18 Unavoidable Delay................................................................... 34
21.19 Hazardous Materials................................................................. 35
21.20 Authorization....................................................................... 35
21.21 No Air Rights....................................................................... 36
21.22 Recording; Confidentiality.......................................................... 36
</TABLE>
Exhibit A Depiction of the Premises and Must-Take Premises
Exhibit B Definitions; Occupancy Costs; Additional Charges; Miscellaneous
Exhibit C Rules and Regulations
Exhibit D Supplemental Terms and Conditions
Exhibit E Construction Procedures
Exhibit F Estoppel Certificate
v
<PAGE>
LEASE OF OFFICE SPACE
BETWEEN: BROOKFIELD REPUBLIC INC.
a Colorado corporation ("Landlord")
(address) 370 17th Street, Suite 3800
Denver, Colorado 80202
AND: INTEK INFORMATION, INC.
a Colorado corporation ("Tenant")
(address) 370 17th Street, Suite 3950
Denver, Colorado 80202
PREMISES IN: REPUBLIC PLAZA
370 17th Street, Suite 2200
Denver, Colorado 80202
DATE:
LANDLORD AND TENANT, in consideration of the covenants herein contained, hereby
agree as follows:
ARTICLE 1.00 DEFINITIONS
1.01 Definitions. In this Lease:
(a) "Annual Rent" means the amount payable by Tenant to Landlord in
respect of each year of the Term under Article 4.01.
(b) "Building" means the building as defined in Exhibit B.
(c) "Building Standard" means the quantity and quality of materials,
equipment, finishing, workmanship and other elements from time to
time specified by Landlord for the Building.
(d) "Article" means an article of this Lease.
(e) "Commencement Date" means the first day of the Term.
"Exhibit A" means the plan(s) attached hereto as Exhibit A.
(g) "Exhibit B" means the provisions relating to Occupancy Costs and
other matters attached hereto as Exhibit B.
(h) "Exhibit C" means the Rules and Regulations attached hereto as
Exhibit C.
1
<PAGE>
(i) "Exhibit D" means the Supplemental Terms and Conditions attached
hereto as Exhibit D.
(j) "Exhibit E" means the Construction Procedures attached hereto as
Exhibit E.
(k) "Exhibit F" means the estoppel certificate attached hereto as
Exhibit F,
(1) "Fiscal Year" means a twelve-month period (all or part of which
falls within the Term) from time to time determined by Landlord,
at the end of which Landlord's books are balanced for auditing
and/or taxation purposes.
(m) "Land" means the Land as defined in Exhibit B.
(n) "Lease" means this lease, Exhibits A, 8, C, D, E, F and any other
Exhibit attached to this Lease, and every instrument complying
with Article 21.07 which by its terms amends, modifies or
supplements this Lease.
(o) "Occupancy Costs" means amounts payable by Tenant to Landlord
under Article 4.02.
(p) "Other Charges" means amounts payable by Tenant to Landlord under
Article 4.03.
(q) "Premises" means approximately 9,983 rentable square feet on the
twenty-second (22nd) floor of the Building as generally indicated
on Exhibit A, being 8,681 usable square feet plus 1,302 square
feet of unallocated space in the Building as determined pursuant
to Section 3.00 of Exhibit B.
(r) "Rent" means the aggregate of all amounts payable by Tenant to
Landlord under Articles 4.01, 4.02 and 4.03.
(s) "Term" means the period of time set out in Article 3.01.
ARTICLE 2.00 GRANT OF LEASE
2.01 Grant. Landlord hereby demises and leases the Premises to Tenant, and
Tenant hereby leases and accepts the Premises from Landlord, to have
and to hold during the Term, subject to the terms and conditions of
this Lease.
2.02 Quiet Enjoyment Landlord shall warrant and defend Tenant in the quiet
enjoyment and possession of the Premises during the Term, subject to
the terms and conditions of this Lease.
2.03 Covenants of Landlord and Tenant. Landlord covenants to observe and
perform all of the terms and conditions to be observed and performed by
Landlord under this Lease.
2
<PAGE>
Tenant covenants to pay the Rent when due under this Lease, and to
observe and perform all of the terms and conditions to be observed and
performed by Tenant under this Lease.
ARTICLE 3.00 TERM AND POSSESSION
3.01 Term. Notwithstanding Articles 3.02 and 3.03, and except as may
otherwise be provided in any exhibit attached hereto, the Term of this
Lease shall be four (4) years, beginning on the first (lst) day of the
month of February, 1997 and ending on the last day of the month of
January 31, 2001, unless terminated earlier as provided in this Lease.
If the Commencement Date is a date other than the date set forth in
this Article 3.01, Landlord and Tenant will promptly enter into an
amendment of lease agreement, prepared by Landlord, stipulating the
actual Commencement Date of the Term.
3.02 Early Occupancy. If Tenant begins to conduct business in all or any
portion of the Premises before the Commencement Date, which Tenant
shall not be permitted to do without obtaining the prior written
consent of Landlord, Tenant shall pay to Landlord on the Commencement
Date, Rent in respect thereof for the period from the date Tenant
begins to conduct business therein to the Commencement Date, which Rent
shall be that proportion of Rent for one calendar year (consisting of
Annual Rent at the rate payable by Tenant during the first year of the
Term, together with Occupancy Costs and Other Charges hereunder) which
the number of days in such period bears to 365. Except where clearly
inappropriate, the provisions of this Lease shall be applicable during
such period and the Term shall not be affected thereby.
3.03 Delayed Possession. If for any reason Landlord is delayed in delivering
possession of all or any portion of the Premises to Tenant on or before
the Commencement Date, then Tenant shall take possession of the
Premises on the date (not later than thirty (30) days after the
Commencement Date) when Landlord delivers possession of all the
Premises, which date shall be conclusively established by notice to
Tenant at least five days before such date. This Lease shall not be
void or voidable nor shall Landlord be liable to Tenant for any loss or
damage resulting from any delay in delivering possession of the
Premises to Tenant. Provided that such delay is not caused by or
attributable to Tenant, its servants, agents or independent
contractors, no Rent shall be payable by Tenant for the period prior to
the date on which Landlord can so deliver possession of all of the
Premises, unless Tenant elects to take possession of a portion of the
Premises, whereupon Rent shall be payable in respect thereof from the
date such possession is so taken.
3.04 Acceptance of Premises. Taking possession of all or any portion of the
Premises by Tenant shall be conclusive evidence as against Tenant that
the Premises or such portion thereof are in satisfactory condition on
the date of taking possession.
3
<PAGE>
ARTICLE 4.00 RENT AND OCCUPANCY COSTS
4.01 Annual Rent. [See Exhibit D, Article 22.00]
4.02 Occupancy Costs. Tenant shall pay to Landlord, at the times and in the
manner provided in Article 4.06, the Occupancy Costs determined under
Exhibit B. During Fiscal Year 1996, the annual Occupancy Costs are
estimated to be $6.95 per rentable square foot.
4.03 Other Charges. Tenant shall pay to Landlord, at the times and in the
manner provided in this Lease or, if not so provided, as reasonably
required by Landlord, all amounts (other than those payable under
Articles 4.01 and 4.02) which are payable by Tenant to Landlord under
this Lease.
4.04 Payment of Rent - General. All amounts payable by Tenant to Landlord
under this Lease shall be deemed to be Rent and shall be payable and
recoverable as Rent in the manner herein provided, and Landlord shall
have all rights against Tenant for default in any such payment as in the
case of arrears of Rent as is more particularly hereinafter provided.
Rent shall be paid to Landlord, without deduction or set-off, in legal
tender of the jurisdiction in which the Building is located, at the
address of Landlord as set forth in the beginning of this Lease, or to
such other person or at such other address as Landlord may from time to
time designate in writing. Tenant's obligation to pay Rent for the entire
Term shall survive the expiration or earlier termination of this Lease
and is independent of any covenant or obligation of Landlord hereunder.
The covenants and obligations of Landlord under this Lease are dependent
upon the performance by Tenant of all of its covenants and obligations
hereunder.
4.05 Annual Rent - Early Termination. If the Term ends on a day other than the
last day of a calendar month, the installment of Annual Rent payable on
the first day of the last calendar month of the Term shall be that
proportion of the Annual Rent which the number of days from the first day
of such last calendar month to and including the last day of the Term
bears to 365.
4.06 Payment - Occupancy Costs.
(a) Prior to the Commencement Date and the beginning of each Fiscal
Year thereafter, Landlord shall compute and deliver to Tenant a
bona fide estimate of Occupancy Costs for the appropriate Fiscal
Year and without further notice Tenant shall pay to Landlord in
monthly installments one-twelfth of such estimate simultaneously
with Tenant's payments of Annual Rent during such Fiscal Year.
Any failure by Landlord to deliver any such estimate as aforesaid
shall not relieve Tenant of its obligation to pay Occupancy Costs
as herein provided. If at any time it reasonably appears to
Landlord that the Occupancy Costs for the current Fiscal Year
will vary from Landlord's estimate then Landlord may readjust the
Occupancy Costs for such Fiscal Year, not more than once per
Fiscal Year, by notice delivered to
4
<PAGE>
Tenant, and subsequent payments by Tenant for such Fiscal Year
will be based upon such readjusted Occupancy Costs.
(b) Unless delayed by causes beyond Landlord's reasonable control,
Landlord shall deliver to Tenant within one hundred twenty (120)
days after the end of each Fiscal Year a written statement (the
"Statement") setting out in reasonable detail the amount of
Occupancy Costs for such Fiscal Year and certified to be correct
by a representative of Landlord. If the aggregate of monthly
installments of Occupancy Costs actually paid by Tenant to
Landlord during such Fiscal Year differs from the amount of
Occupancy Costs payable for such Fiscal Year under Article 4.02
as indicated in the Statement, then, as the case may be, Tenant
shall pay the difference to Landlord or Landlord shall issue a
credit to Tenant against the Rent remaining to be paid hereunder
for the difference, or if no Rent then remains to be paid, refund
the difference to Tenant, without interest, within thirty (30)
days after the date of delivery of the Statement.
(c) If Tenant disagrees with the accuracy of Occupancy Costs as set
forth in the Statement or in any adjustment thereto made by
Landlord pursuant to Article 4.06(d), Tenant shall be required to
give Landlord written notice thereof within thirty (30) days
after the date Landlord gives Tenant the Statement or notice of
adjustment thereto, as the case may be, or Tenant shall
conclusively be deemed to have accepted the accuracy of the
Statement, or modification thereto, as the case may be, and to
have waived any right to claim any readjustment in connection
therewith. If Tenant so disagrees with the Statement, or
modification thereto, as the case may be, and gives such notice
to Landlord, Tenant shall nevertheless make payment in accordance
with any notice given by Landlord, but the disagreement shall be
referred by Landlord for prompt decision by a public accountant,
architect, insurance broker or other professional consultant
selected by Landlord, who shall be unaffiliated with and
unrelated to either Landlord or Tenant or any of their officers,
directors or employees, who shall be deemed to be acting as
expert(s) and not arbitrator(s), and a determination signed by
the selected expert(s) shall be final and binding on both
Landlord and Tenant. Any adjustment required to any previous
payment made by Tenant or Landlord by reason of any such decision
shall be made within thirty (30) days thereof, and the party
required to make payment under such adjustment shall bear all
costs of the expert(s) making such decision except where that
payment represents five percent (5%) or less of the Occupancy
Costs that were the subject of the disagreement, in which case
Tenant shall bear all such costs.
(d) Landlord may readjust the Occupancy Costs for a Fiscal Year, not
more than once per Fiscal Year, by notice delivered to Tenant
within six (6) months after the date of-delivery of the
Statement.
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ARTICLE 5.00 USE OF PREMISES
5.01 Use. The Premises shall be used and occupied only as business offices
for the business of Tenant as initially conducted in the Premises, or
for such other purpose as Landlord may specifically authorize in
writing.
5.02 Compliance with Laws. The Premises shall be used and occupied in a
safe, careful and proper manner so as not to contravene any present or
future governmental or quasi-govemmental laws in force or regulations
or orders or the requirements of Landlord's insurance carriers. If due
solely to Tenant's use of the Premises, improvements are necessary to
comply with any of the foregoing or with the requirements of insurance
carriers, Tenant shall pay the entire cost thereof.
5.03 Abandonment. Tenant shall not abandon the Premises or any portion
thereof at any time during the Term. For purposes of this Lease,
"abandonment of the Premises" shall mean Tenant's failure to occupy the
Premises in accordance with the terms hereof, coupled with Tenant's
failure to pay Rent in accordance with the terms hereof.
5.04 Nuisance. Tenant, its employees, agents and invitees, shall not cause
or maintain any nuisance in or about the Premises, and Tenant shall
keep the Premises free of debris, rodents, vermin and anything of a
dangerous, noxious or offensive nature or which could create a fire
hazard (through undue load on electrical circuits or otherwise) or
undue vibration, heat or noise.
5.05 Sale of Goods from Premises. Tenant shall not conduct or permit the
conduct of any "fire", "bankruptcy", "going out of business" or auction
sale in or from the Premises.
ARTICLE 6.00 SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD
6.01 Operation of Building. During the Term, Landlord shall operate and
maintain the Building in accordance with all applicable laws and
regulations, the requirements of Landlord's insurance carriers and
standards from time to time prevailing for first-class office buildings
of comparable age and character in the area in which the Building is
located, and shall provide the services set out in Articles 6.02 and
6.03.
6.02 Services to Premises. Landlord shall provide in the Premises:
(a) heat, ventilation and cooling as required for the comfortable
use and occupancy of the Premises during normal business
hours,
(b) janitorial services, including window washing, provided that
Tenant shall leave the Premises in a reasonably tidy condition
at the end of each business day,
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(c) electric power as supplied by the local utility company for
normal lighting and small business office equipment (provided,
however, that Landlord shall not be required to- supply to
Tenant or the Premises electrical power.which is
disproportionate to that used by other tenants in the Building
during normal operations such as, without limitation,
electrical power to computer rooms, to above Building Standard
lighting fixtures, or to supplemental air conditioning
equipment),
(d) replacement of Building Standard fluorescent tubes, light
bulbs and ballasts as required from time to time as a result
of normal usage, and
(e) maintenance, repair and replacement as set out in Article
6.04.
6.03 Building Service. Landlord shall provide in the Building:
(a) domestic running water and necessary supplies in washrooms
sufficient for the normal use thereof by occupants in the
Building,
(b) access to and egress from the Premises, including elevator or
escalator service if included in the Building,
(c) heat, ventilation, cooling, lighting, electric power, domestic
running water and janitorial service in those areas of the
Building from time to time designated by Landlord for use
during normal business hours by Tenant in common with all
tenants and other persons in the Building but under the
exclusive control of Landlord,
(d) a general directory board on which Tenant shall be entitled to
have its name shown, provided that Landlord shall have
exclusive control thereof and of the space thereon to be
allocated to each tenant, and
(e) maintenance, repair and replacement as set out in Article 6.04.
6.04 Maintenance, Repair and Replacement. Landlord shall operate,
maintain, repair and replace the systems, facilities and equipment
necessary for the proper operation of the Building and for provision
of Landlord's services under Articles 6.02 and 6.03 (but not
including any systems, facilities or equipment in the Premises such
as, without limitation, non-Building Standard items such as light
fixtures and bulbs, partitioned glass, doors and frames, and non-
Building Standard plumbing fixtures, such as sinks, water heaters,
refrigerators, and garbage disposals, rest rooms exclusively within
the Premises and supplemental air conditioning equipment, all of
which Tenant shall be responsible for pursuant to Article 7.01), and
shall maintain and repair the foundations, structure and roof of the
Building and repair damage to the Building which Landlord is
obligated to insure against under Article 9.00, provided that,
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(a) if all or part of such systems, facilities and equipment are
destroyed, damaged or impaired, Landlord shall have a
reasonable time in which to complete necessary repair or
replacement, and during that time shall be required only to
maintain such services as are reasonably possible in the
circumstances,
(b) Landlord may temporarily discontinue such services or any of
them at such times as may be necessary due to causes (except
lack of funds) beyond the reasonable control of Landlord,
(c) Landlord shall use reasonable diligence in carrying out its
obligations under this Article 6.04, but shall not be liable
under any circumstances for any consequential damage to any
person or property for any failure to do so,
(d) no reduction or discontinuance of such services as permitted
by this Lease shall be construed as an eviction of Tenant or
release Tenant from any obligation of Tenant under this
Lease, and
(e) nothing contained herein shall derogate from the provisions
of Article 16.00.
6.05 Additional Services and Utilities.
(a) If from time to time requested in writing by Tenant, and to
the extent that it is reasonably able to do so, Landlord shall
provide in the Premises services in addition to those set out
in Article 6.02 such as, by way of example but not in
limitation, heat, ventilation and cooling during times other
than normal business hours, provided that Tenant shall within
ten days of receipt of any invoice for any such additional
service pay Landlord therefor at reasonable rates as Landlord
may from time to time establish. The current charge for such
service ranges from $45-00 - $65.00 per hour. Twenty-four (24)
hours prior notice is requested.
(b) Tenant shall not without Landlord's written consent install or
operate in the Premises equipment (including telephone
equipment or lighting) which generates sufficient heat to
affect the temperature otherwise maintained in the Premises by
the air conditioning system as normally operated. Landlord may
install supplementary air conditioning units, facilities or
services in the Premises, or modify its air conditioning
system, as may in Landlord's reasonable opinion be required
to. maintain proper temperature levels, and Tenant shall pay
Landlord within ten (10) days of receipt of any invoice for
the cost thereof, including installation, operation and
maintenance expense.
(c) If Landlord shall from time to time reasonably determine that
the use of electricity or any other utility or service in the
Premises is disproportionate to the use of other tenants,
Landlord may separately charge Tenant for, and Tenant shall
pay to Landlord, the excess costs at reasonable rates
attributable to such disproportionate use together with the
costs incurred by Landlord in determining that Tenant's use is
disproportional. At Landlord's request, Tenant shall install
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and maintain, at Tenant's expense, metering devices for
measuring the use of any such utility or service in the
Premises.
6.06 Alterations by Landlord. Landlord may from time to time
(a) make repairs, replacements, changes or additions to the
structure, systems, facilities and equipment in the Premises
where necessary or desirable to serve the Premises or other
parts of the Building,
(b) make changes in or additions to any part of the Building not
in or forming part of the Premises, and
(c) change or alter the location of the Common Areas,
provided that in doing so Landlord shall not unreasonably disturb or
interfere with Tenant's use of the Premises and operation of its
business.
6.07 Access by Landlord. Tenant shall permit Landlord to enter the Premises
outside normal business hours, and during normal business hours where
such will not unreasonably disturb or interfere with Tenant's use of
the Premises and operation of its business, to examine, inspect and
show the Premises to persons wishing to lease them or to any lender,
prospective lender or purchaser of the Building or Project (as defined
in Exhibit B), or any portion thereof or interest therein, to provide
services or make repairs, replacements, changes or alterations as set
out in this Lease, to monitor Tenant's compliance with its obligations
hereunder, and to take such steps as Landlord may deem necessary or
desirable for the safety, improvement or preservation of the Premises
or the Building. Landlord shall whenever possible (except in an
emergency) consult with or give reasonable notice to Tenant prior to
such entry, but no such entry shall constitute an eviction or entitle
Tenant to any abatement of Rent, or otherwise relieve Tenant of any of
its obligations hereunder.
6.08 Energy, Conservation and Security. Landlord shall be deemed to have
observed and performed the terms and conditions to be performed by
Landlord under this Lease, including those relating to the provision of
utilities and services, if in so doing it acts in accordance with a
directive, policy or request of a governmental or quasi-governmental
authority serving the public interest in the fields of energy,
conservation or security.
ARTICLE 7.00 MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY TENANT
7.01 Condition of Premises. Tenant shall maintain the Premises and all
improvements therein in good order and in first-class condition
consistent with the Building and the premises of other tenants therein,
including, but not limited to making repairs, replacements and
alterations as needed, including those necessary to comply with the
requirements of any governmental or quasi-governmental authority having
jurisdiction.
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7.02 Failure to Maintain Premises. If Tenant fails to perform any obligation
under this Article 7.00, then on not less than ten (10) days notice to
Tenant Landlord may enter the Premises and perform such obligation
without liability to Tenant for any loss or damage to Tenant thereby
incurred, and without the same constituting an eviction or entitling
Tenant to any abatement of Rent or otherwise relieving Tenant from any
of its obligations hereunder, and Tenant shall pay Landlord for the
cost thereof, plus 15% of such cost for overhead and supervision,
within ten days of receipt of Landlord's invoice therefor.
7.03 Alterations by Tenant. Tenant may from time to time at its own expense,
make changes, additions and improvements in the Premises (i.e. ice
maker, etc.) to better adapt the same to its business, provided that
any change, addition or improvement shall
(a) comply with the requirements of any governmental or quasi-
governmental authority having jurisdiction and with the
requirements of Landlord's insurance carriers,
(b) be made only with the prior written consent of Landlord (which
shall not be unreasonably withheld, provided, however, that in
no event may changes be made to the structure or systems of
the Building),
(c) equal or exceed the then current standard for the Building and
be performed in a good and workmanlike manner, and
(d) be carried out only by persons selected by Tenant and approved
in writing by Landlord who shall if required by Landlord
deliver to Landlord, before commencement of the work,
performance and payment bonds, or other evidence of financial
capability satisfactory to Landlord to show the ability to pay
for such change, addition or improvement, as well as proof of
worker's compensation and public liability and property damage
insurance coverage, with Landlord named as an additional
insured, in amounts, with companies, and in a form reasonably
satisfactory to Landlord, which shall remain in effect during
the entire period in which the work will be carried out.
Any increase in property taxes on or fire or casualtv insurance
premiums for the Building attributable to such change, addition or
improvements shall be bome solely by Tenant.
Landlord acknowledges it is Tenant's intent to install, at Tenant's
cost, a sink with base cabinets, water line for an icemaker, and
other customary office kitchen equipment within the Premises. Tenant
may do so, provided such construction is coordinated and performed by
a contractor(s) acceptable to Landlord subject to the requirements
and procedures, as set forth in this Lease, including all applicable
Building codes. Additionally, Tenant may install a card-key access
system at its entrance of its Premises which is compatible with the
Building systems and monitored by Landlord's Central Operations at
rates set by Landlord from time to time.
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7.04 Trade Fixtures and Personal Property. Tenant may install in the Premises
its usual trade fixtures and personal property in a proper, lawful and
workmanlike manner, without causing damage to the Premises, provided that
no such installation shall interfere with or damage the mechanical or
electrical systems or the structure of the Building. If Tenant is not then
in default hereunder, trade fixtures and personal property installed in
the Premises by Tenant may, at Tenant's sole expense, be removed from the
Premises
(a) from time to time in the ordinary course of Tenant's business or in
the course of reconstruction, renovation or alteration of the
Premises by Tenant, and
(b) during a reasonable period prior to the expiration of the Term,
provided that Tenant promptly repairs at its own expense any damage to the
Premises or Building resulting from such installation and removal.
7.05 Mechanic's Liens. Tenant shall pay before delinquency all costs for work
done or caused to be done by Tenant in the Premises which could result in
any lien or encumbrance on Landlord's interest in the Land or Building or
any part thereof, shall keep the title to the Land or Building and every
part thereof free and clear of any lien or encumbrance in respect of such
work, and shall indemnify and hold harmless Landlord against any claim,
loss, cost, demand and legal or other expense, whether in respect of any
lien or otherwise, a6sing out of the supply of material, services or labor
for such work. Tenant shall immediately notify Landlord of any such lien,
claim of lien or other action of which it has or reasonably should have
knowledge and which affects the title to the Land or Building or any part
thereof, and shall cause the same to be removed within five (5) days,
failing which Landlord may take such action as Landlord deems necessary to
remove the same and the entire cost thereof shall be immediately due and
payable by Tenant to Landlord. Tenant shall permit Landlord to post a
notice on the Premises as may be contemplated by applicable law, as
amended from time to time, or any comparable or other statutory provision
for protection of the Building and the Project and Landlord's interest
therein from mechanic's or other liens and to take all other actions
Landlord may desire for Landlord.
7.06 Signs. Any sign, lettering, decal or design of Tenant placed in or upon
the Premises which is visible from the exterior of the Premises shall be
at Tenant's expense and subject to approval by Landlord (in Landlord's
sole discretion), shall conform to the uniform pattern of identification
signs for tenants in the Building as prescribed by Landlord from time to
time and shall be removed, and the surface it was located upon repaired
and restored to the condition it was in prior to the installation of the
same, by Tenant at its sole expense at or prior to the expiration of the
Term. Tenant shall not inscribe or affix any sign, lettering, decal or
design in the Premises or Building which is visible from the exterior of
the Building.
ARTICLE 8.00 TAXES
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8.01 Tenant's Pro Rata Share. Tenant will reimburse Landlord for Tenant's pro
rata share of Taxes (as defined in Exhibit B), as established as part of
the Occupancy Costs set forth in Exhibit 6 attached hereto.
8.02 Other Tenant's Taxes. In addition to Tenants pro rata share of taxes,
Tenant shall pay before delinquency every tax, assessment, license fee,
excise and other charge, however described, which is imposed, levied,
assessed or charged by any governmental or quasi-governmental authority
having jurisdiction and which is payable in respect of the Term upon or on
account of
(a) operations at, occupancy of, or conduct of business in or from the
Premises,
(b) fixtures or personal property in the Premises which do not belong to
Landlord, and
(c) the Rent paid or payable by Tenant to Landlord for the Premises or
for the use and occupancy of all or any part thereof,
provided that if Landlord so elects by notice to Tenant, Tenant shall add
any amounts payable under this Article 8.02 to the monthly installments of
Annual Rent payable under Article 4.01 and Landlord shall remit such
amounts to the appropriate authorities.
8.03 Right to Contest. Tenant shall have the right to contest in good faith the
validity or amount of any tax, assessment, license fee, excise fee and
other charge which it is responsible to pay under Article 8.02, and to
withhold payment of the same during the pendency of such contest, provided
that no contest by Tenant may involve the possibility of forfeiture, sale
or disturbance of Landlord's interest in the Premises, that Tenant
provides to Landlord security for the taxes contested by Tenant adequate
in the opinion of Landlord, and that, upon the final determination of any
contest by Tenant, Tenant shall immediately pay and satisfy the amount
found to be due, together with any costs, penalties and interest.
ARTICLE 9.00 INSURANCE
9.01 Landlord's Insurance. During the Term, Landlord shall maintain at its own
expense (subject to contribution by Tenant of its pro rata share of
Occupancy Costs under Article 4.02) liability insurance, fire insurance
with extended coverage, boiler and pressure vessel insurance, and other
insurance on the Building and all property and interest of Landlord in the
Building with coverage and in amounts deemed reasonable by Landlord from
time to time. Policies for such insurance shall waive, to the extent
available from Landlord's carrier(s) at no additional cost to Landlord,
any right of subrogation against Tenant and all individuals and entities
for whom Tenant is responsible in law.
9.02 Tenant's Insurance. During the Term, Tenant shall maintain at its own
expense
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(a) fire insurance with extended coverage and water damage insurance, in
amounts sufficient to fully cover Tenant's improvements, fixtures and
property in the Premises, and
(b) liability insurance, with blanket contractual liability coverage with
Landlord named as an additional insured, against claims for death,
personal injury and property damage in or about the Premises, in
amounts which are from time to time acceptable to a prudent tenant in
the community in which the Building is located and satisfactory to
Landlord but not less than $2,000,000 for death, illness or injury to
one or more persons, and $500,000 for property damage, in respect of
each occurrence.
Policies for such insurance shall be in a form and with an insurer
reasonably acceptable to Landlord, shall require at least fifteen
days written notice to Landlord of termination or material alteration
during the Term, and shall waive any right of subrogation against
Landlord and all individuals and entities for whom Landlord is
responsible in law and shall contain coverage for blanket contractual
liability to cover indemnities included in this agreement. Tenant
shall deliver to Landlord on the Commencement Date and on each
anniversary thereof, evidence satisfactory to Landlord of such
policies and that all premiums thereon have been paid and that the
policies are in full force and effect.
ARTICLE 10.00 INJURY TO PERSON OR PROPERTY
10.01 Indemnity by Tenant. Tenant shall indemnify and hold harmless Landlord
(and if Landlord requests, defend Landlord with counsel reasonably
acceptable to Landlord) from and against all liabilities, obligations,
losses, damages, fines, penalties, demands, claims, causes of action,
judgments, costs and expenses, including, without limitation, attorneys'
fees, which may be imposed on or incurred, suffered or paid by or asserted
against Landlord or the Building or any interest therein, arising from or
by reason of or in connection with:
(a) the use, non-use, possession, occupation, condition, operation or
maintenance of the Premises by Tenant or any of its agents,
contractors, servants, employees, licensees or invitees;
(b) any negligent or tortious act on the part of Tenant or any of its
agents, contractors, servants, employees, licensees or invitees;
(c) any accident, injury, death or damage to any person or property
occurring in, on or about the Premises;
(d) any theft, loss or damage to, however caused, to books, records, data
or information (computer generated or otherwise), files, money,
securities, negotiable instruments or papers in or about the
Premises;
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(e) any loss or damage resulting from Tenant's negligent or willful
interference with or obstruction of deliveries to or from the
Premises;
any pollutant, toxic or hazardous material, substance or waste, or any
other material which may adversely affect the environment, whether or not
now recognized to have such to effect, which Tenant, its employees,
agents, contractors or invitees bring upon, keep, use or locate in, on or
about the Building, or any release or disposal of any such material,
substance or waste in, on, about or from the Building by any of the
foregoing; and
(g) any failure on the part of the Tenant to perform or comply with any
of the covenants, agreements, terms, provisions, conditions or
limitations contained in this Lease on its part to be performed or
with which to be complied.
Nothing contained in this Article 10.01 shall be deemed to require Tenant
to indemnify Landlord to any extent prohibited by law.
10.02 Subrogation. The provisions of this Article 10.00 shall not abrogate or
impair the waiver of any right of subrogation against Tenant in Landlord's
insurance under Article 9.01 and the waiver of any right of subrogation
against Landlord in Tenant's insurance under Article 9.02.
ARTICLE 11.00 ASSIGNMENT AND SUBLETTING
11.01 Assignment. Tenant, if not then in default under this Lease and with
Landlord's prior written consent, may assign this Lease, subject to
Articles 11.03 and 11.04, to any assignee who, in Landlord's sole opinion,
will not be inconsistent with the character of the Building and its other
tenants, will use the Premises in a manner consistent with Article 5
thereof, has the financial capability of complying with the then remaining
obligations of Tenant hereunder and who otherwise meets such other
standards as Landlord may determine in its reasonable discretion. Without
limiting the foregoing, if Tenant is not then in default under this Lease,
Tenant, with Landlord's prior written consent, which shall not be
unreasonably withheld, may assign this Lease to an entity controlling,
controlled by or under common control with Tenant. For purposes of this
Article 1 1.01, $$control" means the direct or indirect ownership of more
than fifty percent (50%) of an entity's equity.
11.02 Subleasing. Tenant, if not then in default under this Lease and with
Landlord's prior written consent and subject to Articles 11.03 and 11.04,
may sublet all or any part of the Premises to a sublessee who, in
Landlord's sole opinion, will not be inconsistent with the character of
the Building and its other tenants, will use the Premises in a manner
consistent with Article 5 thereof, has the financial capability of
complying with its obligations set forth in the sublease and who otherwise
meets such other standards as Landlord may determine in its reasonable
discretion. Without limiting the foregoing, if Tenant is not then in
default under this Lease, Tenant, with Landlord's prior written
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consent, which shall not be unreasonably withheld, may sublet all or a
part of the Premises to an entity controlling, controlled by or under
common control with Tenant. For purposes of this Article 11.02, "control"
means the direct or indirect ownership of more than fifty percent (50%) of
an entity's equity.
11.03 First Offer to Landlord. If Tenant wishes to sublet all or any part of the
Premises to a named third party, Tenant shall first offer in writing to
sublet to Landlord on the Same terms and conditions as provided in this
Lease except this Article 1 1.00, and for the same Rent as provided @his
Lease or the rent offered to that third party if lower. If Tenant wishes
to assign this Lease (except as set out in Article 11.01) to a named third
party, Tenant shall first offer to Landlord in writing to surrender this
Lease on the effective date of the proposed assignment by Tenant. Landlord
will have fifteen (15) days from the receipt of Tenant's offer either to
accept or reject it. If Landlord accepts the offer, Tenant will then
execute and deliver to Landlord, or to any party designated or named by
Landlord, an assignment or sublease, as the case may be, in either case in
form and substance reasonably satisfactory to Landlord.
11.04 Limitation. Except as specifically provided in this Article 1 1.00, Tenant
shall not assign or transfer this Lease or any interest therein or sublet
or in any way part with possession of all or any part of the Premises, or
permit all or any part of the Premises to be used or occupied by any other
person. Any assignment, transfer or subletting or purported assignment,
transfer or subletting except as specifically provided herein shall be
null and void and of no force and effect without limiting Landlord's right
to approve or disapprove any assignment or sublease pursuant to Articles 1
1.01 and 11.02 hereof. Landlord shall not be required to consent to an
assignment of this Lease or a sublease of all or part of the Premises by
Tenant to, or the use or occupancy of all or part of the Premises by, any
tenant in a building in the same city in which the Building is located and
which is owned or managed by Landlord or any affiliate of Landlord, or any
tenant to whom Landlord or an affiliate of Landlord has then made an
outstanding offer to lease space in any such building, or at rental rates
less than ninety percent (90%) of the lowest "as-is" current market rental
rate for the Building as established by Landlord. The rights and interests
of Tenant under this Lease shall not be assignable by operation of law
without Landlord's written consent, which consent may be withheld in
Landlord's absolute discretion. Tenant shall pay to Landlord immediately
upon receipt by Tenant from time to time (a) all revenue from any approved
assignment, or (b) all revenue from any approved sublease less an amount
equal to the sum of all Annual Rent and Occupancy Costs payable by Tenant
to Landlord under this Lease in respect of the Premises being subleased
for the period of time to which such revenue under such sublease relates.
All such amounts shall constitute Rent and be subject to all terms and
provisions of this Lease, including, without limitation, Article 19
hereof. Upon Landlord's approval of any assignment, use or occupation,
Tenant shall pay to Landlord a reasonable charge to cover Landlord's
administrative costs in connection with that approval.
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11.05 Tenant's Obligations Continue. No assignment, transfer or subletting (or
use or occupation. of the Premises by any other person) which is permitted
under this Article 1 1.00 shall in any way release or relieve Tenant of
its obligations under this Lease.
11.06 Subsequent Assignments. Landlord's consent to an assignment, transfer or
subletting (or use or occupation of the Premises by any other person)
shall not be deemed to be a consent to any subsequent assignment,
transfer, subletting, use or occupation, all of which shall be permitted
only in accordance with the provisions of this Article 1 1.00.
ARTICLE 12.00 SURRENDER
12.01 Possession. Upon the expiration or other termination of the Term, all
right, title and interest of Tenant in the Premises shall cease. Upon such
expiration or other termination, Tenant shall immediately quit and
surrender possession of the Premises in substantially the condition in
which Tenant is required to maintain the Premises excepting only
reasonable wear and tear, or if and to the extent Landlord requires,
remove all improvements and fixtures from the Premises or any part of the
Building not forming a part of the Premises and repair any damage caused
by such removal whether or not the removal is at Landlord's request, all
in accordance with the provisions of Article 7.00.
12.02 Trade Fixtures, Personal Property and Improvements. After the expiration
or other termination of the Term, all of Tenant's trade fixtures, personal
property and improvements remaining in the Premises shall be deemed
conclusively to have been abandoned by Tenant and may be appropriated,
sold, destroyed or otherwise disposed of by Landlord without notice or
obligation to compensate Tenant or to account therefor, and Tenant shall
pay to Landlord on written demand all costs incurred by Landlord in
connection therewith.
12.03 Merger. The voluntary or other surrender of this Lease by Tenant or the
cancellation of this Lease by mutual agreement of Tenant and Landlord
shall not work a merger, and shall at Landlord's option terminate all or
any subleases and subtenancies or operate as an assignment to Landlord of
all or any subleases or subtenancies. Landlord's option hereunder shall be
exercised by notice to Tenant and all known sublessees or subtenants in
the Premises or any part thereof.
12.04 Payments After Termination or Notice. No payments of money by Tenant to
Landlord after the expiration or other termination of the Term or after
the giving of any notice (other than a demand for payment of money) by
Landlord to Tenant, shall reinstate, continue or extend the Term or make
ineffective any notice given to Tenant prior to the payment of such money.
After the service of notice or the commencement of a suit, or after final
judgment granting Landlord possession of the Premises, Landlord may
receive and collect any sums of Rent due under this Lease, and the
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payment thereof shall not make ineffective any notice, or in any manner
affect any pending suit or any judgment theretofore obtained.
ARTICLE 13.00 HOLDING OVER
13.01 Month-to-Month Tenancy. If with Landlord's prior written consent, which
may be withheld in Landlord's sole discretion, Tenant remains in
possession of the Premises after the expiration or other termination of
the Term, Tenant shall be deemed to be occupying the Premises on a month-
to-month tenancy only, at a monthly rental equal to one hundred twenty-
five percent (125%) of the Rent as determined in accordance with Article
4.00 or such other rental as is stated in such written consent, and such
month-to-month tenancy may be terminated by Landlord or Tenant on the last
day of any calendar month by delivery of at least thirty (30) days advance
notice of termination to the other.
13.02 Tenancy at Sufferance. If without Landlord's written consent, which may be
withheld in Landlord's sole discretion, Tenant remains in possession of
the Premises after the expiration or other termination of the Term, Tenant
shall have committed an unlawful detention of the Premises and Landlord
shall be entitled to all rights and remedies available at law or equity as
a result thereof', provided, however, that if at any time after the
expiration or termination of the Term, Landlord so notifies the Tenant in
writing, Tenant shall be deemed to be occupying the Premises upon a
tenancy at sufferance only, at a monthly rental equal to three (3) times
the Rent determined in accordance with Article 4.00. Such tenancy at
sufferance may be terminated by Landlord at any time by notice of
termination to Tenant, and by Tenant on the last day of any calendar month
by at least thirty (30) days advance notice of termination to Landlord.
Notwithstanding the foregoing, Landlord shall also be entitled to such
other remedies and damages provided under this Lease or at law as a result
of such tenancy at sufferance.
13.03 General. Any month-to-month tenancy or tenancy at sufferance hereunder
shall be subject to all other terms and conditions of this Lease except
any right of extension and nothing contained in this Article 13.00 shall
be construed to limit or impair any of Landlord's rights of re-entry or
eviction or constitute a waiver thereof.
ARTICLE 14.00 RULES AND REGULATIONS
14.01 Purpose. The Rules and Regulations in Exhibit C have been adopted by
Landlord for the safety, benefit and convenience of all tenants and other
persons in the Building.
14.02 Observance. Tenant shall at all times comply with, and shall cause its
employees, agents, licensees and invitees to comply with, the Rules and
Regulations from time to time in effect.
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14.03 Modification. Landlord may from time to time, for the purposes set out in
Article 14.01, amend, delete from, or add to the Rules and Regulations,
provided that any such modification
(a) shall not be inconsistent with any other provision of this
Lease,
(b) shall be reasonable and have general application to all
similarly situated tenants in the Building, and
(c) shall be effective only upon delivery of a copy thereof to
Tenant at the Premises.
14.04 Non-Compliance. Landlord shall use reasonable efforts to secure compliance
by all tenants and other persons with the Rules and Regulations from time
to time in effect, but shall not be responsible to Tenant for failure of
any person to comply with such Rules and Regulations nor shall any such
failure relieve Tenant of its obligation to comply with the Rules and
Regulations.
ARTICLE 15.00 EMINENT DOMAIN
15.01 Taking of Premises. If during the Term, all of the Building or the
Premises is permanently taken for any public or quasi-public use under any
statute or by right of eminent domain, or purchased under threat of such
taking, this Lease shall automatically terminate on the date on which the
condemning authority takes possession of the Premises (the "date of such
taking").
15.02 Partial Taking of Building. If during the Term, only part of the Building
is taken or purchased as set out in Article 15.01, then
(a) if in the reasonable opinion of Landlord, substantial alteration or
reconstruction of the Building is necessary or desirable as a result
thereof, whether or not the Premises are or may be affected, Landlord
shall have the right to terminate this Lease by giving Tenant at
least thirty (30) days written notice of such termination, which
notice shall be given within thirty (30) days after the date of such
taking, and
(b) if more than one-third (1/3) of the number of square feet in the
Premises is included in such taking or purchase, and Landlord is
unable to provide Tenant with comparable replacement premises in the
Project, Tenant shall have the right to terminate this Lease by
giving at least thirty (30) days written notice thereof, which notice
shall be given within thirty (30) days after the date of such taking,
if in Tenant's reasonable judgement, the Premises cannot be operated
by Tenant in an economically viable fashion because of such partial
taking.
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If either party exercises its right of termination hereunder, this Lease
shall terminate on the date stated in the notice, provided, however, that
no termination pursuant to notice hereunder may occur later than sixty
(60) days after the date of such taking.
15.03 Surrender. On any such date of termination under Article 15.01 or 15.02,
Tenant shall immediately surrender to Landlord the Premises and all
interests therein under this Lease. Landlord may re-enter and take
possession of the Premises and remove Tenant therefrom, and the Rent shall
no longer accrue from the date of termination, except that if a portion of
the Premises is included as a part of such taking, then that portion of
the Rent attributable to such portion, determined by Landlord pro rata
based on the number of rentable square feet contained within such portion,
shall no longer accrue from the date of such taking. After such
termination, and on notice from Landlord stating the Rent then owing,
Tenant shall forthwith pay Landlord such Rent.
15.04 Partial Taking of Premises. If any portion of the Premises (but less than
the whole thereto is so taken, and no rights of termination herein
conferred are timely exercised, the Term of this Lease shall expire with
respect to the portion so taken on the date of such taking. In such event,
the Rent payable hereunder with respect to such portion so taken shall no
longer accrue from such date, and the Annual Rent and Occupancy Costs
thereafter payable with respect to the remainder not so taken shall be
adjusted pro rata by Landlord in order to account for the resulting
reduction in the number of square feet in the Premises.
15.05 Awards. Upon any such taking or purchase, Landlord shall be entitled to
receive and retain the entire award or consideration for the affected
lands and improvements subject to the rights of any mortgagee of
Landlord's interest in the Land or the Building as their respective
interests may appear, and Tenant shall not have or advance any claim
against Landlord or the condemning authority for the value of its property
or its leasehold estate or the unexpired Term of this Lease, or, except as
otherwise permitted in the next sentence, for costs of removal or
relocation, or business interruption expense or any other damages arising
out of such taking or purchase. Nothing herein shall give Landlord any
interest in or preclude Tenant from seeking and recovering on its own
account from the condemning authority any award or compensation
attributable to the taking or purchase of Tenant's chattels or trade
fixtures or attributable to Tenant's relocation expenses provided that any
such separate claim by Tenant shall not reduce or adversely affect the
amount of Landlord's award. If any such award made or compensation paid to
either party specifically includes an award or amount for the other, the
party first receiving the same shall promptly account therefor to the
other.
ARTICLE 16.00 DAMAGE BY FIRE OR OTHER CASUALTY
16.01 Limited Damage to Premises. If all or part of the Premises are rendered
untenantable by damage from fire or other casualty which in Landlord's
sole opinion can be
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substantially repaired under applicable laws and governmental regulations
within two hundred seventy (270) days from the later to occur of (a) the
date of such casualty (employing normal construction methods without
overtime or other premium) or (b) the date on which Landlord receives the
insurance proceeds relating to such casualty, Landlord shall, but only to
the extent that sufficient insurance proceeds are available therefor (and
subject to the rights of any mortgagee of the Land or the Building in and
to such insurance proceeds), repair such damage other than damage to
improvements, furniture, chattels or trade fixtures which do not belong to
Landlord, which shall be repaired forthwith by Tenant at its own expense.
16.02 Major Damage to Premises. If all or part of the Premises are rendered
untenantable by damage from fire or other casualty which in Landlord's
sole opinion, as set forth in a written notice given to Tenant, cannot be
substantially repaired under applicable laws and governmental regulations
within two hundred seventy (270) days from the later to occur of (a) the
date of such casualty (employing normal construction methods without
overtime or other premium) or (b) the date on which Landlord receives the
insurance proceeds relating to such casualty, then either Landlord or
Tenant may elect to terminate this Lease as of the date of such casualty
by written notice delivered to the other not more than ten (10) days after
Landlord gives Tenant such written notice, failing which Landlord shall,
but only to the extent that sufficient insurance proceeds are available
therefor (and subject to the rights of any mortgagee of the Land or the
Building in and to such insurance proceeds), repair such damage other than
damage to improvements, furniture, chattels or trade fixtures which do not
belong to Landlord, which shall be repaired forthwith by Tenant at its own
expense.
16.03 Abatement. If Landlord elects to repair damage to all or part of the
Premises under Articles 16-01 or 16.02, the Annual Rent and Occupancy
Costs payable by Tenant hereunder shall be proportionately reduced based
on the number of square feet within the Premises which are thereby
rendered untenantable from the date of such casualty until five (5) days
after completion by Landlord of the repairs to the Premises (or the part
thereof rendered untenantable) or until Tenant again uses the Premises (or
the part thereof rendered untenantable) in its business, whichever first
occurs.
16.04 Major Damage to Building. If all or a substantial part (whether or not
including the Premises) of the Building is rendered untenantable by damage
from fire or other casualty to such a material extent that Landlord
determines not to repair the same, Landlord may elect to terminate this
Lease as of the date of such casualty (or on the date of notice if the
Premises are unaffected by such casualty) by written notice delivered to
Tenant not more than sixty (60) days after the date of such casualty. If
Landlord elects not to terminate this Lease, Landlord shall, but only to
the extent that sufficient insurance proceeds are available therefor (and
subject to the rights of any mortgagee of the Land or the Building in and
to such insurance proceeds), commence repair of the damaged portion of the
Building, and the Lease shall remain in full force and effect in
accordance with its terms, subject to Article 16.03 above.
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16.05 Limitation on Landlord's Liability. Except as specifically provided in
this Article 16.00, there shall be no reduction of Rent and Landlord
shall have no liability to Tenant by reason of any injury to or
interference with Tenant's business or property arising from fire or
other casualty, howsoever caused, or from the making of any repairs
resulting therefrom in or to any portion of the Building or the Premises.
Notwithstanding anything contained herein, Rent payable by Tenant
hereunder shall not be abated under Article 16.03 if the damage is caused
by any act or omission of Tenant, its agents, servants, employees or any
other person entering upon the Premises under express or implied
invitation of Tenant.
16.06 Demolition or Substantial Renovation. Notwithstanding anything contained
in this Lease, Landlord may terminate this Lease at any time by giving
Tenant written notice thereof at least twelve (12) months prior to the
effective date of termination if, at the date of the notice, it is
Landlord's intention to demolish or substantially renovate the Building.
ARTICLE 17.00 TRANSFERS BY LANDLORD
17.01 Sale, Conveyance and Assignment. Nothing in this Lease shall restrict the
right of Landlord to sell, convey, assign or otherwise deal with the
Building, subject only to the rights of Tenant under this Lease.
17.02 Effect of Sale, Conveyance, or Assignment. A sale, conveyance or
assignment of the Building shall operate to release Landlord from
liability from and after the effective date thereof upon all of the
covenants, terms and conditions of this Lease, express or implied, except
as such may relate to the period prior to such effective date, or a
condition in existence prior to such effective date, and effective as of
such effective date, Tenant shall look solely to Landlord's successor in
interest in and to this Lease with respect to liability originating on
and after such effective date. This Lease shall not be affected by any
such sale, conveyance or assignment, and Tenant shall immediately and
automatically attorn to Landlord's successor in interest thereunder. Such
attornment shall be effective and self-operative upon Landlord's sale,
conveyance or assignment of the Building, without the execution of any
further instruments or the undertaking of any further acts.
17.03 Subordination. This Lease is and shall be subject and subordinate in all
respects to all mortgages or deeds of trust and assignments of leases and
rents now or hereafter encumbering the Building or Land and to all
extensions, amendments, modifications, supplements, consolidations,
extensions, revisions and replacements thereof and to all advances made
or hereafter made upon the security thereof. However, a holder of any
mortgage or deed of trust may elect to subordinate, in whole or in part,
by an instrument in form and substance satisfactory to the holder, the
mortgage or deed of trust to this Lease.
17.04 Attornment. Subject to Article 17.05, if the Building is transferred to
any person or entity (herein called "Purchaser") by reason of foreclosure
or other proceedings for
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enforcement of a mortgage or deed of trust, or by delivery of a deed in
lieu of such foreclosure or other proceedings, or if the rights under any
assignment of leases and rents are exercised by the holder thereof,
Tenant shall immediately and automatically attorn to Purchaser or the
holder of the assignment of leases and rents, as the case may be.
17.05 Non-disturbance. No attornment under Article 17.04 shall be effective
unless (and until):
(a) the holder of the mortgage or deed of trust has subordinated, in
whole or in part, the mortgage or deed of trust to this Lease, or
(b) Purchaser delivers to Tenant a written undertaking, in a form
satisfactory to Purchaser, binding upon Purchaser and enforceable by
and for the benefit of Tenant under applicable law, that this Lease
and Tenant's rights hereunder shall continue undisturbed while
Tenant is not in default despite such enforcement proceedings and
transfer.
17.06 Effect of Attomment. Upon attomment under Article 17.04, this Lease shall
continue in full force and effect as a direct lease between Purchaser (or
the holder of the assignment of leases and rents if applicable) and
Tenant, upon all of the same terms, conditions and covenants as are set
forth in this Lease except that, after such attomment, Purchaser (or the
holder of the assignment of leases and rents if applicable) shall not be
(a) subject to any offsets or defenses which Tenant might have against
Landlord, or
(b) bound by any prepayment by Tenant of more than one month's
installment of Rent, or by any previous modification of this Lease,
unless such prepayment or modification shall have been approved in
writing by, in the case of a transfer in connection with a
foreclosure, deed in lieu of foreclosure or other proceedings
relating to any such mortgage or deed of trust, the mortgagee of
Landlord's interest in the Land or Building, by Purchaser or by any
predecessor in interest except Landlord or, in the case of the
exercise of the rights under any assignment of leases and rents, by
the holder of such assignment of leases and rents, or
(c) subject to the obligations hereunder except, in the case of a
transfer in connection with a foreclosure, deed in lieu of
foreclosure or other proceedings relating to any such mortgage or
deed of trust, during the period of Purchasees ownership of the
Building or Land, or
(d) liable for any previous act or omission by Landlord under this
Lease, or
(e) obligated with respect to any security deposit under this Lease
unless such security deposit has been physically delivered to
Purchaser or holder of any assignment of leases and rents, as the
case may be, or
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(f) bound or liable under any provisions in this Lease whereby Landlord
assumed the obligations of Tenant covering space in other buildings.
17.07 Execution of Instruments. The subordination and attomment provisions of
this Article 17.00 shall be self-operating and (except as specifically
required in Article 17.03) no further instrument shall be necessary.
Nevertheless Tenant, on request by and without cost to Landlord or any
successor in interest, shall execute and deliver any and all instruments
further evidencing such subordination and (where applicable hereunder)
aftomment.
ARTICLE 18.00 NOTICES, ACKNOWLEDGEMENTS, AUTHORITIES FOR
ACTION
18.01 Notices. All notices, demands, billings, consents or other instruments or
communications provided for under this Lease shall be in writing, signed
by the party giving the same, and shall be deemed property given and
received (a) when actually hand delivered and received or (b) three
business days after placement in the United States mail, if sent by
registered or certified mail, postage prepaid, or (c) the business day
following delivery to an overnight carrier service, if such courier
service obtains a written acknowledgement of receipt, addressed, if to
Tenant, at the Premises (whether or not Tenant has departed from, vacated
or abandoned the same) and, if to Landlord, at the address set forth in
the first paragraph of this Lease, or at such other address as either
party may notify the other of in writing in the manner provided in this
Article 18.01.
18.02 Acknowledgements. Tenant shall at any time and from time to time, within
ten (10) days after Landlord's written request, execute, acknowledge and
deliver a written statement, with the form and substance of such notice
and the party or parties to whom it is addressed to be determined by
Landlord, ratifying this Lease and, except as otherwise noted by Tenant
in the statement, certifying as to the truth or untruth of the matters as
are set forth in such statement. Any such statement may be relied upon by
any prospective transferee or encumbrancer of all or any portion of the
Building or any assignee of any such persons. If Tenant fails to timely
deliver such statement, Tenant shall be deemed to have acknowledged, and
Tenant hereby appoints Landlord its attorney-in-fact to acknowledge a
statement to the effect, that this Lease is in full force and effect,
without modification except as may be represented by Landlord, and that
there are no uncured defaults in Landlord's performance.
18.03 Authorities for Action. Landlord may act in any matter provided for
herein by -its property manager, or any of its officers or general
partners and any other person who shall from time to time be designated
by Landlord by notice to Tenant. Tenant shall designate in writing one or
more persons to act on its behalf in any matter provided for herein and
may from time to time change, by notice to Landlord, such designation. In
the absence of any such designation, the person or persons executing this
Lease for
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Tenant shall be deemed to be authorized to act on behalf of Tenant in any
matter provided for herein.
ARTICLE 19.00 TENANTS DEFAULT AND LANDLORD'S REMEDIES
19.01 Interest and Costs. Tenant shall pay monthly to Landlord interest at a
rate equal to the lesser of 2% per month or the maximum rate permitted by
applicable law, on all Rent required to be paid hereunder from the due
date for payment thereof until the same is fully paid and satisfied.
Tenant shall indemnify Landlord against all costs and charges (including
legal fees) lawfully and reasonably incurred in enforcing payment
thereof, and in obtaining possession of the Premises after default of
Tenant or upon expiration or earlier termination of the Term of this
Lease, or in enforcing any covenant, proviso or agreement of Tenant
herein contained.
19.02 Events of Default. Each of the following events will constitute a
material breach by Tenant and an "Event of Default" under this Lease:
(a) Failure to Pay Rent. Tenant fails to pay Annual Rent, Occupancy
Costs or any Other Charges payable by Tenant under the terms of this
Lease when due, and such failure continues for five (5) days after
written notice from Landlord to Tenant of such failure; provided
that with respect to Annual Rent and Occupancy Costs, Tenant will be
entitled to only two (2) notices of such failure during any calendar
year and if, after two (2) such notices are given in any calendar
year, Tenant fails, during such calendar year, to pay any such
amounts when due, such failure will constitute an Event of Default
without further notice by Landlord or additional cure period.
(b) Failure to Perform Other Obligations. Tenant breaches or fails to
comply with any other provision of this Lease applicable to Tenant,
and such breach or noncompliance continues for a period of ten (10)
days after notice by Landlord to Tenant; or, if such breach or
noncompliance cannot be reasonably cured within such ten (10) day
period, Tenant does not in good faith commence to cure such breach
or noncompliance within such ten (10) day period, or does not
diligently complete such cure within thirty (30) days after such
notice from Landlord. However, if such breach or noncompliance
causes or results in (i) a dangerous condition on the Premises or
Building, (ii) any insurance coverage carried by Landlord or Tenant
with respect to the Premises or Building being jeopardized, or (iii)
a material disturbance to another tenant, then an Event of Default
will exist if such breach or noncompliance is not cured as soon as
reasonably possible after notice by Landlord to Tenant, and in any
event is not cured within twenty (20) days after such notice. For
purposes of this Article 19.02(b), financial inability will not be
deemed a reasonable ground for failure to immediately cure any
breach of, or failure to comply with, the provisions of this Lease.
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(c) Abandonment of Premises. Tenant abandons all of the Premises, as
defined in Article 5.03.
(d) Transfer of Interest Without Consent. Tenant's interest under this
Lease or in the Premises is transferred or passes to, or devolves
upon, any other party in violat@ of Article 11.00.
(e) Execution and Attachment Against Tenant. Tenant's interest under
this Lease or in the Premises is taken upon execution or by other
process of law directed against Tenant, or is subject to any
attachment by any creditor or claimant against Tenant and such
attachment is not discharged or disposed of within ten (10) days
after levy.
(f) Bankruptcy or Related Proceedings. Tenant files a petition in
bankruptcy or insolvency, or for reorganization or arrangement under
any bankruptcy or insolvency laws, or voluntarily takes advantage of
any such laws by answer or otherwise, or dissolves or makes an
assignment for the benefit of creditors, or involuntary proceedings
under any such laws or for the dissolution of Tenant are instituted
against Tenant, or a receiver or trustee is appointed for the
Premises or for all or substantially all of Tenant's property, and
such proceedings are not dismissed or such receivership or
trusteeship vacated within sixty (60) days after such institution or
appointment.
19.03 Landlord's Remedies. Time is of the essence. If any Event of Default
occurs, Landlord will have the right, at Landlord's election, then or at
any later time, to exercise any one or more of the remedies described
below. Exercise of any of such remedies will not prevent the concurrent
or subsequent exercise for any other remedy provided for in this Lease or
otherwise available to Landlord at law or in equity.
(a) Cure by Landlord. Landlord may, at Landlord's option but without
obligation to do so, and without releasing Tenant from any
obligations under this Lease, make any payment or take any action as
Landlord deems necessary or desirable to cure any Event of Default
in such manner and to such extent as Landlord deems necessary or
desirable. Landlord may do so without additional demand on, or
additional written notice to Tenant and without giving Tenant an
additional opportunity to cure such an Event of Default. Tenant
covenants and agrees to pay Landlord, upon demand, all advances,
costs and expenses of Landlord in connection with making any such
payment or taking any such action, including reasonable attorney's
fees, together with interest at the rate described in Article 19.01
from the date of payment of any such advances, costs and expenses by
Landlord.
(b) Termination of Lease and Damages. Landlord may terminate this Lease,
effective at such time as may be specified by written notice to
Tenant, and demand (and, if
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such demand is refused, recover) possession of the Premises from
Tenant. Tenant will remain liable to Landlord for damages in an
amount equal to the Annual Rent, Occupancy Costs and Other Charges
which would have been owing by Tenant for the balance of the Term
had this Lease not been terminated, less the net proceeds, if any,
of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all Landlord's expenses in connection
with such recovery of possession or reletting. Landlord will be
entitled to collect and receive such damages from Tenant on the days
on which the Annual Rent, Occupancy Costs and Other Charges would
have been payable if this Lease had not been terminated.
Alternatively, at Landlord's option, Landlord will be entitled to
recover from Tenant, as damages for loss of the bargain and not as a
penalty, an aggregate sum equal to (i) all unpaid Annual Rent,
Occupancy Costs and Other Charges for any period prior to the
termination date of this Lease (including interest from the due date
to the date of the award at the rate described in Article 19.01),
plus any other sum of money and damages owed by Tenant to Landlord
for events or actions occurring prior to the termination date; plus
(ii) the present value at the time of termination (calculated at the
Prime Rate of the Norwest Bank Denver, N.A. or its successor on the
termination date) of the amount, if any, by which (A) the aggregate
of the Annual Rent, Occupancy Costs, and all Other Charges- payable
by Tenant under this Lease that would have accrued for the balance
the Term after termination (with respect to Occupancy Costs, such
aggregate will be calculated by assuming that Occupancy Costs for
the Fiscal Year in which termination occurs and for each subsequent
Fiscal Year remaining in the Term of this Lease had not been
terminated will increase by 8% per year over the amount of Occupancy
Costs for the prior Fiscal Year), exceeds (B) the amount of such
Annual Rent, Occupancy Costs and Other Charges which Landlord will
receive for the remainder of the Term from any reletting of the
Premises occurring prior to the date of the award, or if the
Premises have not been relet prior to the date of the award the
amount, if any, of such Annual Rent, Occupancy Costs and Other
Charges which could reasonably be recovered by reletting the
Premises for the remainder of the Term at the then-current fair
rental value, in either case taking into consideration loss of Rent
while finding a new tenant, tenant improvements and rent abatements
necessary to secure a new tenant, leasing brokers' commissions and
other costs which Landlord has incurred or might incur in leasing
the Premises to new tenant; plus (iii) interest on the amount
described in (ii) above from the termination date to the date of the
award at the rate described in Article 19.01.
(c) Repossession and Reletting. Landlord may reenter and take possession
of all or any part of the Premises, without additional demand or
notice, and repossess the same and expel Tenant and any party
claiming by, through or under Tenant, and remove the effects of both
using such force for such purposes as may be necessary, without
being liable for prosecution for such action or being deemed guilty
of any manner of trespass, and without prejudice to any remedies for
arrears of Rent or right to bring any proceeding for breach of
covenants or conditions. No such. reentry or taking possession of
the Premises by Landlord will be construed as an election by
Landlord to terminate this Lease unless a written notice of such
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intention is given to Tenant. No notice from Landlord or notice
given under a forcible entry and detainer statute or similar laws
will constitute an election by Landlord to terminate this Lease
unless such notice specifically so states. Landlord reserves the
right, following any reentry or reletting, to exercise its right to
terminate this Lease by giving Tenant such written notice, in which
event the Lease will terminate as specified in such notice. After
recovering possession of the Premises, Landlord may, from time to
time, but will not be obligated to, relet all or any part of the
Premises for Tenant's account, for such term or terms and on such
conditions and other terms as Landlord, in its discretion,
determines. Landlord may make such repairs, alterations or
improvements as Landlord considers appropriate to accomplish such
reletting, and Tenant will reimburse Landlord upon demand for all
costs and expenses, including attorneys' fees, which Landlord may
incur in connection with such reletting. Landlord may collect and
receive the rents for such reletting but Landlord will in no way be
responsible or liable for any failure to relet the Premises or for
any inability to collect any rent due upon such reletting.
Regardless of Landlord's recovery of possession of the Premises,
Tenant will continue to pay on the dates specified in this Lease,
the Annual Rent, Occupancy Costs, and Other Charges which would be
payable if such repossession had not occurred, less a credit for the
net amounts, if any, actually received by Landlord through any
reletting of the Premises. Alternatively, at Landlord's option,
Landlord will be entitled to recover from Tenant, as damages for
loss of the bargain and not as a penalty, an aggregate sum equal to
(i) all unpaid Annual Rent, Occupancy Costs and Other Charges for
any period prior to the repossession date (including interest from
the due date to the date of the award at the rate described in
Article 19.01), plus any other sum of money and damages owed by
Tenant to Landlord for events or actions occurring prior to the
repossession date; plus (ii) the present value at the time of
repossession (calculated at the Prime Rate of the Norwest Bank
Denver, N. A. or its successor on the repossession date) of the
amount, if any, by which (A) the aggregate of the Annual Rent,
Occupancy Costs and all Other Charges payable by Tenant-under this
Lease that would have accrued for the balance of the Term after
repossession (with respect to Occupancy Costs, such aggregate will
be calculated by assuming that Occupancy Costs for the Fiscal Year
in which repossession occurs and for each subsequent Fiscal Year
remaining in the Term if Landlord had not repossessed the Premises
will increase by 8% per year over the amount of Occupancy Costs for
the prior Fiscal Year), exceeds (B) the amount of such Annual Rent,
Occupancy Costs and Other Charges which Landlord will receive for
the remainder of the Term from any reletting of the Premises
occurring prior to the date of the award, the amount, if any, of
such Annual Rent, Occupancy Costs and Other Charges which could
reasonably be recovered by reletting the Premises for the remainder
of the Term at the then-current fair rental value, in either case
taking into consideration loss of Rent while finding a new tenant,
tenant improvements and rent abatements necessary to secure a new
tenant, leasing brokers' commissions and other costs which Landlord
has incurred or might incur in leasing the Premises to a new tenant;
plus (iii) interest on the amount described in (ii) above from the
repossession date to the date of the award at the rate described in
Article 19.01.
(d) Bankruptcy Relief. Nothing contained in this Lease will limit or
prejudice Landlord's right to prove and obtain as liquidated damages
in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding, an amount
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equal to the maximum allowable by any laws governing such proceeding
in effect at the time when such damages are to be proved, whether or
not such amount be greater, equal or less than the amounts
recoverable, either as damages or Rent, under this Lease.
19.04 Effect on Subleases. Whether or not Landlord elects to terminate this
Lease on account of any default by Tenant, Landlord shall have the right
to terminate any and all subleases, licenses, concessions or other
consensual arrangements for possession entered into by Tenant and
affecting the Premises or may, in Landlord's sole discretion, succeed to
Tenant's interest in such subleases, licenses, concessions or
arrangements. In the event of Landlord's election to succeed to Tenant's
interest in any such subleases, licenses, concessions or arrangements,
Tenant shall, as of the date of notice by Landlord of such election, have
no further right to or interest in the rent or other consideration
receivable thereunder.
ARTICLE 20.00 BANKRUPTCY
20.01 Bankruptcy.
(a) In the event a petition is filed by or against Tenant under the
Bankruptcy Code, Tenant, as debtor and debtor in possession, and any
trustee who may be appointed, agree to adequately protect Landlord
as follows:
(i) to pay monthly in advance on the first day of each month as
reasonable compensation for use and occupancy of the Premises
an amount equal to all Rent due pursuant to this Lease; and
(ii) to perform each and every obligation of Tenant under this
Lease until such time as this Lease is either rejected or
assumed by order of a court of competent jurisdiction; and
(iii) to determine within sixty (60) days after the filing of such
petition whether to assume or reject this lease; and
(iv) to give Landlord at least thirty (30) days prior written
notice, unless a shorter notice period is agreed to in writing
by the parties, of any proceeding relating to any assumption
of this Lease; and
(v) to give at least thirty (30) days prior written notice of any
vacation or abandonment (including any vacation or abandonment
specifically described in Article 5.03) of the Premises, any
such vacation or abandonment to be deemed a rejection of this
Lease; and
(vi) to do all other things of benefit to Landlord otherwise
required under the Bankruptcy Code.
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Tenant shall be deemed to have rejected this Lease in the event of the
failure to comply wit any of the above.
(b) If Tenant or a trustee elects to assume this Lease subsequent to the
filing of a petition under the Bankruptcy Code, Tenant, as debtor and as
debtor in possession, and any trustee who may be appointed agree as
follows:
to cure each and every existing breach by Tenant within not more
than ninety (90) days of assumption of this Lease; and
(ii) to compensate Landlord for any actual pecuniary loss resulting from
any existing breach, including without limitation, Landlord's
reasonable costs, expenses and attorney's fees incurred as a result
of the breach, as determined by a court of competent jurisdiction,
within ninety (90) days of assumption of this Lease; and
(iii) in the event of an existing breach, to provide adequate assurance
of Tenant's future performance, including without limitation:
(A) the deposit of an additional sum equal to three (3) months'
Rent to be held (without any allowance for interest thereon)
to secure Tenant's obligations under the Lease; and
(B) the production to Landlord of written cumentation establishing
that Tenant has sufficient present and anticipated financial
ability to perform each and every obligation of Tenant under
this Lease; and
(C) assurances, in a form acceptable to Landlord, as may be
required under any applicable provision of the Bankruptcy
Code; and
(iv) the assumption will not breach any provision of this Lease; and
(v) the assumption will be subject to all of the provisions of this
Lease unless the prior written consent of Landlord is obtained; and
(vi) the prior written consent to the assumption of any mortgagee or
ground lessor to which this Lease has been assigned as collateral
security is obtained.
(c) If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code to any person or
entity who shall have made a bona fide offer to accept any
assignment of this lease on terms acceptable to Tenant, then notice
of such proposed assignment, setting forth:
the name and address of such person,
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(ii) all the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such
person's future performance under the Lease, including
without limitation, the assurances referred to in any
applicable provision of the Bankruptcy Code,
shall be given to Landlord by Tenant no later than twenty (20)
days after receipt by Tenant, but in any event no later than ten
(10) days prior to the date that Tenant shall make application to
a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by
notice to Tenant given at any time prior to the effective date of
such proposed assignment, to accept an assignment of this Lease
upon the same terms and conditions and for the same consideration,
if any, as the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this
Lease. The adequate assurance to be provided Landlord to assure
the assignee's future performance under the Lease shall include
without limitation:
(A) the deposit of a sum equal to three (3) months' Rent to be
held (without any allowance for interest thereon) as security
for performance hereunder; and
(B) a written demonstration that the assignee meets all
reasonable financial and other criteria of Landlord as did
Tenant and its business at the time of execution of this
Lease, including the production of the most recent audited
financial statement of the assignee prepared by a certified
public accountant; and
(C) the assignee's use of the Premises will be in compliance with
the terms of Article 5.00 of this Lease; and
(D) assurances, in a form acceptable to Landlord, as to all
matters identified in any applicable provision of the
Bankruptcy Code.
ARTICLE 21.00 MISCELLANEOUS
21.01 Relationship of Parties. Nothing contained in this Lease shall create any
relationship between the parties hereto other than that of Landlord and
Tenant, and it is acknowledged and agreed that Landlord does not in any
way or for any purpose become a partner of Tenant in the conduct of its
business, or a joint venture or a member of a joint or common enterprise
with Tenant.
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21.02 Consent Not Unreasonably Withheld. Except as otherwise specifically
provided, whenever consent or approval of Landlord or Tenant is
required under the terms of this Lease, such consent or approval
shall not be unreasonably withheld or delayed. Tenant's sole remedy,
4f Landlord unreasonably withholds or delays consent or approval,
shall be an action for specific performance, and Landlord shall not
be liable for damages. If either party withholds any consent or
approval, such party shall on written request deliver to the other
party a written statement giving the reasons therefor.
21.03 Name of Building and Project. Landlord shall have the right in its
sole discretion after thirty (30) days notice to Tenant, to change
the name, number or designation of the Building or the Project (if
any), or both, during the Term without liability to Tenant.
21.04 Applicable Law and Construction. This Lease shall be governed by and
construed under the laws of the jurisdiction in which the Building is
located, and its provisions shall be construed as a whole according
to their common meaning and, because this Lease has been negotiated
by both Landlord and Tenant, shall not be interpreted strictly for or
against Landlord or Tenant. The words Landlord and Tenant shall
include the plural as well as the singular. If this Lease is executed
by more than one tenant, Tenant's obligations hereunder shall be
joint and several obligations of such executing tenants. Time is of
the essence of this Lease and each of its provisions. The captions of
the Articles are included for convenience only, and shall have no
effect upon the construction or interpretation of this Lease.
21.05 Entire Agreement. This Lease contains the entire agreement between
the parties hereto with respect to the subject matter of this Lease
and shall supersede all prior agreements or understandings between
Landlord and Tenant with respect to the subject matter hereof. Tenant
acknowledges and agrees that it has not relied upon any statement,
representation, agreement or warranty except such as are set out in
this Lease.
21.06 Offer Irrevocable. Tenant hereby offers to lease from Landlord the
Premises under the terms and conditions of this Lease. Landlord shall
not be deemed to have made an offer to Tenant by preparing this Lease
and no agreement respecting the Premises shall arise or exist between
the parties except through the making of this offer by Tenant and the
acceptance by Landlord by delivering to Tenant a copy hereof which
has been executed by Landlord. This offer shall be irrevocable and
open for acceptance by Landlord until 5:00 p.m. on the sixtieth
(60th) day after execution hereof by Tenant, and if not accepted by
then may be withdrawn.
21.07 Amendment or Modification. Except to the extent as may otherwise
specifically be provided in this Lease, no amendment, modification,
or supplement to this Lease shall be valid or binding unless set out
in writing and executed by the parties hereto in the same manner as
the execution of this Lease.
21.08 Construed Covenants and Severability. All of the provisions of this
Lease are to be construed as covenants and agreements as though the
words imparting such covenants and agreements were used in each
separate Article hereof. Should any provision of this
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Lease be or become invalid, void, illegal or not enforceable, it
shall be considered separate and severable from the Lease and the
remaining provisions shall remain in force and be binding upon the
parties hereto as though such provision had not been included.
21.09 No Implied Surrender or Waiver. No provisions of this Lease shall be
deemed to have been waived by Landlord unless such waiver is in
writing signed by Landlord. Landlord's waiver of a breach of any term
or condition of this Lease shall not prevent a subsequent act, which
would have originally constituted a breach, from having all the force
and effect of any original breach. Landlord's receipt of Rent with
knowledge of a breach by Tenant of any term or condition of this
Lease shall not be deemed a waiver of such breach. Landlord's failure
to enforce against Tenant or any other tenant in the Building any of
the Rules and Regulations made under Article 14.00 shall not be
deemed a waiver of such Rules and Regulations. No act or thing done
by Landlord, its agents or employees during the Term shall be deemed
an acceptance of a surrender of the Premises, and no agreement to
accept a surrender of the Premises shall be valid, unless in writing
signed by Landlord. Neither the delivery of keys to nor the
acceptance thereof by any of the Landlord's agents or employees, nor
the taking possession of the Premises by Landlord after any vacation
thereof by Tenant, shall operate as a termination of this Lease or a
surrender of the Premises. No payment by Tenant, or receipt by
Landlord, of a lesser amount than the Rent due hereunder shall be
deemed to be other than on account of the earliest stipulated Rent,
nor shall any endorsement or statement on any check or any letter
accompanying any check, or payment as Rent, be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or
pursue any other remedy available to Landlord.
21.10 Successors Bound. Except as otherwise specifically provided, the
covenants, terms and conditions contained in this Lease shall apply
to and bind the heirs, successors, executors, administrators and
assigns of the parties hereto.
21.11 Relocation - Substitute Premises. Landlord shall have the right at
any time, upon reasonable notice to Tenant (the "Relocation Notice"),
to relocate Tenant from all or, in accordance with this paragraph, a
portion, of the Premises to different premises in the Project (the
"Substitute Premises"). If Landlord elects to relocate only a
portion, rather than all, of the Premises, and prior to the proposed
relocation, no portion of the Premises to be relocated is contiguous
to any portion of the Premises not to be relocated, then the
Substitute Premises may be located in such part of the Project as
Landlord may elect in its sole discretion. For purposes of this
paragraph, "contiguous" shall mean that the portion of the Premises
to be relocated and the portion of the Premises not to be relocated
are (a) adjacent to each other within the same floor or (b) located
on adjacent floors which are connected by an internal staircase
(other than the fire staircase). The Substitute Premises shall be of
approximately the same size and comparable finish as the Premises or
the portion thereof to be relocated. Landlord will reimburse Tenant
for all reasonable out-of-pocket expenses incurred by Tenant as a
result of the relocation. Tenant shall relocate to the Substitute
Premises within the time set forth in the Relocation Notice. On the
date on which Tenant takes
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possession of the Substitute Premises, this Lease shall be deemed
amended to provide for the Substitute Premises, and all other terms
and conditions of the Lease shall remain in full force and effect.
Tenant agrees to execute any document reasonably required by Landlord
to reflect the relocation to the Substitute Premises.
If Landlord exercises its right to relocate Tenant during the last
year of the initial Term and the "Substitute Premises" is not
reasonably acceptable to Tenant, then Tenant may elect to cancel this
Lease by giving Landlord written notice within fifteen (15) days of
receipt of Landlord's Relocation Notice. In such instance, the
termination date shall be the effective date of relocation as set
forth in Landlord's Relocation Notice and other than Rent due and
payable which accrues during such period prior to the termination
date, there shall be no termination fee.
21.12 Lease Approval. The execution of this Lease shall be subject to the
approval of Landlord's Management Committee and, if required, by
Landlord's lender for the Building.
21.13 Nondiscrimination. Tenant covenants that this Lease is made and
accepted upon and subject to the condition that there shall be no
discrimination against or segregation of any person or group of
persons on account of sex, marital status, race, color, creed,
religion, national origin or ancestry. In the leasing, subleasing,
transferring, use or enjoyment of the Premises nor shall Tenant
itself, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, sublessees, subtenants or vendees in
the Premises.
21.14 Deposit. A deposit of $15,000 payable to Landlord is delivered
herewith to be held without accruing interest, at Landlord's option
in a separate account or commingled with other funds to be held by
Landlord through the term of the Lease. If Tenant fails to comply
with the provisions hereof, such deposit shall be retained by
Landlord in payment for its expenses or damages or any amounts
payable under the Lease, but such retention shall not limit or
preclude Landlord's right of action for damages or other remedies for
breach of the provisions of this Lease.
21.15 (INTENTIONALLY DELETED]
21.16 Personal Liability. The obligations of Landlord under this Lease do
not constitute personal obligations of the Landlord or the individual
partners, members, directors, officers, agents or shareholders of
Landlord, disclosed or undisclosed. Tenant shall look solely to
Landlord's estate in the Land and Building for satisfaction of any
liability under or in respect of this Lease or for the satisfaction
of Tenants remedies for the collection of a judgment (or other legal
process) requiring the payment of money by Landlord and no other
property and assets of such Landlord or any partner, member, officer,
director, agent or shareholder, disclosed or undisclosed, shall be
subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or in respect
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of this Lease, the relationship of Landlord and Tenant under this
Lease or Tenant's use of the Land or Building or the use or occupancy
of the Premises .
21.17 Brokerage Commission. Landlord and Tenant each agree to indemnify and
hold the other harmless from and against all broker's or other real
estate commissions or fees incurred by the indemnifying party or
arising out of its activities with respect to the Lease. The
provisions of this Article 21.17 shall survive the expiration or
sooner termination of this Lease. Landlord and Tenant each hereby
represent and warrant to the other that it does not recognize and has
not used any broker other than Corporate Facility Consulting, Inc.
("Broker") with respect to this Lease and the negotiation hereof.
Landlord hereby agrees to pay Broker a commission per a separate
agreement between Landlord and Broker.
21.18 Unavoidable Delay. As used in this Lease, "Unavoidable Delay" means
fire, explosion and other casualties; war, invasion, insurrection,
riot, sabotage, and malicious mischief; strikes, work stoppages or
slowdowns and lockouts; condemnation; rules, regulations or orders of
civil or military or naval authorities adopted after the date hereof;
impossibility of or delay in obtaining materials or reasonable
substitutes from suppliers for reasons other than unavailability of
funds (excluding any special materials selected by Tenant which are
not generally available or for which there are not reasonable
substitutes); or any other cause, the occurrence of which, or the
extent and duration of the occurrence of which, is not within the
reasonable control of the party in question. An Unavoidable Delay
shall exist only for the period in which it is not within the
reasonable control of the party in question to prevent, control or
correct such event. Except as otherwise provided in this Lease, (a)
if Landlord or Tenant shall, due to Unavoidable Delay, fail
punctually to perform any obligation on its part to be performed
under this Lease, then such failure shall be excused and not be a
breach of this Lease by the party in question, but only to the extent
caused by Unavoidable Delay: or (b) if any right or option of either
party to take any action under or with respect to this Lease is
conditioned upon the same being exercised within any prescribed
period of time or some specified date, then such prescribed period of
time and such specified date shall be deemed to be extended or
delayed, as the case may be, for a period equal to the period of the
Unavoidable Delay. Notwithstanding the foregoing, Unavoidable Delay
shall not be applicable to determining the date of commencement of,
or the continuance of, Tenant's obligation to pay Rent or its
obligations to pay any other sums, moneys, costs, charges or expenses
required to be paid by Tenant hereunder (whether or not Tenant's Work
is thereby delayed beyond the Construction Period) or to the date by
which Tenant must exercise any right or option under this Lease,
including without limitation to terminate this Lease or to extend the
Term.
21.19 Hazardous Materials. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any
biologically or chemically active or other hazardous substances, or
materials on or about the Premises or any other portion of the
Project, nor shall Tenant allow the storage or use of such substances
or materials on or about the Premises or any other portion of the
Project, nor allow to be brought into the Premises or any other
portion of the Project any such materials or substances. Without
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limitation, hazardous substances and materials shall include those
described in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Resource Conservation and Recovery
Act, the Superfund Amendments and Reauthorization Act of 1986, the
Occupational Safety and Health Act, the Clean Water Act, any
amendments to such Acts, and any federal, state or municipal laws,
ordinances, regulations or common law which may now or hereafter
impose liability on Landlord with respect to hazardous substances.
Tenant will be solely responsible for and will defend, indemnify and
hold Landlord, its agents and employees harmless from and against all
claims, costs and liabilities, including attorneys' fees, court
costs, and other expenses of litigation (i) arising out of or in
connection with any breach of this Article, or (ii) arising out of or
in connection with the removal, clean-up and restoration work and
materials necessary to return the Premises and the Project and any
other property of whatever nature located therein to their condition
existing prior to the introduction of hazardous materials in or about
the Premises or Project. If any lender or governmental agency shall
ever require testing to ascertain whether or not there has been any
hazardous materials on or about the Premises (or, as a result of
Tenant's actions, on or about other portions of the Project), then
the costs thereof shall be reimbursed by Tenant to Landlord upon
demand additional charges. In addition, Tenant shall execute
affidavits, representations and the like from time to time at
Landlord's request concerning Tenant's knowledge and belief regarding
the presence of hazardous substances or materials on the Premises.
The within covenants and indemnity shall survive the expiration or
earlier termination of the Term.
21.20 Authorization. Tenant is a corporation or partnership, each
individual executing this Lease on behalf of Tenant hereby covenants
and warrants that Tenant is, as applicable, a duly qualified
corporation or partnership authorized and/or qualified to do business
in the state in which the Land is located and that each such
individual is, as applicable, an officer or partner of Tenant duly
authorized and empowered to execute and deliver this Lease on behalf
of Tenant, all corporate or partnership action necessary thereto
having been duly taken.
21.21 No Air Rights. This Lease does not grant any easements or rights for
light, air or view. Any diminution or blockage of light, air or view
by any structure or condition now or later erected will not affect
this Lease or impose any liability on Landlord.
21.22 Recording; Confidentiality. Tenant will not record this Lease, or a
short form memorandum. Tenant agrees to keep the Lease terms,
provisions and conditions confidential and will not disclose them to
any other person. However, Tenant may disclose Lease terms,
provisions and conditions to Tenant's accountants, attorneys,
managing employees and others in privity with Tenant, as reasonably
necessary for Tenant's business purposes.
(Signature blocks on following page]
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IN WITNESS OF THIS LEASE, Landlord and Tenant have property executed it as of
the date set out on page one.
LANDLORD: TENANT:
BROOKFIELD REPUBLIC INC. INTEK INFORMATION, INC.
a Colorado corporation Colorado corporation
By:_____________________________ By: /s/ Timothy C. O'Crowley
----------------------------
Name:___________________________ Name: Timothy C. O'Crowley
--------------------------
Title:__________________________ Title: Chief Executive Officer
-------------------------
By:_____________________________ By _____________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
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EXHIBIT B
REPUBLIC PLAZA
OFFICE TOWER
DENVER,COLORADO
SECTION 1.00 WORDS AND PHRASES
1.01 Definitions In the Lease, including this Exhibit
(a) "Architect" means any firm of professional architects or
engineers that Landlord may from time to time engage for
preparation of construction drawings for the Building or for
general supervision of architectural and engineering aspects and
operations of the Building and includes any consultant or
consultants appointed by Landlord or by the firm of professional
architects or engineers Landlord engages as long as the
consultant or consultants act within the scope of their
appointment and specialty.
(b) "Building" means the building in which the Premises are located
currently known as Republic Plaza, being the 56 story office
tower located on the Land and forming part of the Project,
excluding those portions of the building (except entrance
lobbies, elevator cores and stairwells, vertical duct work and
mechanical systems, and structural supports) below street level
leased or designated for lease by Landlord to tenants for retail
or service stores but including those portions of the Project
leased or designated for lease by Landlord to tenants of that
building for storage, support and office parking facilities.
(c) "Common Areas" means at any time those portions of the Project
not leased or designated for lease to tenants that Landlord
provides for use in common by (or by the sublessees, agents,
employees, customers or licensees o@, Landlord, Tenant, and any
other tenants of the Project, whether or not those areas are
open to the general public, and includes any fixtures, chattels,
systems, decor, signs, facilities, or landscaping contained,
maintained or used in connection with those areas, and is deemed
to include any city sidewalks adjacent to the Land and any
pedestrian walkway system whether above or below grade, park, or
other facility open to the general public for which Landlord is
subject to obligations arising from the Land and Project.
(d) "Delivery Facilities" means those portions of the Common Areas
on or below street level from time to time designated by
Landlord as facilities to be used in common by Landlord, tenants
of the Project and others for purposes of loading, unloading,
delivery, dispatch and holding of merchandise, goods and
materials entering or leaving the Project, and giving vehicular
access to the Project.
(e) "Land" means those lands in the City and County of Denver, State
of Colorado, legally described as: Lots 1 through 22 and Lots 29
through 32, Block 209 EAST @ENVER, City and County of Denver,
State of Colorado: EXCEPT that portion of said Lots 21 and 22
described as follows:
commencing at the most northerly comer of said Lot 22; thence
southwesterly along the northwesterly line of said Lot 22, a
distance of 1.00 foot to the True Point of Beginning; thence
southeasterly and parallel with the northeasterly line of said
Lot 22 to a point on the
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southeasterly line of said Lot 22, from which the most easterly
comer of said Lot 22 lies northeasterly 1.00 foot distant;
thence southwesterly along the southeasterly line of said Lot
22, a distance of 16.00 feet; thence northwesterly, 17.00 feet
distant and parallel with the northeasterly line of said Lot 22,
a distance of 65.00 feet; thence westerly to a point that lies
95.00 feet northwesterly by perpendicular measurement from the
southeasterly line of said Lot 21 and also lies 36.00 feet
southwesterly by perpendicular measurement from the
northeasterly line of said Lot 22; thence northwesterly, 36.00
feet distant and parallel with the northeasterly line Of said
Lot 22 to a point on the northwesterly line of said Lot 21;
thence northeasterly along the northwesterly lines of said Lot
21 and Lot 22, a distance of 35.00 feet to the True Point of
Beginning.
AND EXCEPT the northeasterly 1 foot of Lot 22.
TOGETHER WITH that portion of the vacated alley adjoining said
Lots 12 through 21 as described in Ordinance No. 360, Series of
1981, recorded on July 20, 1981 in Book 2415 at page 548 of the
records of the City and County of Denver, State of Colorado;
AND TOGETHER WITH all rights in and to any licenses, permits or
easements granted in favor of the development and use of the
Land;
and shall be deemed to include additional land in which Landlord
has an interest from time to time which is contiguous to the
Land (or contiguous to a public street that is contiguous to the
Land) and which Landlord has improved for use in connection with
the Land, and shall be deemed to exclude any parts of the Land
which are transferred from time to time.
"Project" means the Land and those developments and improvements
in which Landlord has an interest from time to time and which
are located on the Land, including the Building and Retail
Building.
(g) "Rentable Components" means the Building and the Retail
Building.
(h) "Retail Building" means the 4 level building located on the Land
at the comer of Sixteenth Street and Court Place and forming
part of the Project, excluding those portions of that building
below the first level below street level (except entrance
lobbies, elevator cores, stairwells, vertical duct work,
mechanical systems and structural supports), but including those
portions of the Project leased or designated for lease by
Landlord to tenants for retail or service stores and including
those portions of the Project leased or designated for lease by
Landlord to tenants of that building for storage, support and
retail parking facilities.
"Section" means a section of this Exhibit B.
1.02 Normal Business Hours Except as otherwise specifically provided in the
Lease, normal business hours for the Building shall be from 7:30 a.m.
to 6:00 p.m., Monday through Friday of each week, and 9:00 a.m. to 2:00
p.m. on Saturday, excluding days which are legal or statutory holidays
in the jurisdiction in which the Building is located, subject to change
by Landlord.
SECTION 2.00 DETERMINATION OF OCCUPANCY COSTS
2.01 Definitions In this Section 2.00
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(a) "Taxes" means the aggregate of all taxes, rates, charges,
levies, and assessments imposed by any governmental or quasi-
governmental or other taxing authority upon or in respect of
the Land and all improvements on the Land including any tax
imposed on the capital invested in the Land. In determining
Taxes, any income, profits or excess profits tax imposed upon
the income of Landlord and any other tax of a personal nature
charged or levied against the Landlord shall be excluded,
except to the extent that such is levied in lieu of taxes,
rates, charges, or assessments in respect of the Land or
improvements on the Land.
(b) "Tax Cost" means that portion of Taxes accruing in respect of
the calendar year in which the Fiscal Year begins multiplied
by a fraction the numerator of which is the rentable area of
the Building and the denominator of which is the aggregate of
the rentable area of the Rentable Components.
(c) "HVAC Cost" means a percentage of the costs attributable to
the Building in the Fiscal Year for the operation, repair and
maintenance of the systems for heating, ventilating and air
conditioning the Project, as established by Landlord from time
to time on a fair and equitable basis which reflects load and
hours of operation.
(d) "General Project Expense" means all net costs, charges and
expenses in respect of a Fiscal Year directly attributable to
the operation, repair and maintenance of the Project but not
attributable solely to the operation, repair and maintenance
of any of the Rentable Components.
(e) "Common Areas Expense" means all net costs, charges, and
expenses in respect of a Fiscal Year attributable to the
operation, repair, and maintenance of the Common Areas.
"Square Feet in the Building" means the aggregate of the rentable
areas of the Building calculated on a single tenancy floor basis
provided that if from time to time there is a material change in the
rentable space in the Building, Square Feet in the Building shall
from the effective date of the change until any further change mean
the number of square feet in the Building determined on completion of
that change on the basis set out in Section 3.00.
(g) "Square Feet in the Premises" means the aggregate of the
numbers of square feet set out in the definition of Premises
under Article 1.01 of the Lease.
2.02 "Occupancy Costs" Occupancy Costs for any Fiscal Year is an amount
equal to Operating Cost (as defined in Section 2.03) in respect of that
Fiscal Year multiplied by the Square Feet in the Premises.
2.03 Determination of Operating Cost "Operating Cost" means a per square
foot amount in respect of a Fiscal Year (calculated to the nearest
cent) established in accordance with generally accepted accounting
principles and confirmed in a certificate of Landlord, and equal to the
sum of the following costs, divided by the Square Feet in the Building:
(a) all net costs, charges, and expenses directly attributable to
the operation, repair and maintenance of the Building,
including without limitation Tax Cost and HVAC Cost, and all
indirect costs that are reasonably attributable to the
operation, repair and maintenance of the Building including
without limitation accounting, administrative and legal costs;
and
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(b) a portion of Common Areas Expense as established by Landlord
from time to time on a fair and equitable basis; and
(c) that proportion of General Project Expense which the rentable
area of the Building is of the aggregate rentable area of the
Rentable Components; and
(d) a charge for offsite management overhead equal to four percent
of Landlord's gross revenue from the Building in such Fiscal
Year, excluding revenues under this Section 2.03(d), but not
less than 15% of the total of Section 2.03 (a), (b) and (c).
For purposes of this Section 2.03(d), Rent shall be deemed to
be paid for 95% of the Square Feet in the Building at a rate
equal to the average Rent of the leases in place during the
Fiscal Year.
Operating Cost under this Section 2.03 includes all net expenses
property allocable to the Fiscal Year for any capital improvement or
structural repair incurred to reduce or limit increases in Operating
Cost, or required by Landlord's insurance carrier or by any change in
the laws, rules, regulations or orders of any governmental or quasi-
governmental authority having jurisdiction or expenses resulting from
normal repair or maintenance, which expenses shall be repaid in equal
monthly installments together with interest at applicable rates over
the lesser of the useful capital life of the capital improvement or
structural repair or the operational savings payback period.
2.04 Limitation on Operating Cost In determining Operating Cost, the cost
(if any) of the following shall be excluded except as specifically
provided in Section 2.03:
(a) major structural repairs to the Project;
(b) repair and replacement resulting. from inferior or deficient
workmanship, materials, or equipment in the initial
construction of the Project or for which Landlord is
reimbursed by insurers;
(c) ground or master lease rent (if any), depreciation,
amortization, and interest on and capital retirement of debt;
(d) operation, repair and maintenance which is attributable solely
to any of the Rentable Components of the Project other than
the Building; and
(e) tenant improvements and leasing commissions.
2.05 When Services Are Not Provided Notwithstanding Section 2.03, when and
if any service (such as janitorial service) which is normally provided
by Landlord to tenants of the Building in their premises:
(a) is not provided by Landlord in the Premises under the specific
terms of this Lease, then in determining Occupancy Costs for
Tenant, the cost of that service [except as it relates to
Common Areas, and to those areas of the Building from time to
time not designated for leasing or designated by Landlord for
use by or for the benefit of Tenant (or by or for the benefit
of the s' ublessees, agents, employees, customers or
licensees of Tenant) in common with all other tenants and
other persons in the Building] shall be excluded, and
(b) is not provided by Landlord in a significant portion of the
Building, then in determining Occupancy Costs (excluding Tax
Cost) for Tenant, the cost of that service shall be divided by
the difference between the Square Feet in the Building and the
number of square feet in
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in the Building in which Landlord does not provide such service,
determined on the basis set out in Section 3.01.
2.06 Partial Fiscal Year If the Term commences after the beginning of or
terminates before the end of a Fiscal Year, any amount payable by Tenant
or Landlord under Section 2.02 shall be adjusted proportionately.
2.07 Shared Facilities, Services and Utilities If any facilities, services or
utilities:
(a) for the operation, repair and maintenance of the Project are
provided from another building or other buildings owned or operated
by Landlord or any affiliate of Landlord or any agent of Landlord,
or
(b) for the operation, repair and maintenance of another building or
other buildings owned or operated by Landlord or any affiliate of
Landlord, or any agent of Landlord are provided from the Project,
the net costs, charges and expenses therefor shall, for the purposes of
Section 2.03, be allocated by Landlord between the Project and the other
building or buildings on a fair and equitable basis.
2.08 Adjustment of Operating Cost Landlord shall use reasonable efforts to
recover where circumstances so permit an equitable share of the cost of
operating and maintaining Common Areas from owners or occupants of
adjoining properties and shall credit any such recoveries to the gross
cost before determination of Operating Cost.
2.09 Separate Assessment of Taxes Notwithstanding Sections 2.02 and 2.03, if
Taxes for the Premises and all other portions of the Land and Building
leased or designated for lease to tenants are assessed separately for
each tenant by any competent authority:
(a) the amount payable in respect of the Premises shall be included in
Occupancy Costs, and
(b) the amount payable in respect of the Premises and on all other
portions of the Land and Building leased or designated for lease to
tenants shall be excluded from Taxes for the purpose of determining
Operating Cost.
SECTION 3.00 DETERMINATION OF SQUARE FEET IN THE PREMISES
3.01 Office Space - Single Tenancy Floors The number of square feet of office
space in the Premises on a single tenancy floor in the Building (if any)
shall be calculated from dimensioned Architect's drawings to the inside
face of the outside pane of the glass in the permanent exterior building
walls (whether or not the glass extends to the floor) or to the inside
finish of those walls if they contain no glass. It shall include all
space within exterior building walls except for stairs (other than stairs
exclusively serving a tenant occupying offices on more than one floor),
elevator shafts, flues, pipe shafts, vertical ducts, and other vertical
risers which penetrate the floor, and shall include a portion of
unallocated space in the Building as determined by Landlord. No deduction
shall be made for washrooms, janitorial closets, air conditioning rooms,
fan closets, or for electrical or telephone cupboards within and
servicing only that floor or servicing a single tenant on more than one
floor, or for any other rooms, corridors, or areas available to the
tenant on that floor for its use, furnishings or personnel, or for any
columns located wholly or partially within the
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space or for any enclosures around the periphery of the Building used for
the purpose of heating, ventilating or cooling.
3.02 Office Space - Multiple Tenancy Floors The number of square feet of
office space in the Premises on a multiple tenancy floor in the Building
(if any), shall be calculated from dimensioned Architect's drawings to
the inside face of the outside pane of the glass as described in Section
3.01 for a single tenancy floor, to the face of permanent interior walls
and to the center line of demising partitions and shall include a portion
of unallocated space in the Building as determined by Landlord. No
deduction shall be made for washrooms, janitorial closets, air
conditioning rooms, fan closets, or for electrical or telephone cupboards
within and servicing only that floor, or for any other rooms, corridors,
or areas available to the tenants on that floor for their use,
furnishings or personnel, or for any columns located wholly or partially
within the space, or for any enclosures around the periphery of the
Building used for the purpose of heating, ventilating or cooling.
3.03 Retail Space The number of square feet of retail space in the Premises
(if any), whether above or below grade, shall be calculated from
dimensioned Architect's drawings to the inside face of the outside pane
of the glass in the permanent exterior building walls (whether or not the
glass extends to the floor) or to the inside finish of those wall if they
contain no glass, to the opposite face of permanent interior walls, to
the center line of demising partitions, and to the center line of a pre-
determined lease line (usually referred to as the storefront line) in the
case of retail space facing onto either an interior or exterior common
public mall or corridor or onto a public street or lane. No deduction
shall be made for vestibules inside the permanent exterior building wall
or inside the pre-determined lease line, or for any columns located
wholly or partially within the rentable space.
SECTION 4.00 LOADING AND DELIVERY
4.01 The delivery and shipping of merchandise, supplies, fixtures and other
materials or goods of whatsoever nature to or from the Premises and all
loading, unloading, and handling thereof shall be done only at such
times, in such areas, by such means, and through such docks, entrances,
malls, elevators, and corridors, as are designated by Landlord.
4.02 Landlord accepts no liability and is hereby relieved and released by
Tenant in respect of the operation of the Delivery Facilities, or the
adequacy thereof, or of the acts or omissions of any person or persons
engaged in the operation thereof, or in the acceptance, holding,
handling, delivery or dispatch, or failure of any acceptance, holding,
handling or dispatch, or any error, negligence or delay therein.
4.03 Landlord may from time to time make and amend regulations for the orderly
and efficient operation of the Delivery Facilities, and may require the
payment of reasonable and equitable charges for delivery services and
demurrage provided by Landlord.
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EXHIBIT C
RULES AND REGULATIONS
1 Security. Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, any persons
occupying, using or entering the same, or any equipment, finishings or
contents thereof, and Tenant shall comply with Landlord's reasonable
requirements relative thereto.
2. Locks. Landlord may from time to time install and change locking mechanisms
on entrances to the Building, common areas thereof, and the Premises, and
(unless 24-hour security is provided by the Building) shall provide to
Tenant a reasonable number of keys and replacements therefor to meet the
bona fide requirements of Tenant. In these rules keys include any device
serving the same purpose. Tenant shall not add to or change existing
locking mechanisms on any door in or to the Premises without Landlord's
prior written consent. If with Landlord's consent, Tenant installs lock(s)
incompatible with the Building master locking system:
(a) Landlord, without abatement of Rent, shall be relieved of any
obligation under the Lease to provide any service to the affected
areas which require access thereto,
(b) Tenant shall indemnify Landlord against any expense as a result of
forced entry thereto which may be required in an emergency, and
(c) Tenant shall at the end of the Term and at Landlord's request remove
such lock(s) at Tenants expense.
3. Return of Keys. At the end of the Term, Tenant shall promptly return to
Landlord all keys for the Building and Premises which are in possession of
Tenant, its employees, agents or invitees.
4. Windows. Tenant shall observe Landlord's rules with respect to maintaining
window coverings at all windows in the Premises so that the Building
presents a uniform exterior appearance, and shall not install any window
shades, screens, drapes, covers or other materials on or at any window in
the Premises without Landlord's prior written consent. Tenant shall ensure
that window coverings are closed on all windows in the Premises while they
are exposed to the direct rays of the sun.
5. Repair, Maintenance, Alterations and Improvements. Tenant shall carry out
Tenant's repair, maintenance, alterations and improvements in the Premises
only during times agreed to in advance by Landlord and in a manner which
will not interfere with the rights of other tenants in the Building.
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6. Water/Restroom Fixtures. Tenant shall not use water or restroom fixtures
for any purpose for which they are not intended, nor shall water be wasted
by tampering with such fixtures. Any cost or damage resulting from such
misuse by Tenant shall be paid for by Tenant.
7. Personal Use of Premises. The Premises shall not be used or permitted to be
used for residential, lodging or sleeping purposes or for the storage of
personal effects or property not required for business purposes.
8. Heavy Articles. Tenant shall not place in or move about the Premises
without Landlord's prior written consent any safe or other heavy article
which in Landlord's reasonable opinion may damage the Building or the
Premises, and Landlord may designate the location of any heavy articles in
the Premises.
9. Carpet Pads. In those portions of the Premises where carpet has been
provided directly or indirectly by Landlord, Tenant shall at its own
expense install and maintain pads to protect the carpet under all furniture
having casters other than carpet casters.
10. Bicycles, Animals. Tenant shall not bring any animals, with the exception
of working animals to assist the disabled, or birds into the Building, and
shall not permit bicycles or other vehicles inside or on the sidewalks
outside the Building except in areas designated from time to time by
Landlord for such purposes.
11. Deliveries. Tenant shall ensure that deliveries of materials and supplies
to the Premises are made through such entrances, elevators and corridors
and at such times as may from time to time be designated by Landlord, and
shall promptly pay or cause to be paid to Landlord the cost of repairing
any damage in the Building caused by any person making such deliveries.
12. Furniture and Equipment Tenant shall ensure that furniture and equipment
being moved into or out of the Premises is moved through such entrances,
elevators and corridors and at such times as may from time to time be
designated by Landlord, and by movers or a moving company approved by
Landlord, and shall promptly pay or cause to be paid to Landlord the cost
of labor for repairing any damage in the Building caused thereby.
13. Solicitations. Landlord reserves the right to restrict or prohibit
canvassing, soliciting or peddling in the Building.
14. Food and Beverages. Only persons approved from time to time by Landlord may
prepare, solicit orders for, sell, serve or distribute foods or beverages
in the Building, or use the elevators, corridors or common areas for any
such purpose. Except with Landlord's prior written consent and in
accordance with arrangements approved by Landlord, Tenant shall not permit
on the Premises the use of equipment for dispensing food or beverages or
for the preparation, solicitation of orders for, sale, serving or
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distribution of food or beverages-. Tenant shall not permit cooking within
the Premises, except for microwave ovens, coffee makers, etc. for the use
of their employees, agents or invitees.
15. Refuse. Tenant shall place all refuse in proper receptacles provided by
Tenant at its expense in the Premises or in receptacles (if any) provided
by Landlord for the Building, and shall keep sidewalks and driveways
outside the Building, and lobbies, corridors, stairwells, ducts and shafts
of the Building, free of all refuse.
16. Obstructions. Tenant shall not obstruct or place anything in or on the
sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells or other common areas of the Building, or use such locations for
any purpose except access to and exit from the Premises without Landlord's
prior written consent. Landlord may remove at Tenant's expense any such
obstruction or thing (unauthorized by Landlord) without notice or
obligation to Tenant.
17. Dangerous, Immoral or Illegal Activities. Tenant shall not make use of the
Premises which involves the danger or injury to any person, nor shall the
same be used for any immoral or illegal purpose.
18. Proper Conduct. Tenant shall not conduct itself in any manner which is
inconsistent with the character of the Building as a first quality building
or which will impair the comfort and convenience of other tenants in the
Building.
19. Employees, Agents and lnvitees. In these Rules and Regulations, the term
"Tenant" includes the employees, agents, invitees and licenses of Tenant
and others permitted by Tenant to use or occupy the Premises.
20. Housekeeping. Tenant shall prevent paper, books, magazines, and other
obstructions from being placed on heat, ventilating and air conditioning
convectors, or within 18 inches of the ceiling, and any other interference
with the heat, ventilating and/or air conditioning system within the
Premises.
21. Energy Conservation. Tenant shall make every effort to practice energy
conservation within the Premises including turning off lights and
equipment, etc. at the end of the day, and will cooperate with Landlord in
establishing and implementing such conservation programs as Landlord may
from time to time develop.
22. Weapons and Explosives. Tenant, its employees, agents and invitees shall
not bring any weapons and/or explosives into the Project for any reason.
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EXHIBIT D
SUPPLEMENTAL TERMS AND CONDITIONS
BETWEEN: BROOKFIELD REPUBLIC INC. ("Landlord")
AND: INTEK INFORMATION, INC. ("Tenant")
Articles 22.00 through 26.00 are added to this Lease as follows:
ARTICLE 22.00 ANNUAL RENT
22.01 Annual Rent. Tenant shall pay to Landlord as Annual Rent for the
Premises:
(i) the sum of $90,346.20 per annum in respect of years one (1)
and two (2) of the Term, calculated at $9.05 per rentable
square foot per annum on 9,983 rentable square feet, payable
in advance and without notice in monthly installments of
$7,528.85 on February 1, 1997 and on the first day of each
calendar month during this period; and
(ii) the sum of $103,324.08 per annum in respect of years three (3)
and four (4) of the Term, calculated at $10.35 per rentable
square foot per annum on 9,983 rentable square feet, payable
in advance and without notice in monthly installments of
$8,610.34 on the first day of each calendar month during this
period.
22.02 Rental Abatement. Notwithstanding anything to the contrary in the
foregoing, in respect of 7,586 rentable square feet of the Premises,
for a period equivalent to six (6) months beginning on February 1,
1997, and ending on July 31, 1997, Landlord agrees that it shall not
collect from nor demand of Tenant the monthly installments of Annual
Rent required by Article 4.00 of this Lease, provided that as of each
such Annual Rent due date, Tenant is not in default under the terms
of this Lease. During this concession period, for this particular
space only, Tenant shall be obligated to pay Occupancy Costs, as
described in Article 4.06.
Notwithstanding anything to the contrary in the foregoing, in respect
of 2,397 rentable square feet of the Premises, for a period
equivalent to six (6) months beginning on February 1, 1997 and ending
on July 31, 1997, Landlord agrees that R shall not collect from nor
demand of Tenant the monthly installments of Annual Rent and
Occupancy Costs required by Article 4.00 of this Lease, provided that
as of each such Annual Rent and Occupancy Costs due date, Tenant is
not in default under the terms of this Lease.
Notwithstanding such concession period, Tenant agrees that its
obligation to pay the Annual Rent and Occupancy Cost payments
reserved by this Lease during such period shall-continue throughout
the term of this Lease, and in the event Tenant defaults under
Exhibit D - Page 1 of 4
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this Lease pursuant to Article 19.00 and Landlord commences an action
to recover Rent and Occupancy Costs and/or possession of the
Premises, then all Annual Rent and Occupancy Cost payments not
collected by Landlord during the concession period shall, as of the
date of Tenants default, become immediately due and payable with
interest on such sums at the lesser of two percent (2%) per month or
the maximum rate permitted by law from the date each such installment
was originally due to the date of payment. Annual Rent and Occupancy
Costs during the Concession period shall be calculated at the same
rate that Tenant would pay at the end of the Concession period, i.e.
the first month's rent. Said obligation of Tenant for payment of
Annual Rent and Occupancy Cost payments not collected during the
Concession period shall be independent of and in addition to
Landlord's other damages pursuant to Article 19.00 of this Lease.
Nothing set forth in this Article 22.00 shall be applicable to Rent
required for parking spaces as set out in Article 25.00 of the Lease.
Upon expiration of the primary lease term without default by Tenant,
all obligations of Tenant to pay the uncollected Annual Rent and
Occupancy Cost payments and any other Rent Concessions during the
Concession period shall cease and Landlord agrees that it shall
thereafter waive all rights of collection or recovery with respect to
such obligations.
Landlord and Tenant agree that no portion of the rent paid by Tenant
during the portion of the term of this Lease occurring after the
expiration of the Concession period shall be allocated by Landlord or
Tenant to such Concession period, nor is such rent intended by the
parties to be allocable to any Concession period.
ARTICLE 23.00 TENANT IMPROVEMENT ALLOWANCE
23.01 Tenant Improvement Allowance. Landlord shall provide a tenant
improvement allowance not to exceed $51,911.60 ("Tenant Improvement
Allowance"),as increased or decreased on the basis of $5.20 per
rentable square foot) for the purpose of contributing toward the cost
of Tenant's design, engineering and construction for real property
improvements within the Premises, or at Tenant's discretion within the
Must-Take Premises (the "Tenant Improvements") in accordance with the
Construction Procedures detailed in Exhibit E attached hereto and based
on a mutually agreed upon space plan ("Space Plan"). Tenant shall be
responsible for any costs that exceed the above stated Tenant
Improvement Allowance and such costs shall be substantiated within
thirty (30) days of Commencement Date. The Tenant Improvement Allowance
shall be disbursed within approximately sixty (60) days of Landlord's
receipt of invoice and upon evidence of completion of applicable
improvements and appropriate documentation.
For the raw portion of the Premises, Landlord shall provide and install
Building Standard mini-blinds on approximately twenty-one (21) exterior
windows and provide Building Standard ceiling tiles for installation by
Tenant at Tenant's expense. In the event of a discrepancy, between this
Article 23.00 and Exhibit E, this Article 23.00 shall control. Should
Tenant request Landlord to perform any changes or additions to the
Space Plan and such modifications increase the costs of improvements
above the Allowance, Tenant shall be responsible for all such costs and
expenses. Tenant shall be required to
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sign a tenant authorization form prior to commencement of any
modifications and Tenant shall pay to Landlord such costs within ten
(10) days of such written notice from Landlord. Tenant shall be
responsible for all work not described in the Space Plan and
specifications desired by Tenant or necessary to complete the Premises
for occupancy.
ARTICLE 24.00 MUST-TAKE SPACE
24.01 Must-Take Space. Landlord shall lease to Tenant and Tenant shall lease
from Landlord the space ("Must-Take Space") containing approximately
5,820 rentable square feet of space on the twenty-second (22nd) floor
of the Building, as generally indicated on Exhibit A being 5,061 usable
square feet plus 759 unallocated square feet hereof and becoming a part
of the Premises for a term commencing on February 1, 1998 (the 'Must-
Take Commencement Date') and expiring on the same date the Lease
terminates (Must-Take Term), upon the terms and conditions set out in
this Article 24.00.
Notwithstanding the Must-Take Commencement Date, Landlord and Tenant
acknowledge that it is Tenant's intent to build-out the Must-Take Space
simultaneously with the initial Premises. Accordingly, Landlord agrees
to fund the Must-Take Allowance defined below simultaneously with the
Tenant Improvement Allowance. Furthermore, Tenant shall be allowed to
furnish the Must-Take Space prior to the Must-Take Commencement Date.
Prior to such date, Landlord shall not charge Tenant Annual Rent or
Occupancy Costs for the Must-Take Space provided Tenant does not occupy
or conduct business from all or any portion of the Must-Take Space. In
the event Tenant elects to conduct business in all or any portion of
the Must-Take Space prior to the Must-Take Commencement Date, Article
3.02 shall apply.
24.02 Terms. A lease of space under this Article 24.00 shall contain the
following:
(a) Annual Rent for the Must-Take Space shall be the same as
follows:
(i) the sum of $52,671.00 per annum in respect of year
one (1) of the Must-Take Term, calculated at $9.05
per rentable square foot per annum on 5,820
rentable square feet, payable in advance and
without notice in monthly installments of $4,389.25
on February 1, 1998 and on the first day of each
calendar month during this period; and
(ii) the sum of $60,237.00 per annum in respect of years
two (2) and three (3) of the Must-Take Term,
calculated at $10.35 per rentable square foot per
annum on 5,820 rentable square feet, payable in
advance and without notice in monthly installments
of $5,019.75 on the first day of each calendar
month during this period.
(b) Landlord shall provide an allowance not to exceed $30,264
("Must-Take Allowance"), as increased or decreased on the
basis of $5.20 per rentable square fool for the purpose of
contributing toward the cost of Tenant's design, engineering
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and construction of real property improvements within the
Must-Take Premises. The design, engineering and construction
of the Must-Take Premises may begin concurrently with the
design, engineering and construction of the Premises. Tenant
shall be responsible for any costs that exceed the above
stated Must-Take Allowance and such costs shall be
substantiated within thirty (30) days of the Must-Take Space
Commencement Date. The Tenant Improvement Allowance and Must-
Take Allowance shall be disbursed within approximately sixty
(60) days of Landlord's receipt of invoice and upon evidence
of completion of applicable improvements and appropriate
documentation. In the event of a discrepancy, between this
Article 24.00 and Exhibit E, this Article 24.00 shall control.
(c) all other terms and conditions of the lease of Must-Take Space
shall be as set out in Landlord's then-current standard form
of lease for the Building.
24.03 Documentation. Within fifteen (15) days of receipt from Landlord,
Tenant shall execute and deliver to Landlord those instruments
Landlord may request to evidence any lease of space under this
Article 24.00.
ARTICLE 25.00 PARKING
24.01 Parking. Tenant may have the option exercisable by the
Commencement Date of the Lease to rent one (1) guaranteed
unreserved parking space underneath the Building, at rates set by
Landlord from time to time. The current monthly rental rate is
$150.00 per space.
Tenant may have the option exercisable by the Commencement Date
of the Lease to rent ten (10) guaranteed unreserved parking
spaces in the Tremont Parking Garage, located at 15th and Tremont
Streets, at rates set by Landlord from time to time. The current
monthly rental rate is $80.00 per space.
In the event Tenant discontinues the use and payment for any of
the above guaranteed parking spaces for a period of thirty (30)
days or more, such spaces shall no longer be deemed guaranteed
and shall return to Landlord as its available inventory.
ARTICLE 26.01 NON-SEVERABILITY
25.01 Non-Severability. The rights of Tenant under this Lease shall not be
severed from this Lease or separately sold, assigned, or otherwise
transferred, and shall expire on the expiration or earlier
termination of this Lease.
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EXHIBIT E
BROOKFIELD REPUBLIC INC. Office Floors
- ------------------------
Finished
Landlord Coordinated
CONSTRUCTION PROCEDURES
Retail/Office Tower
Republic Plaza
ARTICLE 1.00 WORDS AND PHRASES
1.01 Definitions in this Exhibit E:
-----------
(a) "Building Standard" means the quantity and quality of materials,
equipment, finishing, workmanship and other elements from time to
time specified by Landlord for the Building.
(b) "Space Plan" means a preliminary conceptual layout of the Premises
for use in evaluation of space utilization in the Premises.
(c) "Premises Plan" means the plans and specifications (including
structural, architectural, mechanical and electrical working
drawings) for the supply, installation and finishing in the
Premises of partitions; doors and hardware; ceilings; wiring;
lights and switches; healing, cooling and ventilation equipment and
controls; telephone and electrical outlets, floor covering; drapes;
built-ins; plumbing and fixtures; fire protection, fire warning and
security systems; and other equipment and facilities attached to
and forming part of the Building.
(d) "Landlord's Space Planner" means professional architect(s) or
engineer(s) from time to time engaged by Landlord at Tenants
expense for preparation of a Space Plan and the Premises Plan.
(e) "Tenant's Space Planner means professional architect(s) or
engineers(s) from time to time engaged by Tenant at Tenants expense
and approved by Landlord for preparation of a Space Plan and the
Premises Plan.
(f) "Landlord's Work" means the items supplied, installed and finished
by Landlord at no cost to Tenant under Article 5.00.
(g) "Tenant Work" means the items supplied, installed and finished by
Tenant at no cost to Landlord under Article 6.00.
(h) "Landlord's Contractor means the contractor from time to time
engaged by Landlord to carry out Landlord's work.
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(i) "Tenant's Contractor" means the contractor from time to time
engaged by Tenant to carry out Tenant's work and approved by
Landlord.
ARTICLE 2.00 GENERAL DESIGN AND CONSTRUCTION CRITERIA
2.01 Space planners, contractors and subcontractors engaged by Tenant from
time to time to carry out Tenant's Work shall be subject to Landlord's
prior approval. Restrictions on mechanical and electrical connections
by Tenant must be imposed to ensure that no base building systems are
damaged.
2.02 Landlord is responsible at Tenant's expense for coordination of all
design drawings and plans and specifications relating to completion of
the Premises for occupation by Tenant, supervision and completion of
Tenant's Work and payment thereof, procurement of all permits and
permissions related to Tenant's Work, compliance with the requirements
of all authorities having jurisdiction and with conditions contained
herein, and payment of all fees and charges thereby incurred, as forth
in Article 6.00 of the Construction Procedures. Landlord is
responsible for calling of tenders and letting of contracts relating
to Tenant's work.
2.03 Landlord reserves the right to withhold approval of any plans or
specifications and to withhold authorization for Tenant's Work to
proceed until furnished with reasonable evidence that Tenant has made
provision to pay the full cost of the work and to discharge any liens
that may arise therefrom.
2.04 Tenant shall impose and enforce all terms hereof on any designer,
contractor and workmen engaged by Tenant.
2.05 Space planner(s) and contractor(s) (if any) are to become familiar
with the Building working drawings, design criteria and construction
procedures to permit completion of proper and adequate architectural,
structural, mechanical and electrical working drawings for Tenant's
work that is in addition to the work set forth in Article 2.02.
ARTICLE 3.00 SPACE PLAN AND PREMISES PLAN
3.01 Standards The layout design, materials, workmanship, finishes and
---------
equipment for the Premises shall be uniformly high-quality, not less
than Buildings Standard in accordance with the very best standards of
practice and any governing codes or regulations and subject to
Landlord's approval.
3.02 Tenant shall work with Landlord and Landlord's space planner
throughout the design and construction period on all items which
require Tenant's input and shall respond to all inquiries in a timely
manner. Tenant shall take responsibility for any delays caused by
failure to provide information within Landlord's schedule for
completion of the Premises.
3.03 Costs of Premises Plan Preparation and Review Landlord shall deduct from
---------------------------------------------
the Tenant Allowance fees payable by Landlord to Landlord's space planner
(architects, engineers and other consultants) for any preparation or review
of that portion of the Premises Plan (including any amendments thereto)
that does not relate to Landlord's work.
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ARTICLE 4.00 COMPLETION OF THE PREMISES
4.01 Work Performed by Landlord's Contractor All work involved in completion of
---------------------------------------
the Premises in accordance with the premises plan (including purchase of
required materials and equipment) shall be carried out by Landlord's
contractor under the sole direction of Landlord. Tenant shall cooperate
with Landlord and Landlord's contractor upon request to promote the
efficient and expeditious completion of such work.
4.02 Other Work in the Premises Tenant shall be responsible and pay for any work
--------------------------
in the Premises including design cost which is not included in the premises
plan but which is desired by Tenant. Such work shall be:
(a) of a quality of at least equal to building standard,
(b) completed in accordance with plans and specifications previously
approved by Landlord,
(c) carried out without interfering with the work of Landlord's
contractor and other tenant's, and
(d) designed, performed and completed in strict compliance with
Article 7.00 of the Lease.
ARTICLE 5.00 LANDLORD'S WORK
5.01 At no cost to Tenant, Landlord shall supply the Premises improved and
finished to the extent described in Article 5.02.
5.02 Landlord shall provide the following in or on the same floor as the
Premises, all in accordance with the Building Standard (being the quantity
and quality of material, finishing and workmanship from time to time
specified by Landlord for the Building):
(a) Service Core Complete with finished elevators, stairways,
ventilation shafts, and finished and painted
electrical/telephone and janitor rooms, and
mechanical room, if any.
(b) Washrooms Two common washrooms finished with ceramic
floors and walls, finished ceilings, vanities,
fixtures, trim, lighting and all mechanical
services.
(c) Water & Drainage Access at a central location on the floor to
domestic cold (tempered) water, drainage and
vent systems.
(d) Doors Finished doors, completed with frame, trim and
hardware, installed on washrooms, stairwells,
and electrical, janitor, and (if separate)
mechanical and telephone rooms.
(e) Ceilings Installed modular ceiling suspension system,
with file made available for installation by
Tenant at Tenant's expense.
(f) Lights Recessed fluorescent light fixtures installed
for an open-floor plan (not to exceed one
fixture per 60 square feet of the
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Premises) complete with initial installation of
lamps and ballasts, wired to electrical
distribution panel(s). Any power consumption
for special electrical systems (i.e., computer
rooms, non-standard lighting, supplemental air
conditioning, telephone equipment, etc.) that
is disproportionate to other tenants as
determined by Landlord shall be metered at
tenants expense and tenant shall be responsible
for the additional cost of this power.
(g) Floors Concrete floor with trowelled finish, level to
specified tolerances and designed to support a
load of 75 lb. per square foot.
(h) Heating, Cooling
and Ventilation Perimeter and interior zone healing ventilation
units for an open floor plan, complete with
controls and thermostats. Perimeter mechanical
unit enclosures (if any) ready for application
of Tenant's finishes.
(i) Power Access at panels for distribution of Building
Standard electrical power at the ratio of one
circuit per 540 square feet.
(j) Sprinklers A sprinkler System with concealed heads,
provided to meet the requirements of the local
fire protection codes, for an open floor plan.
(k) Walls Plaster or plasterboard on walls and columns
and core walls in the Premises ready for
application of Tenant's finishes.
(l) Entrance Doors Except in the case of full floor tenancies, one
Building Standard entrance door complete with
frame, trim and hardware. If required by the
applicable fire code, additional Building
Standard exit doors as required.
(m) Auxiliary
Condensor Water If available and included in the Building
Standard, access to auxiliary condenser water
piping.
(n) General Exhaust
System If available and including in the Building
Standard, access to the general exhaust systems
ducts.
(o) Life Safety
System Supply and installation of Building Standard
Life Safety System and emergency lighting as
required by governing local regulatory
authorities.
(p) Security System If included in the Building Standard, a two
phase Building Standard System with the
capability of securing all exterior doors to
the Building and the Building elevators.
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5.03 At Tenant's expense, Landlord shall complete those connections and other
items included in Tenant's Work but which must be done by Landlord's
contractors to preserve related base building Systems, and may also perform
such other work for Tenant at Tenant's expense as is agreed in writing.
5.04 Landlord shall carry out such work with all due diligence. It is understood
that certain of Landlord's Work can only be undertaken at the same time as
or subsequent to work done by Tenant, and that certain work (including
correction of deficiencies) may be undertaken or completed subsequent to
the Commencement Date of the Lease.
ARTICLE 6.00 TENANT'S WORK
6.01 All work required to complete the Premises for occupancy which is not set
out in Article 5.02 shall be performed by Tenant at no cost to Landlord
(except for any tenant improvement allowance).
6.02 At Tenant's expense, Landlord shall provide all design, permits, fees, work
and materials required to complete the Premises for occupancy except as set
out in Article 5.02, on Tenant's behalf up to the amount set forth in the
Lease Agreement. AJI work in excess of the tenant allowance will be
performed by Landlord's contractor at Tenant's expense with the prior
written consent of Tenant on Landlord's then standard tenant authorization
form. This will include but is not limited to the following
(a) Ceilings Modification of ceiling suspension system as
required, and installation of ceiling files made
available by Landlord
(b) Lights Supply and installation of supplementary lights
(which shall require Landlord approval) and all
light switching. Panel breakers are not acceptable
for switching.
(c) Walls, Doors and
Decorating Supply, installation and finishing of all interior
partitions, doors (including in the case of full
tenancies, doors to elevator lobby), fixtures, and
fumishing, and decoration and finishing of all
surfaces and perimeter radiation units (if any)
Mthin the Premises. Upgraded variations of the
Building Standard entrance door are available at
Tenant's expense.
(d) Floors Supply and installation of floor covering and
base.
(e) Heating, Cooling
and Ventilation. Supply and installation of any approved
modification to the Base Building Systems,
including additional controls, and special
ventilation, cooling and exhaust requirements.
(f) Water & Drainage Supply and installation of any plumbing services.
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To and in the Premises (e.g., private
washrooms, kitchens, etc.) all from the
point of access provided by Landlord.
(g) Elevator
Entrances If security lock-off system is included in
the Building Standard, connections to such
system if required by Tenant.
(h) Power Supply and installation of electrical
distribution systems for power and
supplementary lighting to and in the
Premises -from the electrical room,
including any special electrical systems.
Any power consumption for special electrical
systems (i.e., computer rooms, non-standard
lighting, supplemental air conditioning,
telephone equipment, etc.) that is
disproportionate to other tenants as
determined by Landlord shall be metered at
Tenant's expense and Tenant shall be
responsible for the additional cost of this
power.
(i) Fire Protection Supply and installation of any approved
modifications and Sprinklers to the
Building; fire detection and fire warning
systems, and the sprinkler system (if any).
Supply and installation of safety and
emergency equipment and lighting as required
by Tenant or any regulatory authority having
Jurisdiction which is additional to the Base
Building Systems provided by Landlord and
which is require because of Tenant; Use of
the Premises, contrary to the provisions of
Article 5.02 (j) of these Construction
Procedures.
(j) Stairways If Tenant occupies two or more floors, where
structurally feasible, stairways and other
means of private access between floors
required by Tenant and approved by Landlord,
including approved modifications to the base
Building structure framing and floor slab.
(k) Special Services Supply and installation of any special
services required by Tenant and approved by
Landlord, (e.g., compressed air, auxiliary
condenser water system, auxiliary exhaust
system, etc.).
(1) Window Coverings Installed on all exterior windows in
accordance with Building Standard.
(m) Work To Be Performed
by Landlord's Contractor The following shall be carried out at
Tenant's expense:
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(1) All approved modifications to the Base
Building structural, heating, cooling,
ventilation, exhaust, control,
electrical distribution and life safety
and security systems as installed by
Landlord.
(2) patching of Building Standard fire-
proofing.
(3) any drilling, cutting, coring and
patching for conduit, pipe sleeves,
chases, duct equipment, or openings in
the floors, walls, columns, or roofs of
the Building which is approved by
Landlord, and
(4) installation of approved modifications
to the Building Standard sprinkler
system, fire alarm and public address
systems.
6.03 Modifications to the Base Building Systems and special requirements of
Tenant can be considered by Landlord only if applied for at the time the
Premises Plan is submitted for approval and if they are compatible with the
capacity and character of the Building. Any such approved modifications
shall be made at Tenant's expense by, at Landlord's option, either
Landlord's or Tenant's contractor.
6.04 No construction work in any particular portion of the Premises shall be
undertaken or commenced by Tenant on the Building until:
(a) the Premise Plan has been submitted to and approved by Landlord,
(b) all necessary building permits and all insurance coverages have been
obtained by Tenant and their contractor,
(c) proper provision has been made by Tenant for payment in full for cost
of the work for which they are responsible.
6.05 Subject only to circumstances over which Tenant has no control and which
could not have been avoided by Landlord or Tenant by the exercise of due
diligence, Tenant and Landlord shall proceed with its work expeditiously,
continuously, and efficiently, and shall complete the same within the
period provided in the Lease or other applicable agreement between the
parties.
6.06 Tenant shall ensure that all materials and workmanship in Tenant's work
shall be uniformly high quality, not less than Building Standard, and in
accordance with the very best standards of practice and any governing code
or regulations.
ARTICLE 7.00 TENANT'S ACCESS FOR COMPLETION OF WORK
7.01 Subject to compliance with applicable rules referred to in Article 6.00,
Tenant and Tenant's Space Planner, designer, contractors and workmen
employed by Tenant shall have access to and nonexclusive use of the
Premises to perform Tenant's Work and such other work approved by Landlord
as Tenant may desire.
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Any such work shall be done by contractors selected by Tenant and approved
by Landlord, provided that there shall be no conflict caused thereby with
any union or other contract to which Landlord or Landlord's general
contractor may be a party. If Tenants Contractor or subcontractors or
trades or workmen cause such conflict Tenant shall forthwith remove them
from the Building. Landlord shall have no responsibility or liability
whatsoever with respect to any such work or attendant materials left or
installed in the Building, and shall be reimbursed for any additional costs
and expenses of Landlord caused thereby, or resulting directly or
indirectly from any delays caused to Landlord or to Landlord's general
contractor.
7.02 In order to ensure that work proceeds efficiently in the Building, Landlord
and Landlord's general contractor may from time to time make rules for
coordination of all construction work. Tenant shall ensure that Tenant's
space planner and any designer, contractor and workmen employed by Tenant
are informed of and observe such rules, and prior to commencement of any
construction work makes appropriate arrangements with Landlord or
Landlord's general contractor, particularly with respect to:
(a) Material handling and hoisting facilities.
(b) Material and equipment storage.
(c) Time and place of deliveries.
(d) Hours of work and coordination of work.
(e) Power, heating and washroom facilities.
(f) Scheduling.
(g) Security.
(h) Clean-up.
7.03 Landlord may require that neat screens or hoardings as designed or
prescribed by Landlord be erected at Tenant's expense around the work and
the Premises, that all work be conducted and all tools and materials be
kept behind such hoardings, and that all cutting drilling and other work of
a noisy or vibrant nature be conducted outside the normal business hours of
tenants in occupation.
7.04 Any damage caused by Tenant's Contractor or sub-trades to any work of the
prime contractor to any property of Landlord or other tenants shall be
repaired forthwith to the satisfaction of Landlord by Tenant at Tenant's
expense.
7.05 Landlord shall deduct from Tenant Improvement Allowance fees payable by
Landlord to Landlord's architect, engineers, and electrical, mechanical and
other consultants for examination of Tenants plans and specifications
(including in particular electrical and mechanical details) and for
inspection of work performed by Tenant's contractors and workmen in
accordance therewith.
ARTICLE 8.00 PERFORMANCE OF TENANT'S WORK BY LANDLORD
8.01 If Landlord performs any Tenant's Work hereunder, whether at the request of
Tenant or as provided herein to be performed by Landlord at Tenant's cost,
or if Landlord performs other
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work or supplies materials or equipment on the Premises or in the Building by
agreement in writing with Tenant, Tenant shall pay to Landlord the direct cost
thereof to Landlord.
8.02 Landlord shall deduct from the Tenant Allowance any amount payable under
Article 8.01 at the time Landlord commences such work or orders material or
equipment for such work.
ARTICLE 9.00 NON-COMPLIANCE
9.01 In the event of non-compliance by Tenant with any of the provisions of the
Construction Agreement or any other similar agreement relative to
construction or occupation of the Premises including these Construction
Procedures, Landlord, in addition to and not in lieu of any other right or
remedy, may and shall have the right in its discretion to declare and treat
Tenant's non-compliance as a default or breach of covenant under the Lease
and exercise any right available under the provisions of the Lease,
including the right of termination.
9.02 In any event of termination pursuant to Article 9.01 Landlord may further
elect relative to any work done by Tenant to date of such termination to
either
(a) retain for its own use without payment therefor all or any Tenant Work
which has been commenced, installed or completed, or
(b) forthwith demolish or remove all or any work and restore the Premises
to the condition in which the same were prior to the commencement,
installation or completion of all or such of the Tenant's work as is
so demolished or removed and recover the cost of so doing from Tenant.
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EXHIBIT F
STATEMENT OF TENANT IN RE: LEASE
--------------------------------
Date: 199_
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Re: 1625/1675 Broadway
Denver, CO
Gentlemen:
It is our understanding that you are the holder of a deed of trust upon
the subject Premises and have required this certificate by the
undersigned.
The undersigned has been informed that New York Life Insurance Company
(the "Lender") is the holder of a Deed of Trust. which constitutes a
lien on 1625/1675 Broadway. We further understand that the Lender, in
connection with Its loan, has received an assignment of all leases
(including the Lease) from Brookfield Denver Inc. (the "Lessor") as
security for its loan. We further understand that the Lender will be
acting in reliance upon this Estoppel Certificate.
The undersigned, as Lessee, under that certain Lease
dated ________________,199__, made with Brookfield Denver Inc. as Lessor, hereby
ratifies the said Lease and certifies that:
1. the undersigned has entered into occupancy of the Premises
described in said Lease on___________________; and
2. the undersigned is presently open and conducting business in
the Premises; and
3. the operation and use of the Premises by the undersigned do
not involve the generation, treatment, storage, disposal or
release of a hazardous substance or a solid waste into the
environment and that the Premises are being operated by the
undersigned in accordance with all applicable environmental laws,
zoning ordinances and building codes; and
4. the minimum rental in the annual amount of $ ______________
was payable from the date of occupancy; and
5. that said Lease is in full force and effect and has not been
assigned, modified, supplemented or amended in any way (except by
agreement(s) dated ____________) and neither party thereto is in
default thereunder, and 6. that the same represents the entire
agreement between the parties as to this leasing; and
6. that the same represents the entire agreement between the
parties as to this leasing; and
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7. that the term of said Lease expires on ____________________;
and
8. there are ______________ renewal periods of_________ years
each; and
9. that all conditions under said Lease to be performed by the
Lessor have been satisfied; and
10. all required contributions by Lessor to Losses on account of
Lessee's improvements have been received; and
11. on this date there are no existing defenses or offsets which
the undersigned has against the enforcement of said Lease by the
Lessor, and
12. check the applicable provision and fill in the blank where
appropriate.
( ) that no rental has been paid more than one month in
advance and no security has been deposited with Lessor, and
( ) rental in the amount of $______________for the period
___________ to _____________has been paid in advance by Lessee;
and
( ) security in the amount of $____________ has been
deposited with Lessor, and
( )security in the form of a Guarantee
by_______________________ is in full force and effect
through______________________; and
13. there are no concessions, allowances, rebates or refunds or
rent free occupancies to which the undersigned is entitled except
as follows:______________________________________________________
_______________________; and
14. that Lessee's floor area is______________ square feet; and
15. that rental for______________________, 199__ has been paid.
Very truly yours,
_______________________
By:____________________
November 8, 1996
Mr. Tim O'Crowley
Intek Information, Inc.
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370 17th Street, Suite 3950
Denver, Colorado 80202
Re: Lease of Office Space - Republic Plaza
Dear Tim:
Based upon our mutual intent to execute a Lease of Office Space with Brookfield
Republic Inc. (landlord and Intek Information, Inc. (Tenant for premises in
Republic Plaza, and in an effort to expedite and achieve an occupancy date of
January 1, 1997, we request Landlord to permit Tenant Planning Services, Inc.
and McFall Konkle & Kimball to begin construction documents as of the date of
this letter. Tenant hereby indemnifies Landlord against costs associated with
the commencement of construction documents. This amount is estimated to be
$23,704.50, based on $1.50 per rentable square foot.
This indemnification is binding whether or not the lease is executed by both
parties and, further, in the event execution of the lease by both parties does
not occur, Tenant agrees to pay the incurred costs within ten (10) days of
presentation of such invoices. If the lease is executed by both parties, such
costs shall be paid from the tenant improvement allowance.
If agreed, please indicate your approval and acceptance of these terms by
signing below and initial the attached copy of the space plan.
Sincerely,
BROOKFIELD LEPAGE MANAGEMENT COLORADO LLC as Agent for BROOKFIELD REPUBLIC INC.
David W. Morrison
Vice President/Office Leasing
Agreed and accepted this day of November, 1996.
INTEK INFORMATION, INC.
BY:
BROOKFIELD LEPAGE MANAGEMENT COLORADO LLC
370 SEVENTEENTH STREET. SUITE 3800. DENVER. CO 80202,
TELEPHONE: (303) 595-7000 FAX: (303) 595-7003
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EXHIBIT 10.19.1
FIRST AMENDMENT AND
LEASE OF ADDITIONAL OFFICE SPACE
BETWEEN: BROOKFIELD REPUBLIC INC.
a Colorado corporation ("Landlord")
370 17th Street, Suite 3800
Denver, Colorado 80202
AND: INTEK INFORMATION, INC.
a Colorado corporation ("Tenant")
370 17th Street, Suite 3950
Denver, Colorado 80202
FOR PREMISES IN: REPUBLIC PLAZA
370 17th Street
Denver, Colorado 80202
DATE: OCTOBER 17, 1997
LANDLORD AND TENANT hereby agree as follows:
1. In this First Amendment and Lease of Additional Office Space:
(a) "Building" means Republic Plaza located in the City of Denver,
Colorado.
(b) "Lease" means the Lease of Office Space dated November 15, 1996, by
and between Landlord and Tenant, covering certain premises in the
Building.
(c) "Initial Premises" means 9,983 rentable square feet, more or less, on
the twenty-second (22nd) floor of the Building.
(d) "Additional Space" means 11,624 rentable square feet of space on the
twenty-third (23rd) floor of the Building, as generally indicated on
Exhibit 1, being 10,108 usable square feet plus 1,516 unallocated
square feet hereof and becoming a part of the Premises.
(e) "Term" means three (3) years, two and one half (2 1/2) months,
commencing November 16, 1997, and terminating on the same date that
the Lease terminates.
(f) "Amendment Date" means the sixteenth (16th) day of November, 1997.
(g) All other words and phrases, unless otherwise defined herein, have
the meanings attributed to them in the Lease.
2. Landlord hereby demises and leases the Additional Space to Tenant, and
Tenant accepts the lease of the Additional Space to have and to hold during
the Term, on the same terms and conditions as are contained in the Lease
except as herein otherwise provided, and expressly excepting the following:
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(a) Annual Rent - Tenant shall pay the Annual Rent to Landlord in advance
in equal monthly payments at the times and in the manner as rental
payments are to be made pursuant to the Lease.
(b) Renewals - This lease shall be subject to the same right of renewal
(if any) as is contained in the Lease, and any renewal of the Lease
in accordance therewith shall be deemed to be a renewal of this lease
upon the same terms and conditions as are applicable to such renewal
of the Lease.
(c) Condition of Additional Space - Tenant shall be deemed to have
examined and accepted the Additional Space in the condition as of the
date hereof, and no tenant or other allowance shall be paid by
Landlord to Tenant in respect of the Additional Space, except as set
forth in Article 23.00 herein.
(d) Default - Any default by Tenant under the Lease shall be deemed to be
a default hereunder, and any default hereunder shall be deemed to be
a default under the Lease.
(e) Termination - If the Lease terminates for any reason whatever this
Lease shall terminate on the same date.
(f) Occupancy Costs - Tenant shall pay as additional rent Occupancy Costs
in respect of the Additional Space at the times and in the manner as
payments of Occupancy Costs are to be made pursuant to the Lease.
3. Effective on the Amendment Date, Article 1.01 (q) of the Lease is hereby
deleted and the following substituted therefor:
1.01 Definitions. In this Lease:
(q) "Premises" means 9,983 rentable square feet, more or less, on
the twenty-second (22nd) floor, plus 11,624 rentable square
feet, more or less, on the twenty-third (23rd) floor, for a
total of 21,607 rentable square feet in the Building.
4. Effective on the Amendment Date, the following shall be added as Articles
22.03 and 22.04 of the Lease:
22.03 Annual Rent - Additional Space. Tenant shall pay to Landlord as
Annual Rent for the Additional Space:
(i) the sum of $105,197.16 per annum in respect of months one (1)
through fourteen and one half (14 1/2) of the Term, calculated
at $9.05 per rentable square foot per annum on 11,624 rentable
square feet, payable in advance and without notice in monthly
installments of $8,766.43, commencing on November 16, 1997, and
on the first day of each calendar month during this period; and
(ii) the sum of $120,308.40 per annum in respect of months fifteen
(15) through thirty-eight (38) of the Term, calculated at $10.35
per rentable square foot per annum on 11,624 rentable square
feet, payable in advance and without notice in
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monthly installments of $10,025.70, commencing on February 1,
1999, and on the first day of each calendar month during this
period.
22.04 Rental Abatement - Additional Space. Effective on the Amendment Date
and in respect of 5,812 rentable square feet of Additional Space
only, notwithstanding anything to the contrary in the foregoing for a
period equivalent to four (4) months beginning on the first day of
the Term, and terminating on the day preceding the fourth (4th)
monthly anniversary of the first day of the Term ("Rent Concession
Period"), Landlord agrees that it shall not collect from nor demand
of Tenant the monthly installments of Annual Rent and Occupancy Costs
required by Article 4.00 of the Lease, provided that as of each such
Annual Rent and Occupancy Costs required due date, Tenant is not in
default under the terms of the Lease.
Notwithstanding such Rent Concession Period, Tenant agrees that its
obligation to pay the Annual Rent and Occupancy Cost payments
reserved by the Lease during such period shall continue throughout
the term of the Lease, and in the event Tenant defaults under the
Lease pursuant to Article 19.00 and Landlord commences an action to
recover Rent and Occupancy Costs and/or possession of the Premises,
then all Annual Rent and Occupancy Cost payments not collected by
Landlord during the Rent Concession Period shall, as of the date of
Tenant's default, become immediately due and payable with interest on
such sums at the lesser of two percent (2%) per month or the maximum
rate permitted by law from the date each such installment was
originally due to the date of payment. Annual Rent and Occupancy
Costs during the Rent Concession Period shall be calculated at the
same rate that Tenant would pay at the end of the Rent Concession
Period, i.e. the first month's rent. Said obligation of Tenant for
payment of Annual Rent and Occupancy Cost payments not collected
during the Rent Concession Period shall be independent of and in
addition to Landlord's other damages pursuant to Article 4.00 of the
Lease. Nothing set forth in this Article 22.04 shall be applicable to
Rent required for parking spaces as set out in Article 25.00 of the
Lease.
Upon expiration of the primary lease term without default by Tenant,
all obligations of Tenant to pay the uncollected Annual Rent and
Occupancy Cost payments and any other Rent Concessions during the
Rent Concession Period shall cease and Landlord agrees that it shall
thereafter waive all rights of collection or recovery with respect to
such obligations.
Landlord and Tenant agree that no portion of the rent paid by Tenant
during the portion of the term of the Lease occurring after the
expiration of the Rent Concession Period shall be allocated by
Landlord or Tenant to such Rent Concession Period, nor is such rent
intended by the parties to be allocable to any Rent Concession
Period.
5. Effective on the Amendment Date, the following shall be added to Article
21.14 of the Lease:
"In respect of the Additional Space and effective on the Amendment
Date, a deposit of $10,000.00, payable to Landlord is delivered
herewith to be held without accruing interest, at Landlord's option
in a separate account or commingled with other funds to be held by
Landlord through the term of the Lease. If Tenant fails to comply
with the provisions hereof, such deposit shall be retained by
Landlord in payment for its expenses or damages or any amounts
payable under the Lease, but such retention shall not limit or
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preclude Landlord's right of action for damages or other remedies for
breach of the provisions of this Lease."
6. Effective on the Amendment Date, the following Articles 23.02 and 25.02 of
the Lease shall be added to the Lease:
23.02 Tenant Improvement Allowance - Additional Space. Landlord shall
provide a tenant improvement allowance for the Additional Space not
to exceed $58,120.00, as increased or decreased on the basis of $5.00
per rentable square foot ("Tenant Improvement Allowance"), for the
purpose of contributing toward the cost of Tenant's design,
engineering and construction of real property improvements within the
Premises (the "Tenant Improvements") in accordance with a mutually
agreed upon space plan ("Space Plan"). Tenant shall be responsible
for any costs that exceed the above stated Tenant Improvement
Allowance.
Should Tenant request Landlord to perform any changes or additions to
the Space Plan and such modifications increase the costs of Tenant
Improvements above the Tenant Improvement Allowance, Tenant shall be
responsible for all such costs and expenses. Tenant shall be required
to sign a tenant authorization form ("TAF") prior to commencement of
any modifications and Tenant shall pay to Landlord such costs within
ten (10) days of such written notice from Landlord. Tenant shall be
responsible for all work not described in the Space Plan and
specifications desired by Tenant or necessary to complete the
Premises for occupancy.
25.02 Parking. Tenant shall have the option exercisable by the Amendment
Date to rent eight (8) unreserved guaranteed parking spaces at the
Tremont Parking Center, located at 15th and Tremont Street, at rates
set by Landlord from time to time. The current monthly rental rate is
$90.00.
In the event Tenant fails to exercise the above option by the
Amendment Date or discontinues the use or payment for any of the
above guaranteed parking spaces for a period of thirty (30) days or
more, such spaces shall no longer be deemed guaranteed and/or
available and shall return to Landlord as its available inventory.
7. Landlord and Tenant each hereby represent and warrant to the other that it
does not recognize and has not used any broker with respect to this Lease
and the negotiation hereof.
8. Effective on the Amendment Date, Exhibit G ("Telecommunications") is hereby
attached to and made a part of the Lease.
9. This First Amendment and Lease of Additional Office Space shall be binding
on the heirs, administrators, successors and assigns (as the case may be)
of the parties hereto.
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10. The execution of this First Amendment and Lease of Additional Office Space
shall be subject to the approval of Landlord's Management Committee and, if
required, by Landlord's lender for the Building.
11. Except as specifically provided herein, the terms and conditions of the
Lease, including the payment of Occupancy Costs, are confirmed and continue
in full force and effect.
IN WITNESS OF THIS FIRST AMENDMENT AND LEASE OF ADDITIONAL OFFICE SPACE,
Landlord and Tenant have properly executed it as of the date set out on page
one.
LANDLORD: TENANT:
BROOKFIELD REPUBLIC INC. INTEK INFORMATION, INC.
a Colorado corporation a Colorado corporate
By: /s/ David Morrison By: /s/ Patrick F. O'Neal
------------------ ---------------------
Name: David W. Morrison Name: Patrick F. O'Neal
Title: Vice President Title: Managing Director
By: /s/ Richard A. Czoski By: _____________________
----------------------
Name: Richard A. Czoski Name: ___________________
Title: Vice President Title: _________________
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EXHIBIT G
REPUBLIC PLAZA
TELECOMMUNICATIONS
SECTION 1.00 LIMITATION OF RESPONSIBILITY
1.01 Limitation of Responsibility. Tenant acknowledges and agrees that all
telephone and telecommunications services desired by Tenant shall be
ordered and utilized at the sole expense of Tenant. Unless Landlord
otherwise requests or consents in writing, all of Tenants
telecommunications equipment (other than connections) shall be and remain
solely in Tenant's Premises, in accordance with rules and regulations
adopted by Landlord from time to time. Unless otherwise specifically agreed
to in writing, Landlord shall have no responsibility for the maintenance of
Tenants telecommunications equipment, including wiring; nor for any wiring
or other infrastructure to which Tenant's telecommunications equipment may
be connected. Tenant agrees that, to the extent any such service is
interrupted, curtailed or discontinued, Landlord shall have no obligation
or liability with respect thereto and it shall be the sole obligation of
Tenant at its expense to obtain substitute service.
SECTION 2.00 NECESSARY SERVICE INTERRUPTIONS
2.01 Necessary Service Interruptions. Landlord shall have the right, upon
reasonable prior notice to Tenant, to interrupt or turn off
telecommunications facilities in the event of emergency or as necessary in
connection with repairs to the Building or installation of
telecommunications equipment for other Tenants of the Building.
SECTION 3.00 REMOVAL OF EQUIPMENT, WIRING AND OTHER FACILITIES
3.01 Removal of Equipment, Wiring and Other Facilities. Any and all
telecommunications equipment installed in Tenant's Premises or elsewhere in
the Building by or on behalf of Tenant, including wiring, or other
facilities for telecommunications transmittal, shall be removed prior to
the expiration or earlier termination of the Lease term, by Tenant at its
sole cost or, at Landlord's election, by Landlord at Tenants sole cost,
with the cost thereof to be paid as additional rent. Landlord shall have
the right, however, upon written notice to Tenant given no later than
thirty (30) days prior to the expiration or earlier termination of the
Lease term, to require Tenant to abandon and leave in place, without
additional payment to Tenant or credit against rent, any and all
telecommunications wiring and related infrastructure, or selected
components thereof, whether located in Tenant's Premises or elsewhere in
the Building.
SECTION 4.00 NEW PROVIDER INSTALLATIONS
4.01 New Provider Installations. In the event that Tenant wishes at any time to
utilize the services of a telephone or telecommunications provider whose
equipment is not then servicing the Building, no such provider shall be
permitted to install its lines or other equipment within the Building
without first securing the prior written approval of Landlord. Landlord's
approval shall not be deemed any kind of warranty or representation by
Landlord, including, without limitation, any warranty or representation as
to the suitability, competence, or financial strength of the provider.
Without limitation of the foregoing standard, unless all of the following
conditions are satisfied to Landlord's satisfaction, it shall be reasonable
for Landlord to refuse to give its approval:
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(a) Landlord shall incur no expense whatsoever with respect to any aspect
of the provider's provision of its services, including without
limitation, the costs of installation, materials and services;
(b) prior to commencement of any work in or about the Building by the
provider, the provider shall supply Landlord with such written
indemnities, insurance, financial statements, and such other items as
Landlord reasonably determines to be necessary to protect its
financial interests and the interests of the Building relating to the
proposed activities of the provider.
(c) the provider agrees to abide by such rules and regulations, building
and other codes, job site rules and such other requirements as are
reasonably determined by Landlord to be necessary to protect the
interests of the Building, the tenants in the Building and Landlord,
in the same or similar manner as Landlord has the right to protect
itself and the Building with respect to proposed alterations as
described in Exhibits D and E of this Lease;
(d) Landlord reasonably determines that there is sufficient space in the
Building for the placement of the providers equipment and materials;
(e) the provider agrees to abide by Landlord requirements, if any, that
provider use existing building conduits and pipes or use building
contractors (or other contractors approved by Landlord);
(f) Landlord receives from the provider such compensation as is
reasonably determined by Landlord to compensate it for space used in
the Building for the storage and maintenance of the provider's
equipment, for the fair market value of a provider's access to the
Building, and the costs which may reasonably be expected to be
incurred by Landlord;
(g) the provider agrees to deliver to Landlord detailed "as built" plans
immediately after the installation of the provider's equipment is
complete; and
(h) all of the foregoing matters are documented in a written license
agreement between Landlord and the provider, the form and content of
which is reasonably satisfactory to Landlord.
SECTION 5.00 LIMIT OF DEFAULT OR BREACH
5.01 Limit of Default or Breach. Notwithstanding any provision of the proceeding
paragraphs to the contrary, the refusal of Landlord to grant its approval
to any prospective telecommunications provider shall not be deemed a
default or breach by Landlord of its obligation under this Lease unless and
until Landlord is adjudicated to have acted recklessly or maliciously with
respect to Tenant's request for approval, and in that event, Tenant shall
still have no right to terminate the Lease or claim an entitlement to rent
abatement, but may as Tenant's sole and exclusive recourse seek a judicial
order of specific performance compelling Landlord to grant its approval as
to the prospective provider in question. The provisions of this paragraph
may be enforced solely by Tenant and Landlord, are not for the benefit of
any other party (including any subtenant), and specifically but without
limitation, no telephone or telecommunications provider shall be deemed a
third party beneficiary of this Lease.
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SECTION 6.00 INSTALLATION AND USE OF WIRELESS TECHNOLOGIES
6.01 Installation and Use of Wireless Technologies. Tenant shall not utilize any
wireless communications equipment (other than usual and customary cellular
telephones), including antennae and satellite receiver dishes, within
Tenant's Premises or the Building, without Landlord's prior written
consent. Such consent may be conditioned in such a manner so as to protect
Landlord's financial interests and the interests of the Building, and the
other Tenants therein, in a manner similar to the arrangements described in
the immediately preceding paragraphs.
SECTION 7.00 LIMITATION OF LIABILITY FOR EQUIPMENT INTERFERENCE
7.01 Limitation of Liability For Equipment Interference. In the event that
telecommunications equipment, wiring and facilities or satellite and
antennae equipment of any type installed by or at the request of Tenant
within Tenants Premises, on the roof, or elsewhere within or on the
Building causes interference to equipment used by another party, Tenant
shall assume all liability related to such interference. Tenant shall use
reasonable efforts, and shall cooperate with Landlord and other parties, to
promptly eliminate such interference. In the event that Tenant is unable to
do so, Tenant will substitute alternative equipment which remedies the
situation. If such interference persists, Tenant shall discontinue the use
of such equipment, and, at Landlord's discretion, remove such equipment
according to foregoing specifications.
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Exhibit 10.24
Silicon Valley Bank
Loan and Security Agreement
Borrower: Intek Information, Inc.
Address: 370 17th Street, Suite 3950 Denver, Colorado 80202
Date: June 10, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into by the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement
(the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of any Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time.
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest shall be payable monthly, on the last day of the
month. Interest may, in Silicon's discretion, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans. Silicon may, in its discretion, charge interest to Borrower's
Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
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1.4 Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 Letters of Credit. At the request of Borrower, Silicon may, in its
sole discretion, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively, "Letters of Credit"). The aggregate face
amount of all outstanding Letters of Credit from time to time shall not exceed
the amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands
that Letters of Credit may require Silicon to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify and hold Silicon harmless
with respect to any loss, cost, expense, or liability incurred by Silicon under
any Letter of Credit as a result of Silicon's indemnification of any such
issuing bank. The provisions of this Loan Agreement, as it pertains to Letters
of Credit, and any other present or future documents or agreements between
Borrower and Silicon relating to Letters of Credit are cumulative.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to Silicon a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, and all money, and all property now or at
any time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing, (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as the
"Collateral")*.
* provided, however, that the Collateral shall not include the following
(collectively, the "Excluded Assets"): (a) Borrower's patents, copyrights,
trademarks or other intellectual
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property; (b) life insurance and key man insurance policies and the proceeds
thereof; or (c) Borrower's interest in Equipment leased to Borrower. Upon
written request of Borrower, Silicon shall release its security interest in (i)
up to $2,500,000 in cash (the "Spider Cash") and (ii) Borrower's Equipment and
other tangible fixed assets associated with Borrower's Project Spinner division
located in San Diego, California, with an aggregate fair market value not to
exceed $1,000,000, including but not limited to Borrower's TelWeb Technology
Platform (such Equipment and other tangible fixed assets are referred to herein
as the "Spider Fixed Assets"), and (iii) the capital stock of Spider Technology,
Inc., a subsidiary of Borrower (the "Spider Subsidiary"), provided that: (1) the
Spider Cash and the Spider Fixed Assets are concurrently transferred to the
Spider Subsidiary, all of whose capital stock (other than capital stock owned by
employees of the Spider Subsidiary) will, immediately following such transfer,
be owned by parties who are also shareholders of Borrower; (2) at the time of
the release of Silicon's security interest in the Spider Cash and the Spider
Fixed Assets, no Event of Default and no event which, with notice or passage of
time or both, would constitute an Event of Default under this Agreement or any
other agreement between Silicon and Borrower, has occurred and is continuing;
and (3) Borrower has provided Silicon with pro-forma financial projections with
respect to Borrower and the same are satisfactory to Silicon in its good-faith
business judgment.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower.
The execution, delivery and performance by Borrower of this Agreement, and all
other documents contemplated hereby (i) have been duly and validly authorized,
(ii) are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding, upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding, upon Borrower or
its property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
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3.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least 30
days prior written notice before opening any additional place of business,
changing, its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Borrower's right to remove any Collateral from the leased premises.
Whenever any Collateral is located upon premises in which any third party has an
interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien
or otherwise), Borrower shall, whenever requested by Silicon, use its best
efforts to cause such third party to execute and deliver to Silicon, in form
acceptable to Silicon, such waivers and subordinations as Silicon shall specify,
so as to ensure that Silicon's rights in the Collateral are, and will continue
to be, superior to the rights of any such third party. Borrower will keep in
full force and effect, and will comply with all the terms of, any lease of real
property where any of the Collateral now or in the future may be located.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no material adverse change in the financial condition or business
of Borrower. Borrower is now and will continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed, and will timely file, all tax returns and reports * required by
foreign, federal, state and local law,
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and Borrower has timely paid, and will timely pay, all foreign, federal, state
and local taxes, assessments, deposits and contributions now or in the future
owed by Borrower. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their Terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency. Borrower shall, at all times, utilize the services of
an outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower.
*, or extensions thereof,
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing, of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending, or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower
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shall, on the date each Loan is requested and made, (i) represent an undisputed
bona fide existing unconditional obligation of the Account Debtor created by the
sale, delivery, and acceptance of goods or the rendition of services in the
ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility
Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall
deliver to Silicon transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on Silicon's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Silicon's security interest and other
rights in all of Borrower's Receivables, nor shall Silicon's failure to advance
or lend against a specific Receivable affect or limit Silicon's security
interest and other rights therein. Loan requests received after 12:00 Noon will
not be considered by Silicon until the next Business Day. * Together with each
such schedule and assignment, or later if requested by Silicon, Borrower shall
furnish Silicon with copies (or, at Silicon's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
in such form and at such intervals as Silicon shall request. In addition, * *
Borrower shall deliver to Silicon the originals of all instruments, chattel
paper, security agreements, Guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary endorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.
* Immediately upon Silicon's request,
** immediately upon Silicon's request,
4.4 Collection of Receivables. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine.
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Silicon may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may specify. Silicon or its designee may, at any time, notify Account
Debtors that the Receivables have been assigned to Silicon.
4.5. Remittance of Proceeds. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.
7
<PAGE>
4.9 No Liability. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling, any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its Sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but
is not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Silicon copies of all reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $500 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned
8
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upon such accounting firm, service bureau or other third party agreeing to give
Silicon the same rights with respect to access to books and records and related
rights as Silicon has under this Loan Agreement.
5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business*; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) store any Inventory
or other Collateral with any warehouseman or other third party; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on the prospect of repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock**; (xii) make any change in Borrower's capital structure which would have
a material adverse effect on Borrower or on the prospect of repayment of the
Obligations; (xiii) pay total compensation, including salaries, fees, bonuses,
commissions, and all other payments, whether directly or indirectly, in money or
otherwise, to Borrower's executives, officers and directors (or any relative
thereof) in an amount in excess of the amount set forth on the Schedule;
(xiv) dissolve or elect to dissolve ***. **** Transactions permitted by the
foregoing provisions of this Section are only permitted if no Default or Event
of Default would occur as a result of such transaction.
*, provided that Borrower may acquire assets having an aggregate value of no
more than 40% of Borrower's Tangible Net Worth (as defined in the Schedule), as
measured prior to such acquisition, provided that at the time of such
acquisition no Event of Default and no event which, with notice or passage of
time or both, would constitute an Event of Default under this Agreement or any
other agreement between Silicon and Borrower, has occurred and is continuing
**, except for stock acquired with the proceeds of life or key man insurance
***; or (xv) permit there to be any liens, security interest or encumbrances on
any of Excluded Assets
**** Notwithstanding anything contained in this paragraph 5.5, Borrower may make
loans or other capital contributions to the following subsidiaries of Borrower
only (the "Regulated Subsidiaries"), provided that for each fiscal year of
Borrower the aggregate amount of such loans or capital contributions shall not
exceed $400,000 to all of the Regulated Subsidiaries combined: Intek
Teleservices, Inc.; Intek Insurance, Inc.; and Brokerage Administrators
Corporation.
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5.6 Litigation Cooperation. Should any third party suit or Proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, * unless one party gives written notice to the other, not less than
** days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
* and Borrower shall, upon each such renewal, pay Silicon a renewal fee in the
amount of one half percent (0.5%) of the Maximum Credit, as (defined in the
Schedule, in effect as of the effective date of such renewal, which shall be in
addition to all interest and other sums payable to Silicon and is not
refundable,
** thirty
6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Silicon under
this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount
equal to * provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of
Silicon Valley Bank. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.
* $25,000 If such termination occurs prior to the first anniversary of the
Maturity Date, and $15,000 if such termination occurs thereafter,
6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the
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Maturity Date, or on any earlier effective date of termination, there are any
outstanding Letters of Credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part
of Silicon, then on such date Borrower shall provide to Silicon cash collateral
in an amount equal to the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith, to secure
all of the Obligations relating to said Letters of Credit, pursuant to Silicon's
then standard form cash pledge agreement. Notwithstanding any termination of
this Agreement, all of Silicon's security interests in all of the Collateral and
all of the terms and provisions of this Agreement shall continue in full force
and effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other non-
monetary Obligation which by its nature cannot be cured; or (e) Borrower shall
fail to perform any other non-monetary Obligation, which failure is not cured
within 5 Business Days after the date due; or (f) Any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination
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of, or limitation or denial of liability upon, any guaranty of the Obligations
or any attempt to do any of the foregoing, or commencement of proceedings by any
guarantor of any of the Obligations under any bankruptcy or insolvency law; or
(l) revocation or termination of, or limitation or denial of liability upon, any
pledge of any certificate of deposit, securities or other property or asset of
any kind pledged by any third party to secure any or all of the Obligations, or
any attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law; or (m)
Borrower makes any payment on account of any indebtedness or obligation which
has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (n) there shall be a change in the record or beneficial ownership
of an aggregate of more than 20% of the outstanding shares of stock of Borrower,
in one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of Silicon; or (o) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or because
of the occurrence of an event on or subsequent to the effective date. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
7.2 Remedies. Upon the occurrence * of any Event of Default, Silicon, at
its option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (a)
Cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other document or agreement; (b) Accelerate and declare all or
any part of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes Silicon without judicial process to enter onto any of Borrower's
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral
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<PAGE>
prior to a disposition thereof and, for such purpose and for the purpose of
removal, Silicon shall have the right to use Borrower's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge; (f)
Sell, lease or otherwise dispose of any of the Collateral, in its condition at
the time Silicon obtains possession of it or after further manufacturing,
processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale. Silicon shall have the right to conduct such
disposition on Borrower's premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse
or sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general, special or other
Deposit Accounts with Silicon; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Silicon's rights and remedies, from and after the occurrence of any Event
of Default, the interest rate applicable to the Obligations shall be increased
by an additional four percent per annum.
* and continuance
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general, non-
specific terms; (iii) The sale is conducted at a place designated by Silicon,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 Power of Attorney. Upon the occurrence * of any Event of Default,
without
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limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; j) Instruct any third party
having custody or control of any books or records belonging, to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.
* and continuance
7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a
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<PAGE>
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, Silicon shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
"Affiliate" means, with respect to any Person, a relative, partner,
---------
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the
----
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
"Default" means any event which with notice or passage of time or both,
-------
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Eligible Inventory" [NOT APPLICABLE]
------------------
"Eligible Receivables" means Receivables arising in the ordinary course of
--------------------
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
-------
Eligibility Requirements") are the minimum requirements for a Receivable to be
- ------------------------
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the
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<PAGE>
Receivable must not represent progress billings, or be due under a fulfillment
or requirements contract with the Account Debtor, (iii) the Receivable must not
be subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional), (iv) the Receivable must not be owing from
an Account Debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable), (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to Silicon, or which, fails or goes
out of a material portion of its business, (vii) the Receivable must not be
owing from the United States or any department, agency or instrumentality
thereof (unless there has been compliance, to Silicon's satisfaction, with the
United States Assignment of Claims Act), (viii) the Receivable must not be
owing, from an Account Debtor located outside the United States or Canada
(unless pre-approved by Silicon in its discretion in writing, or backed by a
letter of credit satisfactory to Silicon, or FCIA insured satisfactory to
Silicon), (ix) the Receivable must not be owing from an Account Debtor to whom
Borrower is or may be liable for goods purchased from such Account Debtor or
otherwise. Receivables owing from one Account Debtor will not be deemed Eligible
Receivables to the extent they exceed 25% of the total Receivables outstanding*.
In addition, if more than 50% of the Receivables owing from an Account Debtor
are outstanding more than 90 days from their invoice date (without regard to
unapplied credits) or are otherwise not eligible Receivables, then all
Receivables owing from that Account Debtor will be deemed ineligible for
borrowing. Silicon may, from time to time, in its discretion, revise the Minimum
Eligibility Requirements, upon written notice to the Borrower.
*, except that, with respect to Receivables owing from Sony USA, such
percentage shall be 30%
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of this
----------------
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
-------------------
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance,
credit insurance, liability
16
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insurance, property insurance and other insurance), tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower, all rights
to indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Obligations" means all present and future Loans, advances, debts,
-----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and Silicon.
"Permitted Liens" means the following: (i) purchase money security
---------------
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust,
17
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unincorporated organization, association, corporation, government, or any agency
or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
-----------
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all Guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as Silicon
--------
may from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Receivables), (ii) the
assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.
Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon
(including, proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by Silicon on account of the Obligations three Business
Days after receipt by Silicon of immediately available funds, * and, for
purposes of the foregoing, any such funds received after 12:00 Noon on any day
shall be deemed received on the next Business Day. Silicon shall not, however,
be required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Silicon in its sole discretion, and Silicon may
charge Borrower's loan account for the amount of any item of payment which is
returned to Silicon unpaid.
* except for wire transfers, for which Borrower shall receive immediate credit,
9.2 Application of Payments. All payments with respect to the Obligations
may be
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applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
---------
no oral understandings, representations or agreements between the parties which
- -------------------------------------------------------------------------------
are not set forth in this Agreement or in other written agreements signed by the
- --------------------------------------------------------------------------------
parties in connection herewith.
- -------------------------------
9.8 Waivers. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer
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<PAGE>
of Silicon and delivered to Borrower. Borrower waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
-----------------------------------
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
- --------------------------------------------------------------------
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
- --------------------------------------------------------------------------------
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
- ------------------------------------------------------------------------------
only Silicon and not Borrower in connection with this Agreement. If either
- ----------------------------------------------------------------
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees
and costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
20
<PAGE>
9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.16 Paragraph Headings; Construction. Paragraph headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
21
<PAGE>
9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
INTEK INFORMATION, INC.
By: ____________________________
President or Vice President
By: /S/ KRIS DANIELSON
-----------------------------
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By: __________________________
Title Vice President
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<PAGE>
Exhibit 10.25
Master Loan and Security Agreement No. 4339
DEBTOR: Intek Information, Inc. SECURED PARTY: Charter Financial, Inc.
5619 DTC Parkway, 12/th/ Floor 530 Fifth Avenue
Englewood, CO 801 11 New York, NY 10036
In consideration of the mutual covenants set forth herein, the above named
Debtor and the above named Secured Party hereby enter into this Master Loan and
Security Agreement and agree to the terms and conditions set forth herein. Each
Loan Schedule which may be executed by Debtor and Secured Party from time to
time pursuant to this Master Loan and Security Agreement shall be deemed to be a
separate loan transaction incorporating all of the terms and conditions of this
Master Loan and Security Agreement. References in this Master Loan and Security
Agreement to "Agreement", "hereunder" and "herein" shall mean a Loan Schedule
which incorporates this Master Loan and Security Agreement.
1. Loan Schedules. Debtor shall evidence its agreement to enter into
each Agreement incorporating the terms hereof by executing and delivering to
Secured Party a Loan Schedule in the form annexed hereto as Exhibit 1. Debtor's
execution of a Loan Schedule shall obligate Debtor to make all of the payments
set forth in the Schedule of Obligations as set forth in the Loan Schedule. The
Loan Schedule shall set forth the amount of the Loan, the Term of the Loan, the
number of payments to be made and the amount and dates upon which such payments
are due. The Loan Schedule shall also set forth the Time Balance which means the
aggregate amount of all payments which are payable under the Agreement evidenced
by such Loan Schedule. Secured Party shall have no obligation to enter into or
accept any Loan Schedule and no Loan Schedule shall be binding upon Secured
Party until accepted by Secured Party which acceptance shall be evidenced only
by the execution of such Loan Schedule by Secured Party.
2. Grant of Security Interest. Debtor hereby grants to Secured Party a
security interest in the personal property referred to and/or described in each
Loan Schedule (hereinafter with all renewals, substitutions and replacements and
all parts, repairs, improvements, additions and accessories incorporated therein
or affixed thereto referred to as the "Equipment"), together with any and all
proceeds thereof and any and all insurance policies and proceeds with respect
thereto.
3. Obligations Secured. The aforesaid security interest is granted by
Debtor as security for (a) the payment of the Time Balance (as set forth in the
Loan Schedule) and the payment and performance of all other indebtedness and
obligations now or hereafter owing by Debtor to Secured Party, of any and every
kind and description under the Agreement evidenced by such Loan Schedule, and
any and all renewals and extensions of the foregoing, and all interest, fees,
charges, expenses and attorneys' fees accruing or incurred in connection with
any of the foregoing (all of which Time Balance, indebtedness and obligations
are hereinafter referred to as the "Liabilities") and (b) the payment and
performance of all other indebtedness and obligations now or hereafter owing by
Debtor to Secured Party, of any and every kind and description, howsoever
arising or evidenced including without limitation those arising under other Loan
Schedules, (all of which indebtedness and obligations are hereinafter referred
to as the "Other Liabilities"). Subject to Paragraph 16, any nonpayment of any
installment or other amounts due hereunder shall result in the obligation on the
part of Debtor promptly to pay also an amount equal to five percent (5%), (or
the maximum rate permitted by law, whichever is less) of the installment or
other amounts overdue.
<PAGE>
4. Disclaimer of Warranties. DEBTOR ACKNOWLEDGES THAT SECURED PARTY
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN RESPECT OF THE EQUIPMENT, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE. Secured Party shall not be liable to Debtor for any loss,
damage or expense of any kind or nature caused, directly or indirectly, by any
Equipment secured hereunder or the use or maintenance thereof or the failure of
operation thereof, or the repair, service or adjustment thereof, or by any delay
or failure to provide any such maintenance, repairs, service or adjustment, or
by any interruption of service or loss of use thereof or for any loss of
business howsoever caused. The Equipment shall be shipped directly to Debtor by
the supplier thereof and Debtor agrees to accept such delivery. No defect or
unfitness of the Equipment, nor any failure or delay on the part of the
manufacturer or the shipper of the Equipment to deliver the Equipment or any
part thereof to Debtor, shall relieve Debtor of the obligation to pay the Time
Balance or any other obligation under this Agreement. Secured Party shall have
no obligation under this Agreement in respect of the Equipment and shall have no
obligation to install, erect, test, adjust or service the Equipment. Secured
Party agrees, so long as there shall not have occurred or be continuing any
Event of Default hereunder or event which with lapse of time or notice, or both,
might become an Event of Default hereunder, that Secured Party will permit
Debtor to enforce in Debtor's own name at Debtor's sole expense any supplier's
or manufacturer's warranty or agreement in respect of the Equipment to the
extent that such warranty or agreement is assignable.
5. Assignment. Any transaction evidenced by a Loan Schedule shall be
assignable by Secured Party, and by its assigns, without the consent of Debtor,
but Debtor shall not be obligated to any assignee except upon written notice of
such assignment from Secured Party or such assignee. The obligation of Debtor to
pay and perform the Liabilities to such assignee shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever, and such
payments shall be made without interruption or abatement notwithstanding any
event or circumstance whatsoever, including, without limitation, the late
delivery, nondelivery, destruction or damage of or to the Equipment, the
deprivation or limitation of the use of the Equipment, the bankruptcy or
insolvency of Secured Party or Debtor or any disaffirmance of this Agreement by
or on behalf of Debtor and notwithstanding any defense, set-off, recoupment or
counterclaim or any other right whatsoever, whether by reason of breach of this
Agreement or of any warranty in respect of the Equipment or otherwise which
Debtor may now or hereafter have against Secured Party, and whether any such
event shall be by reason of any act or omission of Secured Party (including,
without limitation, any negligence of Secured Party) or otherwise; provided,
however, that nothing herein contained shall affect any right of Debtor to
enforce against Secured Party any claim which Debtor may have against Secured
Party in any manner other than by abatement, attachment or recoupment of,
interference with, or set-off, counterclaim or defense against, the
aforementioned payments to be made to such assignee. Debtor's undertaking herein
to pay and perform the Liabilities to an assignee of Secured Party shall
constitute a direct, independent an unconditional obligation of Debtor to said
assignee. Said assignee shall have no obligations under this Agreement or in
respect of the Equipment and shall have no obligation to install, erect, test,
adjust or service the Equipment. Debtor also acknowledges and agrees that any
assignee of Secured Party's interest in this Agreement shall have the right to
exercise all rights, privileges and remedies (either in its own name or in the
name of Secured Party) which by the terms of this Agreement are permitted to be
exercised by Secured Party.
6. Damage to or Loss of the Equipment; Requisition. Debtor assumes and
shall bear the entire risk of loss or damage to the Equipment from any and every
cause, whatsoever. No loss or damage to
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the Equipment or any part thereof shall affect any obligation of Debtor with
respect to the Liabilities and this Agreement, which shall continue in full
force and effect. Debtor shall advise Secured Party in writing promptly of any
item of Equipment lost or damaged and of the circumstances and extent of such
damage. If the Equipment is totally destroyed, irreparably damaged, lost, stolen
or title thereto shall be requisitioned or taken by any governmental authority
under the power of eminent domain or otherwise, Debtor shall, at the option of
Secured Party, replace the same with like equipment in good repair, condition
and working order, or pay to Secured Party all Liabilities due and to become
due, less the net amount of the recovery, if any, actually received by Secured
Party from insurance or otherwise for such destruction, damage, loss, theft,
requisition or taking. Whenever the Equipment is destroyed or damaged and, in
the sole discretion of Secured Party, such destruction or damage can be
repaired, Debtor shall, at its expense, promptly effect such repairs as Secured
Party shall deem necessary for compliance with clause (a) of paragraph 8 below.
Any proceeds of insurance received by Secured Party with respect to such
reparable damage to the Equipment shall, at the election of Secured Party, be
applied either to the repair of the Equipment by payment by Secured Party
directly to the party completing the repairs, or to the reimbursement of Debtor
for the cost of such repairs; provided, however, that Secured Party shall have
no obligation to make such payment or any part thereof until receipt of such
evidence as Secured Party shall deem-satisfactory that such repairs have been
completed and further provided that Secured Party may apply such proceeds to the
payment of any of the Liabilities or the Other Liabilities due if at the time
such proceeds are received by Secured Party there shall have occurred and be
continuing any Event of Default hereunder or any event which with lapse of time
or notice, or both, would become an Event of Default. Debtor shall, when and as
requested by Secured Party, undertake, by litigation or otherwise, in Debtor's
name, the collection of any claim against any person for such destruction,
damage, loss, theft, requisition or taking, but Secured Party shall not be
obligated to undertake, by litigation or otherwise, the collection of any claim
against any person for such destruction, damage, loss, theft, requisition or
taking.
7. Representations and Warranties of Debtor. Debtor represents and
warrants that: it has the right, power and authority to enter into and carry out
the terms and provisions of this Agreement; this Agreement constitutes a valid
obligation of the Debtor and is enforceable in accordance with its terms; and
entering into this Agreement and carrying out its terms and provisions will not
violate the terms or constitute a breach of any other agreement to which Debtor
is a party.
8. Affirmative Covenants of Debtor. Debtor shall (a) cause the Equipment
to be kept in good condition and use the Equipment only in the manner for which
it was designed and intended so as to subject it only to ordinary wear and tear
and cause to be made all needed and proper repairs, renewals and replacements
thereto; (b) maintain at all times property damage, fire, theft and
comprehensive insurance for the full replacement value of the Equipment, with
loss payable provisions in favor of Secured Party and any assignee of Secured
Party as their interests may appear, and maintain public liability insurance in
amounts satisfactory to Secured Party, naming Secured Party and any assignee of
Secured Party as insured with all of said insurance and loss payable provisions
to be in form, substance and amount and written by companies approved by Secured
Party, and deliver the policies therefor, or duplicates thereof, to Secured
Party; (c) pay or reimburse Secured Party for any and all taxes, assessments and
other governmental charges of whatever kind or character, however designated
(together with any penalties, fines or interest thereon) levied or based upon or
with respect to the Equipment, the Liabilities or this Agreement or upon the
manufacture, purchase, ownership, delivery, possession, use, storage, operation,
maintenance, repair, return or other disposition of the Equipment, or upon any
receipts or earnings arising therefrom, or for titling or registering the
Equipment,
3
<PAGE>
or upon the income or other proceeds received with respect to the Equipment or
this Agreement provided, however, that Debtor shall pay taxes on or measured by
the net income of Secured Party and franchise taxes of Secured Party only to the
extent that such net income taxes or franchise taxes are levied or assessed in
lieu of any other taxes, assessments or other governmental charges hereinabove
described; (d) pay all shipping and delivery charges and other expenses incurred
in connection with the Equipment and pay all lawful claims, whether for labor,
materials, supplies, rents or services, which might or could if unpaid become a
lien on the Equipment; (e) comply with all governmental laws, regulations,
requirements and rules, all instructions and warranty requirements of Secured
Party or the manufacturer of the Equipment, and with the conditions and
requirements of all policies of insurance with respect to the Equipment and this
Agreement; (f) mark and identify the Equipment with all information and in such
manner as Secured Party may request from time to time and replace promptly any
such marking or identification which are removed, defaced or destroyed; (g) at
any and all times during business hours, grant to Secured Party free access to
enter upon the premises wherein the Equipment shall be located and permit
Secured Party to inspect the Equipment; (h) reimburse Secured Party for all
charges, costs and expenses (including attorneys' fees) incurred by Secured
Party in defending or protecting its interests in the Equipment, in the
attempted enforcement or enforcement of the provisions of this Agreement or in
the attempted collection or collection of any of the Liabilities; (i) indemnify
and hold any assignee of Secured Party, and Secured Party, harmless from and
against all claims, losses, liabilities, damages, judgments, suits, and all
legal proceedings, and any and all costs and expenses in connection therewith
(including attorneys' fees) arising out of or in any manner connected with the
manufacture, purchase, ownership, delivery, possession, use, storage, operation,
maintenance, repair, return or other disposition of the Equipment or with this
Agreement, including, without limitation, claims for injury to or death of
persons and for damage to property, and give Secured Party prompt notice of any
such claim or liability; and (j)) maintain a system of accounts established and
administered in accordance with generally accepted accounting principles and
practices consistently applied, and, within thirty (30) days after the end of
each fiscal quarter, deliver to Secured Party a balance sheet as at the end of
such quarter and statement of operations for such quarter, and, within one
hundred and twenty (120) days after the end of each fiscal year deliver to
Secured Party a balance sheet as at the end of such year and statement of
operations for such year, in each case prepared in accordance with generally
accepted accounting principles and practices consistently applied and certified
by Debtor's chief financial officer as fairly presenting the financial position
and results of operation of Debtor, and, in the case of year end financial
statements, certified by an independent accounting firm acceptable to Secured
Party.
9. Negative Covenants of Debtor. Debtor shall not (a) create, incur,
assume or suffer to exist any mortgage, lien, pledge or other encumbrance or
attachment of any kind whatsoever upon, affecting or with respect to the
Equipment or this Agreement or any of Debtor's interests hereunder; (b) make any
changes or alterations in or to the Equipment except as necessary for compliance
with clause (a) of paragraph 8 above; (c) permit the name of any person,
association or corporation other than Secured Party to be placed on the
Equipment as a designation that might be interpreted as a claim of interest in
the Equipment; (d) part with possession or control of or suffer or allow to pass
out of its possession or control any of the Equipment or change the location of
the Equipment or any part thereof from the location shown above; (e) assign or
in any way dispose of all or any part of its rights or obligations under this
Agreement or enter into any lease of all or any part of the Equipment; (f)
change its name or address from that set forth above unless it shall have given
Secured Party no less than thirty (30) days prior written notice thereof; (g)
sell any shares of its capital stock or transfer any ownership interest in the
Debtor to any person, persons, entity or entities (whether in one single
transaction or in multiple transactions) which results in a transfer of a
majority interest in the
4
<PAGE>
ownership and/or the control of the Debtor from the person, persons, entity or
entities who hold ownership and/or control of the Debtor as of the date of this
Agreement; or (h) consolidate with or merge into or with any other entity, or
purchase or otherwise acquire all or substantially all of the assets or stock or
other ownership interest of any person or entity or sell, transfer, lease or
otherwise dispose of all or substantially all of Debtor's assets to any person
or entity.
10. Equipment Personalty. The Equipment is, and shall at all times be and
remain, personal property notwithstanding that the Equipment or any part thereof
may now be, or hereafter become, in any manner fixed or attached to, or imbedded
in, or permanently resting upon, real property or attached in any manner to real
property by cement, plaster, nails, bolts, screws or otherwise. If requested by
Secured Party with respect to any item of Equipment, Debtor will obtain and
deliver to Secured Party waivers of interest or liens in recordable form,
satisfactory to Secured Party, from all persons claiming any interest in the
real property on which such item of Equipment is installed or located.
11. Events of Default and Remedies. If any one or more of the following
events ("Events of Default") shall occur:
(a) Debtor shall fail to make any payment in respect of the Liabilities
when due; or
(b) any certification, statement, representation, warranty or financial
report or statement heretofore or hereafter furnished by or on behalf of Debtor
or any guarantor of any or all of the Liabilities proves to have been false in
any material respect at the time as of which the facts therein set forth were
stated or certified or has omitted any material contingent or unliquidated
liability or claim against Debtor or any such guarantor; or
(c) Debtor or any guarantor of any or all of the Liabilities shall fail to
perform or observe any covenant, condition or agreement to be performed or
observed by it hereunder or under any guaranty agreement; or
(d) Debtor or any guarantor of any or all of the Liabilities shall be in
breach of or in default in the payment and performance of any obligation
relating to any of the Other Liabilities; or
(e) Debtor or any guarantor of any of Debtor's obligations hereunder shall
be in breach of or in default in the payment or performance of any obligation
owing to any bank, lender, lessor or financial institution, howsoever arising,
present or future, contracted for or acquired, and whether joint, several,
absolute, contingent, secured, unsecured, matured or unmatured; or
(f) Debtor or any guarantor of any or all of the Liabilities shall cease
doing business as a going concern, make an assignment for the benefit of
creditors, admit in writing its inability to pay its debts as they become due,
file a petition commencing a voluntary case under any chapter of Title 11 of the
United States Code entitled "Bankruptcy" (the "Bankruptcy Code'), be adjudicated
an insolvent, file a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
arrangement under any present or future statute, law, rule or regulation or file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, consent to the filing of such a
5
<PAGE>
petition or acquiescence in the appointment of a trustee, receiver or liquidator
of it or of all or any part of its assets or properties, or take any action
looking to its dissolution or liquidation; or
(g) an order for relief against Debtor or any guarantor of any or all of
the Liabilities shall have been entered under any chapter of the Bankruptcy Code
or a decree or order by a court having jurisdiction in the premises shall have
been entered approving as properly filed a petition seeking reorganization,
arrangement, readjustment, liquidation, dissolution or similar relief against
Debtor or any guarantor of any or all of the Liabilities under any present or
future statute, law, rule or regulation, or within thirty (30) days after the
appointment without Debtor's or such guarantor's consent or acquiescence of any
trustee, receiver or liquidator of it or such guarantor or of all or any part of
its or such guarantor's assets and properties, such appointment shall not be
vacated, or an order, judgment or decree shall be entered against Debtor or such
guarantor by a court of competent jurisdiction and shall continue in effect for
any period of ten (10) consecutive days without a stay of execution, or any
execution or writ or process shall be issued under any action or proceeding
against Debtor whereby the Equipment or its use may be taken or restrained; or
(h) Debtor or any guarantor of any or all of the Liabilities shall suffer
an adverse material change in its financial condition as compared to such
condition as at the date hereof, and as a result of such change in condition
Secured Party deems itself or any of the Equipment to be insecure;
then and in any such event, Secured Party may, at the sole discretion of Secured
Party, without notice or demand and without limitation of any rights and
remedies of Secured Party under the Uniform Commercial Code, take any one or
more of the following steps:
(1) Declare all of the Time Balance to be due and payable, whereupon the
same shall forthwith mature and become due and payable as provided for in
paragraph 16 below, provided, however, upon the occurrence of any of the events
specified in subparagraphs (f) and (g) above, all sums as specified in this
clause (1) shall immediately be due and payable without notice to Debtor (the
date on which Secured Party declares all of the Time Balance to be due and
payable is hereinafter referred to as the "Declaration Date");
(2) proceed to protect and enforce its rights by suit in equity, action at
law or other appropriate proceedings, whether for the specific performance of
any agreement contained herein, or for an injunction against a violation of any
of the terms hereof, or in aid of the exercise of any other right, power or
remedy granted hereby or by law, equity or otherwise; and
(3) at any time and from time to time, with or without judicial process and
the aid or assistance of others, enter upon any premises wherein any of the
Equipment may be located and, without resistance or interference by Debtor, take
possession of the Equipment on any such premises, and require Debtor to assemble
and make available to Secured Party at the expense of Debtor any part or all of
the Equipment at any place or time designated by Secured Party; and remove an
part or all of the Equipment from any premises wherein the same may be located
for the purpose of effecting the sale or other disposition thereof; and sell,
resell, lease, assign and deliver, grant options for or otherwise dispose of any
or all of the Equipment in its then condition or following any commercially
reasonable preparation or processing, at public or private sale or proceedings,
by one or more contracts, in one or more parcels, at the same or different
times, with or without having the Equipment at the place of sale or other
disposition, for cash and/or credit, and upon any terms, at such place(s) and
time(s) and to such persons, firms or corporations as Secured
6
<PAGE>
Party shall deem best, all without demand for performance or any notice or
advertisement whatsoever, except that Debtor shall be given five (5) business
days' written notice of the place and time of any public sale or of the time
after which any private sale or other intended disposition is to be made, which
notice Debtor hereby agrees shall be, deemed reasonable notice thereof. If any
of the Equipment is sold by Secured Party upon credit or for future delivery,
Secured Party shall not be liable for the failure of the purchaser to pay for
same and in such event Injured Party may resell such Equipment. Secured Party
may buy any part or all of the Equipment at any public sale and if any part or
all of the Equipment is of a type customarily sold in a recognized market or
which is the subject of widely distributed standard price quotations Secured
Party may buy at private sale and may make payment therefor by application of
all or a part of the Liabilities and of all or a part of any Other Liabilities.
Any personalty in or attached to the Equipment when repossessed may be held by
Secured Party without any liability arising with respect thereto, and any and
all claims in connection with such personalty shall be deemed to have been
waived unless notice of such claim is made by certified or registered mail upon
Secured Party within three business days after repossession.
Secured Party shall apply the cash proceeds from any sale or other disposition
of the Equipment first, to the reasonable expenses of re-taking, holding,
preparing for sale, selling, leasing and the like, and to reasonable attorneys'
fees and other expenses which are to be paid or reimbursed to Secured Party
pursuant hereto, and second, to all outstanding portions of the Liabilities and
to any Other Liabilities in such order as Secured Party may elect, and third,
any surplus to Debtor, subject to any duty of Secured Party imposed by law to
the holder of any subordinate security interest in the Equipment known to
Secured Party; provided however, that Debtor shall remain liable with respect to
unpaid portions of the Liabilities owing by it and will pay Secured Party on
demand any deficiency remaining with interest as provided for in paragraph 16
below.
12. Secured Party's Right to Perform for Debtor. If Debtor fails to
perform or comply with any of its agreements contained herein Secured Party may
perform or comply with such agreement and the amount of any payments and
expenses incurred by Secured Party in connection with such performance or
compliance together with interest thereon at the rate provided for in paragraph
16 below, shall be deemed a part of the Liabilities and shall be payable by
Debtor upon demand.
13. Further Assurances. Debtor will cooperate with Secured Party for the
purpose of protecting the interests of Secured Party in the Equipment,
including, without limitation, the execution of all Uniform Commercial Code
financing statements requested by Secured Party. Secured Party and any assignee
of Secured Party are each authorized to the extent permitted by applicable law
to file one or more Uniform Commercial Code financing statements disclosing any
security interest in the Equipment without the signature of Debtor or signed by
Secured Party or any assignee of Secured Party as attorney-in-fact for Debtor.
Debtor will pay all costs of filing any financing, continuation or termination
statements with respect to this Agreement, including, without limitation, any
documentary stamp taxes relating thereto. Debtor will do whatever may be
necessary to have a statement of the interest of Secured Party and of any
assignee of Secured Party in the Equipment noted on any certificate of title
relating to this Equipment and will deposit said certificate with Secured Party
or such assignee. Debtor, shall execute and deliver to Secured Party, upon
request, such other instruments and assurances as Secured Party deems necessary
or advisable for the implementation, effectuation, confirmation or perfection of
this Agreement and any rights of Secured Party hereunder.
7
<PAGE>
14. Non-Waiver; Etc. No course of dealing by Secured Party or Debtor or
any delay or omission on the part of Secured Party in exercising any rights
hereunder shall operate as a waiver of any rights of Secured Party. No waiver or
consent shall be binding upon Secured Party unless it is in writing and signed
by Secured Party. A waiver on any one occasion shall not be construed as a bar
to or a waiver of any right and/or remedy on any future occasion. To the extent
permitted by applicable law, Debtor hereby waives the benefit and advantage of,
and covenants not to assert against Secured Party, any valuation, inquisition,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist which, but for this provision, might be applicable to any sale
or other disposition made under the judgment, order or decree of any court or
under the powers of sale and other disposition conferred by this Agreement or
otherwise. Debtor hereby waives any right to a jury trial with respect to any
matter arising under or in connection with this Agreement.
15. Entire Agreement; Severability; Etc. This Agreement constitutes the
entire agreement between Secured Party and Debtor and all conversations,
agreements and representations relating to this Agreement or to the Equipment
are integrated herein. If any provision hereof or any remedy herein provided for
shall be invalid under any applicable law, such provision or remedy shall be
inapplicable and deemed omitted, but the remaining provisions and remedies
hereunder shall be given effect in accordance with the intent hereof. Neither
this Agreement nor any term hereof may be changed, discharged, terminated or
waived except in an instrument in writing signed by the party against which
enforcement of the change, discharge, termination or waiver is sought. This
Agreement shall in all respects be governed by and construed in accordance with
the internal laws of the State of New York, including all matters of
construction, validity and performance, and shall be deemed a purchase money
security agreement within the meaning of the Uniform Commercial Code. The
captions in this Agreement are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. This Agreement shall
inure to the benefit of and be binding upon Secured Party and Debtor and their
respective successors and assigns, subject, however, to the limitations set
forth in this Agreement with respect to Debtor's assignment hereof. No right or
remedy referred to in this Agreement is intended to be exclusive but each shall
be cumulative and in addition to any other right or remedy referred to in this
Agreement or otherwise available to Secured Party at law or in equity, and shall
be in addition to the provisions contained in any instrument referred to herein
and any instrument supplemental hereto. Debtor shall be liable for all costs and
expenses, including attorneys' fees and disbursements, incurred by reason of the
occurrence of any Event of Default or the exercise of Secured Party's remedies
with respect thereto. Time is of the essence with respect to this Agreement and
all of its provision.
16. Prepayment; Rebate; Interest. Except for the installment payments of
the Time Balance as set forth in the Schedule of Obligations, the Debtor may not
prepay the Time Balance, in whole or in part, at any time. In the event Secured
Party declares all of the Time Balance to be due and payable pursuant to clause
(1) of paragraph 11 above, Debtor shall pay to Secured Party an amount equal to
the sum of (a) all accrued and unpaid amounts as of the Declaration Date plus
interest thereon, and (b) the present value of all future installments set forth
in this Agreement over the remaining unexpired term of this Agreement discounted
to present value using a discount rate of four percent (4%), provided that the
amount of interest earned by Injured Party computed as aforesaid shall not
exceed the highest amount permitted by applicable law. The Time Balance as
reduced to present value in accordance with the preceding sentence shall bear
interest from and after the Declaration Date, and all other Liabilities due and
payable under this Agreement (including past due installments) shall bear
interest from and after their respective due dates, at the lesser of
8
<PAGE>
1.5% per month or the highest rate permitted by applicable law, provided,
however, that Debtor shall have no obligation to pay any interest on interest
except to the extent permitted by applicable law.
17. Consent to Jurisdiction. Debtor hereby irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such state in connection with any action or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. Any such
action or proceeding will be maintained in the United States District Court for
the Southern District of New York or in any court of the State of New York
located in the County of New York and Debtor waives any objections based upon
venue or forum non conveniens in connection with any such action or proceeding.
Debtor consents that process in any such action or proceeding may be served upon
it by registered mail directed to debtor at its address set forth at the head of
this Agreement or in any other manner permitted by applicable law or rules of
court. Debtor hereby irrevocably appoints Secretary of State of the State of New
York as its agent to receive service of process in any such action or
proceeding.
18. Notices. Notice hereunder shall be deemed given if served personally
or by certified or registered mail, return receipt requested, to Secured Party
and Debtor at their respective addresses set forth at the head of this
Agreement. Any party hereto may from time to time by written notice to the other
change the address to which notices are to be sent to such party. A copy of any
notice sent by Debtor to Secured Party shall be concurrently sent by Debtor to
any assignee of Secured Party of which Debtor has notice.
9
<PAGE>
The Debtor agrees to all the provisions set forth above. This Agreement is
executed pursuant to due authorization. DEBTOR ACKNOWLEDGES RECEIPT OF A SIGNED
TRUE COPY OF THIS AGREEMENT.
<TABLE>
<S> <C>
Date: August 26, 1999 Accepted on October 6, 1999.
---------------
Intek Information, Inc. Charter Financial, Inc.
(Signature of Proprietor or name of (Secured Party)
Corporation or Partnership)
By:/S/ TIMOTHY O'CROWLEY By: /S/ JAMES M. GIAIMO
--------------------- ------------------------
Timothy O'Crowley
Its President and Secretary Its Vice President
---------------------------- ----------------------
(if Corporation, President or Vice President (Title of Officer)
should. sign and give official title; if Partnership,
state partner; if L.L.C., state member or manger)
</TABLE>
Main Document - Master Loan and Security Agreement
10
<PAGE>
RIDER TO MASTER LOAN AND SECURITY AGREEMENT NO. 4339
DATED August 26, 1999 (THE "AGREEMENT") BETWEEN
INTEK INFORMATION, INC. AS DEBTOR ("DEBTOR") AND
CHARTER FINANCIAL, INC. AS SECURED PARTY ("SECURED PARTY")
Secured Party and Debtor covenant and agree to amend the Agreement as
follows:
1. In the fifth line of Section 2 of the Agreement, after the words "with
respect thereto" insert the words ", except that life insurance and key man
insurance policies and the proceeds thereof shall be excluded from any security
interest".
2. In the eleventh line of Section 3 of the Agreement, after the words "or
other amounts", insert the words "within ten (10) days of when".
3. In the eighth line of Section 4 of the Agreement, after the words
"howsoever caused," insert the words "Notwithstanding the foregoing, the
provisions of this Agreement shall not impair the rights of Debtor against or in
respect of the supplier or manufacturer of the Equipment with respect to the
Equipment supplied or manufactured therefrom."
4. In the last line of Section 4 of the Agreement, delete the words "to the
extent that such warranty or agreement is assignable".
5. In the eleventh line of Section 6 of the Agreement, after the words "sole
discretion of,", insert the words "Debtor, so long as no Event of Default has
occurred hereunder, otherwise at the sole discretion of".
6. In the fourteenth line of Section 6 of the Agreement, after the words "the
election of,", insert the words "Debtor, so long as no Event of Default has
occurred hereunder, otherwise at the election of".
7. In the ninth line of Section 8 (c) of the Agreement, after the words
"levied or assessed" and insert the word "directly".
8. In the sixth line of Section 8 (j) of the Agreement, delete the words "each
case", and insert instead "the case of the annual statements".
9. In the third line of Section 9 (a) of the Agreement, after the words
"Debtor's Interests hereunder", insert the words "except for a subordinate lien
on the Equipment held by Silicon Valley Bank".
10. In the second line of Section 9 (b) of the Agreement, after the words "to
the Equipment", insert the words "without the prior written consent of Secured
Party".
11. In the third line of Section 9 (d) of the Agreement, before the words
"change the location of the Equipment", insert the words "without the prior
written consent of Secured Party".
12. In the first line of Section 9 (g) of the Agreement, before the words "sell
any shares", insert the words "without Secured Party's prior written consent".
11
<PAGE>
13. In the first line of Section 9 (h) of the Agreement, after the words "any
other entity", insert the words "without Secured Party's prior written consent",
and in the third line of such section after the words "person or entity", insert
the words "except for consolidations, mergers or acquisitions by Debtor from
which Debtor is the purchasing or surviving entity and which does not result in
a material adverse change in the financial condition of Debtor".
14. In the seventh line of Section 16 of the Agreement, delete the words "four
percent (4%)" and insert instead "five percent (5%)".
15. This Rider shall be deemed to be an indivisible part of the Agreement.
(DEBTOR) (SECURED PARTY)
INTEK INFORMATION, INC. CHARTER FINANCIAL, INC.
By: /S/ TIMOTHY O'CROWLEY By: /S/ JAMES M. GIAIMO
--------------------- ----------------------
Timothy O'Crowley James M. Giaimo
Title: President and Secretary Title: Vice President
Date: September 28, 1999 Date: October 6, 1999
12
<PAGE>
RIDER TO MASTER LOAN AND SECURITY AGREEMENT NO. 4339
DATED August 26, 1999 (the "AGREEMENT) BETWEEN INTEK
INFORMATION, INC., AS DEBTOR ("DEBTOR") AND
CHARTER FINANCIAL, INC. AS SECURED PARTY ("SECURED PARTY")
Secured Party and Debtor covenant and agree as follows:
1. Debtor shall remain in compliance with the following provisions at all
times during the term of the Agreement or any Loan Schedule thereunder (the
"Financial Covenants"):
(i) Debtor shall raise no less than $2,000,000.00 in additional equity on
or by November 30, 1999;
(ii) there shall be no material adverse change in the Debtor's financial
condition as compared to the Debtor's business plan received by
Secured Party on August 11, 1999 (the "Business Plan") attached
hereto;
(iii) in the event that Debtor converts its division currently known as the
Spider Technologies division into a separate corporation or other
business entity (the "New Company"), Debtor shall transfer, dispose
of, or otherwise allocate to the New Company, without Secured Party's
prior written consent, no more than $1,500,000.00 in cash, cash
equivalents and/or tangible personal property (based on the fair
market value thereof) provided that such property shall not include
any of the Equipment pledged to Secured Party under this Agreement,
or any Loan Schedule hereunder; notwithstanding the foregoing, in
addition to the foregoing transfer of assets, Debtor shall be
permitted to lease or allow the New Company to use certain personal
property pledged by Debtor to Secured Party as collateral under the
Security Agreement of even date herewith between Debtor and Secured
Party in accordance with the terms and conditions of such Security
Agreement;
(iv) Debtor shall not make any distribution of funds or assets to its
Subsidiaries, either directly or indirectly, whether in cash, assets
or by the assumption of obligations of the Subsidiary, including
without limitation, by the payment or assumption of tax liability or
otherwise, in excess of the aggregate amount of $400,000.00 per
fiscal year; and
(v) all Subsidiaries shall maintain all existing and hereafter acquired
operating licenses which are material to the Subsidiaries in their
various industries for the benefit of Debtor in all appropriate
jurisdictions. In the event that Debtor is deprived of the benefit of
such operating licenses and such non-access results in a material
adverse change to Debtor, including without limitation, Debtor's
financial condition, it shall constitute an Event of Default under
the Agreement.
As used herein:
Subsidiaries shall mean Intek Teleservices, Inc. Brokerage
Administrators Corporation, Inc., Intek Insurance, Inc.
Any accounting terms not defined herein shall have the meanings
ascribed to them in generally accepted accounting principles, consistently
applied.
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<PAGE>
2. Secured Party shall review compliance with the Financial Covenants on a
quarterly basis. In addition, within forty-five (45) days after the end of each
fiscal quarter, Debtor shall provide Secured Party with a certification of its
chief financial officer (the "Compliance Certificate") stating that there has
been no material adverse change in the Debtor's financial condition as compared
to the Debtor's Business Plan.
3. The failure of Debtor to conform or comply with the terms, conditions and
covenants of this Rider shall constitute an "Event of Default" under the
Agreement. In the event that an Event of Default occurs with respect to any of
the provisions of this Rider, Debtor shall cure the Event of Default resulting
from such failure by delivering to Secured Party within fifteen (15) business
days following such Event of Default, an irrevocable standby letter of credit
issued by a recognized financial institution acceptable to Secured Party in an
amount equal to the present value of the sum of the then remaining payments due
under all Loan Schedules under the Agreement discounted using the interest rate
of five percent (5%), which letter of credit shall be substantially in the form
annexed hereto as exhibit I (the "LC"). If an LC is required pursuant to this
Section 3, it shall be an Event of Default under the Agreement if at any time
prior to the end of the term of any of the Agreement the LC is not in full force
and effect or Secured Party receives notice that the LC will not be replaced or
renewed.
4. All other terms and conditions of the Agreement shall remain in full force
and effect. In the event that there is any conflict between the terms and
conditions of this Rider and the terms and conditions of the Agreement, the
terms and conditions of this Rider shall govern. Any capitalized terms undefined
herein shall have the meanings ascribed to them in the Agreement. All of the
terms, conditions and provisions hereunder shall be deemed to be an indivisible
part of and supplement to the Agreement.
INTEK INFORMATION, INC. CHARTER FINANCIAL, INC.
By: /S/ TIMOTHY O'CROWLEY By:/S/ JAMES M. GIAIMO
--------------------- --------------------------
Timothy O'Crowley James M. Giaimo
Title: President and Secretary Title: Vice President
Date: September 28, 1999 Date: October 6, 1999
14
<PAGE>
[Letterhead of Issuing Bank]
______________, 19_
EFFECTIVE DATE: _________________, 19_
Irrevocable Standby Letter Of Credit Number __________________
BENEFICIARY: APPLICANT:
- --------------------
- --------------------
- --------------------
AMOUNT: US$__________________
EXPIRY: As set forth herein
IN NEW YORK FOR PRESENTATION
Gentlemen:
We hereby issue our Irrevocable Standby Letter of Credit Number
____________________________in your favor for the account of
_________________________up to an aggregate amount of US$ AND 00/100
UNITED STATES DOLLARS), available by one or more drawings made at any time after
the Effective Date hereof to and including the expiration date set forth below
or any extended expiration date, by your sight draft drawn on us accompanied by
the following:
1. Beneficiary's signed statement reading as follows:
"The amount of our drawing $ _________________________under [Issuing Bank]
Letter of Credit No. represents a sum due us from ______________which is in
default under a lease agreement dated______, 19__ between
_______________and __________________and said default has not been cured"
2. The original of this Letter of Credit and Amendment(s), if any.
Partial drawings are permitted.
This Letter of Credit expires on the______ day of _____,19_ except if
automatically extended as provided for herein.
It is a condition of the Letter of Credit that it shall be deemed
automatically extended without amendment for additional periods of one year from
the current and future expiration dates unless sixty days prior to the then
15
<PAGE>
current expiration date we notify you by registered mail, return receipt
requested, that we elect not to consider this Letter of Credit renewed for any
such additional period.
In the event you receive written notification from us that we elect not to renew
this Letter of Credit, then at any time within sixty (60) days of your receipt
of such notice, you may draw upon this Letter of Credit without the necessity of
presenting the signed statement required in paragraph number I of this Letter of
Credit.
This Letter of Credit is Transferable. Transfer of this Letter of Credit
must conform strictly to the terms hereof and to the conditions of Article 48 of
the Uniform Customs and Practice for Documentary Credits (1993
Revision) fixed by the International Chamber of Commerce, Publication No. 500.
Should you wish to affect a transfer under this Letter of Credit, such transfer
will be subject to the return to us of this advice accompanied by our form of
transfer property signed by you and verified by your bankers that the signature
is valid, and subject to your payment of our customary transfer charge of
______________________.
Draft must state: "DRAWN UNDER [ISSUING BANK] LETTER OF CREDIT NUMBER
______DATED , _______________-, 19___"
We hereby agree with you that drafts drawn under and in compliance with the
terms of this Letter of Credit shall be duly honored upon due presentation to
us. This Letter of Credit sets forth in full the terms of our undertaking and
our undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein or, in
which this Letter of Credit is referred to or to which this Letter of Credit
relates.
Except as otherwise expressly stated, this credit is subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), the International
Chamber of Commerce Publication No. 500.
Very truly yours,
[Name of Issuing Bank]
By:
___________________
___________________
[Name and Title of
Authorized Signature]
Letter of Credit (irrevocable)
16
<PAGE>
Exhibit 10.28
SERVICES AGREEMENT
------------------
THIS AGREEMENT, entered into and effective as of May 1, 1997, (the "Effective
Date") is by and between Information Technologies of America, a division of Sony
Electronics Inc., with offices at 3300 Zanker Road, San Jose, CA 95134 ("Sony"),
and Intek Information Inc. with an address at 370 Seventeenth Street, Suite
3950, Denver, Colorado 80202 ("Vendor").
WITNESSETH:
Background. Sony wishes to engage Vendor to perform certain services as more
particularly described in Exhibit A, attached to and made a part of this
Agreement, as well as such other additional and/or modified Services on projects
that may, from time to time be assigned by Sony to and accepted by Vendor
pursuant to the procedures provided herein (the "Services"). Vendor desires to
perform the Services for Sony in such capacity and represents that it possesses
the skills and expertise required to perform the Services.
NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinabove and hereinafter set forth, the parties hereby agree as follows:
1. SERVICES / SCHEDULE
A. Sony hereby engages Vendor to perform the Services as described in
Exhibit A or as from time to time may be assigned pursuant to Paragraph 1.B.
Vendor agrees to perform the Services in accordance with the highest
professional standards applicable to the performance of like services. Without
in any manner prejudicing the right of Sony to claim that any other breach or
default of this Agreement on the part of Vendor constitutes a material breach or
default, it is understood and agreed that, except as provided under Paragraph
1.D below, the failure of Vendor to perform the Services in any material
respects at the times and in the manner specified shall constitute a material
breach and default of this Agreement on the part of Vendor.
B. Sony may, from time to time, request that Vendor perform additional
services ("Additional Services"). If Vendor accepts such assignments, the
parties shall agree to the parameters of the Additional Services to be
undertaken by executing an Additional Work Authorization in the form of Exhibit
B, attached to and made a part of this Agreement. The Additional Services shall
be considered Services under this Agreement, and shall be performed in
accordance with and subject to the terms and conditions of this Agreement and
the Additional Work Authorization specifying the Services to be performed.
C. Sony may periodically request reasonable written reports concerning
Vendor's progress, project status, billing data, and other matters pertaining to
the Services, and Vendor shall promptly provide such reports to Sony at no
additional charge.
<PAGE>
D. In the event delay is caused by circumstances beyond either party's
control, including but not limited to fire, strike, war, riots, acts of God
and/or acts of civil or military authority, the time limitation in Paragraph 1.A
above shall be extended to provide for such delay. Immediately upon such an
occurrence, the parties shall enter into good faith discussions as to mutually
acceptable adjustments to or alternate methods of proceeding with the affected
Services, and the impact, if any, on project schedules. If any such delay
continues for a period beyond 30 days, and the parties are unable to agree to an
acceptable adjustments to or alternate methods of proceeding with the affected
Services, then either party may terminate any or all of the affected Services
and/or this Agreement. It is understood and agreed by the parties that this
Section 1.D shall apply if a labor and/or equipment shortage is caused by a
requirement by Sony with notice of less than sixty (60) days which would require
substantial hiring and/or equipment acquisition.
E. Sony shall respond to Vendor inquiries in an expeditious manner to
promote the efficient and effective performance of the Services.
2. COMPENSATION / EXPENSES
A. As full and complete consideration for the Services to be performed by
Vendor, Sony agrees to pay Vendor total fees (hereinafter called the "Fees") in
accordance with this Paragraph 2, inclusive of any and all taxes on the Services
which are Vendors complete responsibility (but which in any case are exclusive
of taxes based on Sony's income or property taxes on Sony owned, leased or
licensed assets). For the Services to be provided under Exhibit A, the Fees
shall be as set forth in Exhibit A. For any Additional Services pursuant to
Paragraph 1.B above, the Fees shall be agreed upon prior to the initiation of
such Additional Services and set forth in the Additional Work Authorization as
provided in Paragraphs 1.B above. Vendor shall only be compensated for
Additional Services pursuant to executed Additional Work Authorizations as
provided in this Agreement. Any work which is not so executed and documented
shall not be entitled to compensation under any legal theory and Vendor hereby
waives any compensation for such additional and/or modified work. Payment of
the Fees shall be subject to performance of the Services as provided herein.
B. The Fees shall include all sums due and owing of every kind and
description including but not limited to mileage, stationery, and special
services such as typing, duplicating costs and mailing expenses. Unless these
costs are specifically agreed to as a separate reimbursable expense item on
Exhibit A or in an Additional Work Authorization, Sony will not pay Vendor
therefor. However, it is understood and agreed by the parties that Fees as used
in this Agreement do not include telecommunications expenses including, but not
limited to, set-up fees, installation fees, taxes on phone services provided on
behalf of Sony, monthly telephone fees for numbers utilized by Vendor in
performing the Services, 800 and 900 number charges, line charges and TI
charges. Whenever possible such charges shall be billed directly to Sony.
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<PAGE>
C. Vendor represents to Sony that Vendor shall employ good faith efforts
to maintain rates that are the same as or no higher than those charged to other
clients of Vendor for the performance of like services.
D. Unless otherwise specified in Exhibit A or in an Additional Work
Authorization, Invoices are to be submitted monthly and, subject to the terms of
this Agreement, are payable by Sony within thirty (30) days of receipt thereof
by Sony. The parties agree that payment for Services rendered between the
Effective Date and December 31, 1997 has been made in full. Payment for
Services rendered from January 1, 1998 to September 30, 1998 and property
documented by Vendor shall be made by October 30, 1998.
E. Vendor shall maintain complete and accurate accounting records, and
shall retain such records for a period of two (2) years following the date of
the invoice to which they relate. Sony shall have the right, upon reasonable
notice, to audit at any time up to one (1) year after payment of an invoice,
Vendor's records relating to the Fees and expenses billed to Sony in connection
with the Services rendered under this Agreement. Sony will attempt to minimize
any disruption to Vendor's business caused by the audit.
F. In the event Vendor determines that it has any inquiries, problems or
believes there are errors or discrepancies with respect to any amounts due
pursuant to this Agreement, Vendor agrees to give Sony written notice thereof
within one (1) year from the date that the work which gave rise to the inquiry,
problem and/or discrepancy, etc. was performed. Vendor's failure to give Sony
such notice shall constitute a waiver of any and all rights which Vendor may
have to any adjustment, charge or reimbursement by reason thereof.
3. PROPRIETARY RIGHTS / CONFIDENTIALITY/ EXPORT CONSIDERATIONS
A. Vendor and Sony hereby represent and warrant to one another that their
respective activities in connection with the performance of the Services
hereunder will not violate any proprietary rights of third parties, including,
without limitation, patents, copyrights, or trade secrets, and that neither
party's activities in connection with the performance of the Services hereunder
will violate any contractual obligations or confidential relationships which
either Vendor or Sony may have to/with any third party.
B. Vendor agrees to hold in trust and confidence all of the information
regarding Sony's business, Sony's customers, the Services performed hereunder
and the results thereof (i) disclosed by Sony, its agents or employees to Vendor
hereunder; (ii) obtained from Sony or otherwise learned as a result of the
Services performed hereunder; and/or (iii) used as a basis for and/or contained
in any reports prepared by Vendor for Sony hereunder (all of which shall be
called the "Confidential Information").
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C. Sony agrees to hold in trust and confidence all information marked as
Confidential Information regarding Vendor's business, methods, processes, the
Services performed hereunder and the results thereof (i) disclosed by Vendor,
its agents or employees to Sony hereunder, (ii) obtained from Vendor or
otherwise learned as a result of the Services performed hereunder; and/or (ii)
used as a basis for and/or contained in any reports prepared by Vendor for Sony
hereunder (all of which shall be included as Confidential Information). In
addition, any and all information regarding the architecture and use of Telweb
and the networking arrangements supporting the Services shall be considered
Confidential Information without being so marked.
D. The existence and substance of this agreement shall be included as
Confidential Information. Neither Sony nor Vendor will disclose all or any part
of the Confidential Information to any third party not associated with the
performance of the Services hereunder. Neither Sony nor Vendor shall make any
press release regarding the existence of this Agreement without the prior
written consent of the other party; provided, however, that Vendor may use
Sony's name as a reference and on Vendor's client lists. Notwithstanding the
foregoing, Vendor may disclose the terms hereof on a confidential basis to its
advisors and lenders.
E. It is understood, however, that the restrictions in this Paragraph 3,
shall not apply to any portion of the Confidential Information which Sony or
Vendor can clearly demonstrate falls within any of the following categories: (i)
Confidential Information that as of the time of disclosure to Sony or Vendor
respectively, was already known to Sony or Vendor without obligation of
confidentiality, as demonstrated by appropriate documentary evidence antedating
the relationship between Vendor and Sony; or (ii) Confidential Information
obtained after the date hereof by Sony or Vendor from a third party which is
lawfully in possession of such information and not in violation of any
contractual or legal obligation to Vendor or Sony respectively with respect to
such information; or (iii) Confidential Information which is or becomes part of
the public domain through no fault of Sony or Vendor or their respective
employees; (or) Confidential Information which Sony or Vendor is required to
disclose by applicable law, rule, regulation or order.
F. Each party agrees to restrict access to all of the Confidential
Information within its company to only such limited group of authorized
employees or independent contractors who (i) require such information in
connection with their activities as contemplated by this Agreement, and (ii)
have agreed in writing to maintain the confidential nature of all proprietary
information including that of third parties received by them in the course of
their employment or engagement.
G. All written materials relating to or containing the Confidential
Information shall be maintained in a secure area and plainly marked to indicate
the secret and confidential nature thereof and to prevent unauthorized use or
reproduction thereof.
H. Disclosure of Confidential Information to Vendor hereunder shall not
constitute any option, grant or license to Vendor under any patent or other
rights now or hereinafter held by Sony, its subsidiaries, or any of its
affiliated companies.
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I. Upon termination of this Agreement, or earlier upon Vendor or Sony's
request, Sony or Vendor respectively shall deliver all items containing any
Confidential Information to Sony or Vendor respectively or make such other
disposition thereof as the requesting party may direct.
J. In order to enable Sony to disclose technology or software to Vendor
in conformity with the requirements of Part 740.3 (d) of the U.S. Department of
Commerce's Export Administration Regulations, Vendor hereby gives assurance to
Sony that it will not, without a license or a License Exception from the U. S.
Department of Commerce's Bureau of Export Administration, reexport or release
the technology and/or software, including source code, to any one of the
countries listed in Country Groups D:l or E:2 of Supplement No. 1 to Part 740 of
the Export Administration Regulations or to a national of any one of those
countries. Such countries are currently: Albania, Armenia, Azerbajian, Belarus,
Bulgaria, Cambodia, the People's Republic of China, Cuba, Estonia, Georgia,
Kazakhstan, Kyrgyzstan, Laos, Latvia, Libya, Lithuania, Moldova, Mongolia, North
Korea, Romania, Russia, Tajikstan, Turkmenistan, Ukraine, Uzbekistan and
Vietnam.
K. Sony will not solicit for employment any employee of Vendor or its
affiliates directly involved in the Services identified to Sony in writing, or
induce any such employee or contractor of Vendor to leave the employment of or
terminate the contractor relationship with, Vendor or its affiliates, or assist
or encourage any other person to do so, during the term of this Agreement and
for a period of one (1) year thereafter without the prior written consent of
Vendor.
L. This Paragraph 3 shall survive termination or expiration of this
Agreement.
4. OWNERSHIP OF DATA DERIVED
A. As part of this Agreement, and without additional compensation, Vendor
acknowledges and agrees that all right, title and interest (including, without
limitation, patents and copyrights) in any and all Data as defined below shall
vest exclusively in Sony. Data shall be defined as the business plan, marketing
plan, customer lists, historical customer data and/or other data compiled by
Vendor relating to Sony products and/or customers, Sony product and service
information, scripts, and call guides used in connection with the performance of
Services hereunder. Vendor without further compensation therefor does hereby
irrevocably assign, transfer and convey in perpetuity to Sony and its successors
and assigns the entire worldwide right, title, and interest in and to the Data
including, without limitation, all patent rights, copyrights, mask work rights,
trade secret rights and other proprietary rights therein. Such assignment
includes the transfer and assignment to Sony and its successors and assigns of
any and all moral rights which Vendor may have in the Data. Vendor acknowledges
and understands that moral rights include the right of an author: to be known
as the author of a work; to prevent others from being named as the author of a
work; to prevent others from falsely attributing to an author the authorship of
a work which he/she has not in fact created; to prevent others from making
deforming changes in an author's work; to withdraw a published work from
distribution if it no longer represents the views of the author; and to prevent
others from using the work or the author's name in such a way as to reflect on
his/her
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professional standing. Notwithstanding anything to the contrary in this
Agreement, it is understood and agreed by the parties that any and all right,
title an interest in Vendor's proprietary software known as Telweb remains with
Vendor.
B. All data, business plans and information, specifications, drawings, or
other property indicated on Attachment 3A shall remain the exclusive property of
Sony. Vendor agrees that such Sony property will be used for no purpose other
than for work for Sony under this Agreement. Vendor shall be responsible for the
safekeeping of all such property. All telephone numbers (including 800 and 900
numbers), web addresses and other locator information used as part of the
Services shall be the property of Sony. Any hardware or software supplied by
Sony shall remain the property of Sony, and Vendor agrees to execute Sony's
standard loan agreement for any such property.
C. Vendor agrees that without further remuneration (except out-of-pocket
expenses) and whether or not this Agreement is in effect, Vendor will, at Sony's
request execute and deliver any documents and give all reasonable assistance
which may be essential or desirable to secure to, assign, and vest in Sony the
sole and exclusive right, title, and interest in and to the Data and items
listed on Attachment 3A.
D. Sony hereby grants Vendor a perpetual, non-terminable, world wide
royalty-free license to such elements of the Data that are both generic in
nature and necessary for the normal operation of Vendor's business (as such
business is presently conducted or may be conducted). Any Data setting forth
Sony customer or other Sony database information, or other proprietary
information reasonably designated by Sony as confidential, is specifically
excluded from this license. THE DATA LICENSED BY SONY IS LICENSED AS IS, WITHOUT
WARRANTY OF ANY KIND. SONY DISCLAIMS ALL OTHER WARRANTIES, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND/OR FITNESS FOR A
PARTICULAR PURPOSE.
5. INDEMNIFICATION
A. Vendor shall indemnify, defend and hold Sony, its affiliates, and
their respective officers, directors, and employees, harmless from and against
any and all claims, demands, liabilities, loss, damages, expenses, proceedings,
actions or causes of action or government inquiries, including attorneys' fees
and expenses and costs, arising out of or connected with (i) personal injury or
property damage to the extent such injury and/or damage results from the
negligence or willful misconduct of Vendor or its employees, agents, or
subcontractors, (ii) Vendor's breach of contract, services or obligations under
this Agreement (iii) third party claims of negligence, invasion of privacy,
mental distress, defamation or any other claim or cause of action based upon the
acts and/or omissions of the agents, employees or subcontractors of Vendor.
Vendor shall have no such obligation (x) if the matter is based on the accuracy
and/or truthfulness of scripts, policies or instructions provided (or scripts
approved) by Sony, (y) for any goods or services provided or to be
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<PAGE>
provided by Sony, its agents or contracts, or (z) for goods or services
designated by Sony to be used by Vendor.
B. Sony shall indemnify, defend and hold Vendor, its affiliates, and
their respective officers, directors and employees, harmless from and against
any and all claims, demands, liabilities, loss, damages, expenses, proceedings,
actions or causes of action or government inquiries, including attorneys' fees
and expenses and costs, arising out of or connected with (i) personal injury or
property damage to the extent such injury and/or damage results from the
negligence or willful misconduct of Sony or its employees, agents or
subcontractors, (ii) Sony's breach of contract, services or obligations under
this Agreement and/or (iii) third party claims of negligence, products
liability, consumer credit, consumer fraud, deceptive trade practices or any
other claim or cause of action based upon the policies, acts and/or omissions of
the agents, employees or subcontractors of Sony other than Vendor. It is
understood and agreed by the parties that Vendor shall have no obligation to
evaluate and/or verify that Sony is in compliance with laws relating to consumer
credit, consumer fraud, deceptive trade practices or other similar matters and
that Vendor may rely upon Sony's representation, hereby made, that Sony is in
compliance to the best of its knowledge.
C. Any party seeking defense and indemnification under this Section shall
(i) give the indemnifying party prompt written notice of the claim for which
defense and indemnification is sought, (ii) give the indemnifying party control
over the defense and any compromise or settlement of the claim, except the party
being defended and indemnified shall have the right to approve the selection of
counsel, which approval shall not be unreasonably withheld; (iii) cooperate with
the indemnifying party in connection with the defense, compromise and settlement
of the claim; and (iv) provide, at the indemnifying party's expense, such
assistance in the defense, compromise and settlement of the claim as the
indemnifying party may reasonably request. The obligations described in this
Paragraph 5 shall survive the termination/expiration of this Agreement.
6. INSURANCE
A. Simultaneously with execution of this Agreement, Vendor shall furnish
to Sony an insurance certificate evidencing that it maintains, with insurance
companies with a Best's rating of B+ or above, and naming Sony as an additional
insured, the following coverages: (i) Worker's Compensation and Employer's
Liability, with minimum statutory limits; and (ii) General Liability, with
minimum limits of $1,000,000.00 per occurrence for bodily injury, death, or
property damage.
B. The Certificate required pursuant to Paragraph 6.A above shall specify
date(s) when such insurance expires and shall further provide for thirty (30)
days' prior notification to Sony of cancellation or material change in coverage,
and renewal certificates shall be in Sony's possession prior to the expiration
dates of all policies noted therein.
7. TERM, TERMINATION AND CANCELLATION
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A. This Agreement shall commence on the Effective Date and thereafter
shall remain in effect (unless and until terminated as set forth in this
Paragraph 7) until all duties and obligations of the parties have been
discharged, but in any event shall expire on March 31, 1999.
B. Either party may terminate this Agreement, effective upon delivery of
written notice of termination, if the other party materially breached this
Agreement and does not correct such material breach within thirty (30) days
after receiving written notice of such material breach.
C. Upon expiration of the cure period and termination of this Agreement,
either party shall deliver to the other party all items requested containing any
Confidential Information as described under Paragraph 3 above and/or Data as
described under Paragraph 4 above, or make such other reasonable disposition
thereof as the requesting party may direct in writing.
8. INDEPENDENT CONTRACTOR
A. It is understood and agreed that in performing the Services for Sony
hereunder, Vendor shall act in the capacity of an independent contractor and not
as an employee or agent of Sony except to the extent that Vendor is specifically
required to do so under this Agreement. Vendor agrees that unless otherwise
instructed in writing it shall not represent itself as the agent or legal
representative of Sony for any purpose whatsoever except to the extent that
Vendor is specifically required to do so under this Agreement. Vendor shall be
solely responsible for the remuneration of and the payment of any and all taxes
with respect to its employees and contractors and any claims with respect
thereto and shall be solely responsible for the withholding and payment of all
federal, state and local income taxes as well as all FICA and FUTA taxes
applicable to it, or its employees. Vendor acknowledges that as an independent
contractor, neither it nor any of its employees or contractors shall be eligible
for any Sony employee benefits, including, but not limited to, vacation,
medical, dental or pension benefits.
B. Vendor agrees to indemnify Sony for and hold it harmless from any and
all taxes which Sony may have to pay and any and all liabilities (including, but
not limited to, judgements, penalties, fines, interest, damages, costs and
expenses, including reasonable attomey's fees) which may be obtained against,
imposed upon or suffered by Sony or which Sony may incur by reason of Vendor's
failure to deduct and withhold from the compensation payable hereunder any
amounts required or permitted to be deducted and withheld from the compensation
of an individual under the provisions of any statutes heretofore or hereafter
enacted or amended requiring the withholding of any amount from the compensation
of an individual.
C. Notwithstanding any other provisions of this Agreement, if it should
be determined that Sony is legally required to make deductions from any amounts
owed to Vendor under this Agreement (e.g., withholding taxes, social security
contributions, etc.), Sony shall have the right to do so after providing Vendor
with thirty (30) days prior written notice.
9. LIMITATION OF LIABILITY
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Under no circumstances shall either party be liable to the other for any
punitive or indirect loss or damage whether or not such loss or damage is caused
by the fault or negligence of such party, its employees, agents or contractors.
This exclusion is not intended to apply to:
(i) loss or damage incidental to a default, termination, suspension or
defect in Vendor's services such as, but not limited to, additional managerial
and administrative costs and expenses incurred in effecting a cover under a
Vendor default;
(ii) loss or damage to property or personal injuries (including death)
directly caused by Vendor's or Sony's negligence.
10. NOTICES
Except as otherwise provided herein, to be effective, all communications
and notices relating to this Agreement are to be sent by first class mail,
postage prepaid (effective three (3) days after postmark date) or delivered
personally or by telecopy/fax (with a first class mail, postage prepaid
confirmation) to the respective addresses set forth in the opening paragraph
hereof (in the case of notices to Sony, with a copy to: Law Department, Mail
Drop 2A8, at such address, and in the case of Vendor addressed ("Attn.
President"), or to such other addresses as either party shall designate by
notice given as aforesaid.
11. GENERAL
A. If Vendor's employees are working on the premises of Sony, Vendor's
employees shall observe the working hours, working rules and security procedures
established by Sony.
B. If Sony's employees are working on the premises of Vendor, Sony's
employees shall observe the working hours, working rules and security procedures
established by Vendor.
C. Neither party may assign this Agreement, provided however, it is
understood and agreed by the parties that there is a possibility that the
Vendor, as an entire business unit, could be purchased by another company. In
the event that such purchase as an entire business unit becomes probable, Vendor
shall promptly notify Sony. Sony shall have the right to immediately terminate
this Agreement after any such purchase of Vendor at any time the senior
management of Vendor as of the Effective Date is no longer directly involved in
making the strategic or operational business decisions for the new entity
affecting Sony.
D. Either party's waiver of any breach or failure to enforce any of the
terms and conditions of this Agreement at any time shall not in any way affect,
limit or waive such party's right thereafter to enforce and compel strict
compliance with every term and condition thereof.
E. This Agreement shall be deemed to have been made and executed in the
State of California and any dispute arising hereunder shall be resolved in
accordance with the laws of
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California. The parties hereby consent to and submit to the jurisdiction of the
federal and state courts located in the State of California, and any action or
suit under this Agreement shall only be brought by the parties in any federal or
state court with appropriate jurisdiction over the subject matter established or
sitting in the State of California. The parties shall not raise in connection
therewith, and hereby waive, trial by jury and/or any defenses based upon the
venue, the inconvenience of the forum, the lack of personal jurisdiction, the
sufficiency of service of process or the like in any such action or suit brought
in the State of California. THE PARTIES HEREBY WAIVE TRIAL BY JURY WITH RESPECT
TO ANY DISPUTE RELATING TO OR ARISING OUT OF THIS AGREEMENT.
F. In case any term of this Agreement shall be held invalid, illegal or
unenforceable in whole or in part, neither the validity of the remaining part of
such term nor the validity of any other term shall be in any way affected
thereby.
G. All remedies provided herein are cumulative and not exclusive of any
remedies provided by law or equity.
H. In the event of any litigation between the parties hereto with respect
to this Agreement, the prevailing party (the party entitled to recover the costs
of suit, at such time as all appeals have been exhausted or the time for taking
such appeals has expired) shall be entitled to recover reasonable attorneys'
fees in addition to such other relief as the court may award.
I. Except as otherwise provided herein, the rights and obligations of the
parties hereto shall survive any termination of this Agreement.
J. Vendor will comply with all statutes, ordinances, and regulations of
all federal, state, county and municipal or local governments, and of any and
all of the departments and bureaus thereof, applicable to the carrying on of its
business and performance of the Services, including without limitation laws
regarding misrepresentation, deceptive business practices and invasion of
privacy. Vendor agrees to comply with the Sony Electronics Inc. Ethics Guide
for Third Parties attached as Exhibit C.
K. Sony will comply with all statutes, ordinances, and regulations of all
federal, state, county and municipal or local governments, and of any and all of
the departments and bureaus thereof, applicable to the carrying on of its
business and performance of the Services, including without limitation laws
regarding misrepresentation, deceptive business practices and invasion of
privacy.
L. This Agreement constitutes the complete agreement between the parties
hereto and supersedes all prior communications and agreements between the
parties with respect to the subject matter hereof and may not be modified or
otherwise amended except by a further writing executed by both parties hereto,
which writing makes specific reference to this Agreement.
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M. The parties will act in good faith, deal fairly, and act in a
commercially reasonable manner in connection with the relationship between them.
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IN WITNESS WHEREOF, the parties hereto by their duly authorized representatives
have executed this Agreement upon the date first set forth above.
INTEK INFORMATION INC. SONY INFORMATION
TECHNOLOGIES OF AMERICA,
A DIVISION OF
SONY ELECTRONICS INC.
By:/S/ PATRICK F. O'NEAL_____________________ By: /S/ HIDEKI KOMIYAMA
Patrick F. O'Neal -------------------
Managing Director Print Name: Hideki Komiyama
Title: President, ITA
Sony Electronics, Inc.
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CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
EXHIBIT 10.28.1
AMENDMENT TO SERVICES AGREEMENT
This Amendment (the "Amendment"), dated as of April 1, 1999 (the "Effective
Date") amends the Services Agreement between Direct Sales Division, a division
of Sony Electronics Inc. ("Sony") and Intek Information Inc. ("Vendor") dated as
of May 1, 1997 and amended March 31, 1999 (the "Agreement").
1. AMENDMENT
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The Agreement is hereby further modified and amended as follows:
a. The term of the Agreement shall be extended for an additional two
years from the Effective Date of this Amendment.
b. Exhibit A of the Agreement and related referenced Attachments shall be
replaced in its entirety with the new Exhibit A and related referenced
Attachments attached hereto, effective as of April 1, 1999.
2. GENERAL
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a. The terms of this Amendment shall supersede any inconsistent or different
terms contained in the Agreement.
b. Defined terms used and not defined herein shall have the meanings assigned
to them in the Agreement.
c. This Amendment shall not be interpreted nor construed as waiving any
rights, obligations, remedies or claims the parties may otherwise have
under the Agreement.
d. Except as expressly modified herein, all terms and conditions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties, through their respective authorized
representatives, have executed this Amendment as of the Effective Date.
DIRECT SALES DIVISION, A DIVISION OF
SONY ELECTRONICS INC. INTEK INFORMATION INC.
By: /s/ H. Komiyama By: /s/ Frank Richards
---------------- ----------------------
Name: H. Komiyama Name: Frank D. Richards
Title: President, PNSC Title: Executive Vice President/
a division of Sony Electronics, Inc. Chief Operating Officer
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CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
SERVICES AGREEMENT
EXHIBIT A
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SERVICES AND FEES
-----------------
Effective Date: July 1, 1999
This Exhibit A is attached to and made a part of the Services Agreement between
the Direct Sales Division of Sony Electronics Inc. ("Sony") and Intek
Information Inc. ("Vendor").
I. SCOPE OF SERVICES.
Vendor shall perform inbound and outbound telesales and related customer support
for Sony in connection with certain direct sales programs, which will offer
computer and computer related products and services to end-user customers (the
"Program"). Sony shall in its sole discretion determine the products and
services to be included in the Program and the nature of promotions to be
utilized in the Program. Vendor support shall be transparent to Sony customers
so that, to the extent permitted by applicable law, such customers will not know
whether they are speaking to Sony or Vendor acting on behalf of Sony. In
supporting the Program Vendor will provide the following services: order entry
systems, inventory systems, return merchandise authorization systems, EDI
transmission into Sony's STN system, processing files, online product
information systems, credit card authorization services/technology, welcome kit
with invoice to customer, database feeds to Sony or Sony designated third
parties, and sales reporting. Vendor will either address or route non-Program
related calls as Sony directs. Vendor shall implement such third party credit
verification and granting procedures as Sony may direct. Vendor shall follow the
EDI protocol designated by Sony, including but not limited to the items listed
in Attachment 1 hereto. Vendor shall use reasonable commercial effort to
implement an automated IVR that provides order tracking and shipping information
no later than December 1, 1999 (any cost to Sony for such IVR implementation
shall be limited to costs related to support of Sony-specific legacy systems
such as STN).
a. Recruiting, Hiring and Training of Personnel. Vendor will at all times
--------------------------------------------
ensure that sufficient trained personnel are available to meet the performance
standards in (d) below. Vendor will recruit, interview and hire dedicated sales
and customer service representatives (ISRs) to provide both inbound and outbound
telesales and customer service. Vendor will provide both initial and ongoing
training of such personnel. Sony will be billed [______] per hour for continuing
classroom product and development training (as opposed to initial training) that
exceeds 7.5% of ISR billable hours per fiscal quarter. Sony shall approve the
general characteristics of all ISR groups hired as well as the size of the Home
Office/ Business ISR groups.
b. Reporting. Vendor will provide reports in such format and frequency as
---------
reasonably requested by Sony in any standard electronic or non-electronic
format. Such reports may include daily real time reporting online as well as
weekly and monthly quantitative reporting including total calls by marketing
program, total sales by product by marketing program, cost per call
2
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
analysis, average call length, calls and sales analysis by hour, day, week and
month, and aspect reports by ISR. Notwithstanding any agreed reporting schedule,
Vendor will immediately notify Sony of any critical developments.
c. Database. Vendor will maintain a complete database of all Sony customers
--------
related to the Services hereunder containing such information as Sony shall
specify. Such database system shall be flexible enough to support multiple
marketing campaigns and categorize different information by campaign. Vendor
shall provide data from such database to Sony or third parties as designated by
Sony in accordance with a fee schedule to be mutually agreed by the parties no
later than November 1, 1999 and attached hereto as Attachment 3. Sony shall
approve all Vendor internal procedures regarding database management and
maintenance in writing, and Vendor shall follow such procedures without
exception. Upon termination or expiration of this Agreement Vendor shall deliver
such database in its entirety to Sony in standard electronic format and retain
no copies.
d. Performance Standards. Vendor will meet Sony's minimum performance
---------------------
standards as specified below in conducting telesales services:
i. On a monthly basis, monitor each ISR a minimum of three times
per forty (40) hours.
ii. On a monthly basis, maintain a ISR to supervisor ratio of 12:1.
iii. Provide a dedicated manager for the Program with no other
responsibilities.
iv. Provide a minimum hourly pay rate of [__________ (____)] per ISR
employed in the Northern California area beginning no later than
the ninety-first day of employment by Vendor.
v. On a monthly basis, answer eighty percent of incoming calls
within 30 seconds during both peak and non-peak times (three
minutes for Customer Service calls). "Customer Service" call
shall be defined as all outbound customer service calls and all
inbound calls that select the post sales customer service prompt
within the Sony IVR and are actually answered by Vendor customer
service representatives.
vi. On a monthly basis, maintain a call abandonment rate of less
than three percent (3%) during both peak and non-peak times
(twenty-five percent (25%) for Customer Service calls unless the
total percentage of Customer Service calls is below twenty
percent (20%) of the total calls answered, in which case the
abandonment percentage maximum for Customer Service calls shall
be reduced to ten percent (10%)).
vii. On a monthly basis, maintain a call blockage (busy) rate of less
than two percent (2%) during both peak and non-peak times
(twenty-five percent (25%) for Customer Service calls unless the
total percentage of Customer Service calls is below twenty
percent (20%) of the total calls answered, in which case the
abandonment percentage maximum for Customer Service calls shall
be reduced to ten percent (10%)).
viii. On a monthly basis, average hold time once a customer is within
the voice response unit must average less than 30 seconds (three
minutes for Customer Service calls unless customer service calls
exceed 20% of total calls.
3
<PAGE>
ix. ISRs performing below quality standards must be coached and
counseled by Vendor in accordance with Vendor's corrective
action procedures and brought up to baseline quality standards
within 30 days.
x. With respect to Home Office/Business staffing, on a monthly
basis, Vendor shall not perform more than one hour daily of
training, focus groups or other meetings or breaks per 8 hour
day per ISR. ISRs shall be either engaged in a customer phone
call, engaged in wrap-up of a previous customer phone call (90
second average expectation of required time) or fully available
for customer phone calls 87% of their total work day.
xi. Automated support shall be provided 24 hours per day, 7 days per
week, 365 days per year.
xii. Live ISR's shall be available Monday-Friday 8 AM to 11 PM CST;
Saturday and Sunday 8 AM to 7 PM CST; 365 days a year. Changes
to such hours shall be mutually agreed by the parties in
writing. Customer service reps shall be available Monday -
Friday 8 AM to 5 PM PST. Home office reps shall be available
Monday - Friday 6 AM to 6 PM PST.
xiii. Vendor shall follow the EDI profile and procedures set forth in
Attachment 1.
xiv. Vendor shall utilize the staffing model generated by the Prime
Time software as used by Vendor on January 1, 1998, or such
other software or upgrade to Prime Time mutually agreed upon in
writing by the parties.
Vendor shall provide equipment and connections to allow Sony to perform remote,
undetected monitoring of ISR calls (Vendor shall ensure that all legally
required disclosure of such monitoring shall be made) at all times. Vendor shall
participate in such monitoring at Sony's request with 24 hours notice. Vendor
shall allow Sony nondisruptive on-site monitoring with 24 hours notice.
Vendor shall supply Sony with drafts of all sales and other scripts for Sony's
approval, which may be withheld in Sony's sole discretion.
e. Fee for Teleservicing Services.
------------------------------
i. Percentage of Revenues for all Sales other than "Home Office/Business"
Sales. For the period beginning July 1, 1999 through March 31, 2000,
Vendor shall be compensated for all of its services other than "Home
Office/Business Sales" on a percentage of revenue basis as set forth
in the chart below. For purposes of this Agreement, "Sony Revenues"
shall mean actual (April 1 to March 31) telesales revenue received by
Sony from customers ordering via Vendor, less taxes, refunds, fraud
charge writeoffs and shipping charges (if any). Taxes, refunds, and
shipping charges will be capped at [______] of Gross Revenue. "Sony
Revenue" shall never be less than [____] of telesales revenue received
by Sony from customers ordering via Vendor.
4
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
Sony Revenues Percent due Vendor
------------- ------------------
$ [__________] [____]
[_________] [____]
[__________] [____]
[______________] [____]
[______________] [____]
[______________] [____]
[______________] [____]
Upon attainment of $[________] in revenues, Vendor shall be paid a one time
bonus of [__]% of $[______________ ($____________)]. Upon attainment of the rate
of [____]% (greater than $[__________] but less than $[____________)] , the
reductions in percentage due Vendor based on Sony revenues are for incremental
revenue only.
ii. Home Office/Business Sales Compensation. For the period beginning
July 1, 1999 through March 31, 2000, Vendor shall be compensated for
all revenues related to Home Office / Business Sales at a rate of [$ ]
per hour based on ISR billable hours as determined by mutually agreed
scheduling software parameters. For purposes of this Agreement, "Home
Office / Business" sales shall be any sales developed or secured
through the Sony Financial Services Program plus any credit card
transactions discounted by Sony as part of its Sony Business Direct
program(s). Sony represents in good faith that the Sony Business
Direct program shall be directed toward business (including home and
small business) market segments. All Home Office / Business ISRs shall
be compensated an average of $[_____] per hour (base plus incentive).
iii. Sony shall pay Vendor a $[________] retainer on a monthly basis by the
last day of each month, subject to quarterly reconciliation to be
completed by the tenth (10/th/) business day after the end of a
quarter (June 30, September 30, December 31 and March 31.) At the time
of such reconciliation, any amount due from one party to the other
shall be paid within thirty (30) days.
iv. The fee for the period beginning April 1, 2000 and ending March 31,
2001 will be mutually agreed by the parties and memorialized in a
written amendment to this agreement prior to February 28, 2000; in the
event the parties do not agree after good faith negotiation (including
in person meetings with responsible management) on such fee this
Agreement shall expire as of March 31, 2000 and Sony shall pay Vendor
a one-time fee of $[__________] in lieu of any other termination
obligation (including any obligation to provide minimum call volume).
v. Adjustments. The fee payable to Vendor shall be subject to adjustment
as set forth in this Section (e) (v).
5
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
(A) If over twenty percent (20%) of total inbound and outbound calls to Vendor
constitute "Customer Service" calls as defined in Section I(d)(v), through no
fault of Vendor, such number of calls that are incremental over the twenty
percent (20%) limit shall be billed to Sony at $[_____] per hour or such other
amount as the parties may mutually agree.
(B) Sony shall provide Vendor with rolling three month advance inbound call
forecasts by the fifteenth (15/th/) of each month for the next three full month
period. If actual realized call volume for the first month of such three month
forecast period is less than eighty seven point twenty five percent (87.25%) of
such three month forecast's prediction, the incremental difference between
actual call volume and the eighty seven point twenty five percent (87.25%)
requirement shall be billed to Sony at the rate of $[_____] per hour. Vendor
will not be held to performance standards I (d) (v--viii) for any month when
actual volume variance is + 12.75% of the three month forecast.
Example: May forecast 1 000 calls
May actual 700 calls
Percent to forecast 70%
Percent to forecast goal 87.5%
Percent under goal 17.5%
Staffing hours for forecast 100 hours
Percent hours at hourly rate 17.5 hours
Hourly bill rate $ [__]
Incremental billing amount $[______]
(C) Sony shall provide Vendor with a confidential quarterly forecast of
expected sales of Sony desktop and notebook PC CPU units through Vendor. On a
product build cycle basis, if Sony does not maintain at least an average 87.5
percent (87.5%) order fill rate (orders other than pre-orders shipped within a
sixty (60) day period) by product build basis forecast of orders on PC notebook
and desktop computer CPU units, Vendor shall bill Sony such incremental amount,
if any, as Vendor would have realized if such forecast amounts, had been
fulfilled at an average 87.5 percent (87.5%) fill rate. Such financial
adjustment shall not be made for Sony's delay or inability to fulfill due to
force majeure.
(D) Vendor agrees to provide information technology (IT) customization services
beyond those within the scope of the inclusive retainer relationship herein
("New IT Services") at negotiated mutually agreed rates. Sony shall approve all
such New IT Services in writing before such New IT Services and rates are
initiated. The mutually agreed upon rates for all New IT Services, definition of
scope of such services, and any special terms or payment considerations will be
attached to this document by November 1, 1999.
(E) For any period of time Vendor is not in compliance with the minimum
performance standards set forth in I (d) above and Vendor has been notified in
writing of such default during the applicable cure period, Vendor or any
extension to such cure period, Vendor's fee percentage of revenues for such
period shall be adjusted downward by one-half percent (0.50%) and Vendor's
hourly rate shall be adjusted downward to $[______] per hour. No adjustment
shall be
6
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
made if the actual call volume is more than 12.75% of the first month of the
three month call forecast.
(F) If Vendor's customer fulfillment activity increases more than ten percent
as a percentage of total units sold beyond the level for the year ending April
1, 1999, Sony shall pay for incremental fulfillment beyond such April 1, 1999
fulfillment percentage plus ten percent on a per unit basis. Such incremental
units shall be billed by Vendor in accordance with the feeds outlined in
Attachment 4 along with related supplies and postage.
iii. ISR Incentive Plan. Sony at its sole discretion may fund an
additional ISR Incentive Program, the terms of which the parties shall mutually
agree to in writing. Vendor will pay any agreed incentives within 30 days of ISR
accrual and Sony shall find such payment within thirty days of Vendor invoice
(which shall not be issued prior to Vendor payment to ISRs).
iv. Call Volume. Subject to Section 1(e)(iv) Sony shall provide
Vendor the data and authority to receive at least 25,000 calls per month; Sony
however provides no guarantee, in the event of a business downturn, that such
call volume will be achieved. For purposes of this section, business downturn
shall be defined as circumstances not controlled directly or indirectly by Sony
that causes a material decline in telephone traffic, sales and/or the
profitability of the VAIO business segment of business for Sony no longer meets
the internal business requirements of Sony to continue in, such business segment
through direct marketing. In the event that Sony relies on this section in order
to justify the decline in call volume as outlined above, it is understood and
agreed that Sony shall not change the business requirements for continuation in
said business segment in order to invoke this section. It is further understood
and agreed that in the event that call volume goes below 25,000 per month and/or
Sony determines that Sony shall no longer participate in the VAIO segment,
Vendor shall be entitled to payment as if the campaign continued to the ending
date of this Agreement with incoming call volumes of ten thousand (10,000) per
month at the average Sony revenues attributable to such a call volume for the
ninety (90) days prior to the announcement by Sony of Sony's discontinuation of
participation in such business segment.
v. Vendor shall conduct Sony teleservices activities only at the
following call center locations at the following percentages: Northern
California (excluding Hayward after a to be mutually agreed point in time): 55-
75%; Fort Scott, Kansas: 25-45% and Denver. The parties will mutually agree on
a plan to transition services from Denver. Any changes outside of the above
ranges and locations must be approved by Sony in writing.
f. Hardware and Software. The hardware and software referenced on Attachment
---------------------
3A, is the property of Sony. If Vendor has not already, Vendor shall take all
appropriate actions to transfer ownership and otherwise secure for Sony's
benefit the use of such hardware and software. Except as provided in Attachment
3A, Vendor shall be required to provide all hardware, software,
telecommunications and infrastructural resources to enable full customer support
services.
7
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
g. Invoice and Thank-You Kit Project. Vendor shall perform additional
---------------------------------
services in connection with invoicing and inclusion of a thank you kit in
invoice mailings per Attachment 4. The Percentage of Revenues fee in e(i) above
shall constitute Vendor's sole compensation for such services.
h. Sony Loan of Equipment/Products. Vendor shall execute an Equipment Loan
-------------------------------
Agreement with Sony for all equipment loaned by Sony to Vendor in the form of
Attachment 5. Such equipment shall include any hardware or software purchased
for Sony by Vendor as provided in Attachment 3A.
i. Ownership of Telephone Numbers. Sony shall own all telephone numbers,
------------------------------
including 800 numbers, used in connection with the Services unless owned by some
other service provider.
j. Training Fees. Sony shall pay the fees specified in Attachment 6 with
-------------
respect to the training services. Notwithstanding the foregoing, Vendor shall
be responsible for all new-hire training cost as a result of annual attrition
rates greater than twenty eight percent (28%).
8
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 1
------------
EDI PROTOCAL
- ------------
9
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
Intek Profile and Procedures
[_______
___________________________
___________________________
___________________________
___________ ________________
___________ ________________
___________ ________________
___________ ________________
___________ ________________
____________________
______________________________________________________________________________
______________________________________________________________________________
____________________________________________
____________________________________________]
10
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 3A
-------------
LIST OF HARDWARE AND SOFTWARE PURCHASED BY VENDOR AND
-----------------------------------------------------
SOLD TO SONY
------------
Exhibit A
---------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Equipment Quantity Unit Price Extended Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compaq Servers
Compaq Proliant 50000R 6/200 2 12,307.00 24,614.00
Pentium Pro 6/200 Processor Kit 2 2,125.00 4,250.00
Rack-Mountable Storage System 2 1,118.00 2,232.00
Rack - 42U 1 1,678.00 1,678.00
Rack Stabilizing Kit 1 124.00 124.00
Rack Sidewall Kit for Rack - 42U 1 208.00 208.00
Rack Blanking panel Kit 1 45.00 45.00
2.1 GB Hard Drive Hot Pluggable 10 770.00 7,700.00
Smart UPS 30000RM, 30000VA 2 1,712.00 3,424.00
Netflex Controller 2 169.00 338.00
10/100 Base TX UTP Module 2 97.00 194.00
SCSI Storage Expander For Rack 2 661.00 1,322.00
V50 Monitor 2 361.00 722.00
Rack External Keyboard 2 30.00 60.00
Compaq Mouse 2 35.00 70.00
Backup Exec Software for Windows NT v.6.1 2 437.00 874.00
126MB DIMM RAM Memory Kit 2 1,397.00 2,794.00
- ------------------------------------------------------------------------------------------------------------------------------
Subtotal 50,649.00
- ------------------------------------------------------------------------------------------------------------------------------
Freight 121.44
Tax 3,925.30
- ------------------------------------------------------------------------------------------------------------------------------
Subtotal Compaq Servers with Freight and Tax 54,695.74
- ------------------------------------------------------------------------------------------------------------------------------
Sybase Database Licenses
Sybase Replication Server 2 [________] [_________]
SQL Server NT - 64 User 1 [_________] [________]
Replication Server Manager 1 [_______] [________]
Sybase Replications Server Support 2 [_______] [________]
SQL Server NT - 64 User Support 1 [_______] [________]
Replication Server Manager Support 1 [______] [________]
- ------------------------------------------------------------------------------------------------------------------------------
Subtotal 40,255.30
- ------------------------------------------------------------------------------------------------------------------------------
Freight 150.00
Tax 3,119.79
- ------------------------------------------------------------------------------------------------------------------------------
Subtotal Sybase Database Licenses with Freight and Tax 43,525.09
- ------------------------------------------------------------------------------------------------------------------------------
Grand Total All Equipment Freight and Tax 98,220.82
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 4
------------
Sony Invoice & Thank You Kit Proposal
Invoicing will require the following items be custom hand picked, packed,
sealed, metered and mailed 1st class:
Invoice
Personalized letter - customer name & address, ISR name & extension who placed
order
Full Line Catalog - 6" x 9", 41 pages
Product Return Labels
Return Request Process/Instructions - 2 pages
Return Checklist - 1 page
Gift - Package of Klear Screen Wipes
Assumptions
- -----------
. Sony will provide Intek with custom 9" x 12" envelopes w/ Sony "Direct"
Logo
. Sony will provide Intek with all preprinted materials; catalogs, brochures,
labels, envelopes, etc...
. Sony will provide Intek with 1 month inventory of all above items - Intek
will provide Sony inventory usage reports
. Intek will supply and laser print the Return Request Process/Instructions,
Return Checklist, and Terms and Conditions
. Sony has requested a "Blurb" box-advertising message on invoice; this can
change monthly but it is not product specific
. Thank you kit to include a "checklist of items required to be returned to
receive full RMA credit"
. Sony is responsible for all mailing charges; Intek will use its own postage
account, track costs, and pass through mailing costs
. Based on $[___] volume 1st full year and average order price of $[_____]
this is estimated at 115 invoices/day
. Setup charges for creating the invoice and creating personalized letters
are billed at $[__]/hour.
. Setup charges requiring senior level programming skills are billed at
$[_____]/hour.
. Daily Minimum Charge of $[___] to cover both invoicing and literature
fulfillment
. Invoicing will be done Monday through Friday (Saturday and Sunday's
invoicing will be done on Monday)
. Intek will provide a daily invoicing confirmation report online
. The prices listed below are priced on a "per thousand" basis
<TABLE>
<CAPTION>
Service Provided Unit Cost Daily Qty Daily $'s Monthly $'s Annual $'s
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Invoicing/Thank You Kit Fees
Laser Print Invoice $ [___] 115 $ [_____] $ [______] $ [ __________]
Laser Print Personalized Letter $ [___] 115 $ [_____] $ [ _______] $ [_________]
Laser Print/Copy Return Process, Checklist $ [___] 115 $ [_____] $ [______] $ [_______]
Insert Invoice, Letter, Process & Checklist $ [___] 115 $ [_____] $ [______] $ [_______]
Insert Full Line Catalog, Gift, Return $ [___] 115 $ [_____] $ [______] $ [________]
Labels
Print Label 1 1/3" x 4" Avery labels $ [___] 115 $ [_____] $ [______] $ [_______]
Hand Label $ [___] 115 $ [____] $ [______] $ [_______]
Seal Flat (9 x 12), meter, and mail $ [___] 115 $ [____] $ [______] $ [_______]
- -------------------------------------------------------------------------------------------------------------------
Total Unit Cost Invoice/Thank You Kit $ [___] 115 $ [______] $ [_________] $ [___________]
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Warehousing of materials
<S> <C>
Pallet Storage Fees - per pallet/month $ [_____]
Box Storage Fees - per box/month $ [_____]
- approximately 4 boxes/pallet
Rack Storage Fees - per rack/month $ [____]
</TABLE>
12
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 4
------------
Literature Fulfillment Proposal
Literature Fulfillment will require the following items be custom hand picked,
packed, sealed, metered and mailed 1st class:
Personalized letter - customer name & address, ISR name & extension who placed
the order
Full Line Catalog - 6" x 9", 41 pages
Personalized address label
Assumptions
- -----------
. Sony will provide Intek with custom 6" x 9" windowed envelopes w/Sony
"Direct" Logo
. 6" x 9" envelope will have window customized and address on letter will be
formatted to fit within window
. Sony will provide Intek with all preprinted materials; envelopes, catalogs,
spec sheets, etc.
. Sony will provide Intek with 1 month inventory of all above items - Intek
will provide Sony inventory usage reports
. Sony is responsible for all mailing charges; Intek will use its own postage
account, track costs, and pass through mailing costs
. Based on a potential call volume of 10,000 calls/month, Intek has estimated
25% or 2500 literature fulfillments/month
. Setup charges for creating personalized letters are billed at $[__] /hour.
. Setup charges requiring senior level programming skills are billed at
$[___] /hour.
. Daily Minimum Charge of $[___] to cover both invoicing and literature
fulfillment.
. Literature Fulfillment will be done Monday through Friday (Saturday and
Sunday's invoicing will be done on Monday)
. Intek will provide a daily literature fulfillment confirmation report
online
. The prices listed below are priced on a "per thousand" basis
<TABLE>
<CAPTION>
Service Provided Unit Cost Daily Qty Daily $'s Monthly $'s Annual $'s
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Literature Fulfillment Fees
Laser Print Personalized Letter $ [ ] 125 $ [ ] $ [ ] $ [ ]
Fold and Insert Letter $ [ ] 125 $ [ ] $ [ ] $ [ ]
Insert 6" x 9" Full Line Catalog $ [ ] 125 $ [ ] $ [ ] $ [ ]
Seal 6" x 9" Envelope, meter and mail $ [ ] 125 $ [ ] $ [ ] $ [ ]
- ----------------------------------------------------------------------------------------------------------------
Total Unit Cost Literature Fulfillment $ [ ] $ [ ] $ [ ] $ [ ]
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Warehousing of materials
<S> <C>
Pallet Storage Fees - per pallet/month $ [ ]
Box Storage Fees - per box/month $ [ ]
approximately 4 boxes/pallet
Rack Storage Fees - per rack/month $ [ ]
</TABLE>
13
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 4
------------
Literature Fulfillment Services & Price List
(Prices are per Thousand)
. Sony will provide Intek with all custom envelopes w/ Sony "Direct" Logo
. Sony will provide Intek with all preprinted materials; catalogs, labels,
spec sheets
. Sony will provide Intek with 1 month inventory of all above items - Intek
will provide Sony inventory usage reports
. Sony is responsible for all mailing charges; Intek will use its own postage
account, track costs, and pass through mailing costs
. Setup charges for creating personalized letters are billed at $[ ]/hour.
. Setup charges requiring senior level programming skills are billed at
$[ ]/hour.
. Daily Minimum Charge of $[ ] to cover both invoicing and literature
fulfillment
. Literature Fulfillment will be done Monday through Friday (Saturday and
Sunday's invoicing will be done on Monday)
. The prices listed below are priced on a "per thousand" basis.
<TABLE>
<CAPTION>
Service Provided Unit Cost
- -------------------------------------------------------------------------------
<S> <C> <C>
Printing-Standard Letter (per piece)
Laser Printing Invoice $ [ ]
Laser Printing Personalized Letter $ [ ]
Laser Printing Standard Letter $ [ ]
Laser Printing Label $ [ ]
Folding (per fold)
Machine Fold $ [ ]
Hand Fold $ [ ]
Hand Inserting (per Insert)
Letters (# 10) $ [ ]
Flats (9 x 12) $ [ ]
Odd Shaped - Catalogs, Magazines $ [ ]
Pens, etc... $ [ ]
Hand Labeling (pressure sensitive)
Letters (# 10) 1 1/3" x 4" Avery laser printable labels [ ]
Flats (9 x 12) 1 1/3"' x 4" Avery laser printable labels [ ]
Sealing
Letters (#10) $ [ ]
Flats (9 x 12) $ [ ]
Metering
Meter Stamp $ [ ]
Hand Stamp $ [ ]
Hand Sorting (per piece)
Zip Order
Letters (#10) $ [ ]
Flats (9 x 12) $ [ ]
Non-Zip Order
Letters (#10) $ [ ]
Flats (9 x 12) $ [ ]
Hand Counting (per piece) $ [ ]
</TABLE>
14
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 5
------------
EQUIPMENT LOAN AGREEMENT
------------------------
Date: December 2, 1997
THIS AGREEMENT is between the following parties:
Sony Electronics Inc. Intek Information, Inc.
Information Technologies of America 1455 Frazee Road
3300 Zanker Road Suite 220
San Jose, CA 95134-1940 San Diego, CA 92108
("Sony") ("Company")
Sony agrees to lend to the Company and Company agrees to accept the following
Equipment on the following terms and conditions:
1. Description and value of the Equipment: Attached as Exhibit A
2. The Equipment shall be located at the following location: Intek
-----
Information, Inc. 1455 Frazee Road, Suite 220, San Diego, CA 92108.
------------------------------------------------------------------
Company agrees not to remove the Equipment from this location without prior
written consent of Sony.
3. Delivery of the Equipment to Company shall be the sole responsibility of
Sony. Sony shall assume all risk of loss or damage in transit until
delivery to the aforementioned location.
4. Upon the expiration or termination of this Agreement, Company agrees to
return the Equipment to Sony at the Sony location designated by Sony for
such return. All costs of return delivery shall be borne solely by Company.
The Company shall assume all risk of loss or damage in transit until
delivery to Sony.
5. Title to the Equipment shall at all times remain with Sony. Company assumes
all risk of loss regardless of cause.
6. Company shall exercise due care for the safekeeping of the Equipment and
keep the Equipment in a safe and secure environment at all times.
7. Company agrees to pay for any Equipment which is not returned at the value
listed above plus any applicable sales and use taxes. Sony agrees to pay
the cost of repairs on any Equipment which becomes defective during the
loan period.
8. The loan shall be for the term of that Services Agreement between the
parties dated May 1, 1997 unless otherwise extended in writing by the
parties to this Agreement.
15
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
9. Company agrees to use the Equipment only for the purpose(s) stated below:
To host Sony Electronics Teleservicing Application and Sybase Database.
----------------------------------------------------------------------
10. Sony shall not be liable for any incidental or consequential damages
arising out of use of the Equipment.
11. Company acknowledges that the Equipment has been inspected and is in good
repair and operating condition.
12. Sony lends the Equipment to the Company AS IS AND WITH ALL FAULTS and
specifically disclaims ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Sony Electronics Inc. Intek Information, Inc.
By: ______________________ By: ________________________
Print Name: ________________ Print Name: _________________
Title: _____________________ Title: ______________________
Date: _____________________ Date: ______________________
16
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
Exhibit A to Attachment 5
-------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Equipment Quantity Unit Price Extended Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compaq Servers
Compaq Proliant 50000R 6/200 2 12,307.00 24,614.00
Pentium Pro 6/200 Processor Kit 2 2,125.00 4,250.00
Rack-Mountable Storage System 2 1,118.00 2,232.00
Rack - 42U 1 1,678.00 1,678.00
Rack Stabilizing Kit 1 124.00 124.00
Rack Sidewall Kit for Rack - 42U 1 208.00 208.00
Rack Blanking panel Kit 1 45.00 45.00
2.1GB Hard Drive Hot Pluggable 10 770.00 7,700.00
Smart UPS 30000RM, 30000VA 2 1,712.00 3,424.00
Netflex Controller 2 169.00 338.00
10/100 Base TX UTP Module 2 97.00 194.00
SCSI Storage Expander For Rack 2 661.00 1,322.00
V50 Monitor 2 361.00 722.00
Rack External Keyboard 2 30.00 60.00
Compaq Mouse 2 35.00 70.00
Backup Exec Software for Windows NT v.6.1 2 437.00 874.00
126MB DIMM RAM Memory Kit 2 1,397.00 2,794.00
- -----------------------------------------------------------------------------------------------------------------------------
Subtotal 50,649.00
- -----------------------------------------------------------------------------------------------------------------------------
Freight 121.44
Tax 3,925.30
- -----------------------------------------------------------------------------------------------------------------------------
Subtotal Compaq Servers with Freight and Tax 54,695.74
- -----------------------------------------------------------------------------------------------------------------------------
Sybase Database Licenses
Sybase Replication Server 2 [ ] [ ]
SQL Server NT - 64 User 1 [ ] [ ]
Replication Server Manager 1 [ ] [ ]
Sybase Replications Server Support 2 [ ] [ ]
SQL Server NT - 64 User Support 1 [ ] [ ]
Replication Server Manager Support 1 [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------
Subtotal 40,255.30
- -----------------------------------------------------------------------------------------------------------------------------
Freight 150.00
Tax 3,119.79
- -----------------------------------------------------------------------------------------------------------------------------
Subtotal Sybase Database Licenses with Freight and Tax 43,525.09
- -----------------------------------------------------------------------------------------------------------------------------
Grand Total All Equipment Freight and Tax 98,220.82
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
CONFIDENTIAL TREATMENT OF REDACTED PORTIONS REQUESTED BY
INTEK INFORMATION, INC.
ATTACHMENT 6
------------
FEE SCHEDULE
- ------------
<TABLE>
<CAPTION>
Campaign Set-Up Fee Schedule
- --------------- ------------
<S> <C>
Program Design and Set-Up $[ ]/hour
IT Programming and Services Per Attachment 3 & 4
Training $ [ ] /hour
Travel and Expenses At Vendor cost without
Markup (passthrough)
Trainer Included
Recruiting Included
Project Management Included
Campaign Administrator $[ ]/hour
DEI Sales Training At Vendor cost without
Markup (passthrough)
Operating Features Fee Schedule
- ------------------ ------------
Automated Support (VRU) $[ ]/min
Live Support (ISRs) Per Attachment 2
Training (New Hire, Replacement, Ongoing, Enhancement) $[ ]/hour
E-Mail Communication to Consumers $[ ]/hour
IT Programming and Services Per Attachment 3 & 4
Trainer Included
Fax/E-Mail Communication with Sony Included
Project Management Included
Quality Assurance Included
Supervisors Included
Voice Talent $[ ]/hour
Campaign Administration $[ ]/hour
ISR Incentive Plan At Vendor cost without
Markup (passthrough)
Fax on Demand to Consumers $[ ]/page
Travel and Expenses At Vendor cost without
Markup (passthrough)
</TABLE>
18
<PAGE>
Exhibit 10.28.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE LAW, AND MAY NOT BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (I) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS COVERING ANY SUCH TRANSACTION INVOLVING THIS WARRANT, (II) REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED, AND THE ISSUER RECEIVES
AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THIS WARRANT SATISFACTORY TO THE
ISSUER STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER FEDERAL
SECURITIES LAWS, (III) THE SALE IS MADE PURSUANT TO SEC RULE 144 ISSUED PURSUANT
TO THE ACT, OR (IV) THE ISSUER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION.
Warrant No. S-1
Warrant Date: January 14, 2000
WARRANT TO PURCHASE SHARES OF
COMMON STOCK OF
INTEK INFORMATION
(Void after January 15, 2003)
This certifies that Sony Electronics Inc., a Delaware corporation or its
permitted assigns (the "Holder"), for payment of $100 and other value received,
is entitled to purchase from Intek Information, Inc. a Delaware corporation
(the "Company"), Two Hundred Seven Thousand Three Hundred Fifty (207,350) fully-
paid and nonassessable shares of the Company's common stock ("Common Stock") for
cash at a price of $7.45 per share (the "Common Stock Purchase Price") as
adjusted from time to time in accordance with the provisions hereof. Such
numbers reflect the .286 for 1 reverse stock split which occurred in December,
1999 but not the anticipated January reverse stock split. The aggregate amount
payable if this Warrant is fully exercised is $1,544,757.50. This Warrant shall
become exercisable from and after the Effective Date as defined in Section 5.7.
This Warrant shall terminate at 5:00 p.m. (Mountain Time) on January 15, 2003
(the "Expiration Date"). This Warrant may be exercised by the surrender to the
Company at its principal office (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed, together with a
duly executed Subscription Form and a duly executed Investment Representation,
each in the form attached hereto and incorporated herein by this reference, upon
payment in cash or by check of the aggregate Common Stock Purchase Price for the
number of shares for which this Warrant is being exercised. The Common Stock
Purchase Price and the maximum number of shares purchasable hereunder are
subject to adjustment as provided in Article II of this Warrant.
<PAGE>
This Warrant is subject to the following terms and conditions:
I. EXERCISE
--------
1.1 General. This Warrant is exercisable at the option of the Holder on
-------
and after the Effective Date, at any time or from time to time, until and up to
the Expiration Date for all or any part of the shares of Common Stock (but not
for a fraction of a share) which may be purchased hereunder. The shares of
Common Stock purchased under this Warrant shall be deemed to have been issued to
the Holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered, properly endorsed,
together with a duly executed Subscription Form, a duly executed Investment
Representation and payment for such shares. Certificates for the shares of
Common Stock so purchased, together with any other securities or property to
which the Holder is entitled upon such exercise, shall be delivered to the
Holder by the Company at the Company's expense within a reasonable time after
the exercise of this Warrant. In the event of the purchase of fewer than the
maximum number of shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver to the Holder, as soon as
practicable, a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase. Each stock
certificate so delivered shall be in such denominations of Common Stock as may
be requested by the Holder and shall be registered in such name or names as are
specified by the Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein to the
------------------
contrary, if the Fair Market Value of one share of Common Stock is greater than
the Common Stock Purchase Price at the date of calculation, then, in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled), in which event the Company shall issue to the Holder that number of
shares determined in accordance with the following formula:
X [Y - Z]
W = -----------
Y
Where:
W = the number of shares of Common Stock to be issued to the
Holder;
X = the maximum number of shares of Common Stock purchasable
under the Warrant at the date of calculation, or, if only a
portion of the Warrant is being exercised, the portion of
the Warrant being canceled;
Y = the Fair Market Value of one share of Common Stock at the
date of calculation;
Z = the Common Stock Purchase Price in effect at the date of
calculation.
2
<PAGE>
Upon receipt of a written notice of the Company's intention to raise
capital by selling shares of Common Stock in an IPO (the "IPO Notice"), which
----------
notice shall be delivered to Holder at least thirty (30) days but not more than
ninety (90) days before the anticipated effective date of the filing with the
Securities and Exchange Commission of the registration statement associated with
the IPO, the Holder shall promptly (but in any case within twenty (20) days
before the anticipated effective date) notify the Company whether or not the
Holder will exercise this Warrant pursuant to this Section 1.2 prior to
consummation of the IPO. Notwithstanding whether or not an IPO Notice has been
delivered to Holder or any other provision of this Warrant to the contrary
concerning calculation of the Common Stock Purchase Price, if Holder decides to
exercise this Warrant while a registration statement is on file with the
Securities and Exchange Commission (the "SEC") in connection with the IPO, this
---
Warrant shall be deemed exercised on the consummation of the IPO and the Fair
Market Value of a share of Common Stock will be the price at which one share of
Common Stock was sold to the public in the IPO. If the Holder has elected to
exercise this Warrant pursuant to this Section 1.2 while a registration
statement is on file with the Securities and Exchange Commission in connection
with an IPO and the IPO is not consummated, then Holder's exercise of this
Warrant shall not be effective unless the Holder confirms in writing Holder's
intention to go forward with the exercise of this Warrant.
1.3 Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon the exercise of this Warrant. In lieu of any fractional share of
Common Stock which would otherwise be issuable upon the exercise of this
Warrant, the Company shall pay a cash adjustment in respect of such fraction.
Such cash adjustment shall be determined by multiplying such fraction by the
Fair Market Value of the share of stock.
1.4 Merger or Acquisition. Notwithstanding the other provisions of this
---------------------
Warrant (including Sections 2.3, 2.4 and 2.5), if, in an arm's length
transaction, (i) the Company shall be merged with or be acquired by another
entity such that the capital stock of the Company outstanding, prior to such
merger or acquisition thereafter is, or stock of the surviving or acquiring
entity which was issued in respect of such capital stock of the Company is,
fifty percent (50%) or less of the equity and voting interests of the surviving
or acquiring entity, (ii) the Company shall have all or substantially all its
assets acquired by another entity, or (iii) eighty percent (80%) or more of the
Company's voting capital stock becomes held by one or more affiliated (as to
each other) entities, the Company shall have the right, but not the obligation,
to redeem this Warrant in its entirety in exchange for cash equal to the product
of the maximum number of shares of Common Stock and other property then
receivable under this Warrant multiplied by the Fair Market Value of one share
receivable less the Common Stock Purchase Price in effect upon the closing of
such transaction. If at such time the Common Stock Purchase Price exceeds the
Fair Market Value, the Company may cancel this Warrant in its entirety and no
compensation is owed to the Holder. To elect to redeem (or, if applicable,
cancel) this Warrant as contemplated by this Section 1.4, the Company shall send
written notice to the Holder to that effect not less than twenty (20) days prior
to the closing of the anticipated transaction under (i), (ii) or (iii) above,
describing the terms of such transaction, the expected closing date, and the
Fair Market Value anticipated upon the closing of such transaction.
3
<PAGE>
To the extent this Warrant has not been exercised in full prior to such closing,
the redemption (or, if applicable, cancellation) of this Warrant will become
effective upon such closing.
II. ADJUSTMENT OF COMMON STOCK PURCHASE PRICE AND NUMBER OF SHARES
--------------------------------------------------------------
2.1 Adjustment for Stock Splits and Combinations. If the Company shall at
--------------------------------------------
any time or from time to time effect a subdivision of the outstanding Common
Stock, the Common Stock Purchase Price in effect immediately before that
subdivision shall be proportionately decreased and the maximum number of shares
receivable under this Warrant shall be proportionately increased. Conversely, if
the Company shall at any time or from time to time combine the outstanding
shares of Common Stock into a smaller number of shares, the Common Stock
Purchase Price in effect immediately before the combination shall be
proportionately increased and the maximum number of shares receivable under this
Warrant shall be proportionately decreased. Any adjustment under this Section
shall become effective at the close of business on the record date for the
subdivision or combination.
2.2 Adjustment for Common Stock Dividends and Distributions. If the
-------------------------------------------------------
Company at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities, whether Common Stock or other
securities, or assets of the Company (excluding cash dividends paid or payable
solely out of retained earnings), in such event provision shall be made so that
the Holder shall receive upon exercise hereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such securities or
assets (excluding cash dividends paid or payable solely out of retained
earnings) of the Company which it would have received had its Warrant been
exercised for Common Stock on the date of such event and had it thereafter,
during the period from the date of such event to and including the exercise
date, retained such securities or assets (excluding cash dividends paid or
payable solely out of retained earnings) receivable by it as aforesaid during
such period, subject to all other adjustments called for during such period
under this Article II with respect to the rights of the Holder or with respect
to such other securities or assets (excluding cash dividends paid or payable
solely out of retained earnings) by their terms.
2.3 Adjustment for Reclassification, Exchange and Substitution. If at any
----------------------------------------------------------
time or from time to time, the Common Stock issuable upon the exercise of this
Warrant is changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares, a stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Article II), in any such event the Holder shall have the right
thereafter to exercise this Warrant for the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock for
which this Warrant could have been exercised immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof. No adjustment shall be made pursuant to this
4
<PAGE>
Section 2.3 upon any conversion or redemption of the Common Stock which is the
subject of Section 2.5.
2.4 Reorganizations, Mergers or Consolidations. Except as provided in
------------------------------------------
Section 1.4, if at any time or from time to time, there is a capital
reorganization, merger or consolidation involving the Company (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Article II), as a part of
such capital reorganization, merger or consolidation, provision shall be made so
that the Holder shall thereafter be entitled to receive upon the exercise of
this Warrant the number of shares of stock or other securities or property of
the Company, or its successor, to which a holder of the number of shares of
Common Stock deliverable upon exercise of this Warrant would have been entitled
on such capital reorganization, merger or consolidation, subject to adjustment
in respect of such stock or securities or property by the terms thereof. If the
per-share consideration payable to the Holder for shares in connection with any
such transaction is in a form other than cash or marketable securities then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Article II with respect to the rights of the Holder
after the capital reorganization, merger or consolidation to the end that the
provisions of this Article II (including adjustment of the Common Stock Purchase
Price then in effect and the number of shares issuable upon the exercise of this
Warrant) shall be applicable after that event and be as nearly equivalent as
practicable.
2.5 Conversion of Common Stock. In case all or any portion of the
--------------------------
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "Termination Date"),
----------------
shall receive, in lieu of the number of shares of Common Stock that would have
been issuable upon such exercise immediately prior to the Termination Date, the
shares of Common Stock of the Company that would have been received if this
Warrant had been exercised in full and the Common Stock received thereupon had
been simultaneously converted immediately prior to the Termination Date, all
subject to further adjustment as provided in this Warrant. Additionally, the
Common Stock Purchase Price shall be immediately adjusted to equal the quotient
obtained by dividing (x) the aggregate Common Stock Purchase Price of the
maximum number of shares of Common Stock for which this Warrant was exercisable
immediately prior to the Termination Date by (y) the number of shares of Common
Stock of the Company for which this Warrant is exercisable immediately after the
Termination Date, all subject to further adjustment as provided herein.
2.6 Certificate of Adjustment. In each case of an adjustment or
-------------------------
readjustment of the Common Stock Purchase Price and the maximum number of shares
of Common Stock or other securities issuable upon the exercise of this Warrant,
the Company, at its expense, shall compute such adjustment or readjustment and
prepare a certificate showing such adjustment or readjustment,
5
<PAGE>
and shall deliver such certificate to the Holder. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
Common Stock Purchase Price at the time in effect, (ii) the maximum number of
shares of Common Stock then issuable, and (iii) the type and amount, if any, of
other property which at the time would be received upon the exercise of this
Warrant.
2.7 Notices of Record Date. Upon (i) any taking by the Company of a
----------------------
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any acquisition or other capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company, any merger or consolidation of the Company with or into any other
entity, or any transfer of all or substantially all the assets of the Company,
or any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall deliver to the Holders at least ten (10) days prior
to the record date specified therein a notice specifying (1) the date on which
any such record is to be taken for the purpose of such dividend or distribution
and a description of such dividend or distribution, (2) the date on which any
such acquisition, reorganization, reclassification, transfer, consolidation,
merger, asset transfer, dissolution, liquidation or winding up is expected to
become effective, and (3) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such acquisition, reorganization,
reclassification, transfer, consolidation, merger, asset transfer, dissolution,
liquidation or winding up.
2.8 Reservation of Stock Issuable Upon Exercise. The Company shall at all
-------------------------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
2.9 Payment of Taxes. The Company shall pay all taxes (other than taxes
----------------
based upon income or taxes or withholdings due because the holder is not a
United State resident) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon the exercise of
this Warrant, excluding any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the Holder.
2.10 Restrictions on Transfer.
------------------------
a. This Warrant and the underlying Common Stock, or any other
security issued or issuable upon exercise of this Warrant may not be offered or
sold except in compliance with the
6
<PAGE>
Securities Act of 1933, as amended. Moreover, this Warrant and the underlying
Common Stock may not be sold, transferred or assigned during the first 365 days
after the date hereof without the written consent of the Company unless (i) to
up to two affiliates of Sony Electronics Inc., a Delaware corporation each of
whom is a large, sophisticated institutional purchaser that is an "accredited
investor" as defined in Regulation D; (ii) to no more than two "qualified
institutional buyers" as such term is defined in SEC Rule 144A issued pursuant
to the Act; or (iii) in connection with the sale or change in control of the
Company or its assets which has been approved by the Company's Board of
Directors.
b. The Company may cause the following legend to be set forth on
each certificate representing Common Stock or any other security issued or
issuable upon the exercise of this Warrant, unless counsel for the Company is of
the opinion as to any such certificate that such legend is unnecessary:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
WARRANT DATED JANUARY 14, 2000, (A COPY OF WHICH IS
AVAILABLE AT THE COMPANY), AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR APPLICABLE STATE LAW, AND MAY NOT BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
(I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING THE SHARES, (II) REGISTRATION UNDER
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED, AND THE
ISSUER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER
OF SAID SECURITIES SATISFACTORY TO THE ISSUER STATING THAT
SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER FEDERAL
SECURITIES LAWS, (III) THE SALE IS MADE PURSUANT TO SEC
RULE 144 ISSUED PURSUANT TO THE ACT, OR (IV) THE ISSUER
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
2.11 Subject Agreements. This Warrant and the Common Stock receivable on
-------------------
exercise hereof, is subject to the Amended and Restated Shareholders and Voting
Agreement dated November 19, 1999 of the Company (as amended from time to time)
and any lock-up or similar agreement with the underwriters of the Company's
securities (including the lock-up agreement with, among others, Hambrecht &
Quist, LLC dated December 23, 1999). The initial holder hereof has executed an
Investment Representation Statement and further hereby represents it is a large,
sophisticated
7
<PAGE>
institutional purchaser that is an "accredited investor" as defined in
Regulation D issued under the Securities Act of 1933.
2.12 No Voting or Dividend Rights. Nothing contained in this Warrant shall
----------------------------
be construed as conferring upon the Holder the right to vote or to consent or to
receive notice as a shareholder of the Company, or any other rights whatsoever
as a shareholder of the Company. Except as otherwise provided herein, no
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder unless and
until, and only to the extent that, this Warrant shall have been exercised.
III. COVENANTS OF THE COMPANY
------------------------
The Company covenants and agrees that:
3.1 All shares of Common Stock which may be issued upon the exercise of
this Warrant shall, upon issuance, be duly authorized, validly issued, fully-
paid and nonassessable and free from all preemptive rights of any shareholder
and free of all taxes, liens and charges with respect to the issuance thereof.
3.2 The Company shall not take any action which would result in any
adjustment of the Common Stock Purchase Price (as set forth in Article II) (i)
if the total number of shares of Common Stock issuable after such action upon
the exercise of all outstanding warrants, together with all shares of Common
Stock then outstanding and all shares of Common Stock then issuable upon the
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation, as amended.
IV. NOTICES
-------
All notices, requests, demands and other communications under this Warrant
shall be in writing and shall be deemed to have been duly given (i) on the date
of personal service confirmed in writing by the serving party, (ii) upon
verified delivery by air express courier; or (iii) five days after deposit in
the United States mail, first class postage paid, registered or certified mail,
return receipt requested, addressed as follows:
To the Holder:
Sony Electronics Inc.
3300 Zanker Road
San Jose, CA 94134
Attn: Law Department
8
<PAGE>
To the Company:
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
ATTN: Chief Executive Officer
Telephone: (303) 357-3000
Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
V. MISCELLANEOUS
-------------
5.1 Lost Warrants. Upon receipt of evidence reasonably satisfactory to the
-------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company, at its expense,
shall make and deliver to the Holder a new Warrant of like tenor in lieu of the
lost, stolen, destroyed or mutilated Warrant.
5.2 Rights and Obligations Survive Exercise of Warrant. The rights and
--------------------------------------------------
obligations of the Company, of the Holder and of the holder of shares of Common
Stock issued upon the exercise of this Warrant shall survive the exercise of
this Warrant.
5.3 Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
amended, modified, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought. If
this Warrant or the underlying Common Stock is transferred in part, this Warrant
or any provision hereof may be amended modified, waived, discharged or
terminated (i) as to the provisions of the Warrant which apply to the
outstanding underlying Common Stock by holders of a majority of the underlying
Common Stock assuming all Warrant(s) were thus exercised and (ii) as to other
provisions, by holders of Warrants representing a right to receive a majority of
the Common Stock (or other interests) then receivable on exercise of such
Warrants.
5.4 Successors. This Warrant shall be binding upon the successors and
----------
assigns of the Company. All of the obligations of the Company relating to the
Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant. All of the covenants and agreements
of the Company hereunder shall inure to the benefit of the permitted successors
and assigns of the Holder.
5.5 Headings. The descriptive headings of the several articles and
--------
sections of this Warrant are included for convenience only and do not constitute
a part of this Warrant.
9
<PAGE>
5.6 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware without reference to choice of
law principles.
5.7 Board and Stockholder Approval. This Warrant shall be effective only
-------------------------------
upon, and subject to, approval hereof, and waiver of antidilution and preemptive
rights, if any, by the Board of Directors and applicable stockholders of the
Company. The Company shall undertake in good faith to obtain any such approval
and waiver and shall notify Holder when such approval and waiver has occurred.
The date of the later of the last such approval and waiver is the "Effective
Date".
VI. DEFINITIONS
-----------
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange or market over the 5
trading days ending immediately prior to the applicable date of valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the 30-calendar day
period ending immediately prior to the applicable date of valuation; and
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as determined in good faith by the Company's Board of
Directors.
"IPO" shall mean the Company's first firm commitment underwritten public
offering of the Company's Common Stock pursuant to a registration statement
filed with the Securities and Exchange Commission.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 14th day of January, 2000.
Intek Information, Inc.
By:/S/ TIMOTHY C. O'CROWLEY
---------------------------------------------
Timothy C. O'Crowley, Chief Executive Officer
AGREED TO AND ACCEPTED BY:
- -------------------------
By: Sony Electronics Inc.
Print Name:/S/ MICHAEL EHLERS
--------------------
Title:Vice President
-------------------------
Date: January 14, 2000
-------------------------
11
<PAGE>
Attachment to Warrant
SUBSCRIPTION FORM
Date:_________________
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by Intek
Information, Inc., a Delaware corporation (the "Company"), and dated January
_____, 2000, Warrant No. S-1 (the "Warrant") and to purchase thereunder
______________________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of ___________ per Share for an
aggregate purchase price of ___________________ Dollars ($___________) (the
"Purchase Price").
Pursuant to the terms of the Warrant, the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer
in the amount of $________ and/or elected to exercise this Warrant by use of the
Net Issue Exercise provision to acquire ____ shares. The undersigned also makes
the representations set forth in the attached Investment Representation.
Very truly yours,
____________________________________
By:_________________________________
Title: _____________________________
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
__________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
<PAGE>
If the number of Shares issuable upon this exercise shall not be all of the
shares of Common Stock which the undersigned is entitled to purchase in
accordance with the enclosed Warrant, the undersigned requests that a new
Warrant evidencing the right to purchase the shares of Common Stock not issuable
pursuant to the exercise evidenced hereby be issued in the name of and delivered
to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _________________ Name of Holder:
(Print) _________________________________________
(By) ____________________________________________
(Name:)
(Title:)
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
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<PAGE>
Attachment to Warrant
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________ the right represented by the within Warrant to purchase
________ shares of Common Stock of Intek Information, Inc. to which the within
Warrant relates and appoints each of the chief financial officer and secretary
of Intek Information, Inc. attorney to transfer said right on the books of Intek
Information, Inc. with full power of substitution in the premises.
Dated: _________________, 2000.
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
__________________________________________________
Address of Transferee
__________________________________________________
__________________________________________________
In the presence of:
_______________________
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<PAGE>
Attachment to Warrant
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO INTEK INFORMATION, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THE WARRANT SHALL BE ISSUED.
_____________________
Intek Information, Inc.
5619 DTC Parkway, 12 Floor
Englewood, CO 80111
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned,_______________("Purchaser"), intends to acquire up to
__________ shares of the Common Stock (the "Common Stock") of Intek Information,
Inc., a Delaware corporation (the "Company"), from the Company pursuant to the
exercise of certain Warrants to purchase Common Stock held by Purchaser. The
Common Stock shall be issued to Purchaser in a transaction not involving a
public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act"), and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock and any other securities receivable
on exercise hereof ("Securities") for its own account, to hold for investment,
and Purchaser shall not make any sale, transfer or other disposition of the
Common Stock or Securities in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock and Securities have not
been registered under the 1933 Act or state securities laws on the ground that
this transaction is exempt from registration, and that reliance by the Company
on such exemptions is predicated in part on Purchaser's representations set
forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock and
Securities must be held indefinitely unless it is subsequently registered under
the 1933 Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock and Securities. Purchaser further agrees
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<PAGE>
that the Company may refuse to permit Purchaser to sell, transfer or dispose of
the Common Stock and Securities (except as permitted under Rule 144) unless
there is in effect a registration statement under the 1933 Act and any
applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company to the effect that such registration is not required.
Purchaser also understands and agrees that there shall be placed on the
certificate(s) for the Common Stock and Securities, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE LAW, AND MAY NOT BE SOLD,
DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS COVERING ANY SUCH TRANSACTION INVOLVING THE SHARES,
(II) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED, AND THE ISSUER RECEIVES AN OPINION OF LEGAL
COUNSEL FOR THE HOLDER OF SAID SECURITIES SATISFACTORY TO
THE ISSUER STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER FEDERAL SECURITIES LAWS, (III) THE
SECURITIES ARE EXEMPT UNDER SEC RULE 144 ISSUED PURSUANT TO
THE ACT, OR (IV) THE ISSUER OTHERWISE SATISFIES ITSELF THAT
SUCH TRANSACTION IS EXEMPT FROM REGISTRATION."
Purchaser agrees such additional legends as required by other applicable
laws and agreements may also be placed on the certificate.
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Common Stock and
Securities with Purchaser's counsel.
Very truly yours,
________________________________________
By: ____________________________________
Title: _________________________________
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