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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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CHANNELPOINT, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7375 84-1367639
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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10155 WESTMOOR DRIVE
SUITE 210
WESTMINSTER, CO 80021
(303) 410-6180
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
KENNETH E. HOLLEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHANNELPOINT, INC.
10155 WESTMOOR DRIVE
SUITE 210
WESTMINSTER, CO 80021
(303) 410-6180
(Name, Address, Including Zip Code, And Telephone Number, Including
Area Code, Of Agent For Service)
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Copies To:
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JAMES C. T. LINFIELD, ESQ. ALAN DEAN, ESQ.
COOLEY GODWARD LLP DAVIS POLK & WARDWELL
2595 CANYON BOULEVARD, SUITE 250 450 LEXINGTON AVENUE
BOULDER, CO 80302-6737 NEW YORK, NY 10017
(303) 546-4000 (212) 450-4000
</TABLE>
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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) of the Securities Act, please check the following box
and list the Securities Act registration serial number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1)(2) REGISTRATION FEE
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Common Stock, $.001 par value................. $75,000,000 $19,800
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(1) Includes shares that the Underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION 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 THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS (Subject to Completion)
Issued March 28, 2000
Shares
[CHANNELPOINT LOGO]
COMMON STOCK
------------------------
CHANNELPOINT, INC. IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND
$ PER SHARE.
------------------------
WE HAVE APPLIED TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "CHPT."
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
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PRICE $ A SHARE
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS CHANNELPOINT
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<S> <C> <C> <C>
Per Share....................... $ $ $
Total........................... $ $ $
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ChannelPoint, Inc. has granted the underwriters the right to purchase up to an
additional shares to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on , 2000.
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MORGAN STANLEY DEAN WITTER
CHASE H&Q
ROBERTSON STEPHENS
WIT SOUNDVIEW
, 2000
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[Our artwork will consist of diagrams displaying how carriers, distributors and
buyers interact with our applications and Exchange Platform technology.
Descriptive captions will be used to describe the diagrams. In addition, we plan
to use our corporate logo, which contains the word "ChannelPoint."]
[INSIDE COVER]
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................... 3
Risk Factors.......................... 8
Forward-Looking Statements............ 18
Use of Proceeds....................... 19
Dividend Policy....................... 19
Concurrent Private Transactions....... 19
Capitalization........................ 20
Dilution.............................. 21
Selected Consolidated and Combined Pro
Forma Financial Data................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
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Business.............................. 33
Management............................ 50
Certain Transactions.................. 58
Principal Stockholders................ 62
Description of Capital Stock.......... 65
Shares Eligible for Future Sale....... 68
Underwriters.......................... 70
Legal Matters......................... 72
Experts............................... 72
Where You Can Find Additional
Information......................... 72
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
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UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, especially "Risk Factors" and the
financial statements and notes attached to those statements, before deciding to
invest in shares of our common stock.
We are a leading provider of Internet based, business-to-business solutions
that enable e-commerce in the approximately $2.8 trillion global insurance
industry. Our software applications and professional services offerings are
designed to meet the evolving needs of carriers, distributors and buyers of
insurance. Our technologies leverage the power of the Internet to streamline and
automate the insurance distribution process to facilitate end-to-end transaction
processing. We have developed proprietary Exchange Platform technology, which
allows the creation of dynamic electronic marketplaces, or e-markets, that bring
together buyers and sellers of insurance products. Our technology electronically
links insurance carriers with distribution channels, ranging from traditional
brokers that sell the majority of insurance today to banks, financial brokerage
firms and other emerging distribution channels, such as Internet portals. Using
our technology, individual carriers or groups of carriers can create e-markets
that are customized to their particular distribution strategies. Carriers and
distributors can significantly decrease costs, increase revenue and improve
service levels by using our applications and Exchange Platform technology to
conduct e-insurance transactions.
We complement our technology with a professional services organization that
offers a range of services, including selected strategic, process reengineering,
customization of applications, implementation assistance and project management
services. We have designed these services to decrease implementation risk,
shorten the time it takes to create e-markets, improve our customers'
competitive position and maximize their return on investment. We believe that
our ability to successfully deliver a complete e-insurance solution to our
customers provides us with a significant competitive advantage.
We expect that our merger with InsurQuote Systems, Inc. will accelerate our
ability to provide e-commerce solutions to the property and casualty sectors of
the insurance industry. We intend to capitalize on InsurQuote's extensive
relationships with insurance carriers and distributors and to integrate its
comparative rating technology and its substantial inventory of carrier rating
and plan content with our Exchange Platform technology.
Our customers and strategic partners cover nearly all facets of the
insurance industry:
- Health and Ancillary Carriers. Our health and ancillary carrier customers
include leading companies such as Blue Cross and Blue Shield of Colorado,
two regional Kaiser Foundation Health Plans, The Regence Group, Standard
Insurance Companies and UnitedHealthcare.
- Life Insurance and Annuity Carriers. Our life insurance and annuity
carrier customers include 40 leading insurance carriers, including
Equitable, GE Financial Assurance Holdings, Hartford Life, John Hancock,
Merrill Lynch, Mutual of Omaha, New York Life, Phoenix Home Life,
Travelers and Zurich Kemper Life.
- Property and Casualty Carriers. We provide solutions to leading property
and casualty carriers such as Zurich Financial Services in the U.S.,
Canada, and Europe. Through our acquisition of InsurQuote, we provide
insurance distributors with rating services using data received from over
400 property and casualty carriers, including leaders such as AIG,
Metropolitan Property and Casualty, The Hartford, Nationwide, Progressive
and Travelers.
- Distributors. Our distributor customers are among the largest brokerage
firms in the U.S. and include Acordia of California; CBIZ Benefits &
Insurance Services, Inc.; Lockton Companies of Colorado; Seabury & Smith
(a division of Marsh McLennan) and USI Insurance Services.
- Portals. We provide our solutions to a rapidly growing number of leading
insurance portals such as Autobytel.com, Cars.com, Insurance.com (an
affiliate of Fidelity Investments), Insure.com, InsWeb, Intuit's
QuickenInsurance and Perksatwork.com.
We believe that our solutions for enabling e-commerce in the insurance
industry, together with our strategic relationships with leading insurance
carriers and distributors, give us a significant first mover advantage as the
insurance industry capitalizes on the opportunities created by the Internet.
3
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THE OFFERING
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Common stock offered................................. shares
Common stock to be outstanding after this offering... shares
Use of proceeds...................................... To fund the expansion of our professional
services, product development, content
management and sales and marketing
capabilities, repayment of indebtedness and
for other working capital and general
corporate purposes, including potential
strategic acquisitions or investments.
Proposed Nasdaq National Market symbol............... CHPT
</TABLE>
You should be aware that we are permitted, and in some cases obligated, to
issue shares of common stock in addition to the common stock to be outstanding
after this offering. The foregoing information is based on shares outstanding as
of March 28, 2000. This information:
- excludes an aggregate of 13,519,961 shares issuable upon the exercise of
options outstanding as of March 28, 2000 under our stock option plan, at
a weighted average exercise price of $6.54 per share;
- excludes 42,076 additional shares that could be issued under our stock
option plan as of March 28, 2000;
- excludes shares available for issuance to our employees who elect to
buy stock in the future under our employee stock purchase plan;
- includes 50,000 shares of common stock issuable upon the conversion of a
convertible promissory note;
- includes $ million of our common stock to be sold to ,
and in a private transaction concurrent with the
closing of this offering at a price per share equal to the initial public
offering price. At an assumed initial public offering price of $ per
share (the midpoint of the filing range), shares will be sold;
- includes an aggregate of shares of common stock, which we
expect to issue in connection with the proposed acquisition of
InsurQuote, subject to certain adjustments; and
- excludes an aggregate of shares issuable upon the exercise of
options and warrants outstanding as of March 28, 2000 which we expect to
assume from InsurQuote upon the closing of the proposed acquisition of
InsurQuote, at a weighted average exercise price of $ per share.
RECENT DEVELOPMENTS
Acquisition of InsurQuote Systems, Inc.
In February 2000, we signed a definitive agreement to acquire InsurQuote
Systems, Inc., which we refer to in this prospectus as InsurQuote. InsurQuote is
a leading provider of integrated insurance rating solutions to insurance
carriers, distributors, Internet portals and consumers in the property and
casualty insurance market. InsurQuote's applications enable its customers to
develop, distribute and compare insurance rating information for desktop and
online property and casualty rate quoting. We expect to close the InsurQuote
acquisition in April 2000.
Acquisition of LifeLink Corporation
In March 2000, we acquired LifeLink Corporation, which we refer to in this
prospectus as LifeLink. LifeLink is a provider of illustration applications,
Internet-based quoting services, and comparative financial and rating data for
the life insurance industry.
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ADDITIONAL INFORMATION
Unless otherwise indicated, all information in this prospectus:
- assumes the sale of $ million of our common stock to ,
and in private transactions concurrent with the
closing of this offering at a price per share equal to the initial public
offering price. At an assumed initial public offering price of $ per
share (the midpoint of the filing range), shares will be sold;
- assumes that the underwriters' overallotment option will not be
exercised;
- reflects the closing of our proposed acquisition of InsurQuote in April
2000;
- reflects the closing of our acquisition of LifeLink in March 2000; and
- reflects the conversion of all of our outstanding shares of preferred
stock and our convertible promissory note automatically upon the closing
of the offering.
"ChannelPoint," "HealthSearch," "P.D.,Q. 2000," "P.D.,Q. LITE," "PROBOL,"
"Policy $hopper," "InsurQuote," "InsurWare," "Quotesearch," "Rate Analyst" and
"Insight" are United States trademarks of ours. All brand names or trademarks of
other companies appearing in this prospectus are owned by their respective
holders.
Unless the context requires otherwise, "ChannelPoint," "we," "us," and
"our" in this prospectus refer to ChannelPoint, Inc.
We were incorporated in Delaware on December 5, 1996. Our principal
executive office is located at 10155 Westmoor Drive, Suite 210, Westminster,
Colorado 80021 and our telephone number is (303) 410-6180. Our worldwide web
site address is www.channelpoint.com. The information on our web site is not a
part of this prospectus.
You should rely only on the information contained in this prospectus.
Neither we nor any underwriter has authorized anyone to provide prospective
investors with different or additional information. This prospectus is not an
offer to sell nor is it seeking an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless
of the time of the delivery of this prospectus or any sale of these securities.
5
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SUMMARY CONSOLIDATED AND COMBINED PRO FORMA FINANCIAL DATA
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ACTUAL PRO FORMA
--------------------------------------------- -----------
INCEPTION
(DECEMBER 5,
1996) THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------
1996 1997 1998 1999 1999
------------- ------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue.................................. $ -- $ -- $ 1,603 $ 5,498 $ 16,031
Costs and expenses:
Cost of revenue........................ -- -- 1,748 12,159 25,774
Product development.................... 49 3,983 7,829 18,212 21,754
Selling and marketing.................. 12 1,292 4,714 19,884 23,060
General and administrative............. 67 609 1,428 8,595 17,393
Amortization of intangible assets
acquired from InsurQuote............ -- -- -- -- 38,270
------ ------- -------- -------- ---------
Total operating expenses....... 128 5,884 15,719 58,850 126,251
------ ------- -------- -------- ---------
Loss from operations..................... (128) (5,884) (14,116) (53,352) (110,220)
Interest and other income, net........... 3 77 249 1,001 732
------ ------- -------- -------- ---------
Net loss................................. $ (125) $(5,807) $(13,867) $(52,351) $(109,488)
====== ======= ======== ======== =========
Basic and diluted net loss per common
share.................................. $(0.07) $ (1.22) $ (1.72) $ (4.60) $ (4.22)
Weighted average common shares
outstanding used in computing basic and
diluted net loss per common share...... 1,889 4,743 8,077 11,378 25,969
Pro forma basic and diluted net loss per
common share, (unaudited).............. $ (1.55) $ (2.26)
Weighted average common shares
outstanding used in computing pro forma
basic and diluted net loss per common
share (unaudited)...................... 33,831 48,422
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AS OF DECEMBER 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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(UNAUDITED)
(IN THOUSANDS)
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $26,028 $ 29,304
Working capital............................................. 22,581 17,405
Total assets................................................ 74,524 230,730
Deferred revenue............................................ 29,919 32,970
Long-term obligations (net of current portion).............. 131 9,138
Total stockholders' equity.................................. 32,952 168,018
</TABLE>
The unaudited pro forma financial information reflects the acquisition of
InsurQuote, which is expected to be completed in April 2000. The unaudited pro
forma financial information is derived from the unaudited pro forma consolidated
condensed financial statements and should be read in conjunction with such pro
forma statements and the notes thereto, which are included elsewhere in this
prospectus. In preparing the unaudited pro forma consolidated statement of
operations data, the InsurQuote operations have been included as if the
acquisition had occurred on January 1, 1999 and the unaudited pro forma
consolidated balance sheet data assumes the acquisition occurred on December 31,
1999. The unaudited pro forma information is presented
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for illustrative purposes only and is not necessarily indicative of future
operating results or our financial position following the acquisition of
InsurQuote. The unaudited pro forma as adjusted balance sheet financial data
reflects:
- - the receipt of the estimated net proceeds from the sale of shares of
common stock offered by us at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and offering
expenses payable by us;
- - the sale of shares of common stock in a private transaction
concurrent with the closing of this offering; and
- - the conversion of all outstanding shares of preferred stock and the
convertible promissory note into shares of common stock.
See note 1 of notes to our consolidated financial statements for an
explanation of the determination of the number of shares used in computing per
share data.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding whether to invest in shares of our common stock. The risks described
below are not the only ones facing our company. Additional risks not presently
known to us or that are currently deemed immaterial may also impair our
business. The trading price of our common stock may decline due to any of these
risks and you may lose part or all of your investment.
RISKS RELATING TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT.
We were founded in December 1996 and began providing professional services
to clients in 1997. Because of our limited operating history, it is difficult to
evaluate our business and our prospects. Our historical financial information is
of limited value in projecting our future operating results because of our
limited operating history and the emerging nature of the online insurance
distribution market. While our revenues to date have principally been generated
from our professional services to carriers, our long-term business model depends
on our ability to generate transaction fees from the use of our Exchange
Platform technology and software license fees from related applications.
Moreover, companies in an early stage of development like ourselves frequently
encounter enhanced risks and unexpected expenses and difficulties. Therefore,
our past results and rate of growth may not be meaningful and you should not
rely on them as an indication of future performance.
OUR PLAN TO CHARGE TRANSACTION FEES FOR OUR TECHNOLOGY IS NOVEL AND
UNPROVEN.
Our plan to generate transaction fees from our Exchange Platform technology
and related software applications is based on a novel and unproven business
model in the insurance industry. We will be successful only if insurance
carriers and distributors adopt our Exchange Platform technology to streamline
and automate the distribution of their insurance products, use our technology to
complete transactions and pay us transaction fees based on the use of our
technology. To date, we have generated limited transaction fees. We cannot
predict whether our technology will be successful or achieve the degree of
acceptance necessary to become profitable or whether a transaction fee model
will prove to be viable. Factors that might slow or reduce acceptance of our
technology or our ability to generate transaction fees include:
- Insurance carriers and distributors may be reluctant to use our
technology out of concern for placing competitively sensitive pricing
information on our database;
- Carriers and distributors might have a concern that electronic methods
will not adequately protect their customers' privacy and confidential
information;
- Carriers or distributors may not want to invest the significant time and
resources necessary to use our technology; and
- Buyers of insurance may be reluctant to buy insurance from participating
carriers or distributors due to privacy concerns and other factors.
WE HAVE A HISTORY OF LOSSES AND WE EXPECT TO INCUR SIGNIFICANT LOSSES IN
THE FUTURE AS WE EXPAND OUR OPERATIONS.
We had net losses of $5.8 million in calendar year 1997, $13.9 million in
calendar year 1998 and $52.4 million in calendar year 1999. In addition,
InsurQuote has incurred net losses of $2.8 million in the eleven months ended
June 30, 1997, $8.8 million in fiscal year ended June 30, 1998, $17.3 million in
fiscal year ended June 30, 1999 and $9.2 million for the six months ended
December 31, 1999. As of December 31, 1999, we had an accumulated deficit of
$72.2 million and InsurQuote had an accumulated deficit of $41.6 million. We
have never been profitable and we expect to remain unprofitable for the
foreseeable future as we continue to incur significant expenses to expand our
operations by growing our professional services, sales and marketing and product
development organizations and incur expenses in developing new applications and
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adding new content to our Exchange Platform technology. We have not generated
enough revenues to exceed the substantial amounts we have spent to develop our
Exchange Platform technology and electronic insurance applications and build our
operational infrastructure. If our revenues do not increase substantially in
future periods, we will never become profitable.
WE ARE LIKELY TO NEED TO OBTAIN FUTURE CAPITAL AND OUR INABILITY TO DO SO
COULD SIGNIFICANTLY HARM OUR BUSINESS.
To date, we have not been able to fund our operations from cash generated
by our business and do not expect to be able to do so for the foreseeable
future. We expect that the money generated from this offering, combined with our
current cash resources, will be sufficient to meet our requirements for at least
the next 12 months. The time period for which we believe our capital is
sufficient is an estimate; the actual time period may differ materially as a
result of a number of factors, risks and uncertainties. After that time, we
expect that we will need to raise additional financing to support expansion,
develop new or enhanced applications, respond to competitive pressures, acquire
complementary businesses or technologies or take advantage of unanticipated
opportunities. We may need to raise additional funds by selling debt or equity
securities, by entering into strategic relationships or through other
arrangements. We may be unable to raise any additional funds on reasonable terms
when they are needed. In addition, equity financing may dilute the equity
interest of existing shareholders.
OUR QUARTERLY REVENUES AND OPERATING RESULTS FLUCTUATE AND ARE DIFFICULT TO
PREDICT, AND, IF OUR RESULTS ARE BELOW THE EXPECTATIONS OF THE PUBLIC MARKET
ANALYSTS AND INVESTORS, THE PRICE OF OUR COMMON STOCK MAY DECLINE.
Our quarterly revenues and operating results have fluctuated significantly
in the past and we expect them to continue to fluctuate significantly in the
future. As a result, you should not rely on year-to-year or quarter-to-quarter
comparisons of our operating results as an indication of future performance.
These fluctuations are due to a variety of factors, not all of which are in our
control. Some of the factors that may lead to fluctuations in our results
include:
- the amount and timing of operating costs relating to expansion of our
infrastructure and business;
- the demand for and acceptance of our applications;
- the mix of software license, professional service and transaction fee
revenue;
- the utilization rate of our professional services organization; and
- the lengthy sales cycle and product implementation period for our
applications.
In addition, our operating expenses are based largely on our expectations
of our future revenues and are expected to grow significantly due to continued
investments in expanding the capabilities of and adding content to our Exchange
Platform technology, developing and launching new applications, and servicing
our customers. We may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall. If we have a shortfall in revenues in relation to
our expenses, or if our expenses precede increased revenues, then our operating
results and financial condition would be harmed. It is possible that in some
future periods our results may be below expectations of public market analysts
and investors. If this were to occur, the price of our common stock may fall.
OUR LENGTHY SALES CYCLE COULD IMPACT THE TIMING OF OUR REVENUE, CAUSING OUR
QUARTERLY OPERATING RESULTS TO FLUCTUATE.
A customer's decision to purchase our applications typically involves a
significant decision by its senior management, as our products are generally
critical to the customer's business and involve both a transformation of
business processes and a significant commitment of resources. The period between
our initial contact with a potential customer and the purchase of our
applications is often long and subject to delays associated with educating
customers as to the strategic benefits of our Exchange Platform technology and
with the budgeting, approval, competitive evaluation, project definition, and
contract negotiation processes that
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frequently accompany significant technology purchasing decisions. Our lengthy
sales process makes the timing of sales unpredictable and subjects us to the
risk that revenues for a particular quarter will be less than expected. In
addition, we incur significant expenses in the sales process and failure to
complete sales would significantly impair our operating results.
OUR CUSTOMER BASE IS CONCENTRATED AND LOSS OF A MAJOR CUSTOMER COULD CAUSE
OUR REVENUE TO DECLINE.
During the year ended December 31, 1999, three customers accounted for
approximately 88% of our revenue. During the year ended December 31, 1998, one
customer accounted for all of our revenue. We may continue to derive a
significant portion of our revenue from a relatively small number of customers
in the future. While we typically seek to enter into long-term relationships
with our customers, if a major customer terminates its relationship with us or
fails to use our applications, our revenue could decline and our operating
results and financial condition could be harmed.
WE RELY ON RELATIONSHIPS WITH LEADING CARRIERS AND DISTRIBUTORS; AN
INABILITY TO ESTABLISH SUCH RELATIONSHIPS WOULD IMPAIR OUR ABILITY TO GENERATE
INCREASED REVENUES.
To be successful, we must establish and maintain relationships with leading
carriers and distributors. This is critical to our success because we believe
that these relationships will enable us to:
- extend the reach of our applications and services to the various
participants in the insurance industry;
- obtain specialized insurance industry expertise and input to refine our
applications;
- obtain content about carrier plans which is critical to the success of
our Exchange Platform technology; and
- develop and deploy new applications to further enhance our Exchange
Platform technology.
We may not be able to establish relationships with key carriers or
distributors in the insurance industry if we have established relationships with
their competitors. Moreover, many potential carrier and distributor participants
may resist working with us until our applications have been successfully
introduced and have achieved market acceptance.
In addition, potential carriers may not be willing to invest the time and
resources necessary to implement our Exchange Platform technology and our
applications, or we may not be able to overcome the technological difficulties
associated with, or devote the time and resources necessary to, successfully
implement our applications. Carriers may already have substantial investments in
their legacy systems, and may refuse to adopt new systems when they have made
extensive investment in hardware, software and training for older systems. Some
carriers might not be willing to implement our other applications if they cannot
achieve end-to-end processing because they find it too expensive or difficult to
implement one of our applications.
WE DO NOT HAVE EXCLUSIVE RELATIONSHIPS WITH INSURANCE CARRIERS, AND
CARRIERS DO NOT NEED TO USE OUR TECHNOLOGY TO DISTRIBUTE THEIR PRODUCTS.
We do not have an exclusive relationship with any of the insurance carriers
who use our Exchange Platform technology and electronic insurance applications.
These carriers are free to use the traditional means of distributing insurance
through brokers, insurance agents or direct sales. In addition, these carriers
can also offer their products and services over the Internet, either directly to
consumers or through online portals, or both. Accordingly, brokers and consumers
could have multiple methods to obtain quotes and coverage from these insurance
companies and would not have to use our technology.
IF WE ENCOUNTER DIFFICULTY IMPLEMENTING OUR TECHNOLOGY FOR NEW CARRIERS, WE
COULD HARM OUR REPUTATION AND LOSE CUSTOMERS AND REVENUE.
Implementation of many of our applications, particularly our Insure
application, which automates a carrier's core sales and distribution processes,
requires a significant commitment of time and resources on our
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<PAGE> 13
part and on the part of the carrier and is a technologically difficult process.
Implementation problems could delay market acceptance of our applications,
divert our development resources, harm our reputation and give rise to claims
against us. If we encounter difficulties implementing our applications, our
professional service costs could increase and our revenue could decline.
Furthermore, an unexpected delay in the completion of a major implementation
could result in a delay in the redeployment of professional services personnel
to new assignments for which we are contractually committed to achieve
milestones on a timely basis. Conversely, because we assign significant numbers
of professional services personnel to our large implementation projects,
unexpected early terminations of any large implementation could result in
under-utilization of project personnel until such persons can be redeployed to
other projects. For these and other reasons, our failure to successfully
complete implementations within the time frame projected could have a material
adverse effect on our business, results of operations and financial condition.
IF WE ARE REQUIRED TO COMMIT UNANTICIPATED RESOURCES TO COMPLETE
FIXED-PRICE CONTRACTS, OUR OPERATING RESULTS MAY DECLINE AND WE MAY INCUR LOSSES
IN FULFILLING THOSE CONTRACTUAL OBLIGATIONS.
To date, a significant number of our contracts have been billed on a
fixed-price basis. These contracts specify obligations and deliverables to be
met by us regardless of our actual costs incurred. We cannot assure you that we
can successfully complete these contracts on budget, and our inability to do so
could seriously harm our business, financial condition and results of
operations.
Our failure to accurately estimate the resources required for a fixed-price
contract could require us to record losses which could cause our operating
results to decline. In the past, we have been required to commit unanticipated
additional resources to complete certain project plans during the project to
ensure that the project was completed on schedule. We may experience similar
situations in the future.
WE DEPEND ON INCREASED BUSINESS FROM OUR CURRENT AND NEW CUSTOMERS, AND IF
WE FAIL TO GROW OUR CUSTOMER BASE OR INCREASE THE AMOUNT OF BUSINESS WE RECEIVE
FROM OUR CURRENT CUSTOMERS, OUR OPERATING RESULTS COULD BE HARMED.
Once we have established relationships with a significant number of
insurance carriers and distributors, we will depend on our customers' ability to
generate increased acceptance and use of our applications. Our customer
relationships are in the early stages of development. We have limited experience
in establishing and maintaining relationships with insurance industry
participants. Some of these customers may not choose to expand their use of our
applications. Our business model depends on the expanded use of our applications
within our customers' organizations. If we do not expand our current
relationships, or if we lose any of these relationships or fail to establish
additional relationships, we would not be able to execute our business plan and
our business would suffer significantly.
WE MUST SUCCESSFULLY INTEGRATE OUR RECENT ACQUISITIONS, INCLUDING OUR
ACQUISITION OF INSURQUOTE SYSTEMS, INC.
On February 1, 2000, we executed an agreement to acquire InsurQuote, a
developer of applications used to price and rate insurance coverage. We acquired
LifeLink Corporation on March 24, 2000, a provider of illustration applications,
Internet based quoting services, and comparative financial and rating data for
the life insurance industry. On November 15, 1999, we acquired the assets
related to p.d.,q., an agency management software package designed for broker
general agents in the individual life insurance market. On June 7, 1999, we
acquired certain assets of Blaise Software, Inc., the primary asset of which is
a desktop application used by brokers to generate and complete insurance
transactions. Our failure to address successfully the risks associated with the
acquisition of these companies could have a material adverse effect on our
ability to develop and market applications based on their technology. Our
ability to realize the potential benefits and synergies of these acquisitions
will depend on our ability to do one or more of the following:
- integrate and manage the operations of the acquired companies;
- integrate the acquired companies' applications into our Exchange Platform
technology;
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<PAGE> 14
- retain the acquired companies' key personnel; and
- maintain and expand upon the acquired companies' carrier and distributor
relationships.
FUTURE ACQUISITIONS MAY PROVE DIFFICULT TO INTEGRATE, MAY DIVERT MANAGEMENT
ATTENTION OR UPSET CUSTOMER RELATIONSHIPS AND MAY RESULT IN SIGNIFICANT CHARGES,
EACH OF WHICH COULD HARM OUR BUSINESS AND OPERATING RESULTS.
We may acquire or make investments in other businesses, technologies,
services or products in order to increase the number and variety of applications
on our Exchange Platform and increase our distribution base if appropriate
opportunities arise. This acquisition and investment strategy may require us to
integrate new technology or personnel into our operations. These integration
efforts may not succeed or may distract management's attention from our existing
business. Our failure to successfully manage future acquisitions could seriously
harm our business. Also, our existing stockholders would be diluted if we
financed future acquisitions by issuing equity securities. As with our past
acquisitions, future acquisitions may also involve significant one-time charges
or ongoing charges for amortizing goodwill or other acquired intangible assets.
OUR OPERATING RESULTS MAY DECLINE AND OUR CUSTOMERS MAY BECOME DISSATISFIED
IF WE DO NOT EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION OR IF WE ARE UNABLE
TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH THIRD-PARTY SERVICE PROVIDERS.
To date, our revenue has been generated principally from professional
services. Customers that use our applications typically engage our professional
services staff to assist with support, training, consulting and implementation.
We believe that our growth depends on our ability to provide our customers with
these services and to attract and educate third-party consultants to provide
similar services. As a result, we plan to increase the number of our
professional services personnel to meet these needs. New professional services
personnel will require training and education and take time to reach full
productivity. Competition for qualified personnel is intense, particularly
because we are in a new market and only a limited number of individuals have
acquired the skills needed to provide the services our customers require. We
cannot be certain that we can attract or retain a sufficient number of highly
qualified professional services personnel. To meet our needs for professional
services personnel, we also intend to use more costly third-party consultants to
supplement our own professional services staff. Our business may be harmed if we
are unable to establish and maintain relationships with third-party
implementation providers.
OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND
THE LOSS OF ANY OF THESE OFFICERS OR KEY PERSONNEL WOULD LIKELY HARM OUR
BUSINESS.
Our future success is substantially dependent on the continued services and
continuing contributions of our senior management and other key personnel,
particularly Kenneth Hollen, our President and Chief Executive Officer. The loss
of the services of any of our executive officers or other key employees could
harm our business. We have no long-term employment agreements with any of our
key personnel. We do not have "key person" life insurance on any of our key
employees.
BECAUSE OF COMPETITION FOR ADDITIONAL QUALIFIED PERSONNEL, WE MAY NOT BE
ABLE TO RECRUIT OR RETAIN NECESSARY PERSONNEL, WHICH COULD IMPACT OUR GROWTH.
Our future success depends on our ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, sales and
marketing and administrative personnel. We have expanded our operations, and we
need to hire a significant number of additional personnel in order to implement
our business plan. Competition for such personnel is intense, and we cannot
guarantee that we will successfully attract, assimilate or retain a sufficient
number of qualified personnel. Failure to retain and attract the necessary
technical, managerial, sales and marketing and administrative personnel could
adversely affect our business, financial condition and operating results.
The novelty of our technology requires highly trained product development
personnel, as well as experienced sales and marketing personnel to educate
prospective customers regarding the use and benefits of
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<PAGE> 15
our applications. Many of our product development and sales and marketing
personnel have recently joined us and have limited insurance industry
experience. New hires take time to become productive, and we cannot be certain
that our new hires will be successful.
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE HARMED.
We are expanding our operations rapidly, and we expect to continue to grow.
This growth has placed and is expected to continue to place a significant strain
on our managerial, operational and financial resources. To manage any further
growth, we must effectively manage our operational, customer service and
financial systems, procedures and controls. Our management may not be able to
hire, train, retain, motivate and manage the personnel we need for our business.
The majority of our current employees have been with us less than 18 months and
we expect that our rate of hiring will continue at a very high pace. If we
cannot manage growth effectively, our business, operating results and financial
condition will suffer.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR BUSINESS COULD
BE HARMED.
Our success depends, in part, upon our proprietary technology and other
intellectual property rights. To date, we have relied primarily upon a
combination of copyright, trade secrets, trademark and patent laws, security
measures and nondisclosure and other contractual restrictions on copying and
distribution to protect our proprietary technology. We have five United States
patent applications pending and no foreign patent applications pending. We
cannot assure you that our patent applications will result in the issuance of
any patents nor can we be certain that any issued patents would protect or
benefit us or give us adequate protection from competing products or services.
For example, issued patents may be circumvented or challenged and declared
invalid or unenforceable. We seek to protect our proprietary rights, but our
efforts may be inadequate to protect our proprietary rights. Existing trade
secret, copyright, patent and trademark laws offer only limited protection.
Further, effective trade secret, copyright, patent and trademark protection may
not be available in every country in which our applications are made available
through the Internet, and policing unauthorized use of our proprietary
information is difficult. The unauthorized misappropriation of our proprietary
technology could have a material adverse effect on our business. If we resort to
legal proceedings to enforce our proprietary rights, the proceedings could be
burdensome and expensive and could involve a high degree of risk, resulting in
counterclaims or countersuits against us.
THIRD-PARTY CLAIMS THAT WE INFRINGE UPON THEIR INTELLECTUAL PROPERTY RIGHTS
COULD BE COSTLY TO DEFEND OR SETTLE.
We are currently involved in litigation in which another company has
claimed that we have improperly utilized their trade secrets. We may also be
subject to other claims alleging infringement by us of third-party proprietary
rights. If we were to discover that any of our technology infringed third-party
rights, we may not be able to obtain permission to use such rights on
commercially reasonable terms. This inability may require us to expend
significant resources to make our technology non-infringing or to discontinue
the use of such technology. We have incurred significant expense defending
ourselves from the claims that we have improperly used another company's trade
secrets. These or other additional claims of infringement could cause us to
incur substantial costs defending against the claim, even if the claim is
invalid, and could distract our management from our business. In addition, we
have agreed, and may agree in the future, to indemnify certain of our customers
against claims that our software infringes upon the intellectual property rights
of others. We could incur substantial costs in defending our customers against
claims that our software infringes third-party proprietary rights. Further, a
party making such a claim could secure a judgment that requires us to pay
substantial damages or that prevents us from using or selling our applications.
Any of these events could have a material adverse effect on our business,
operating results and financial condition.
ONLINE SECURITY BREACHES MAY DETER FUTURE USE OF OUR APPLICATIONS.
The secure transmission of confidential information over the Internet is
essential in maintaining carrier, distributor and consumer confidence in our
applications. Substantial or ongoing security breaches affecting our technology
or the Internet in general could significantly harm our business. We rely on
licensed encryption and
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authentication technology to effect secure transmission of and access to
confidential information, including individuals' confidential data and other
confidential data of insurance carriers and distributors. It is possible that
advances in computer capabilities, new discoveries or other developments could
result in a compromise or breach of the technology used by us to protect
confidential data.
We incur substantial expense to protect against and remedy security
breaches and their consequences. A party that is able to circumvent our security
systems could steal proprietary information or cause interruptions in our
operations. Security breaches could also damage our reputation and expose us to
a risk of loss or litigation and possible liability. Our insurance policies
carry low coverage limits, which may not be adequate to reimburse us for losses
caused by security breaches. We cannot guarantee that our security measures will
prevent security breaches.
We also face risks associated with security breaches affecting third
parties conducting business over the Internet. Consumers and businesses
generally are concerned with security and privacy on the Internet, and any
publicized security problems could hinder the growth of e-commerce and,
therefore, our applications as a means of distributing insurance.
SYSTEM FAILURES OR CAPACITY CONSTRAINTS COULD HARM OUR BUSINESS.
Although we have experienced only minor system failures or outages to date,
we may experience further system failures or outages in the future that could
disrupt the operation of our Exchange Platform technology and could harm our
business. Our future revenues will depend in large part on the volume of
transactions on our Exchange Platform. Accordingly, the performance, reliability
and availability of our Exchange Platform technology, the software supporting
our transaction engines and databases and network infrastructure are critical to
our ability to complete transactions and support a high volume of traffic on our
Exchange Platform and to attract and retain carriers and distributors.
Our Exchange Platform is hosted in a Denver, Colorado data center, which
includes redundant servers and Internet service providers. In addition, some of
our other applications are hosted at other data centers. We do not have backup
systems in other locations. If any of these data centers experience a system
failure, the performance of our Exchange Platform or applications will be
harmed. These systems are also vulnerable to damage from fire, floods, power
loss, telecommunications failures, break-ins and similar events. If we seek to
replicate any of these systems at other locations, we will face a number of
technical challenges, particularly with respect to database replications, which
we may not be able to address successfully. Although we carry property and
business interruption insurance, our coverage may not be adequate to compensate
us for all losses that may occur. Our servers may also be vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions.
OUR APPLICATIONS MAY BE AFFECTED BY UNKNOWN SOFTWARE DEFECTS, WHICH COULD
CAUSE US TO LOSE CUSTOMERS AND REVENUE.
Our applications depend on complex software. Software often contains
defects, particularly when first introduced or when new versions are released.
We may not discover software defects that affect our applications or
enhancements until after they are deployed. These defects could cause service
interruptions, which could damage our reputation, increase our service costs,
cause us to lose revenue, delay market acceptance or divert our development
resources, any of which could cause our business to suffer. Additionally,
defects or difficulties in implementing one of our applications may cause a
customer to decide not to use other applications offered by our Exchange
Platform.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, THEY COULD BE
TIME-CONSUMING AND COSTLY TO DEFEND.
Since our customers use our technology for mission-critical applications,
errors, defects or other performance problems could result in financial or other
damages to our customers. They could seek damages for losses from us, which, if
successful, could have a material adverse effect on our business, operating
results and financial condition. Although our customer agreements typically
contain provisions designed to limit our exposure to product liability claims,
existing or future laws or unfavorable judicial decisions could negate these
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limitation of liability provisions. We have not experienced any product
liability claims to date. However, a product liability claim brought against us,
even if not successful, could be time-consuming and costly to defend and could
harm our reputation.
IF THE THIRD-PARTY TECHNOLOGIES AND SERVICES WE USE FAIL OR BECOME
UNAVAILABLE, OUR BUSINESS COULD BE HARMED.
We have incorporated technology developed by third parties, including
security, encryption and database technology, into our Exchange Platform
technology and applications, and we will continue to incorporate third-party
technology in our future applications. Our business would be seriously harmed if
the providers from whom we license technology ceased to deliver and support
these products, enhance their current products in a timely fashion or respond to
emerging industry standards. We have limited control over whether or when these
third-party technologies will be developed or enhanced.
RISKS RELATING TO OUR INDUSTRY
CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.
The market for Internet based, business-to-business solutions is relatively
new and is evolving rapidly. Our future success depends upon the widespread
acceptance of the Internet as an effective medium for business-to-business
commerce. The failure of the Internet to continue to develop as a medium for
commerce could harm our business. The acceptance of the Internet for
business-to-business commerce could be limited by a number of factors,
including:
- inadequate development of the necessary infrastructure for communication
speed, access and server reliability;
- security, confidentiality and personal privacy concerns;
- lack of development of complementary products, such as high-speed modems
and high-speed communication lines;
- implementation of competing technologies; and
- delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity.
THE MARKET FOR BUSINESS-TO-BUSINESS E-COMMERCE SOLUTIONS FOR THE INSURANCE
INDUSTRY IS HIGHLY COMPETITIVE.
The market for business-to-business e-commerce solutions for the insurance
industry is a new industry and, like the broader electronic insurance market, is
rapidly evolving and is highly competitive. Increased competition, particularly
by companies offering electronic insurance distribution, could adversely affect
the willingness of insurance companies or distributors to implement our
solutions and could reduce the fees we are able to charge for transactions
completed on our Exchange Platform, resulting in reduced margins or loss of
market share, any of which would harm our business.
Some of our current competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than we do. In addition, we believe we will face
increasing competition as the online financial services industry develops and
evolves. Our current and future competitors may be able to:
- undertake more extensive marketing campaigns for their brands and
services;
- devote more resources to web site and systems development;
- adopt more aggressive pricing policies; and
- make more attractive offers to potential employees, distribution partners
and third-party service providers.
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Accordingly, we may not be able to maintain or grow our customer base, or
our competitors may grow faster than we do, any of which would harm our
business.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND OUR FUTURE SUCCESS
WILL DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.
The online insurance distribution market is characterized by rapidly
changing technology, evolving industry standards, frequent new service and
product announcements, introductions and enhancements and changing consumer
demands. We may not be able to keep up with these rapid changes. In addition,
these market characteristics are exacerbated by the emerging nature of the
Internet and the increasing use of the Internet by insurance industry
participants to offer their products and services. As a result, our future
success will depend on our ability to:
- adapt to rapidly changing technologies;
- adapt our applications to evolving industry standards; and
- continually improve the performance, features and reliability of our
applications.
In addition, the widespread adoption of new Internet technologies could
require us to incur substantial expenditures to modify or adapt our applications
or infrastructure. Our business could be harmed if we incur significant costs
without adequate results, or if we are unable to adapt rapidly to these changes.
IF WE DO NOT COMPLY WITH THE NUMEROUS LAWS AND REGULATIONS THAT GOVERN THE
INSURANCE INDUSTRY, OUR BUSINESS COULD BE HARMED.
We perform functions for licensed insurance carriers and are, therefore,
required to comply with a complex set of rules and regulations that often vary
from state to state. If we fail to comply with these rules and regulations, an
insurance carrier doing business with us could be subject to censure, fines or a
cease-and-desist order. This risk, as well as changes in the regulatory climate
or the enforcement or interpretation of existing law, could require changes to
our business. Furthermore, because the application of e-commerce to the consumer
insurance market is relatively new, the impact of current or future regulations
on our business is difficult to anticipate.
REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD HARM
OUR BUSINESS.
The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. Furthermore, the growth and
development of the market for e-commerce may prompt the enactment of more
stringent consumer protection laws that may impose additional burdens on
companies conducting business online. The adoption of additional laws or
regulations may inhibit the growth of the Internet as a medium for commerce and
comparison insurance shopping, which could, in turn, decrease demand for our
applications, increase our cost of doing business, or otherwise harm our
business. In addition, applicability to the Internet of existing laws governing
issues including property ownership, copyrights and other intellectual property
issues, taxation, libel and personal privacy is uncertain. The vast majority of
these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies.
RISKS RELATING TO THIS OFFERING
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS.
We have not designated any specific use for the net proceeds from the sale
of our common stock. We expect to use the net proceeds of the offering to
further expand our professional services, product development, content
management and sales and marketing capabilities, repayment of indebtedness and
other general corporate purposes. Accordingly, management will have broad
discretion in applying the net proceeds of this offering. You will not have the
opportunity to evaluate the economic, financial or other information on which we
base our decisions on how to use the proceeds. Management's allocation of the
proceeds of this offering may not benefit our business, and we may not be able
to generate a significant return on any use of the proceeds of this offering.
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OUR EXECUTIVE OFFICERS AND DIRECTORS AND ENTITIES AFFILIATED WITH THEM WILL
RETAIN SUBSTANTIAL CONTROL OVER OUR BUSINESS AFTER THE OFFERING.
Our executive officers and directors and entities affiliated with them will
beneficially own approximately % of our outstanding common stock following
the completion of this offering. These persons and entities, acting together,
will be able to significantly influence all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers
and other business combinations and may make decisions that are not in the best
interest of all stockholders.
THE PRICE FOR OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE.
The market price and trading volume of our common stock is likely to be
highly volatile. In particular, the market for Internet related and technology
companies has been highly volatile. The trading prices of many technology and
Internet related companies' stocks are at or near historical highs and have
reflected relative valuations substantially above historical levels. We cannot
assure you that our common stock will trade at the same levels of other Internet
stocks or that these trading prices and price earnings ratios will be sustained.
Factors that could cause such volatility may include, among other things:
- announcements of technological innovations;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet companies; and
- announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures.
Fluctuations in our common stock's price may affect our visibility and
credibility in the business-to-business e-commerce solutions market. In the
event of broad fluctuations in the market price of our common stock, you may be
unable to resell your shares at or above the offering price.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
a lawsuit and management's attention could be diverted from our business.
OUR SECURITIES HAVE NO PRIOR MARKET, AND OUR STOCK PRICE MAY DECLINE AFTER
THEIR OFFERING.
There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how active that market
might become. The initial public offering price will be determined by
negotiations between representatives of the underwriters and us and may not be
indicative of prices that will prevail in the trading market. The trading market
price of our common stock may decline below our initial public offering price.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Immediately after the offering, the public market for our common stock will
include only the shares that we are selling in the offering. At that
time, there will be an additional shares of common stock outstanding.
The persons that hold of these shares will be able to sell these
shares in the public market upon the expiration of the 180-day lock-up
agreements which they have executed. If our stockholders sell substantial
amounts of common stock (including shares issued upon the exercise of
outstanding options) in the public market following this offering, the market
price of our common stock could fall. Such sales might also make it more
difficult for us to sell equity securities in the future at a time and price
that we deem appropriate.
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Some of our existing stockholders have the right to require us to register
their shares of common stock with the Securities and Exchange Commission. If we
register their shares of common stock, they can sell those shares in the public
market.
After the offering, we intend to register approximately shares of
common stock that we have issued or may issue under our stock plans. Once we
register these shares, they can be sold in the public market upon issuance,
subject to the "lock-up" agreements described above.
WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS THAT COULD MAKE IT
MORE DIFFICULT FOR A THIRD-PARTY TO ACQUIRE US.
Provisions of our certificate of incorporation and our bylaws, as well as
Delaware law, could make it more difficult for a third-party to acquire us, even
if doing so would be beneficial to our stockholders. See "Description of Capital
Stock -- Anti-Takeover Effects of Certain Provisions of Delaware Law and Our
Certificate of Incorporation and Bylaws" on page 66 for a description of these
provisions.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "intends," "plans," and similar
expressions. Our actual results could differ materially from those anticipated
in the forward-looking statements as a result of various factors, including
those discussed in "Risk Factors" and elsewhere in this prospectus. Such
forward-looking statements speak only as of the date of this prospectus and we
caution potential investors not to place undue reliance on such statements.
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USE OF PROCEEDS
We estimate that we will receive approximately $ million in net
proceeds from this offering based upon an assumed initial public offering of
$ per share. This amount reflects deductions from the gross proceeds of the
offering of approximately $ for underwriting discounts and an estimated
$ for the expenses of this offering. If the underwriters exercise their
over-allotment option in full, we estimate that our net proceeds will be $
million.
We intend to use the net proceeds from the offering to further develop our
professional services, product development, contract management and sales and
marketing capabilities, repayment of indebtedness and for capital expenditures,
working capital and other general corporate purposes. We are obligated to repay
certain notes that were issued in connection with our acquisition of LifeLink at
the completion of this offering. The notes have an aggregate principal amount of
$6.0 million and bear interest at the rate of 7% per annum. The amounts we
actually expend in any particular area may vary significantly and will depend on
a number of factors, including our future revenues and the other factors
described under "Risk Factors." Accordingly, management will retain broad
discretion in the allocation of the net proceeds of this offering. A portion of
the net proceeds may also be used to acquire or invest in complementary
businesses, technologies, or applications. We have no current plans, agreements
or commitments with respect to any such acquisition or investment, and we are
not currently engaged in any negotiations with respect to any such transaction.
Pending such uses, the net proceeds of this offering will be invested in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future.
CONCURRENT PRIVATE TRANSACTIONS
Concurrently with the closing of this offering, we plan to sell $
million of our common stock, or shares, to ,
and in private transactions at a price per share equal
to the initial public offering price.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999.
This information is presented:
- on an actual basis;
- on an unaudited pro forma basis to reflect our capitalization giving
effect to the acquisition of InsurQuote; and
- as adjusted to give effect to the sale of shares of common stock
offered hereby at an assumed initial public offering price of $ per
share (after deducting the estimated underwriting discounts and
commissions and offering expenses) and the application of the net
proceeds therefrom, the sale of shares of common stock in
private transactions concurrent with the closing of this offering, and
the automatic conversion of our preferred stock and a convertible
promissory note into shares of common stock.
This table should be read together with the financial statements and notes
to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt and capital lease obligations, less current
portion................................................... $ 131 $ 9,138 $
-------- -------- --------
Stockholders' equity:
Preferred stock, $.001 par value, 15,000,000 shares
authorized, 13,613,986 shares issued and outstanding
actual; shares authorized, 13,613,986 and
shares issued and outstanding pro forma and pro forma
as adjusted, respectively.............................. 14 14
Common stock, $.001 par value, 64,000,000 shares
authorized, 16,974,692 shares issued and outstanding
actual; shares authorized, 31,565,532, and
shares issued and outstanding pro forma, and pro forma
as adjusted............................................ 17 32
Additional paid-in capital................................ 110,263 246,614
Deferred compensation..................................... (5,184) (5,184)
Accumulated deficit....................................... (72,158) (73,458)
-------- -------- --------
Total stockholders' equity........................... 32,952 168,018
-------- -------- --------
Total capitalization.............................. $ 33,083 $177,156 $
======== ======== ========
</TABLE>
The number of shares of common stock outstanding on an actual basis is
based on the number of shares outstanding as of December 31, 1999. You should be
aware that we are permitted, and in some cases, obligated, to issue shares of
common stock in addition to the common stock to be outstanding after this
offering. The following is a summary of these additional shares of common stock:
- 10,742,814 shares issuable upon the exercise of options outstanding as of
December 31, 1999 under our stock option plan, at a weighted average
exercise price of $4.13 per share;
- shares issuable upon the exercise of options and warrants
outstanding as of December 31, 1999 which we expect to assume from
InsurQuote, at a weighted average exercise price of $ per share; and
- 140,922 additional shares that could be issued under our stock option
plan as of December 31, 1999; and shares available for issuance to
our employees who elect to buy stock in the future under our employee
stock purchase plan.
20
<PAGE> 23
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
$8,413,000, or approximately $0.19 per share. Pro forma net tangible book value
represents the amount of total tangible assets less total liabilities, divided
by the total number of shares of common stock outstanding, after giving effect
to the conversion of all outstanding shares of preferred stock and the
convertible promissory note into common stock. Dilution in net tangible book
value per share represents the difference between the assumed initial public
offering price and the net tangible book value per share of our common stock
immediately after completing this offering. After giving effect to (1) our
receipt of the net proceeds from the sale of the shares of common stock in
this offering at an assumed initial public offering price of $ per share and
(2) the receipt of $ million from in connection with the sale of
shares of common stock in private transactions concurrently with the
closing of this offering at a price per share equal to the assumed initial
public offering price of $ per share, our pro forma net tangible book value
as of December 31, 1999 would have been approximately $ , or $ per
share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999............................................... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after the
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between existing stockholders and the new investors with
respect to:
- 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, before deducting estimated underwriting discounts and
commissions and offering expenses payable by us, using an assumed initial
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. % $ % $
New investors..........................
------- ------ -------- ------
Total........................ 100.0% $ 100.0%
======= ====== ======== ======
</TABLE>
If the underwriters' overallotment option is exercised in full, the number
of shares held by new investors will increase to shares, or %, of
the total number of shares of common stock outstanding after this offering.
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1999. New investors in this offering will be
further diluted to the extent that these options are exercised. If all
outstanding options outstanding as of December 31, 1999 were exercised on the
date of closing of this offering, investors purchasing shares in this offering
would suffer total dilution of $ per share.
21
<PAGE> 24
SELECTED CONSOLIDATED AND COMBINED PRO FORMA FINANCIAL DATA
The following selected consolidated financial data of ChannelPoint should
be read in conjunction with the consolidated financial statements and the notes
to those statements, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and other financial information included
elsewhere in this prospectus. The consolidated statement of operations data for
each of the years ended December 31, 1997, 1998 and 1999 and the consolidated
balance sheet data as of December 31, 1998 and 1999 are derived from the audited
consolidated financial statements of ChannelPoint included elsewhere in this
prospectus. The consolidated balance sheet data as of December 31, 1997 are
derived from audited consolidated financial statements not included in this
prospectus. The consolidated statement of operations data for the period ended
December 31, 1996 and the consolidated balance sheet data as of December 31,
1996 are derived from unaudited consolidated financial statements not included
in this prospectus. Historical results are not necessarily indicative of future
results to be expected for any interim period or for the year as a whole. See
note 1 of our notes to consolidated financial statements for a discussion of the
computation of net loss per common share and weighted average common shares
outstanding. Unaudited pro forma basic and diluted net loss per share and
weighted average shares outstanding used in the unaudited pro forma basic and
diluted net loss per share calculation gives effect to the automatic conversion
of all outstanding shares of preferred stock and the convertible promissory note
into 27,277,972 shares of common stock upon the effectiveness of this offering.
Unaudited pro forma statement of operations data and pro forma balance sheet
data reflect the planned acquisition of InsurQuote which is expected to be
completed in April 2000. The unaudited pro forma financial information is
derived from and should be read in conjunction with the unaudited pro forma
consolidated condensed financial statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
--------------------------------------------- -----------
INCEPTION
(DECEMBER 5,
1996) THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------
1996 1997 1998 1999 1999
------------- ------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue................................. $ -- $ -- $ 1,603 $ 5,498 $ 16,031
Costs and expenses:
Cost of revenue....................... -- -- 1,748 12,159 25,774
Product development................... 49 3,983 7,829 18,212 21,754
Selling and marketing................. 12 1,292 4,714 19,884 23,060
General and administrative............ 67 609 1,428 8,595 17,393
Amortization of intangible assets
acquired from InsurQuote........... -- -- -- -- 38,270
------ ------- -------- -------- ---------
Total operating expenses...... 128 5,884 15,719 58,850 126,251
------ ------- -------- -------- ---------
Loss from operations.................... (128) (5,884) (14,116) (53,352) (110,220)
Interest and other income, net.......... 3 77 249 1,001 732
------ ------- -------- -------- ---------
Net loss................................ $ (125) $(5,807) $(13,867) $(52,351) $(109,488)
====== ======= ======== ======== =========
Basic and diluted net loss per common
share................................. $(0.07) $ (1.22) $ (1.72) $ (4.60) $ (4.22)
====== ======= ======== ======== =========
Weighted average common shares
outstanding used in computing basic
and diluted net loss per common
share................................. 1,889 4,743 8,077 11,378 25,969
Pro forma basic and diluted net loss per
common share (unaudited).............. $ (1.55) $ (2.26)
Weighted average common shares
outstanding used in computing pro
forma basic and diluted net loss per
common share (unaudited).............. 33,831 48,422
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
1996 1997 1998 1999 1999 PRO FORMA
----------- ------ ------- ------- --------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments............................. $5,000 $4,883 $24,449 $26,028 $ 29,304
Working capital........................... 4,833 2,826 21,731 22,581 17,405
Total assets.............................. 5,012 5,818 29,424 74,524 230,730
Deferred revenue.......................... -- 1,000 12,991 29,919 32,970
Long-term obligations (net of current
portion)................................ -- -- 105 131 9,138
Total stockholders' equity................ 4,845 3,714 14,814 32,952 168,018
</TABLE>
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes to Consolidated Financial Statements included elsewhere in this
prospectus. This prospectus contains forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends," "plans," and
similar expressions. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of various factors,
including those discussed in "Risk Factors" and elsewhere in this prospectus.
Such forward-looking statements speak only as of the date of this prospectus and
we caution potential investors not to place undue reliance on such statements.
OVERVIEW
We are a leading provider of Internet based, business-to-business solutions
that enable e-commerce in the approximately $2.8 trillion global insurance
industry. Our software applications and professional service offerings are
designed to meet the evolving needs of carriers, distributors and buyers of
insurance. Our technologies leverage the power of the Internet to streamline and
automate the insurance distribution process to facilitate end-to-end transaction
processing. We have developed proprietary Exchange Platform technology, which
facilitates the creation of dynamic e-markets that bring together buyers and
sellers of insurance products. Our technology electronically links insurance
carriers with distribution channels, ranging from traditional brokers that sell
the majority of insurance today to banks, financial brokerage firms and other
emerging distribution channels, such as Internet portals. Carriers and
distributors can significantly decrease costs, increase revenue and improve
service levels using our applications and Exchange Platform technology to
conduct insurance e-commerce transactions. We complement our technology with a
professional services organization that offers a range of select strategic
services including process reengineering, customization of applications,
implementation assistance and project management.
ChannelPoint was formed in December 1996. During 1997, our principal
operating activities consisted of developing our ChannelPoint Insure
application. The Insure application is designed to automate insurance carriers'
core internal sales, marketing, underwriting and distribution processes. During
1998 and 1999, we continued to develop the Insure application, but also designed
our Exchange Platform technology which provides a basis to re-engineer the core
business processes associated with distribution for both carriers and
distributors. The platform was also developed to handle the processing
requirements of numerous insurance carriers and heavy volumes of traffic from
insurance distributors. Our Insure application can be linked with our Exchange
Platform technology and applications to enable automated end-to-end processing
for insurance products. During 1998 and 1999, we commenced advertising campaigns
and executed strategic relationships with certain insurance carriers and
distributors. In 1999, we substantially increased our efforts to attract
carriers and brokers to our Exchange Platform technology. We have also incurred
significant expenses associated with expanding our professional services
organization, increasing our sales and marketing activities and building
administrative infrastructure to support our operations and in anticipation of
increased demand for our solutions. As a result, we have incurred substantial
and increasing net losses since our inception. We expect these net losses to
continue for the foreseeable future.
SOURCES OF REVENUE AND REVENUE RECOGNITION POLICY
Through December 31, 1999, our revenue has been principally derived from
professional services provided to our customers. As our applications are more
fully deployed by our customers and as our Exchange Platform technology is
accepted by the insurance industry, we anticipate future revenue will be
generated from a mix of transaction fees, software license fees, professional
service fees, maintenance and training.
We initially focused our efforts on the health insurance market, but have
expanded the scope of our business to include the life and annuity and property
and casualty markets. During 1999, Zurich Financial Services Group accounted for
46% of our total revenue, UnitedHealthcare accounted for 31% of our total
24
<PAGE> 27
revenue and GE Financial Assurance Holdings accounted for 11% of our total
revenue. During the year ended December 31, 1998, we recognized 100% of our
total revenue from one customer, UnitedHealthcare. All three are direct or
indirect stockholders in our company and two have representation on our board of
directors, UnitedHealthcare indirectly through Bernard McDonagh. In the future,
we expect that the percentage of total revenue recognized from these customers
will significantly decrease as we add additional carriers and distributors.
Additionally, we expect to broaden our Exchange Platform technology by adding
additional integrated applications in the health and ancillary, life and annuity
and property and casualty insurance markets.
We recognize software license fee and services revenue in accordance with
the provisions of Statement of Position ("SOP") 97-2, "Software Revenue
Recognition", as amended. Our revenue is derived from license fees and services
which include maintenance, installation, implementation and consulting under the
terms of both fixed-price and time-and-materials contracts.
In arrangements where the services are not essential to the functionality
of the delivered software, we recognize license revenue when a license agreement
has been signed, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. Where applicable, fees from such arrangements
involving multiple elements are unbundled and recorded as revenue as the
elements are delivered to the extent that vendor specific objective evidence of
fair value exists. If vendor specific objective evidence of fair value does not
exist, fees from such arrangements are deferred until the earlier of the date
that vendor specific objective evidence of fair value does exist or all of the
elements are delivered.
License fees and services revenue, other than maintenance revenue,
generated from fixed-price contracts, where the services are essential to the
functionality of the delivered software, are recognized using the
completed-contract method of accounting. Costs incurred on contracts in-progress
are capitalized and amounts billed are recorded as deferred revenue because the
total costs to fulfill the arrangement are not reasonably estimable at contract
signing. We may encounter budget and schedule overruns on fixed-price contracts
caused by increased material, labor or overhead costs. Adjustments to cost
estimates are made in the periods in which the facts requiring such revisions
become known. Estimated losses, if any, are recorded in the period in which
current estimates of total contract revenue and contract costs indicate a loss.
Revenue from services provided pursuant to time-and-materials arrangements is
recognized as the services are performed.
Annual maintenance revenue is recorded as deferred revenue and is
recognized ratably over the service period, which is generally twelve months.
Revenue from consulting or training services is recognized as the services are
performed. When maintenance or other services are bundled with the original
license fee arrangement, their fair value is deferred and recognized during the
period that the services are provided.
As of December 31, 1999, we have $29.9 million in deferred revenue
resulting from license, service, maintenance and prepaid transaction fees.
COST OF REVENUE AND OPERATING EXPENSES
Through December 31, 1999, our cost of revenue has been primarily comprised
of salaries and benefits, consulting, contract labor, travel, depreciation,
occupancy and recruiting expenses incurred in providing professional services to
our customers. We expect that costs of revenue relating to our applications and
services will consist primarily of salaries and benefits, contract labor,
travel, depreciation and occupancy costs necessary to operate and maintain our
applications.
Our operating expenses are classified into three general categories:
product development, sales and marketing, and general and administrative. We
classify all charges to these operating expense categories based upon the nature
of the expenditures. We allocate the total costs for occupancy and certain
overhead expenses, to each functional area based on headcount. These allocated
charges include facility rent, occupancy expenses, telecommunication charges,
general information technology expenses and depreciation expense for the
corporate offices.
Total costs and operating expenses have increased in general due to our
overall growth, primarily as a result of an increase in the number of employees
and associated costs. Our total number of employees
25
<PAGE> 28
increased to 456 as of December 31, 1999 from 154 as of December 31, 1998 and
from 55 as of December 31, 1997. We expect to significantly increase the number
of employees in the future, particularly in the professional services, product
development and content management areas. We also expect to significantly
increase our headcount as a result of our recent and potential future
acquisitions. We intend to continue to invest in and expand our professional
services, product development, content management, sales and marketing and
general and administrative organizations. This expansion will place significant
demands on management and operational resources. To manage this rapid growth and
increased demand, we must invest in and implement operational systems,
procedures and controls. We must also be able to recruit qualified candidates to
manage our expanding operations. We expect future expansion to continue to
challenge our ability to hire, train, manage and retain our employees.
Although combined revenue and deferred revenue have increased, we have
incurred significant costs to develop our technology and applications and to
recruit and train personnel for our professional services, product development,
content management, sales and marketing, and general and administrative
functions. As a result, we have incurred significant losses since inception, and
as of December 31, 1999, we had an accumulated deficit of approximately $72.2
million. We believe that our success is contingent on increasing our customer
base and developing additional application offerings. We therefore expect to
continue to incur substantial operating losses for the foreseeable future.
Our limited operating history and the recent introduction of our
applications and Exchange Platform technology makes the prediction of future
results very difficult. We believe that period-to-period comparisons of
operating results should not be relied upon as predictive of future performance.
Our prospects must be considered in light of the risks, expenses and
difficulties encountered by companies at an early state of development,
particularly companies in new and rapidly evolving markets. There can be no
assurance that we will achieve significant revenue or profitability or, if
significant revenue or profitability are achieved, that they can be sustained.
STOCK COMPENSATION EXPENSE
We had outstanding stock options to purchase a total of 10,742,814,
5,540,246 and 1,720,400 shares of our common stock as of December 31, 1999, 1998
and 1997. Certain options granted to employees during the years ended December
31, 1999 and 1998 resulted in deferred compensation of $8.7 million and
$366,000, respectively. The deferred compensation amount reflects the difference
between the deemed fair market value of our common stock for accounting purposes
and the exercise price of the options as of the measurement date. Deferred
compensation is reflected as a reduction of stockholders' equity and is
generally being amortized as a charge to operations over the 48-month vesting
period of the options using an accelerated method as described in Financial
Accounting Standards Board Interpretation No. 28. For the years ended December
31, 1999 and 1998, the amortization of deferred compensation related to employee
stock options was $4.4 million and $34,000, respectively, and we expect to
record amortization of $2.9 million, $1.3 million and $0.5 million in the years
ended December 31, 2000, 2001 and 2002. Subsequent to December 31, 1999, we have
granted 3,233,500 stock option to employees. We do not expect to record any
deferred compensation related to these options.
During 1999, we granted stock options to non-employees to purchase 133,000
shares of common stock in exchange for consulting services. We recorded an
additional $855,000 of deferred compensation related to these options. We
recorded amortization of deferred stock compensation of $250,000 in the year
ended December 31, 1999, related to these non-employee options. These shares
will be subject to variable accounting treatment until the related services are
completed.
RECENT ACQUISITIONS
InsurQuote Systems, Inc.
We expect to close our merger with InsurQuote in April 2000. InsurQuote is
a leading provider of integrated insurance rating solutions to insurance
carriers, distributors, and agents, Internet portals and consumers in the
property and casualty insurance market. As a result of the merger, we will
acquire all of the
26
<PAGE> 29
outstanding securities of InsurQuote in exchange for 14,590,840 shares and stock
options and warrants to purchase an aggregate of 996,294 shares of our common
stock, subject to certain adjustments. Of these shares, 90% will be delivered to
the former InsurQuote shareholders at the closing of the acquisition and 10%
will be placed in escrow for a one-year period to satisfy potential
indemnification claims that we may have against the former stockholders of
InsurQuote. We will also convert all of InsurQuote's outstanding stock options
and warrants into options and warrants to purchase approximately
shares of our common stock. We will reserve shares of our common stock for
issuance upon the exercise of the options and warrants.
InsurQuote derives revenue from software license fees for the license of
its software applications and from fees for maintenance and related services.
For the twelve months ended June 30, 1999, InsurQuote's net sales totaled $9.9
million. For the twelve months ended December 31, 1999, InsurQuote's net sales
totaled $10.5 million. Net sales grew to $11.9 million for the twelve months
ended June 30, 1998 from $3.5 million for the eleven months ended June 30, 1997,
primarily due to acquisitions of Insurance Automation Systems, Inc. ("IAS") and
Automated Call Processing ("ACP") during 1997. The decline in net sales during
1999 was due to InsurQuote's loss of its new and used car pricing service
contract with a leading consumer publication and advocacy group. InsurQuote's
operating expenses increased significantly during each of the twelve month
periods ended December 31, 1999 and June 30, 1999 and 1998 as a result of
InsurQuote's acquisitions of IAS and ACP, its expansion of its sales and
marketing activities and its increased investment in product development. As a
result, InsurQuote's net loss applicable to common shareholders was $17.8
million and $8.9 million for the twelve months ended June 30, 1999 and 1998,
respectively and was $2.8 million for the eleven months ended June 30, 1997. For
the twelve months ended December 31, 1999 InsurQuote's net loss applicable to
common shareholders was $19.9 million.
We will account for the acquisition under the purchase method of accounting
and will record an estimated charge related to acquired in-process research and
development of approximately $1.3 million which will be reflected in the quarter
ending June 30, 2000. The acquired in-process technology had not reached
technological feasibility and, in the opinion of our management, has no
alternative future use. In addition to the in-process research and development
charge, we expect to record acquired intangible assets of approximately $146.4
million which will be amortized over estimated useful lives of 24 to 48 months.
Goodwill represents approximately $122.7 million of the total intangibles and
will be amortized over an estimated useful life of four years.
LifeLink Corporation
In March 2000, we acquired LifeLink, a provider of illustration
applications, Internet-based quoting services, and comparative financial and
rating data for the life insurance industry. As a result of the merger, we
acquired all of the outstanding capital stock of LifeLink in exchange for
333,333 shares of our common stock, with an estimated value of $2.9 million, and
three secured promissory notes with aggregate principal amounts of $6.0 million,
payable with accrued interest of 7%, due upon the successful completion of this
offering or one year from the date of issuance subject to certain contingencies.
Of the secured promissory notes, one of the notes with a principal amount of
$1.0 million will be placed in escrow for 12 months and another note with a
principal amount of $1.0 million will be placed in escrow for 18 months. Both of
the escrowed notes will be used to satisfy potential indemnification claims that
we may have against the former stockholders of LifeLink. We will account for the
acquisition under the purchase method of accounting and allocate the purchase
price to the tangible and intangible assets acquired based upon an independent
third-party valuation, when complete.
p.d.,q.
In November 1999, we acquired assets related to p.d.,q., an agency
management software package designated for broker general agents in the
individual life insurance market, from First Colony Life Insurance Company, a
wholly owned subsidiary of General Electric Financial Assurance Holding, Inc. We
issued 1,058,450 shares of our Series D preferred stock, with an approximate
value of $22.3 million, in exchange for the p.d.,q. assets. We accounted for the
acquisition using the purchase method of accounting and we allocated the
purchase price amongst the assets acquired based upon an independent third-party
valuation. Such
27
<PAGE> 30
allocation resulted in acquired intangibles of $22.3 million which is being
amortized over estimated useful lives of 24 to 48 months. Goodwill represents
approximately $14.4 million of the total intangibles and is being amortized over
an estimated useful life of four years.
Blaise Software, Inc.
In June 1999, we acquired certain assets of Blaise Software, Inc., a
provider of healthcare insurance carrier information. In connection with the
acquisition, we paid $1.2 million in cash, issued 50,000 shares of common stock,
issued a secured promissory note of $750,000 which bears interest at 8.5% per
annum, with principal and interest payable through June 2000 and a $750,000
promissory note which bears interest at 8.5% per annum and which is convertible
into 50,000 shares of our common stock upon completion of this offering. The
acquisition was accounted for using the purchase method of accounting and we
allocated the purchase price amongst the assets acquired based upon an
independent third-party valuation. Such allocation resulted in acquired
intangibles of approximately $3.0 million which are being amortized over
estimated lives of 36 to 60 months.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Revenue
Revenue increased to $5.5 million in 1999 from $1.6 million in 1998 and $0
in 1997. The increases were primarily due to recognition of revenue from
professional services fees related to pre-implementation, implementation,
consulting and other services provided to three customers during 1999, and one
customer in 1998, all of whom are direct or indirect shareholders in the
Company.
Cost of Revenue
Cost of revenue increased to $12.2 million for 1999 from $1.7 million in
1998 and $0 in 1997. Cost of revenue for 1999 and 1998 was primarily comprised
of personnel and related expenditures resulting from expanding the professional
services organization to support current customers and future business
activities. The increase in cost of revenue in 1999 as compared with 1998 was
primarily due to increased headcount in our professional services organization
and increased use of contract labor. We expect cost of revenue to continue to be
a substantial portion of our expenses in the future as we expand our
professional services organization and content management, gathering and
formatting activities in order to meet anticipated demand for our applications.
OPERATING EXPENSES
Product Development. Product development expenses increased to $18.2
million in 1999 from $7.8 million in 1998 and $4.0 million in 1997. The increase
in the total amount of product development expense was primarily attributable to
increased personnel and related expenses and increased use of third-party
developers relating to further development and enhancement to our Exchange
Platform technology and applications. Product development is essential to our
future success and we expect that product development expenses will continue to
increase in absolute dollars in future periods.
Selling and Marketing. Selling and marketing expense consists of personnel
and related overhead costs, including sales commissions together with market
research and promotion costs. Selling and marketing expense increased to $19.9
million in 1999 from $4.7 million in 1998 and $1.3 million in 1997. The increase
in the total amount of selling and marketing expense was primarily attributable
to the expansion of our sales and marketing organizations and further
development of our market strategy and related activities. In particular, the
increase in expense is a result of increased personnel and related expenses,
marketing and travel expenditures. We expect that selling and marketing expenses
will continue to increase in future periods as we expect to further expand our
sales and marketing efforts.
General and Administrative. General and administrative expense includes
personnel and related overhead costs for our support and administration
functions. General and administrative expense increased to
28
<PAGE> 31
$8.6 million in 1999 from $1.4 million in 1998 and $609,000 in 1997. The
increase in the total amount of general and administrative expense was primarily
attributable to increased personnel and related expenses, consulting, contractor
and legal expenditures. We anticipate that general and administrative expenses
will increase in future periods as we expect to add personnel to support our
expanding operations, incur additional costs related to the growth of our
business, and assume the responsibilities of a public company.
Interest and Other Income, net
Interest and other income, net increased to $1.0 million for 1999 from
$249,000 in 1998 and $77,000 in 1997. The increases were primarily attributable
to increases in interest income as a result of increased average cash, cash
equivalents and short-term investment balances maintained in interest-bearing
accounts.
Income Taxes
As of December 31, 1999, we had net operating loss carryforwards of
approximately $61.5 million, which begin expiring in 2011, and product
development credit carryforwards of $1.3 million, which begin expiring in 2012.
As a result of changes in our ownership in 1998, our ability to utilize $5.3
million of our net operating loss carryforwards is limited to approximately $3.8
million per year. Future ownership changes may further limit our ability to use
our current and future net operating loss carryforwards. Finally, based on the
weight of available evidence, both positive and negative, including our history
of losses, we have not established a deferred tax asset on our consolidated
balance sheet as it is currently more likely than not that such benefits will
not be realized. Accordingly, a full valuation allowance of approximately $26.5
million has been recorded to offset the net deferred tax assets.
29
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results both in absolute dollars
and as a percentage of revenue for each of the four quarters ended December 31,
1999. The information for each of these quarters is unaudited and has been
prepared on the same basis as our annual audited financial statements appearing
elsewhere in this prospectus. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments that are necessary to present
fairly the unaudited quarterly results of operations for such periods have been
included. This information should be read in conjunction with the audited
financial statements and the notes attached to those financial statements.
Results for any quarterly period are not necessarily indicative of the results
which may be expected for any other period. We have experienced, and expect to
continue to experience, fluctuations in operating results from quarter to
quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- ---------- ------------- ------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $ 453 $ 423 $ 432 $ 4,190
Operating expenses:
Cost of revenue............................ 1,087 2,022 2,440 6,610
Product development........................ 3,437 4,114 4,854 5,807
Selling and marketing...................... 3,054 4,661 5,471 6,698
General and administrative................. 831 1,355 2,039 4,370
--------- ---------- ---------- ----------
Total operating expenses.............. 8,409 12,152 14,804 23,485
--------- ---------- ---------- ----------
Loss from operations......................... (7,956) (11,729) (14,372) (19,295)
Interest and other income, net............... 229 183 122 467
--------- ---------- ---------- ----------
Net loss..................................... $ (7,727) $ (11,546) $ (14,250) $ (18,828)
========= ========== ========== ==========
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue...................................... 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of revenue............................ 240.0 478.0 564.8 157.8
Product development........................ 758.7 972.6 1,123.6 138.6
Selling and marketing...................... 674.2 1,101.9 1,266.4 159.9
General and administrative................. 183.4 320.3 472.0 104.3
--------- ---------- ---------- ----------
Total operating expenses.............. 1,856.3 2,872.8 3,426.8 560.6
--------- ---------- ---------- ----------
Loss from operations......................... (1,756.3) (2,772.8) (3,326.8) (460.6)
Interest and other income, net............... 50.6 43.3 28.2 11.1
--------- ---------- ---------- ----------
Net loss..................................... (1,705.7)% (2,729.5)% (3,298.6)% (449.5)%
========= ========== ========== ==========
</TABLE>
Our revenue increased significantly during the fourth quarter of 1999 due
to professional services revenue primarily related to consulting, installation
and implementation services provided under time-and-materials contracts for
related parties. Quarterly increases in operating expenses reflect continued
expansion in all phases of our operations throughout the four-quarter period.
Operating expenses are largely the result of higher personnel costs resulting
from continued increases in the number of employees. Changes in interest and
other income, net in the fourth quarter largely reflects changes in interest
income due to increases in cash, cash equivalents and short-term investments
resulting from proceeds from the issuance of preferred stock in October 1998,
September 1999 and November 1999.
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside of our control.
In the future, we intend to increase our product development, selling and
marketing and general and administrative activities and to increase other
operating expenses as required to launch new applications and content. Our
limited operating history and the emerging nature of the markets in
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which we compete make it difficult for us to accurately forecast our operating
results. We expect, however, that we will continue to incur operating losses in
the future.
Due to the foregoing factors, our annual or quarterly operating results may
fall below the expectations of securities analysts and investors. In such event,
the trading price of our common stock would likely decline.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the year ended December 31, 1999 was
$30.4 million. Cash used in operating activities for the years ended December
31, 1998 and 1997, respectively, was $2.9 million and $4.5 million. The net cash
used in operating activities in the years ended 1999, 1998 and 1997 was
primarily attributable to the net losses of $52.4 million in 1999, $13.9 million
in 1998 and $5.8 million in 1997, partially offset by increased deferred revenue
of $16.9 million in 1999, $12.0 million in 1998 and $1.0 million in 1997.
Net cash used in investing activities was $26.3 million for the year ended
December 31, 1999 compared to $1.7 million and $1.0 million for the years ended
1998 and 1997, respectively. Purchases of property and equipment, net, were $9.6
million, $1.6 million and $725,000 for the years ended December 31, 1999, 1998
and 1997, respectively. The increase in 1999 was largely the result of purchases
of computers, servers and office equipment for our expanding workforce. In
addition, during 1999, $15.3 million was invested in short-term debt instruments
and commercial paper. During 1999, $1.2 million of cash was used in connection
with the acquisition of Blaise Software, Inc. (see Note 8 in the notes attached
to the consolidated financial statements).
Cash provided by financing activities for the year ended December 31, 1999
was $43.0 million and was primarily a result of the net proceeds received from
the issuance of the Series D preferred stock totaling $42.5 million. The
proceeds from the exercise of stock options totaled $859,000. Cash provided by
financing activities was $24.2 million in 1998, and $5.4 million in 1997,
resulting primarily from net proceeds from the sale of preferred stock in each
of those respective years. Bank financing of $750,000 was received in 1997 and
repaid in 1998. As of December 31, 1999, our total minimum operating lease
commitments were $3.6 million and were primarily related to the facilities that
we occupy.
Since inception we have funded our operations primarily through the private
placement of equity securities, through which we have raised net proceeds of
$76.8 million as of December 31, 1999. We have also financed our operations
through bank borrowings and equipment lease financing. In connection with the
acquisition of Blaise Software, Inc., we issued a secured promissory note of
$750,000 and a convertible promissory note of $750,000. The secured promissory
note bears interest at 8.5% per annum, with principal and interest payable
monthly through June 2000. At December 31, 1999, it has a balance due of
approximately $476,000. The convertible promissory note bears interest at 8.5%
per annum, and automatically converts into 50,000 shares of common stock upon an
initial public offering of our common stock. This note matures in December 2000
and no principal or interest payments are due until maturity. As of December 31,
1999, we also had $188,000 of capital lease obligations outstanding.
InsurQuote used $13.3 million and $14.5 million of cash in operating
activities during the twelve months ended June 30 and December 31, 1999,
respectively. Cash used was primarily attributable to the net losses of $17.3
million and $18.9 million, respectively. In addition, $2.9 million was used for
purchases of property and equipment during each of the twelve month periods
ended June 30 and December 31, 1999, respectively. InsurQuote has funded its
operations primarily through the private placement of convertible preferred
stock through which it raised $19.9 million in March 1999. For the year ended
June 30, 1998, InsurQuote financed its operations primarily through the private
placement of redeemable convertible preferred stock for $5.0 million and
convertible preferred stock for $4.5 million, the issuance of common stock for
$1.5 million and an $8.9 million note payable issued to a related party.
We currently anticipate that the net proceeds from this offering and the
concurrent private transactions, together with our available cash, cash
equivalents and short-term investments, will be sufficient to meet our capital
requirements for at least the next 12 months. However, we may need to raise
additional funds prior to the end of this period if we were to experience
greater than expected losses from operations, undertake new
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business initiatives or acquire complementary businesses or technologies. Our
future liquidity and capital requirements will depend upon numerous factors,
including the success of our existing and new application offerings and
competing technological and market developments. We may be required to raise
additional funds through public or private financing, strategic relationships or
other arrangements. There can be no assurance that additional funding, if
needed, will be available on terms acceptable to us, or at all. If we are not
successful in raising additional capital as required, our business could be
materially harmed. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then-current stockholders would be
reduced.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. SFAS No. 133, as
amended, is effective for fiscal years beginning after June 15, 2000. To date,
we have not entered into any derivative financial instruments or hedging
activities.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 provides specific
guidance, among other things, as to the recognition of revenue related to
up-front, non-refundable fees and service charges received in connection with a
contractual arrangement. We have applied the provisions of SAB 101 for the year
ended December 31, 1999. The adoption of SAB 101 did not have a material impact
on our financial condition or results of operations.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We sell our applications and professional services in North America and
Europe and in the future may sell our applications and professional services in
other regions of the world. As a result, our financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Our interest income is sensitive to changes in
the general level of U.S. interest rates. Due to the short-term nature of our
investments, we believe that there is no material risk exposure.
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BUSINESS
OVERVIEW
We are a leading provider of Internet based, business-to-business solutions
that enable e-commerce in the approximately $2.8 trillion global insurance
industry. Our software applications and professional services offerings are
designed to meet the evolving needs of carriers, distributors and buyers of
insurance. Our technologies leverage the power of the Internet to streamline and
automate the insurance distribution process to facilitate end-to-end transaction
processing. We have developed proprietary Exchange Platform technology, which
allows the creation of dynamic electronic marketplaces, or e-markets, that bring
together buyers and sellers of insurance products. Our technology electronically
links insurance carriers with distribution channels, ranging from traditional
brokers that sell the majority of insurance today to banks, financial brokerage
firms and other emerging distribution channels, such as Internet portals.
Carriers and distributors can significantly decrease costs, increase revenue and
improve service levels by using our applications and Exchange Platform
technology to conduct e-insurance transactions.
Our Exchange Platform technology enables the creation of single- and
multi-carrier, multi-product e-markets. Using our technology, individual
carriers or groups of carriers can create e-markets that are customized to their
particular distribution strategies. Our technology gives carriers the
flexibility to expand their e-markets to include additional products, carriers
or distributors. Our Exchange Platform technology enables brokers, financial
advisors, other distributors and consumers to easily access product, pricing and
market information online and complete business transactions electronically.
Our extensive suite of applications automates core insurance sales,
marketing, underwriting, and distribution processes, while integrating with
carrier and distributor legacy systems to enable electronic, end-to-end
processing of insurance policies. In addition, we provide a variety of client
server, Internet based and desktop applications, including comparative quoting,
financial analysis and sales illustration. We expect that our merger with
InsurQuote Systems, Inc. will accelerate our ability to provide e-commerce
solutions to the property and casualty sectors of the insurance industry. We
intend to capitalize on InsurQuote's extensive relationships with property and
casualty insurance carriers and distributors, and to integrate its comparative
rating technology and its substantial inventory of carrier rating and plan
content with our Exchange Platform technology.
We complement our technology with a professional services organization that
offers a range of services, including selected strategic, process reengineering,
customization of applications, implementation assistance and project management
services. We have designed these services to decrease implementation risk,
shorten the time it takes to create e-markets, improve our customers'
competitive position and maximize their return on investment. We believe that
our ability to successfully deliver a complete e-insurance solution to our
customers provides us with a significant competitive advantage.
Our customers and strategic partners cover nearly all facets of the
insurance industry:
- Health and Ancillary Carriers. Our health and ancillary carrier customers
include leading companies such as Blue Cross and Blue Shield of Colorado,
two regional Kaiser Foundation Health Plans, The Regence Group, Standard
Insurance Companies and UnitedHealthcare.
- Life Insurance and Annuity Carriers. Our life insurance and annuity
carrier customers include 40 leading insurance carriers, including
Equitable, GE Financial Assurance Holdings, Hartford Life, John Hancock,
Merrill Lynch, Mutual of Omaha, New York Life, Phoenix Home Life,
Travelers and Zurich Kemper Life.
- Property and Casualty Carriers. We provide solutions to leading property
and casualty carriers such as Zurich Financial Services Group's
subsidiaries in the U.S., Canada, and Europe. Through our acquisition of
InsurQuote, we provide insurance distributors with rating services using
data received from over 400 property and casualty carriers, including
leaders such as AIG, Metropolitan Property and Casualty, The Hartford,
Nationwide, Progressive and Travelers.
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- Distributors. Our distributor customers are among the largest brokerage
firms in the U.S. and include Acordia of California; CBIZ Benefits &
Insurance Services, Inc.; Lockton Companies of Colorado; Seabury & Smith
(a division of Marsh McLennan) and USI Insurance Services.
- Portals. We provide our solutions to a rapidly growing number of leading
insurance portals such as Autobytel.com, Cars.com, Insurance.com (an
affiliate of Fidelity Investments), Insure.com, InsWeb, Intuit's
QuickenInsurance and Perksatwork.com.
We believe that our solutions for enabling e-commerce in the insurance
industry, together with our strategic relationships with leading insurance
carriers and distributors, give us a significant first mover advantage as the
insurance industry capitalizes on the opportunities created by the Internet.
INDUSTRY OVERVIEW
GROWTH OF THE INTERNET AND BUSINESS-TO-BUSINESS E-COMMERCE
The Internet is dramatically changing how businesses and individuals
communicate and share information. The widespread adoption of the Internet as a
business communications platform continues to create many new opportunities to
conduct commerce more efficiently. Business-to-business e-commerce is expected
to grow from $145 billion in 1999 to $7.29 trillion in 2004, with $2.7 trillion
expected to occur through business-to-business e-markets, according to the
Gartner Group. International Data Corporation projects that use of the Internet
will grow from over 150 million users at the end of 1999 to 500 million users by
2003.
As e-commerce continues to grow, business-to-business e-markets are
achieving increasing acceptance across a number of industries. These e-markets
seamlessly link sellers, distributors and buyers, in an online marketplace.
E-markets allow market participants to easily share comprehensive product,
pricing and market information online and complete business transactions
electronically.
INSURANCE INDUSTRY CHARACTERISTICS
According to the U.S. Census Bureau, in 1997 insurance carrier revenues in
the United States totaled $1.1 trillion, representing the largest segment of
United States Gross Domestic Product of any industry. Direct commercial premiums
in the global insurance market were approximately $2.3 trillion in 1997
according to the U.S. Census Bureau and the Organization for Economic
Cooperation and Development.
The U.S. insurance industry is highly fragmented. According to the
Organization for Economic Co-Operation and Development, there were more than
5,000 carriers in the U.S. in 1997 and, according to the Health Insurance
Association of America, in 1994 there were more than 744,000 brokers, agents and
other persons employed in distribution and administration by the insurance
industry. Insurance carriers have traditionally used three distribution channels
to market their products and services: independent agents and brokers, exclusive
agents and direct sales. Independent agents and brokers sell insurance products
on behalf of multiple insurance carriers. Insurance carriers may also use
general agents to serve as intermediaries between the carrier and independent
agents and brokers. Exclusive, or captive agents, sell only a particular
carrier's products. Direct sales efforts by carriers include direct mailings,
telemarketing and use of the Internet.
TRADITIONAL APPROACH TO INSURANCE UNDERWRITING AND DISTRIBUTION
The traditional approach to underwriting and distributing insurance is
highly inefficient and involves numerous manual, redundant functions. At many
stages in the process, data must be manually re-keyed, reformulated or
manipulated multiple times so that it can be processed by a variety of
incompatible systems. The typical, broker-assisted sales process for insurance
products involves the following key steps:
- collecting client data, analyzing client needs, searching available
policies, reviewing and selecting policy options from multiple carriers,
and educating the client about the available options;
- obtaining and comparing preliminary quotes from various insurance
carriers, collecting additional detailed information about the client,
verifying information, correcting data entry errors, collecting missing
information, and generating a final price quote;
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- purchasing the insurance after the final rate presentation to the client
and inputting the client's policy information into the carrier's systems
to generate a policy; and
- managing policy administration, addressing ongoing benefit and coverage
questions and handling the annual policy renewal process.
The entire process is people- and paper-intensive and may take 30 to 60
days or longer to complete for many types of insurance. The complexity,
redundancy, and manual nature of the process means that errors may occur at
multiple points, resulting in additional cost, slow turnaround times, and high
levels of customer and distributor frustration and dissatisfaction. The
inefficiency of the process, together with a fragmented distribution system,
results in insurance distribution costs that according to Deloitte & Touche
account for 20% of each premium dollar, or extrapolating to the global market,
$560 billion annually. The inefficiencies of the process make it uneconomical
for carriers to tailor products to specific consumer needs. Thus, most carriers
tend to offer generic products that are designed for large markets.
INITIAL APPROACHES TO ONLINE INSURANCE DISTRIBUTION
There have been several attempts to improve the current insurance
distribution process through use of the Internet. To date, these efforts have
been primarily focused on providing rate quotes to consumers for consumer lines
of insurance such as health and auto. A number of insurance carriers have
created web sites to sell their own products directly to consumers. However,
these single carrier sites generally offer only limited buying and
administrative capabilities. In addition, a number of e-markets have been
created through which consumers can shop for simple insurance products. Most of
these sites have been largely referral-based consumer sites with limited
transaction capability, although some sites are now offering online enrollment.
To date, no site has addressed the more complex products required in the
business-to-business market. The early online distributors have not integrated
their Internet based systems with carriers' legacy systems and therefore have
not been able to provide end-to-end electronic transaction processing.
Furthermore, most of these initial efforts have attempted to displace the
broker, rather than improve the efficiency of the current broker-dominated
distribution system.
NEED FOR IMPROVED DISTRIBUTION
We believe that several factors make the traditional methods of insurance
distribution ripe for significant change:
- Development of the Internet Economy. The proliferation of Internet
technologies is enabling a wide range of improvements to business
processes. Insurance carriers and distributors face increasing pressure
to rapidly adopt new technologies to reduce costs, eliminate
inefficiencies and improve their competitive position. Insurance carriers
and distributors are increasingly seeking to capitalize on the
efficiencies of Internet communications. As carriers and distributors
create e-markets they seek to increase the efficiency of their existing
distribution channels, while providing the means to pursue a variety of
emerging and new distribution opportunities.
- Consumer Empowerment. Consumers are demanding a broader range of choice
in insurance and financial products and ready access to more extensive
information regarding those products. As employers provide their
employees with an expanding array of insurance and benefit choices, there
is a growing need for better information regarding the available
alternatives.
- Need for Differentiation. As insurance and other financial protection
products become increasingly commoditized and information about these
products becomes easier to access, carriers will seek opportunities to
differentiate their offerings on the basis of service, quality and
product design. Similarly, distributors will look to technology to help
them become sophisticated, value-added advisors rather than mere
intermediaries.
- Evolving Competitive Environment. Financial services deregulation has
increased competition in the insurance market by allowing the entry of
banks and financial institutions, intensifying the competitive
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pressure on traditional industry participants and driving the need to
improve core business processes. The trend toward insurance industry
consolidation continues among both carriers and distributors, creating
larger, better financed competitors.
As their operating environments change, insurance carriers and distributors
can no longer afford to rely on distribution systems that are costly and
inefficient, that cannot accommodate changing technology or that fail to meet
customer expectations. The Internet economy demands insurance distribution
processes that use leading-edge technologies to eliminate inefficiencies, create
competitive advantage, differentiate products and create new revenue
opportunities. These technologies must also support an increasing variety of
distribution channels, while improving the carrier's and distributor's ability
to capture information that will enable them to develop products that target key
markets and that are more tailored to meeting customer needs.
THE CHANNELPOINT SOLUTION
We have created a unique set of Internet-based, business-to-business
e-commerce solutions that are designed to transform the way insurance, benefits
and financial protection products are bought, sold and serviced. Our technology
automates the complex business processes of insurance rating, underwriting and
distribution and enables carriers, distributors and buyers to engage in
e-commerce. Our Exchange Platform technology and extensive suite of electronic
insurance, or e-insurance, applications provide the only end-to-end electronic
distribution solution for the insurance industry. By automating the core
processes for insurance distribution and administration, we enable the creation
of user-friendly, efficient e-markets. These e-markets can be single- or
multi-carrier and can support multiple products. They can cover a single type of
insurance product or multiple types of insurance products. They can be sponsored
by carriers, distributors, portals, financial advisors, banks or other e-market
entrepreneurs. We believe that these e-markets will enable carriers and
distributors to significantly reduce distribution costs, increase revenue and
more effectively meet the needs of purchasers by offering more highly
customer-focused and differentiated solutions, while enhancing service levels.
By automating the current paper-based, labor-intensive, inefficient and
error-prone distribution process, our solutions significantly reduce
administrative costs and dramatically improve sales cycle times.
The insurance marketplace has three important constituencies: carriers,
distributors and buyers, including businesses and individuals. We believe our
applications provide the following benefits to these constituencies.
BENEFITS TO INSURANCE CARRIERS
Significantly Reduces Administrative Costs. We enable carriers to automate
core rating, underwriting, sales and distribution processes, thereby
streamlining the distribution process and reducing administrative costs. We
expect processing costs to decline sharply as paper processes are largely
eliminated and data entry errors are reduced. For example, our ChannelPoint
CommerceLink application facilitates rapid and secure transmission of data
between distributors and carriers. Our technology generates proposals and quotes
in a fraction of the time previously required and significantly reduces policy
processing turnaround times.
Generates Revenue Opportunities. Our applications create new revenue
opportunities for participating carriers by increasing the productivity of
brokers and direct sales personnel and by generating product sales from a
broader distribution base. Carriers also may use the information made available
through our solutions to sell additional products to the same customer. Our
technology enables carriers to develop new products and services based upon
customer demand and to differentiate their products on features other than
price. Our technology also enables carriers to create new distribution methods
to market and sell their products and services through the creation of
e-markets.
Improves Customer Service and Satisfaction. Our solutions are designed to
automate and streamline core business functions. By providing customers with
faster access to information, reducing the time it takes to buy insurance and
reducing the number of administrative errors, carriers provide their customers
with a more satisfying experience.
Improves Access to Information and Response Time. Participating carriers
can more easily access data throughout the distribution and administration
processes, including up-to-date information regarding the types
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of policies that customers are purchasing, features customers are demanding and
consumer reaction to changes in product offerings. This enables carriers to
rapidly modify their product offerings to address the evolving demands of the
marketplace, alter distribution channels and mix, and create trading partner
alliances to meet the requirements of employers or large distributors.
Reduces Time to Enable Internet Assisted Distribution. We enable insurance
carriers to benefit from sophisticated Internet based distribution technology
without requiring them to develop proprietary systems. In addition, we offer a
range of services, including selected strategic, process reengineering,
customization of applications, implementation assistance and product management
services, to ensure that our customers can rapidly deploy our e-insurance
solutions.
BENEFITS TO INSURANCE DISTRIBUTORS
Generates Revenue Opportunities. Our applications open new revenue
opportunities to participating distributors. Distributors can improve their
productivity due to faster and simpler proposal and quote turnaround and the
ability to complete e-insurance transactions, giving distributors more time to
develop new accounts and serve existing customers. Distributors can increase
revenue per customer by using the information made available through our
technology to sell additional products to the same customer. Distributors can
use our technology to develop additional innovative products and services,
including worksite marketing through our ChannelPoint Commerce atWork
application.
Reduces Administrative Costs. Our ChannelPoint Commerce Broker application
is designed to reduce distributors' administrative costs by reducing or
eliminating the need to fill out proposal and enrollment forms manually and by
automating other distribution and administrative functions. Distributors can
create quotes and professional proposals, facilitate online enrollment and
manage their daily business all through a standard web browser.
Provides Insurance Solutions to Better Match Customer Needs. Because our
applications are designed to enable distributors to review a wide variety of
carrier information, as well as other market data, distributors are better able
to match effectively insurance and financial protection solutions to each
purchaser's specific needs. This solution orientation enables distributors to
enhance their competitive position with a client and increase client
satisfaction. Distributors are also able to respond to changes in customer
demands at an earlier stage by recognizing emerging market trends that would not
be visible without the data collection and reporting capabilities of our
technology platform.
BENEFITS TO BUYERS
Improved Customer Service. By eliminating time-consuming, paper-based
processes, carriers and distributors can devote more time to customer service,
leading to enhanced customer satisfaction.
Improved Access to Product Information. Our ChannelPoint Commerce atWork,
ChannelPoint Commerce Consumer and ChannelPoint QuoteSearch applications improve
the availability and timeliness of information and facilitate more informed
consumer choices. Traditionally, comparison shopping for insurance was complex
because the paper-based system made it difficult for purchasers to understand
the price and product differences among various policies. Our solution makes it
easy for employers or consumers to compare coverage and pricing comparisons of
available policies.
Access to Innovative, Customized Products. As carriers and distributors use
market data aggregated by our technology to customize their offerings, customers
will benefit by gaining better access to insurance and financial protection
products that meet their needs. We believe that customers benefit from more
customized solutions and more efficient use of their premium dollars. By using
our technology, buyers are able to access information about products and buy
them from their desktop computer.
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OUR STRATEGY
Our objective is to strengthen our position as a leading provider of
business-to-business e-commerce solutions for the global insurance industry. Our
strategy for achieving this objective includes the following elements:
Expand Insurance Services and Benefits Solutions. Our Exchange Platform
technology and e-insurance applications are designed to enable our customers to
implement innovative distribution solutions. Using our technology, carriers and
distributors can create customized e-markets for the distribution of insurance
products. In addition, to further enhance our offerings, we intend to continue
to develop and introduce unique business-to-business solutions for the insurance
industry.
Establish Exchange Platform Technology as the Industry Standard. We seek to
establish our Exchange Platform technology as the industry standard for the
distribution of insurance and financial services products by securing the
participation of leading carriers and distributors. We are targeting key
insurance industry participants to adopt our Exchange Platform technology, which
enables carriers to create their own trading groups through single- and
multi-carrier e-markets. As our technology becomes embedded in their
infrastructure, we plan to deploy additional applications to capitalize on
additional opportunities. To date, we have secured contracts with carriers such
as UnitedHealthcare, GE Financial Assurance Holdings, and Zurich Financial
Services/Zurich Insurance Company to standardize on our Exchange Platform. We
have signed agreements with leading brokers such as Acordia of California; CBIZ
Benefits and Insurance Services; Lockton Companies of Colorado; Seabury & Smith
(a division of Marsh McLennan) and USI Insurance Services.
Expand Range of Insurance Product Offerings. Our technology provides access
to an extensive selection of customizable insurance, benefits and financial
protection products and services across several lines of business. We currently
support products in all three of the principal lines of insurance: health and
ancillary, life and annuity and property and casualty and plan to expand our
applications to cover additional insurance products. We also plan to develop
relationships with traditional financial service providers, enabling them to
provide a broad range of customizable insurance, benefits and financial
protection products using our technology.
Rapidly Expand Professional Services Capabilities. We intend to continue to
rapidly expand our professional services organization to meet the requirements
of existing customers and the growing demand for our e-insurance solutions. We
intend to supplement our internal professional services capabilities with our
relationships with leading technology consulting firms, including Andersen
Consulting, First Consulting Group and USWeb/CKS. We plan to establish new
relationships with additional leading consulting and systems integration firms.
Extend Technology Leadership. We plan to extend our technology leadership
by continuing to develop our Exchange Platform technology, applications, content
management systems and the quality of our services. We intend to invest heavily
in product development as we develop our technology and expand the range of
insurance products offered. To achieve these goals, we plan to continue to
attract and develop high quality technical talent and use third-party consulting
organizations to leverage our ability to maintain our technological competitive
advantage.
Pursue Strategic Acquisitions. We intend to pursue strategic acquisitions
of companies or lines of business that enable us to accelerate our market
penetration, acquire access to additional brokers and acquire complementary
technologies and applications. For example, through our successful acquisition
of Blaise Software, Inc. in June 1999, we gained relationships with over 600
brokerages, primarily in the health insurance segment, and 31 carriers in the
Northeast United States.
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EXCHANGE PLATFORM AND APPLICATIONS
We offer an extensive set of e-insurance applications for carriers,
distributors and buyers that integrate with our Exchange Platform. For example,
our ChannelPoint Insure application eliminates traditional paper-based systems
and automates a carrier's core internal sales and distribution processes which,
when coupled with our Exchange Platform technology enables end-to-end
transaction processing. Through our acquisitions of InsurQuote, p.d.,q.,
LifeLink and Blaise we have several client-server, Internet-based and desktop
applications that are in the process of being integrated with our Exchange
Platform. Our Exchange Platform technology and its related carrier, distributor
and buyer applications are designed to achieve our goal of significantly
reducing administrative costs and dramatically improving sales cycle times.
[DIAGRAM]
[Schematic with ChannelPoint logo in the center. Circles on either side of the
logo list all of the types of ChannelPoint customers, grouping them as Buyers,
Distributors and Carriers. Under each customer grouping, the client lists
ChannelPoint products that correspond to that grouping.]
OUR EXCHANGE PLATFORM TECHNOLOGY
Our Exchange Platform technology is an Internet-based platform that enables
business-to-business e-commerce between insurance carriers and distribution
partners. The Exchange Platform technology also provides the foundation for the
development and implementation of user-friendly, efficient, Internet-based
carrier, distributor and buyer applications. These applications support existing
and new e-markets, which can be single- or multi-carrier and can support
multiple products.
Our Exchange Platform technology provides for online shopping, selling and
buying across multiple lines of insurance including health and ancillary, life
and annuities and property and casualty. It enables insurance carriers to
conduct business electronically with distributors, employers and consumers
through standard web browsers. Our Exchange Platform technology provides
detailed information on participating plans and policies, and incorporates
carriers' business rules to permit efficient distribution of their products.
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OUR CARRIER APPLICATIONS
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Our carrier applications enable carriers to support their existing distribution channels
and to develop and take advantage of new channels of distribution.
- -------------------------------------------------------------------------------------------------
- Commerce Carrier(TM) An Exchange Platform integrated application that provides
administration, transaction information and analytical
services to carriers that participate in
ChannelPoint-enabled e-markets.
- CommerceLink An Exchange Platform integrated application that enables
business-to-business integration by connecting carriers' and
distributors' legacy systems with our Exchange Platform.
- InSight A desktop-based application that provides comparative quote
data used to facilitate competitive market analysis for
personal auto products.
- Rate Analyst A desktop-based application that enables carriers to vary
rating plan assumptions to create scenarios that can be
imported into the InSight application.
- Insure(TM) An enterprise application that automates health and life
insurance carrier core internal sales and distribution
processes, thereby eliminating traditional paper-based
systems. Insure can be linked to our Exchange Platform
technology and applications to enable end to end processing
for health and life insurance products.
- -------------------------------------------------------------------------------------------------
</TABLE>
OUR DISTRIBUTOR APPLICATIONS
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Our distributor applications enable distributors to actively participate in the
efficiencies provided by the Exchange Platform and to establish multiple e-markets.
- -------------------------------------------------------------------------------------------------
- Commerce Broker(TM) An Exchange Platform integrated application that automates
rating, quoting, proposal and enrollment tasks, all within a
standard web browser. Enables distributors and brokers to
create proposals without manually comparing and evaluating
prices, benefits and provider networks.
- InsurQuote A desktop-based application that provides comparative rating
for automobiles, homeowners, and commercial products.
- InsurWare An Internet-based application that provides a web hosting,
content, and rating package that enables agencies to create
an agency-branded web site where consumers can shop from
agency-licensed carriers. Provides the agent with the
ability to purchase, download and process leads from other
insurance portals.
- HealthSearch A desktop-based application that supports quoting, product
comparisons, proposal generation, physician searches, and
forms management for health insurance brokers and general
agencies.
- pdq Commerce A client server-based application that enables carriers and
general agencies to communicate by facilitating downloading
of pending case status, in-force policy status, and
commission information. Enables case processing, agent
management, resource database, and commission tracking.
- VitalTerm and VitalAnnuity An Internet-based application that provides comparative
quoting for term life insurance and annuities.
- VitalSigns A desktop-based application that enables brokers and other
distributors to select the right life insurance carrier
based on customer needs for financial analysis, ratings and
comparisons.
- WinFlex A desktop-based application that enables multi-carrier life
insurance sales illustration.
- -------------------------------------------------------------------------------------------------
</TABLE>
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OUR BUYER APPLICATIONS
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Our buyer applications enable carriers and distributors to implement multiple e-market
options for the electronic distribution of insurance products to employers, employees and
consumers.
- -------------------------------------------------------------------------------------------------
- Commerce atWork(TM) An Exchange Platform integrated application that delivers
electronic enrollment, benefits administration and worksite
marketing capabilities. Enables carriers and distributors to
market and sell insurance, benefits and financial protection
products directly to corporate employees and affinity group
members using standard web browsers.
- Commerce Consumer(TM) An Exchange Platform integrated application that facilitates
direct-to- consumer retailing. Enables carriers,
distributors and third-party aggregators to establish
e-insurance web sites to sell directly to consumers and
small businesses (Available 2nd half of 2000).
- TransAct An Internet-based application that provides on-line
comparative shopping for auto insurance. Enables portals,
distributors and other third-party aggregators to deliver
comparative quotes to consumers based on the information
they provide and pre-defined assumptions.
- -------------------------------------------------------------------------------------------------
</TABLE>
PRODUCT DEVELOPMENT
We have assembled a large staff of product development professionals with
extensive experience in the insurance, software, and e-commerce industries to
lead the definition of our market and applications requirements. The core of our
product development group came as a team directly from Sun Microsystems where
they worked together in the design and development of Java-based applications.
Our management team's insurance industry experience provides the guidance for
our product development.
Our product development process is designed to facilitate rapid delivery of
continuous, incremental capabilities. Our application development capitalizes on
our component-based architecture and extendable insurance object model to meet
evolving market requirements.
We will take advantage of our core health and ancillary, life and annuity
and property and casualty Exchange Platform technology to cover other insurance,
benefits and financial protection products. Our planned technology investments
are intended to enable both carriers and distributors to optimize decisions
relative to branding, differentiation and where best to deploy functional
components, such as underwriting and pricing. We will continue to develop and
utilize tools such as data mining and personalized content that allow for
targeted selling and buying activities.
PROFESSIONAL SERVICES
We offer a broad range of professional services that enable our customers
to rapidly implement and deploy our Exchange Platform technology and our
applications. Our professional services organization has significant domain
expertise across all lines of insurance, consists of professional services
personnel with extensive experience in enterprise-scale implementations and is
supported by a world-class product development organization. Our professional
services teams also include specialized personnel from our sales and product
marketing organizations to ensure the complete and timely delivery of our
implementations. Our professional services organization also complements our
sales organization by providing reengineering and workflow design services and
other strategic technology services during the sales and implementation
processes. We intend to expand our professional services organization
substantially to enable the rapid implementation and delivery of our solutions
as demand for our solutions increases.
To complement our internal professional services organization, we have
established strategic relationships with several leading consulting and system
integration firms, including Andersen Consulting, First Consulting Group and
USWeb/CKS. These consulting firms and systems integrators assist in the
implementation and deployment of our Exchange Platform technology and our
applications as well as in the sales process.
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CUSTOMERS
Our customers include leading carriers in the health and ancillary, life
and annuity and property and casualty segments of the insurance industry. Our
customers also include leading national and regional distributors, including
brokerage firms, agencies, general agents, and other wholesalers, as well as a
number of leading Internet portals and electronic brokers. The following is a
partial list of our customers that have entered into agreements with us to use
our technology and that we believe are representative of our overall customer
base:
<TABLE>
<S> <C>
HEALTH AND ANCILLARY CARRIERS
Blue Cross and Blue Shield of Colorado Mid-Atlantic Medical Services, Inc.
Ceres Net, Inc. Physicians Health Services, Inc.
Guarantee Life Insurance Company The Regence Group
Kaiser Foundation Health Plan of the Standard Insurance Company
Mid-Atlantic States, Inc. UnitedHealthcare
LifeGuard
</TABLE>
<TABLE>
<S> <C>
LIFE AND ANNUITY CARRIERS
American General Life Insurance Company Massachusetts Mutual Life Insurance Company
The Equitable Life Insurance Company of the Merrill Lynch Life Agency
United States Mutual of Omaha Insurance Company
GE Financial Assurance Holdings, Inc. New York Life Insurance Co.
The Hartford The Travelers Insurance Company
John Hancock Zurich Kemper Life
</TABLE>
<TABLE>
<S> <C>
PROPERTY AND CASUALTY CARRIERS
21st Century Insurance Group Progressive Casualty Insurance Company
AIG Specialty Safeco Insurance Co. of America
eCoverage The Travelers Indemnity Company
Metropolitan Property and Casualty Zurich Financial Services Group's
Insurance subsidiaries
Company in the U.S., Canada and Europe and
Hartford Fire Insurance Company Zurich Insurance Company
Nationwide Mutual Insurance Company
</TABLE>
<TABLE>
<S> <C>
DISTRIBUTORS
Acordia California, Inc. Meeker Sharkey
BISYS The Reppond Company Inc.
CBIZ Benefits & Insurance Services, Inc. Seabury & Smith, Inc. (a division of Marsh
Jordan Shields Insurance Agency McLennan)
The Kooper Group USI Insurance Services Inc.
Lockton Companies of Colorado, Inc.
</TABLE>
<TABLE>
<S> <C>
PORTALS
Autobytel.com InsWeb Corporation
Cars.com Perks-At-Work, Inc.
Insurance.com (an affiliate of Fidelity QuickenInsurance
Investments) ReliaQuote.com
Insure.com
InsureOne.com
</TABLE>
During 1999, Zurich Financial Services Group, UnitedHealthcare and GE
Financial Assurance Holdings, Inc., each of which are direct or indirect
ChannelPoint stockholders, accounted for 46%, 31% and 11%, respectively, of our
revenue. We expect these customers to continue to account for a significant
portion of our revenue in the future. The loss of any one of these customers, or
a substantial reduction in the scope of the work we do with any one of these
customers, would significantly harm our business.
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CASE STUDIES
The following case studies illustrate how some representative customers
have implemented or are implementing e-commerce solutions based on our Exchange
Platform technology and applications to automate and Internet-enable their
insurance distribution and administration processes.
HEALTH AND ANCILLARY CARRIER
UnitedHealthcare is one of the three largest national managed healthcare
companies, with premium revenue in 1999 of $13.9 billion. It is a leader in 41
geographic markets nationwide and sells commercial, Medicare, and Medicaid
network-based insurance products. UnitedHealthcare was interested in developing
its e-commerce capabilities to generate increased revenue and make distribution
more efficient.
UnitedHealthcare selected us as its strategic electronic market technology
provider. It recognized our technology leadership, insurance domain expertise
and ability to design, manage and implement enterprise-scale projects.
UnitedHealthcare uses our technology to reduce its overall administrative costs
and processing time associated with quoting and enrolling small group health
customers in five key markets. We believe it intends to expand this capability
to additional markets over the next several years. UnitedHealthcare is using our
ChannelPoint Insure application in its small business service centers to support
paper-based requests for proposals and case processing. Insure is at the core of
UnitedHealthcare's small business service center's strategy. Insure's
sophisticated rules-based technology allows UnitedHealthcare to customize its
processes specific to competitive and regulatory demands of each market. Insure
integrates with multiple UnitedHealthcare legacy systems used for managing
UnitedHealthcare's small group business.
UnitedHealthcare uses ChannelPoint Commerce Broker technology to power
privately branded e-markets for distributing UnitedHealthcare products. Commerce
Broker allows brokers to quickly generate proposals at any time. Planned
enhancements will allow brokers to electronically enroll customers in
UnitedHealthcare plans, and to enable end-to-end processing, from the initial
proposals through loading into UnitedHealthcare's legacy systems complete
information regarding each new product sold.
LIFE AND ANNUITY CARRIER
GE Financial Assurance Holdings, Inc. owns a number of leading consumer
insurance and investment companies that sell a variety of products, including:
life insurance, annuities, mutual funds, long-term care coverage, supplemental
accident and health benefits, retirement investment plans, auto coverage and
life style enhancement products like travel services and automobile clubs. They
are sold through multiple distribution channels, generating approximately $9
billion in revenues in 1999. GE Financial Assurance ("GEFA") selected us to help
it pursue its e-commerce strategy because of our technology leadership, the
strength of our management team and our ability to design, manage and implement
enterprise-scale projects. GEFA and ChannelPoint are in the initial phases of
implementing our Exchange Platform technology for GEFA's life and long-term care
insurance product lines. It is intended that our Exchange Platform technology
will web-enable end-to-end processing from application to policy issuance and
will provide electronic interfaces to third-party medical information providers.
GEFA believes that the end-to-end processing capabilities of our Exchange
Platform technology will result in substantially reduced back office costs,
faster policy issuance, improved broker productivity and increased flexibility
to expand into new distribution channels for greater choice of customer access.
PORTAL
Autobytel.com is the leading international automotive e-commerce provider.
Autobytel.com recognized the new revenue opportunity and value-added service it
could provide on its web site through an automobile insurance program. While
many other automobile web sites had implemented click-through agreements with
third-party insurance sites, Autobytel.com wanted to increase its brand value,
revenues and the stickiness of its web site through an Autobytel.com-branded
automobile insurance service within its existing web site framework.
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Autobytel.com chose ChannelPoint to provide the insurance service because
of our proven rating technology, established carrier relationships and
nationwide fulfillment partners. Our TransAct product provides Autobytel.com a
private-labeled, comprehensive, turn-key automobile insurance solution for its
web site. In this regard, our TransAct product provides Autobytel.com with an
Autobytel.com-branded end-user interface. Based on the individual consumers'
personal data, our interface allows consumers to generate accurate quotes from
various insurance companies simultaneously. TransAct connects Autobytel.com's
customers with a nationwide network of carriers and distributors that can
complete the insurance policy binding process.
SALES AND MARKETING
Our sales organization targets leading global or national insurance
carriers and distributors across the health and ancillary, life and annuity and
property and casualty segments of the insurance industry. We believe that we
have assembled a sales organization with significant experience in selling
complex solutions that are critical to a customer's business and with
significant insurance domain expertise. Our sales process for prospective
customers for Exchange Platform technology requires a significant investment of
time and resources, as it involves a strategic and technical assessment of the
prospective customers' existing insurance distribution processes and information
technology systems. Because of this, we utilize integrated sales teams that
include members of both our sales and professional services organizations, as
well as personnel from leading consulting firms and systems integrators with
which we have developed close working relationships. We believe this approach
provides each prospective customer with important strategic and technical advice
and enables us to define for the customer e-insurance solutions that are
tailored to the individual customer's needs, that can be delivered and
implemented on a timely basis.
We focus our marketing efforts on branding, awareness and direct marketing.
We create branding and awareness through a public relations effort focused on
disseminating our business-to-business e-commerce vision through national and
regional business publications, the information technology press and insurance
industry magazines. Our primary brand, ChannelPoint, is promoted through our web
site, advertising and direct mail. Our secondary brand, Powered by ChannelPoint,
is required on all customer web sites that utilize our applications. We take
advantage of high-profile speaking opportunities at conferences and seminars to
promote our technology. Our direct marketing staff uses direct mail, places
advertisements in regional business and insurance industry publications and
conducts inbound and outbound telemarketing. In addition, we regularly produce
sales tools such as videos, multimedia CD-ROM demonstrations and product
literature to heighten visibility.
CUSTOMER SUPPORT
We believe that effective customer service is essential to attracting and
retaining carriers and distributors. We provide ongoing telephone support
through our customer service and sales support centers which are accessible by a
toll-free call and are available from 6:00 a.m. to 6:00 p.m. Mountain Time
Monday through Friday. Our operators screen all requests for telephone support
and direct the call to the appropriate customer service personnel. Technical
support personnel are responsible for resolving technical problems encountered
by carriers, distributors and buyers.
TECHNOLOGY
Our Exchange Platform technology is the foundation that enables carriers
and distributors to electronically distribute and administer their insurance
products. Our Exchange Platform technology consists of the base infrastructure
required to support large-scale e-commerce operations. The common object model
at the core of the platform enables e-market sponsors to create cross-product,
cross-carrier solutions for their customers.
Platform Infrastructure and Security. The platform infrastructure provides
the scalability, performance and security required to support high-volume
e-markets. The platform architecture is designed for the tightly coupled
relationships between business objects that are necessary to support end-to-end
processing of business
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transactions in the insurance marketplace. Our data security centers around a
rule-based model that tracks who has access to which services. Roles are defined
for each user type and group. Each role has a set of applications and
information for which it is authorized. Our security architecture begins with
the specification of users. We have a nine point plan in place to ensure the
security of customer information: authentication, privacy and encryption, access
control, user auditing, network, monitoring, redundancy, professional evaluation
and certification, and ongoing investigation.
Applications and Programming Interfaces. We provide a variety of
applications that e-market sponsors can use to construct branded e-markets for
their end users. Packaged applications including our ChannelPoint Commerce
Carrier, ChannelPoint Commerce Broker, and ChannelPoint Commerce atWork provide
functionality to carriers, distributors and consumers. In addition, those who
want to build their own applications can interface directly with our Exchange
Platform technology through a set of application programming interfaces to drive
their own user experience. The Exchange Platform web-API is composed of Internet
standard protocols. This is intended to ensure interoperability, interface
stability, and security. The technologies used are also specifically designed
for ensuring performance appropriate for the Internet medium. This end-to-end
solution provides high-performance response to transaction requests between
market sponsor sites and the Exchange Platform.
Line of Business Support. The Exchange Platform technology supports
multiple lines of business through line of business content libraries targeted
at insurance or financial protection products. Line of business content
libraries can be added as necessary to meet the needs of our customers.
Hosting Architecture. The Exchange Platform is hosted in a Denver, Colorado
data center, which includes redundant servers and Internet service providers.
The data center is co-located at a facility managed by Inflow, a third-party
hosting provider. Extensive fail-over, switchover and load balancing
capabilities are designed to allow information and transactions to continue
without interruption if there is a server or Internet service provider failure.
Our applications provide high performance and availability, supporting large
numbers of simultaneous users, 24 hours a day, 7 days a week. We are currently
developing plans to expand to additional sites to provide further safeguards
against primary site failures.
Integration with Third-Party and Legacy Systems. Our technology can
interface with third-party information systems as well as external rating
technologies through our ChannelPoint CommerceLink application. We believe that
CommerceLink provides us with a significant advantage over competitors in the
e-commerce space by enabling tight integration with our customer-existing
systems. CommerceLink is flexible and extensible to enable the Exchange Platform
technology to connect to legacy environments and provides broad
business-to-business capability for the future. CommerceLink provides
out-of-the-box capabilities such as e-mail and printing interfaces as well as
the ability to store ASCII files to enable carriers to benefit from Exchange
Platform connectivity without investing in direct interfaces to legacy systems.
CommerceLink also includes a "plug-in" development kit for tailored integration
of Exchange Platform technology applications into back-end systems. The
CommerceLink development kit includes plug-in API and Java classes, programmer's
guide, sample plug-in source code, and a simulator for enrollment information.
Our technology is based on Internet standards including:
- Strong encryption using 128-bit SSL;
- Strong authentication using X.509 digital certificates and access control
lists;
- HIPAA-compliant security solution;
- HTTP and HTTPS transports to work with existing firewall technologies;
and
- Integrated support for XML 1.0 documents.
CONTENT MANAGEMENT CAPABILITIES
Through our relationships with our customers and through recent
acquisitions we have collected a significant base of insurance rating
information, or content. This content base consists of company-specific
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rates, business rules, information and calculations used to develop a quote for
insurance and issue a policy. We have developed complex technology and processes
that enable us to develop and maintain this content base. We plan to continue to
invest in content management technology and processes to extend our competitive
advantage. Our extensive content base can be accessed through our Exchange
Platform technology and applications, allowing us to leverage the same content
base across existing and new distribution channels.
To date, we have assembled and maintain over 10,000 carrier plans across
multiple lines of insurance and we are increasing the capability of our Exchange
Platform technology to access these plans. We believe that our extensive
inventory of content provides us with a significant competitive advantage in the
market.
STRATEGIC RELATIONSHIPS
A key element of our strategy to strengthen our position as a leading
provider of business-to-business e-commerce solutions for the insurance industry
has been to develop long-term strategic relationships with leading insurance
carriers across all lines of insurance. We believe that these strategic
relationships have enabled us to leverage the significant domain expertise and
resources of these organizations to rapidly develop e-insurance solutions that
are designed to transform the way insurance products are bought, sold and
administered in all segments of the insurance industry. We intend to develop
additional relationships with leading insurance distributors and financial
services firms to enable us to continue to provide best-of-breed e-insurance
solutions for those industries. The following describes our current strategic
relationships:
UnitedHealthcare
In December 1999, we entered into a five year agreement with
UnitedHealthcare. Under this agreement, UnitedHealthcare will serve as a
strategic partner, providing us with input on products and participating in
joint marketing initiatives. UnitedHealthcare will pay us licensing fees for use
of our software, professional services fees, transaction fees based on their
customers' use of our Exchange Platform technology and maintenance fees.
GE Financial Assurance Holdings
In November 1999, we entered into a five year alliance with GEFA to
standardize its life, annuity and long-term care business on our Exchange
Platform technology. GEFA will provide us with input on products and participate
in joint marketing initiatives. GEFA will pay us transaction fees based on their
customers' use of our Exchange Platform technology, professional services fees
and maintenance fees.
Zurich Financial Services/Zurich Insurance Company
In December 1999 we entered a five year strategic agreement with Zurich
Financial Services/Zurich Insurance Company, which we refer to as the Z Group in
this prospectus, to create an end-to-end delivery network for the global
distribution of Z Group's insurance and financial services products. Under the
agreement, we will develop application programs for our Exchange Platform for
any Zurich affiliate as well as provide product maintenance and support services
for Z Group's use of our Exchange Platform technology. Zurich will pay us a
fixed fee in exchange for a perpetual license to our Exchange Platform
technology, professional services fees, under certain circumstances, a
percentage of its revenue from third-party products that are sold through any
Zurich e-market on our Exchange Platform and transaction fees from Z Group
products sold through multi-carrier exchanges hosted by us, and maintenance
fees.
COMPETITION
The overall insurance industry is intensely competitive, and the market for
business-to-business e-commerce solutions for insurance industry likewise is
becoming intensely competitive. The companies that have entered or that are
seeking to enter this market are pursuing a wide variety of different business
models.
An increasing number of insurance carriers and distributors are creating
their own insurance quoting and enrollment web sites. Furthermore, there are a
number of companies across particular lines of insurance or financial services
that offer some of the functionality that we provide through our Exchange
Platform
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technology. These companies may be able to build upon this functionality to
provide a more comprehensive solution that could compete with our Exchange
Platform technology.
Additionally, we face the potential entry into our market space from
established information technology companies that traditionally have not focused
on insurance and benefits distribution. Large technology companies may enter the
market for electronic insurance distribution. Each possesses the vast technology
infrastructure and resources necessary to pursue the online insurance
distribution market should they choose to compete with us. Several of these
companies have existed much longer than us and possess large installed customer
bases as well as a substantial, established brand identity.
PRIVACY POLICY
We believe the privacy of personally identifiable information of Internet
users is becoming increasingly important as the use of the Internet for
e-commerce continues to grow. We have adopted a privacy policy for our user
information. We do not disclose any of our users' personally identifiable
information to carriers unless a user specifically requests insurance coverage.
We do not sell or otherwise make available to any other party any personally
identifiable information concerning our users. However, we do compile user
information in our databases. We analyze this aggregated statistical information
internally for marketing purposes and to improve the content and site layout of
our applications. We make this information available in aggregate form only,
without individual identification of consumers, to participating carriers for
their use in adjusting, refining and expanding their product offerings.
GOVERNMENT REGULATIONS AND FUTURE LEGISLATION
The insurance industry is subject to extensive regulation under state laws.
Insurance laws and regulations cover all aspects of the insurance process,
including sales techniques, underwriting for eligibility, rates, claim payments
and record keeping by licensed insurance carriers and distributors. We perform
functions for licensed insurance carriers and are, therefore, required to comply
with a complex set of rules and regulations that often vary from state to state.
If we fail to comply with these rules and regulations, insurance carriers doing
business with us could be subject to censure, fines or cease-and-desist orders.
This risk, as well as changes in the regulatory climate or the enforcement or
interpretation of existing law, could require changes to our business.
Furthermore, because the application of e-commerce to the insurance market is
relatively new, the impact of current or future regulations on our business is
difficult to anticipate. We also will be required to comply with international
insurance laws and regulations to the extent we make our services and products
available in foreign markets. Compliance with foreign regulatory requirements
may be expensive and time-consuming, and may not ultimately be successful. If we
are unsuccessful in receiving foreign regulatory approvals, our international
efforts would be hurt.
We face additional regulatory risk because most of the laws and regulations
governing insurance agents contemplate or assume paper-based transactions and do
not currently address the delivery of required disclosures or other documents
through electronic communications. Until these laws and regulations are revised
to clarify their applicability to e-commerce, any company offering insurance
products and services through the Internet or other means of e-commerce will
face uncertainty as to compliance with these laws and regulations. Moreover,
there are a number of bills pending before Congress that could fundamentally
change the traditional role of state regulation of insurance. Our policies and
procedures may not be deemed acceptable by any regulatory body examining our
activities in light of these potentially different laws and regulations. Any
adverse regulatory actions could seriously harm our business. In addition, many
state insurance codes limit the collection and use of personal information by
insurance carriers, distributors or service organizations. If we do not comply
with these state laws, we could be subject to fines or other enforcement
proceedings that could harm our business in a particular state. To date, we have
not been notified by any regulatory authority that our information practices do
not comply with these state laws.
INTELLECTUAL PROPERTY
We regard our intellectual property as critical to our success, and we rely
upon patent, trademark, copyright and trade secrets laws in the United States
and other jurisdictions to protect our proprietary rights. We have filed five
U.S. patent applications and expect to file additional applications. No patents
may issue
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from these applications and, if any patents are issued, any claims allowed may
not be sufficiently broad to protect our technology. In addition, any patents
issued may be challenged, invalidated or circumvented. Our trademark
registration applications may not be approved or granted, or, if granted, may be
successfully challenged by others or invalidated through administrative
processes or litigation. In addition, effective patent, copyright, trademark,
and trade secret protection may be unavailable or limited in some foreign
countries.
We also seek to protect our proprietary rights through physical and
technological security measures, and through the use of confidentiality or
license agreements with participating carriers and distributors, technology
partners, employees, consultants, advisors and others, and generally to control
access to, and distribution and use of, our software, documentation, business
and other proprietary information. Despite our efforts to protect our
proprietary rights from unauthorized use or disclosure, employees, consultants,
advisors or others may not maintain the confidentiality of our proprietary
information, and this proprietary information may otherwise become known, or be
independently developed, by competitors. The steps we have taken may not prevent
misappropriation of our proprietary rights, particularly in foreign countries
where laws or law enforcement practices may not protect our proprietary rights
as fully as in the United States. We license our trademarks and similar
proprietary rights to third parties. While we attempt to ensure that the quality
of our brand is maintained, certain parties may take actions that could harm the
value of our proprietary rights, our reputation or the reputation of our
services. We may receive notice of claims of infringement of other parties'
proprietary rights or claims that our own patents or other intellectual property
rights are invalid.
We are currently involved in litigation in which another company has
claimed that we have improperly utilized their trade secrets. We may also be
subject to other claims alleging infringement by us of third-party proprietary
rights. If we were to discover that any of our technology infringed third-party
rights, we may not be able to obtain permission to use such rights on
commercially reasonable terms. This inability may require us to expend
significant resources to make our technology non-infringing or to discontinue
the use of such technology. We have incurred significant expense defending
ourselves from the claims that we have improperly used another company's trade
secrets. These or other additional claims of infringement could cause us to
incur substantial costs defending against the claim, even if the claim is
invalid, and could distract our management from our business. In addition, we
have agreed, and may agree in the future, to indemnify certain of our customers
against claims that our software infringes upon the intellectual property rights
of others. We could incur substantial costs in defending our customers against
claims that our software infringes third-party proprietary rights. Further, a
party making such a claim could secure a judgment that requires us to pay
substantial damages or that prevents us from using or selling our applications.
Any of these events could have a material adverse effect on our business,
financial condition and operating results. Our success depends significantly
upon our proprietary technology and other intellectual property rights,
including our Exchange Platform technology.
EMPLOYEES
As of February 29, 2000, we had 614 full-time employees, including 147
employees primarily engaged in professional services, 314 in product
development, 83 in sales and marketing, and 70 in administration. As a result of
our acquisition of InsurQuote, the number of our employees will increase by 426,
based on information as of February 29, 2000, including 297 in product
development, 61 in professional sales, 27 in sales and marketing and 41 in
administration. We have never had a work stoppage, and none of our employees are
currently represented under collective bargaining agreements. We consider our
relations with our employees to be good. We believe our future success will
depend in part on the continued service of our senior management and key
technical personnel, and our ability to attract, integrate, retain and motivate
highly qualified technical and managerial personnel. There is significant
competition for qualified personnel in our industry and geographical locations.
We may not continue to be successful in attracting and retaining a sufficient
number of qualified personnel to conduct business in the future.
FACILITIES
Our principal executive offices and sales operations are located in
Westminster, Colorado and our product development, professional services and
product marketing operations are located in Colorado Springs, Colorado. We also
maintain offices for product development, professional services and sales
personnel in New
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York, New York; Hartford, Connecticut; Alameda, California; Lynchburg, Virginia
and several other locations throughout the United States. As of March 28, 2000,
we lease, in total, approximately 189,000 square feet of office space. The
leases expire during the period 2000 to 2004. We anticipate that we will require
additional space within the next 12 months to accommodate our anticipated growth
and that suitable office space will be available on commercially reasonable
terms. In July 2000 we plan to occupy an additional 128,000 square feet of
office space in Colorado Springs, Colorado, to support the expansion of our
product development, professional services and product marketing operations.
As a result of our acquisition of InsurQuote, we will have product
development, sales and support offices in Provo, Utah; Cleveland, Ohio; College
Station, Texas and San Francisco, California.
LEGAL PROCEEDINGS
FirePond, Inc. v. David R. Lundberg. FirePond, Inc. filed suit in the
United States District Court for the District of Minnesota on February 26, 1999
against David Lundberg. FirePond subsequently added us as a defendant in the
suit. FirePond alleges that Mr. Lundberg, a current ChannelPoint employee and
former FirePond employee, breached a noncompetition agreement with FirePond by
accepting employment with us. FirePond also alleges misappropriation of
FirePond's trade secrets, breach of fiduciary duty, unfair competition and
tortious interference with FirePond's noncompetition agreement with Mr.
Lundberg. On April 15, 1999, FirePond amended the complaint and added us as a
party. On July 30, 1999, the court upheld FirePond's motion for temporary
injunction against Mr. Lundberg on the basis of his noncompetition agreement,
enjoining him from working for us from July 30, 1999 to September 25, 1999. The
court denied FirePond's motion for temporary injunction against ChannelPoint and
Mr. Lundberg on the basis of misappropriation of trade secrets. We believe that
FirePond's claims are without merit and intend to pursue our defenses
vigorously. However, due to the inherently uncertain nature of litigation and
the fact that discovery has not yet been completed, we cannot determine the
possible loss, if any, that we may ultimately incur either in the context of a
trial or as a result of a negotiated settlement. Our defense of this litigation,
regardless of its outcome, could result in the expenditure of significant
financial and managerial resources.
Jeffrey Bork v. ChannelPoint, Inc. and Ken Hollen. Jeffrey Bork, a former
ChannelPoint employee, filed a suit in District Court, Boulder County, Colorado
on February 9, 2000 against ChannelPoint and Ken Hollen, our President and Chief
Executive Officer. Mr. Bork seeks a declaratory judgment that, among other
things, Mr. Bork's options for shares of ChannelPoint common stock have
accelerated according to the terms of an employment agreement with ChannelPoint.
Mr. Bork also claims breach of contract, right to unpaid wages, securities
fraud, conversion and tortious interference with a contract. He seeks to
accelerate options to acquire 655,286 shares of ChannelPoint common stock and
unspecified damages. On February 25, 2000 we filed a motion to change venue to
El Paso County, Colorado. We believe that Mr. Bork's claims are without merit
and intend to pursue our defenses vigorously. However, due to the inherently
uncertain nature of litigation and the fact that discovery has not yet begun, we
cannot determine the possible loss, if any, that we may ultimately incur either
in the context of a trial or as a result of a negotiated settlement. Our defense
of this litigation, regardless of its outcome, could result in the expenditure
of significant financial and managerial resources.
In addition, we are involved in other litigation that arises in the normal
course of business operations. As of the date of this prospectus, we do not
believe that any of this litigation will have a material adverse effect on our
business, results of operations or financial condition.
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<PAGE> 52
MANAGEMENT
Our executive officers and directors and their ages and positions as of
March 28, 2000 are as follows:
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kenneth E. Hollen(a)...................... 42 President, Chief Executive Officer and
Director
Frederick H. Eppinger..................... 41 Executive Vice President, Industry
Services
Frederick W. Rook III..................... 44 Executive Vice President, Product
Development and Operations
Timothy D. Hoogheem....................... 46 Senior Vice President, Finance and
Administration, Chief Financial Officer
Peter Micciche............................ 46 Senior Vice President, Sales
James B. Hollen........................... 40 Senior Vice President, Business
Development and Director
Eric H. Corwin............................ 46 Senior Vice President, Strategic
Technology
David L. Whetten.......................... 43 Senior Vice President
William B. Woahn.......................... 43 Senior Vice President
Conrad A. McCarty......................... 33 Corporate Controller, Chief Accounting
Officer
James C. T. Linfield...................... 44 Secretary
Gregory D. Brenneman(b)................... 38 Director
Michael D. Fraizer........................ 41 Director
Steven M. Gluckstern...................... 48 Director
Eve M. Kurtin(b).......................... 46 Director
Bernard F. McDonagh(b).................... 56 Director
Adam M. Mizel(a).......................... 30 Director
Nancy J. Schoendorf(a).................... 45 Director
</TABLE>
- ------------
(a) Member of the Compensation Committee
(b) Member of the Audit Committee
Kenneth E. Hollen co-founded ChannelPoint in December 1996 and has been our
Chairman of the Board, President and Chief Executive Officer since that time.
From April 1995 until February 1996, Mr. Hollen served as Chief Executive
Officer of Icon Health, an online consumer healthcare and information services
company, which he co-founded, and which was acquired by Healtheon Corporation, a
healthcare technology company, in February 1996. From October 1993 to March
1995, he served as Vice President of Sales and Marketing for Emotion, Inc., a
provider of multimedia networking solutions.
Frederick H. Eppinger has been our Executive Vice President, Industry
Services since January 2000. From January 1991 to January 2000, Mr. Eppinger was
with McKinsey & Company, a management consulting company, holding the positions
of Principal from January 1991 to June 1998 and Director from June 1998 to
January 2000.
Frederick W. Rook III has been our Executive Vice President, Product
Development and Operations since June 1999. From May 1998 to June 1999, Mr. Rook
was the Chief Technical Officer at Manugistics, Inc., a software applications
company. From August 1995 to May 1998, he served as Senior Vice President of
Business Intelligence at Platinum Technology, Inc., a software, computer support
and consulting services firm. From January 1994 to August 1995, he was the Chief
Technical Officer of Trinzic Corporation, a software company.
Timothy D. Hoogheem has been our Senior Vice President, Finance and
Administration and Chief Financial Officer since November 1998. From July 1998
to November 1998, Mr. Hoogheem acted as an independent industry consultant. From
May 1992 to July 1998, Mr. Hoogheem worked at Somatogen, Inc., a
50
<PAGE> 53
publicly traded biopharmaceutical company, most recently as Senior Vice
President of Finance and Administration, Chief Financial Officer and Treasurer.
Peter Micciche has been our Senior Vice President, Sales since October
1998. Mr. Micciche co-founded SceneWare Corporation, a visual business
applications software and services company, in September 1994, and served as its
President and Chief Executive Officer from then until October 1998.
James B. Hollen co-founded ChannelPoint in December 1996, and has been our
Senior Vice President, Business Development since July 1998. He was our Vice
President of Sales and Marketing from December 1996 until July 1998. He has been
a director since December 1996. Prior to co-founding ChannelPoint, Mr. Hollen
was Vice President of Market Development at Healtheon Corporation from February
1996 to July 1996. Before Healtheon, he co-founded Icon Health and served as
Vice President of Sales and Marketing from January 1996 to February 1996. From
May 1991 to January 1996, he served as Vice President of Business Development at
Access Health, Inc., a publicly traded healthcare information technology
company.
Eric H. Corwin has served as our Senior Vice President, Strategic
Technology since June 1999, and served as our Vice President of Engineering from
January 1997 to June 1999. From August 1986 to January 1997, Mr. Corwin worked
at Sun Microsystems, Inc., where he most recently served as Director of the
Rocky Mountain Technology Center in Colorado Springs.
David L. Whetten will become a Senior Vice President of ChannelPoint
following the closing of the InsurQuote merger. He is the founder of InsurQuote
and has been its Chief Executive Officer for the last 13 years.
William B. Woahn will become a Senior Vice President of ChannelPoint and
will continue to serve as President of InsurQuote following the closing of the
InsurQuote merger. He has been President of InsurQuote since February 1993.
Conrad A. McCarty has served as our Corporate Controller and Chief
Accounting Officer since January 1999. From December 1995 to May 1998, Mr.
McCarty was Corporate Controller and Chief Accounting Officer of Somatogen, Inc.
Somatogen was acquired by Baxter International Inc. ("Baxter") in May 1998 and
from that date until January 1999, Mr. McCarty was Corporate Controller of
Baxter Hemoglobin Therapeutics Inc., a wholly owned-subsidiary of Baxter. Prior
to joining Somatogen, he was employed by the accounting firm of Price Waterhouse
LLP from December 1991 to December 1995 where he most recently held the position
of audit manager. He is a Certified Public Accountant.
James C. T. Linfield has served as our Secretary since December 1998. Mr.
Linfield has been a partner of Cooley Godward LLP, a law firm, since June 1993.
Gregory D. Brenneman has served as a director of ChannelPoint since March
2000. Mr. Brenneman has served as President and Chief Operating Officer of
Continental Airlines since September 1996 and as a Director since June 1995.
From May 1995 to September 1996, Mr. Brenneman served as its Chief Operating
Officer. Mr. Brenneman is a director of Browning-Ferris, Inc. and J. Crew Group.
Michael D. Fraizer has served as a director of ChannelPoint since October
1999. Mr. Fraizer has served as the Chairman of the Board, President and Chief
Executive Officer of GE Financial Assurance Holdings, Inc. since November 1996.
In addition, Mr. Fraizer has held various officer positions with each of General
Electric Company and General Electric Capital Corporation since June 1980 and
June 1991, respectively, to present. Mr. Frazier also holds a similar position
in various companies within the GE Financial Assurance holding company system,
including Chairman and Chief Executive Officer of GE Life and Annuity Assurance
Company from October 1999 to present.
Steven M. Gluckstern has served as a director of ChannelPoint since October
1999. Mr. Gluckstern is a partner and co-founder of Capital Z Partners, an
alternative asset management firm formed in August 1998. From January 1988 to
August 1998, Mr. Gluckstern served in various executive and board positions
within Zurich Financial Services, including Chairman and Chief Executive Officer
of Zurich Centre Group, the holding company for Zurich's strategic financial
business, which includes Centre Solutions (formerly Centre Re), which Mr.
Gluckstern co-founded in 1988 and Chief Executive Officer of Zurich Re, the
global
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<PAGE> 54
reinsurance networks of Zurich. Mr. Gluckstern is a member of the board of
directors of Wit Capital Group and Aames Financial Corporation.
Eve M. Kurtin has served as a director of ChannelPoint since June 1999. She
has been a Managing Director of Pacific Ventures Group, a healthcare-focused
venture capital firm which she co-founded, since November 1995. From June 1994
to November 1995, Ms. Kurtin was Chief Executive Officer and founder of
Physician Venture Management, a joint venture of UniHealth and Columbia/HCA,
Inc., which developed and operated physician networks nationwide.
Bernard F. McDonagh has served as a director of ChannelPoint since November
1998. Mr. McDonagh has served as a General Partner of Validus Partners, a
venture capital fund manager, since its inception, in May 1998. Mr. McDonagh is
also the Chief Executive Officer of UnitedHealth Capital, a business unit of
UnitedHealth Group Incorporated responsible for investing in early stage
companies. From February 1995 to May 1998, he was the Vice President, Investor
Relations and Business Research of United HealthCare Corp.
Adam M. Mizel has served as a director of ChannelPoint since October 1998.
He is a partner and co-founder of Capital Z Partners, formed in August 1998.
From April 1994 to August 1998, Mr. Mizel was Managing Director of Zurich Centre
Investments, Inc., a private equity investment firm. Mr. Mizel also is currently
a General Partner of Capital Z Financial Services Fund II, L.P., a private
equity fund which focuses on opportunities in the financial services industry.
Mr. Mizel is a member of the board of directors of Wit Capital Group, Lending
Tree, Inc. and Aames Financial Corporation.
Nancy J. Schoendorf has served as a director of ChannelPoint since December
1996. She has been a General Partner of Mohr, Davidow Ventures, a venture
capital firm, since June 1993, and a Managing Partner of Mohr, Davidow Ventures
since January 1997. Ms. Schoendorf is a member of the board of directors of
Actuate Corporation, Agile Software Corporation, BroadBase Software, Inc., and
Onvia.com, Inc.
We currently have nine (9) directors. All directors hold office until the
next annual meeting of stockholders at which their term expires and until their
successors have been duly elected and qualified. Other than Messrs. Hollen and
Hollen, who are brothers, there are no family relationships among any of the
directors or executive officers of the Company.
Following the InsurQuote acquisition, the size of our Board will increase
by two positions and the former InsurQuote shareholders will have the right to
designate two representatives to our Board, subject to our reasonable approval.
This right, however, will terminate upon the closing of this offering with
respect to one of the InsurQuote designees.
BOARD COMMITTEES
Our audit committee consists of Ms. Kurtin, Mr. Brenneman and Mr. McDonagh.
The audit committee makes recommendations to the board of directors regarding
the selection of independent accountants, reviews the results and scope of the
audit and other services provided by our independent accountants, and evaluates
our internal accounting procedures.
Our compensation committee consists of Messrs. Kenneth Hollen and Mizel and
Ms. Schoendorf. The compensation committee reviews and approves compensation and
benefits for our executive officers. The compensation committee also administers
our compensation and stock plans and makes recommendations to the board of
directors regarding such matters.
DIRECTOR COMPENSATION
We do not pay any of our directors cash compensation for any services
provided as directors. They are reimbursed for certain expenses in connection
with attendance at board and committee meetings. Directors are eligible to
participate in our 2000 Equity Incentive Plan. See "Management -- 2000 Equity
Incentive Plan." In March 2000, the Board of Directors granted Mr. Brenneman an
option to purchase 20,000 shares of common stock at an exercise price of $15.00
per share. The first 25% of the option will vest one year after the initial
grant with the remainder vesting quarterly thereafter for three additional
years.
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<PAGE> 55
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of our Board of Directors was formed in 1998,
and during fiscal year 1998, its members were Messrs. Kenneth Hollen and Mizel
and Ms. Schoendorf. Other than Mr. Hollen, none of the other members of the
compensation committee were executive officers of ChannelPoint. None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of our Board of Directors or compensation committee. Compensation of Mr.
Hollen was determined by the entire Board of Directors with a view to attracting
and retaining talented individuals to serve as directors and officers of
ChannelPoint.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our four other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000 for services
rendered in all capacities to us during 1999, whom we collectively refer to as
the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
--------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kenneth E. Hollen, President and Chief
Executive Officer........................... $244,049 $350,000 -- $ --
Eric H. Corwin, Senior Vice President,
Strategic Technology........................ 200,013 32,000 -- --
Frederick W. Rook III, Executive Vice
President, Product Development and
Operations(a)............................... 107,692 120,000 456,000 4,029
Timothy D. Hoogheem, Senior Vice President,
Finance and Administration, Chief Financial
Officer..................................... 200,013 125,000 200,000 --
Peter Micciche, Senior Vice President,
Sales....................................... 200,013 150,333 12,000 11,183
</TABLE>
- ---------------
(a) Mr. Rook joined us as Executive Vice President, Product Development and
Operations on June 7, 1999 and earns an annual salary of $225,000.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999
The following table sets forth certain information for the year ended
December 31, 1999 with respect to grants of stock options to each of the Named
Executive Officers. All options granted by ChannelPoint in 1999 were granted
under its 1997 Stock Option Plan. These options have a term of 10 years. See
"Stock Plans" for a description of the material terms of these options. During
1999, ChannelPoint granted options to purchase 8,925,850 shares of common stock
(including 133,000 shares of common stock issuable pursuant to options granted
to non-employees). Options were granted at an exercise price equal to the fair
market value of ChannelPoint's common stock, as determined in good faith by the
Board of Directors. The Board of Directors determined the fair market value
based on ChannelPoint's financial results and prospects. Potential realizable
values are net of exercise price before taxes, and are based on the assumption
that the common stock of
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<PAGE> 56
ChannelPoint appreciates at the annual rate shown, compounded annually, from the
date of grant until the expiration of the ten-year term. These numbers are
calculated based on Securities and Exchange Commission requirements and do not
reflect ChannelPoint's projection or estimate of future stock price growth.
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE -----------------------------
NAME GRANTED IN 1999 ($/SHARE) EXPIRATION DATE 5% 10%
- ---- --------- ---------- --------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Hollen.......... -- -- -- -- -- --
Eric H. Corwin............. -- -- -- -- -- --
Frederick W. Rook III(a)... 456,000 5.2% $3.50 June 6, 2009 $1,003,716 $2,543,613
Timothy D. Hoogheem(a)..... 200,000 2.3% 1.00 March 10, 2009 125,779 318,748
Peter Micciche(b).......... 12,000 0.1% 2.50 April 28, 2009 18,867 47,812
</TABLE>
- ------------
(a) These options vest on a monthly basis over a period of 48 months. These
options have a term of 10 years. See "Stock Plans" for a description of the
material terms of these options.
(b) These options vest at a rate of 25% of the shares on the first anniversary
of the date of grant and 1/48 of the shares each month thereafter. These
options have a term of 10 years. See "Stock Plans" for a description of the
material terms of these options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND 1999 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning exercisable and unexercisable options held as of
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/99 OPTIONS AT 12/31/99(a)
----------------------- ----------------------------------
NAME NUMBER OF VALUE VESTED UNVESTED VESTED UNVESTED
- ---- SHARES REALIZED(b) --------- ---------- --------------- ---------------
ACQUIRED ON -----------
EXERCISE
-----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Hollen........ -- -- -- -- -- --
Eric H. Corwin........... -- -- -- -- -- --
Frederick W. Rook III.... -- -- 57,000 399,000 $ 313,500 $2,194,500
Timothy D. Hoogheem...... 323,458 $32,346 37,500 485,958 300,000 4,081,739
Peter Micciche........... -- -- 280,004 692,038 2,408,034 5,926,327
</TABLE>
- ------------
(a) The value of unexercised options set forth above is calculated based on the
deemed fair value of the underlying securities on December 31, 1999 of $9.00
per share, minus the exercise price.
(b) The value realized upon exercise is based on the deemed fair value of the
underlying securities on the date of exercise, minus the exercise price.
2000 EQUITY INCENTIVE PLAN
Our Board of Directors adopted our 2000 Equity Incentive Plan on
, and our stockholders approved it on . The equity incentive
plan is an amendment and restatement of our 1997 Stock Option Plan.
We currently have shares of our common stock reserved for
issuance under the equity incentive plan. As of March 28, 2000, options had been
granted under the equity incentive plan to purchase an aggregate of 21,153,202
shares of our common stock at a weighted average exercise price of $4.38 per
share, 5,116,484 shares of which had been exercised (including 1,514,232 shares
currently subject to repurchase), and 2,516,757 of which had lapsed.
The Board of Directors administers the equity incentive plan and has the
authority to construe, interpret and amend the equity incentive plan. The Board
of Directors also has the authority to determine which eligible individuals are
to receive awards and the number, vesting requirements and other terms of each
award.
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<PAGE> 57
The Board of Directors may grant incentive stock options with an exercise
price of not less than the fair market value of a share of our common stock on
the grant date. It may determine the exercise price of nonstatutory stock
options. The provisions of the plan provide that if the value of our shares
declines thereafter, the Board of Directors may offer optionholders the
opportunity to replace their outstanding higher-priced options with new,
lower-priced options.
If we dissolve or liquidate, then outstanding stock awards will terminate
immediately prior to this event. However, we treat outstanding stock awards
differently in the following situations:
- a sale of substantially all of our assets;
- a merger or consolidation in which we are not the surviving corporation
(other than a merger or consolidation in which stockholders immediately
before the merger or consolidation have, immediately after the merger or
consolidation, greater stock voting power);
- a reverse merger in which we are the surviving corporation but the shares
of our common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise (other than a reverse merger in
which stockholders immediately before the merger have, immediately after
the merger, greater stock voting power); or
- any transaction or series of related transactions in which in excess of
50% of our voting power is transferred.
In these situations, the surviving entity will either assume or replace all
outstanding awards under the incentive plan. If it declines to do so, then
generally the vesting and exercisability of the awards will accelerate.
In addition, if a participant's service either is involuntarily terminated
without cause or is voluntarily terminated for good reason within one month
before or 13 months after the change in control, then any vesting of an award
(and, if applicable, the exercisability of the award) will accelerate.
The equity incentive plan will terminate in 2010 unless the Board of
Directors terminates it sooner.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors adopted the 2000 Employee Stock Purchase Plan on
, and our stockholders approved it on .
We authorized the issuance of shares of our common stock pursuant
to purchase rights granted to eligible employees under the purchase plan. On
December 31 of each year for 10 years, beginning on December 31, 2000, the
number of shares in the reserve automatically will be increased by the greater
of:
- % of our outstanding shares on a fully-diluted basis, or
- that number of shares that have been issued under the purchase plan
during the prior twelve-month period.
However, the Board of Directors may provide for a lesser increase each
year. The automatic share reserve increase in the aggregate may not exceed
million shares over the 10-year period.
The purchase plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code. The purchase
plan provides a means by which eligible employees may purchase our common stock
through payroll deductions. We implement the purchase plan by offerings of
purchase rights to eligible employees. Generally, all of our employees and the
employees of our affiliates incorporated in the United States may participate in
offerings under the purchase plan. However, no employee may participate in the
purchase plan if immediately after we grant the employee a purchase right, the
employee has voting power over 5% or more of our outstanding capital stock.
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<PAGE> 58
The Board of Directors has the authority to set the terms of an offering.
It may specify offerings of up to 27 months where common stock is purchased for
accounts of participating employees at a price per share equal to the lower of:
- 85% of the fair market value of a share on the first day of the offering,
or
- 85% of the fair market value of a share on the purchase date.
For the first offering, which will begin on the effective date of this
initial public offering, we will offer shares registered on a Form S-8
registration statement. The fair market value of the shares on the first date of
this offering will be the price per share at which our shares are first sold to
the public as specified in the final prospectus with respect to our initial
public offering. Otherwise, fair market value generally means the closing sales
price (rounded up where necessary to the nearest whole cent) for such shares (or
the closing bid, if no sales were reported) as quoted on the Nasdaq National
Market on the trading day prior to the relevant determination date, as reported
in The Wall Street Journal.
The Board of Directors may provide that employees who become eligible to
participate after the offering period begins nevertheless may enroll in the
offering. These employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the purchase plan, or
- 85% of the fair market value of a share on the purchase date.
The Board of Directors has determined that participants may authorize
payroll deductions of up to % of their base compensation for the purchase of
stock under the purchase plan. These employees may end their participation in
the offering at any time up to 10 days before a purchase date. Their
participation ends automatically on termination of their employment.
A participant's right to purchase our stock under the purchase plan, plus
any other purchase plans established by us or by our affiliates, is limited. It
may accrue at a rate of no more than $25,000 of the fair market value of our
stock for each calendar year in which the purchase right is outstanding. We
determine the fair market value of our stock, for the purpose of this
limitation, as of the first day of the offering.
Upon a change in control, the Board of Directors may provide that the
successor corporation will assume or substitute for outstanding purchase rights.
Alternatively, the Board of Directors may shorten the offering period and
provide that our stock will be purchased for the participants immediately before
the change in control.
The purchase plan will not be effective until this initial public offering
of our stock. Therefore, as of the date hereof, no shares of common stock have
been purchased under the purchase plan.
The purchase plan has no set termination date. The Board of Directors may
terminate the purchase plan at any time after the end of an offering.
INSURQUOTE SYSTEMS, INC. 1994 STOCK OPTION PLAN
As a result of our acquisition of InsurQuote, we will assume InsurQuote's
1994 Stock Option Plan and all outstanding options under that plan. Following
the closing of the acquisition, options to purchase shares of our
common stock at a weighted average exercise price of $ per share will be
outstanding under the InsurQuote plan. These stock options represent incentive
stock options intended to qualify under Section 422 of the Internal Revenue Code
and nonstatutory stock options granted to officers, employees and consultants of
InsurQuote. Following the acquisition, our Board will administer the InsurQuote
plan and will have authority to construe, interpret and amend the InsurQuote
plan. No additional grants of stock options or other awards will be made under
the InsurQuote plan.
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<PAGE> 59
EMPLOYMENT AGREEMENTS
We do not have employment agreements with any of our Named Executive
Officers. Pursuant to the terms of our Executive Severance Benefit Plan, which
was approved by the Board of Directors effective October 23, 1998, and amended
on January 28, 1999, Kenneth E. Hollen, Eric H. Corwin, Frederick W. Rook, III,
Timothy D. Hoogheem and Peter Micciche will be entitled, in the event we
terminate their employment without cause or they voluntarily terminate their
employment for good reason within thirteen months following the effective date
of certain changes in control, to the payment of their base salary for twelve
months following such termination of employment.
William B. Woahn and David L. Whetten are each employed by InsurQuote under
written employment agreements each dated as of February 10, 1998. Upon
consummation of the merger with InsurQuote, these agreements will be assumed and
amended by ChannelPoint. Following the merger, pursuant to the terms of their
respective employment agreements, as amended, Mr. Woahn will be employed as the
President of InsurQuote for a period of at least one year and will be employed
as Senior Vice President of ChannelPoint thereafter, and Mr. Whetten will be
employed as Senior Vice President of ChannelPoint. The initial term of each
employment agreement, as amended, ends on January 31, 2003 and renews
automatically on a year-to-year basis unless either party gives advance written
notice of intent not to renew. The employment agreements, as amended, each
provide for an annual base salary of $200,000, and Messrs. Woahn and Whetten
will each be eligible to receive an annual bonus of up to 40% of their base
salary. The employment agreements also provide that ChannelPoint will provide
Messrs. Woahn and Whetten with their current employment benefits for a period of
one year after the merger and provide them with customary benefits of
ChannelPoint executive employees thereafter. Each of the employment agreements
also contains a noncompetition and no-raid provision pursuant to which each of
Messrs. Woahn and Whetten has generally agreed that, during the term of his
employment and for one year thereafter, he will not compete against ChannelPoint
or its affiliates and will not solicit or hire certain employees of ChannelPoint
or its affiliates. Each of the employment agreements also contains severance
provisions providing that, upon the termination of employment of Messrs. Woahn
and Whetten under certain circumstances, Messrs. Woahn and Whetten will be
entitled to receive severance payments equal to the greater of (i) $200,000 or
(ii) one year of benefits, salary and bonus and will also be provided one year
of executive out-placement services. The employment agreements will terminate
upon permanent disability and may be terminated at any time for cause.
In the event of certain changes in control of ChannelPoint as provided
under the 1997 Stock Option Plan, if we terminate any employee's employment
without cause within twelve months of such change in control, any option held by
us to repurchase shares of stock acquired by such employee under an option shall
lapse, and any options held by such employee shall become fully vested. Upon
certain changes in control of ChannelPoint as provided under Attachment IV to
the Stock Option Grant Notice of the 1997 Stock Option Plan, fifty percent of
the unvested stock options held by each of Kenneth E. Hollen, Eric H. Corwin,
Frederick W. Rook III, Timothy D. Hoogheem and Peter Micciche will become fully
vested and exercisable immediately prior to the happening of certain changes in
control. The remainder of the unvested stock options will become fully vested
and exercisable if we terminate their employment without cause or if they
terminate their employment for good reason within twenty-four months following
such change in control.
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CERTAIN TRANSACTIONS
The following is a description of transactions since our inception
(December 5, 1996) to which we have been a party, in which the amount involved
exceeds $60,000 and in which any director, executive officer or holder of more
than 5% of our capital stock had or will have a direct or indirect material
interest, other than our compensation arrangements with our executive officers
which are described under "Management." For more information about our preferred
stock, see Note 4 to the notes to our consolidated financial statements.
SERIES A FINANCING
In December 1996, we sold 5,000,000 shares of Series A preferred stock in a
private placement at a purchase price of $1.00 per share. Upon the closing of
this offering, each share of Series A preferred stock will automatically convert
into two shares of common stock. The following beneficial owners of more than 5%
of our common stock purchased shares of Series A preferred stock in the private
placement:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
5% STOCKHOLDERS OF SHARES PURCHASE PRICE
- --------------- --------- --------------
<S> <C> <C>
Mohr, Davidow Ventures IV, L.P. ............................ 2,352,000 $2,352,000
MDV IV Entrepreneurs' Network Fund, L.P. ................... 98,000 98,000
Pacific Venture Group, L.P. ................................ 2,340,289 2,340,289
PVG Associates, L.P. ....................................... 109,711 109,711
</TABLE>
Ms. Schoendorf, one of our directors, is a member of Fourth MDV Partners,
L.L.C., the general partner of Mohr, Davidow Ventures IV, L.P. and MDV IV
Entrepreneurs' Network Fund, L.P. Ms. Kurtin, one of our directors, is a member
of PVG Equity Partners L.L.C., the general partner of Pacific Venture Group,
L.P. and PVG Associates, L.P.
SERIES B FINANCING
In September 1997, we sold 1,700,000 shares of Series B preferred stock,
and in April 1998, we sold an additional 18,181 shares of Series B preferred
stock, in private placements at a purchase price of $2.75 per share. Upon the
closing of this offering, each share of Series B preferred stock will
automatically convert into two shares of common stock. The following beneficial
owner of more than 5% of our common stock purchased shares of Series B preferred
stock in the private placements:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
5% STOCKHOLDER OF SHARES PURCHASE PRICE
- -------------- --------- --------------
<S> <C> <C>
Validus L.P.(a)............................................. 1,200,000 $3,300,000
</TABLE>
- ------------
(a) 1,200,000 shares were purchased by HLM Partners VII, L.P. at the initial
time of the sale of the shares of Series B preferred stock; such shares
were later transferred to Validus, L.P.
Mr. McDonagh, one of our directors, is a member of Validus Partners L.L.C.,
the general partner of Validus L.P.
SERIES C FINANCING
In October 1998, we sold 3,797,785 shares of Series C preferred stock in a
private placement at a purchase price of $6.50 per share. Upon the closing of
this offering, each share of Series C preferred stock will
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<PAGE> 61
automatically convert into two shares of common stock. The following beneficial
owners of more than 5% of our common stock purchased shares of Series C
preferred stock in the private placement:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
5% STOCKHOLDERS OF SHARES PURCHASE PRICE
- --------------- --------- --------------
<S> <C> <C>
Capital Z Financial Services Fund II, L.P. ................. 2,678,081 $17,407,527
Capital Z Financial Services Private Fund II, L.P. ......... 14,226 92,469
Validus L.P. ............................................... 461,538 2,999,997
Mohr, Davidow Ventures IV, L.P. ............................ 146,154 950,001
MDV IV Entrepreneurs' Network Fund, L.P. ................... 7,692 49,998
Pacific Venture Group, L.P. ................................ 146,923 955,000
PVG Associates, L.P. ....................................... 6,923 45,000
Gene Hollen(a).............................................. 10,432 67,808
</TABLE>
- ------------
(a) Gene Hollen is the father of Kenneth E. Hollen and James B. Hollen.
Messrs. Gluckstern and Mizel, two of our directors, are general partners of
Capital Z Partners, Ltd., the general partner of Capital Z Financial Services
Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. Mr.
McDonagh, one of our directors, is a member of Validus Partners L.L.C., the
general partner of Validus L.P. Ms. Schoendorf, one of our directors, is a
member of Fourth MDV Partners, L.L.C., the general partner of Mohr, Davidow
Ventures IV, L.P. and MDV IV Entrepreneurs' Network Fund, L.P. Ms. Kurtin, one
of our directors, is a member of PVG Equity Partners L.L.C., the general partner
of Pacific Venture Group, L.P. and PVG Associates, L.P.
SERIES D FINANCING
Between September 1999 and February 2000, we sold 3,442,808 shares of
Series D preferred stock in a private placement at a purchase price of $20.97
per share. Upon the closing of this offering, each share of Series D preferred
stock will automatically convert into two shares of common stock. The following
beneficial owners of more than 5% of our common stock purchased shares of Series
D preferred stock in the private placement:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
5% STOCKHOLDERS OF SHARES PURCHASE PRICE
- --------------- --------- --------------
<S> <C> <C>
GE Capital Equity Investments, Inc. ........................ 715,302 $14,999,883
First Colony Life Insurance Company(a)...................... 1,058,450 22,195,697
UnitedHealthcare............................................ 238,435 4,999,982
Validus L.P. ............................................... 47,687 999,996
Mohr, Davidow Ventures IV, L.P. ............................ 90,605 1,899,987
MDV IV Entrepreneurs' Network Fund, L.P. ................... 4,769 100,006
Capital Z Financial Services Fund II, L.P. ................. 200,661 4,207,861
Capital Z Financial Services Private Fund II, L.P. ......... 1,066 22,354
</TABLE>
- ------------
(a) First Colony Life Insurance Company is a wholly owned subsidiary of General
Electric Capital Corporation. Shares issued to First Colony Life Insurance
Company were in connection with the acquisition of p.d.,q., an agency
management software package, and was a non-cash transaction.
Mr. McDonagh, one of our directors, is Chief Executive Officer of
UnitedHealth Capital, a business unit of UnitedHealth Group Incorporated and is
a member of Validus Partners L.L.C., the general partner of Validus L.P. Ms.
Schoendorf, one of our directors, is a member of Fourth MDV Partners L.L.C., the
general partner of Mohr, Davidow Ventures IV, L.P. and MDV IV Entrepreneurs'
Network Fund, L.P. Messrs. Gluckstern and Mizel, two of our directors, are
general partners of Capital Z Partners, Ltd., the general partner of Capital Z
Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund
II, L.P.
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<PAGE> 62
At the time of the closing of the sale of the Series D preferred stock, we
entered into agreements with four holders of Series D preferred stock allowing
them to acquire shares of our common stock concurrently with the consummation of
the initial public offering, or IPO, at a purchase price equal to the IPO price.
Three holders (including UnitedHealthcare) are entitled to purchase common stock
having an aggregate purchase price of up to $18.3 million and GE Capital Equity
Investments is entitled to purchase an amount of additional securities
representing up to 2% of our fully diluted capitalization.
We entered into an agreement with a holder of our Series D preferred stock
allowing us to repurchase 119,217 shares of Series D preferred stock at the
original price paid per share if the Company and the holder do not execute a
strategic agreement.
SERIES E FINANCING
In March 2000, we sold 300,000 shares of Series E preferred stock in a
private placement at a purchase price of $100.00 per share. Upon the closing of
this offering, each share of Series E preferred stock will automatically convert
into shares of common stock. The following beneficial owner of more than 5%
of our common stock purchased shares of Series E preferred stock in the private
placement:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
5% STOCKHOLDER OF SHARES PURCHASE PRICE
- -------------- --------- --------------
<S> <C> <C>
GE Capital Equity Investments, Inc. ........................ 200,000 $20,000,000
</TABLE>
We believe that each of the transactions described above was carried out on
terms that were no less favorable to us than those that would have been obtained
from unaffiliated third parties. Any future transactions between us and any of
our directors, officers or principal stockholders will be on terms no less
favorable to us than could be obtained from unaffiliated third parties and will
be approved by a majority of the independent and disinterested members of the
board of directors.
ACQUISITION OF INSURQUOTE SYSTEMS, INC.
On February 1, 2000, we entered into an Agreement and Plan of Merger with
InsurQuote pursuant to which InsurQuote will become a wholly-owned subsidiary of
ours. Under the terms of the agreement, we will issue shares of our
common stock, subject to adjustment for certain changes in both companies'
capitalizations, to former InsurQuote shareholders, including:
- shares to David L. Whetten, one of our Senior Vice
Presidents;
- shares to William B. Woahn, one of our Senior Vice
Presidents; and
- shares to CCC Information Services Inc.
Of the total number of shares issued to former InsurQuote shareholders, 10% will
be held in escrow to secure indemnification obligations to us under the
agreement. As part of the acquisition, former InsurQuote shareholders will have
the right to designate one representative to our Board upon the closing of this
offering, subject to our approval.
AGREEMENTS WITH CCC INFORMATION SERVICES INC.
Following the InsurQuote acquisition, CCC Information Services Inc.
("CCC"), one of InsurQuote's principal shareholders, will own shares of our
common stock. In February 1998, CCC and InsurQuote entered into a securities
purchase agreement pursuant to which CCC invested $20.0 million in InsurQuote in
exchange for shares of InsurQuote common and preferred stock, an $8.9 million
unsecured, subordinated promissory note and a common stock purchase warrant.
Prior the closing of the acquisition, the warrant will be exercised in full for
an aggregate exercise price of $8.9 million and the note plus accrued interest
will be repaid. Also in February 1998, CCC and InsurQuote entered into a sales
and marketing agreement that gave CCC certain rights to market and sell
InsurQuote products to the insurance carrier market. In March 2000, CCC and
InsurQuote agreed to terminate the marketing and sales agreement. As part of the
termination, CCC will receive $5 million, of which $4.5 million will be paid by
an unsecured, subordinated promissory note
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<PAGE> 63
that matures in September 2002 and $500,000 will be paid in cash in the second
quarter of 2000. Following the closing of the acquisition and prior to the
closing of this offering, the president of CCC will have Board observer rights.
COMMERCIAL TRANSACTIONS
We entered into a five year agreement with UnitedHealthcare in December
1999. See "Business -- Strategic Relationships -- UnitedHealthcare" on page 46
for a description of this agreement. Affiliates of UnitedHealthcare are the
beneficial owners of approximately 8.8% of our common stock held prior to this
offering. In addition, Bernard F. McDonagh, a director of our company, is the
chief executive officer of UnitedHealth Capital which shares a common parent
company with UnitedHealthcare. UnitedHealthcare accounted for $1.7 million, or
31%, of our revenue in 1999.
In November 1999, we entered into a five year alliance with GE Financial
Assurance Holdings, Inc. For a description of this agreement, see
"Business -- Strategic Relationships -- GE Financial Assurance Holdings" on page
46. GE Capital, the parent company of GEFA, is the beneficial owner of
approximately 8.0% of our common stock held prior to this offering. In addition,
Michael D. Fraizer, a director of our company, is the President and Chief
Executive Officer of GEFA. In 1999, GEFA accounted for $0.6 million, or 11%, of
our revenue.
In March 2000, we acquired LifeLink. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Acquisitions -- LifeLink Corporation" on page 27 for a description of this
transaction. We issued GE Capital Assurance Company, a former LifeLink
shareholder, 110,000 shares of our common stock and a secured promissory note in
the amount of $1,980,000 in the transaction. GE Capital, the parent company of
GE Capital Assurance Company, is the beneficial owner of approximately 8.0% of
our common stock.
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<PAGE> 64
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of March 28, 2000 and as adjusted to reflect
the sale of common stock offered hereby to:
- each person (or group of affiliated persons) known to us to own
beneficially more than 5% of the common stock;
- each of our directors and Named Executive Officers; and
- all of our directors and executive officers as a group.
The information has been adjusted to reflect the sale of the common stock
in this offering (assuming no exercise of the underwriters' over-allotment
option), the sale of shares of common stock in private transactions concurrent
with the closing of this offering, the conversion of all outstanding shares of
preferred stock into common stock and the issuance of common stock upon the
conversion of a convertible promissory note. This information does not reflect
the shares of common stock issuable upon the closing of the InsurQuote merger.
In accordance with the rules of the Securities and Exchange Commission, the
following table gives effect to the shares of common stock that could be issued
upon the exercise of outstanding options within 60 days of March 28, 2000.
Unless otherwise noted in the footnotes to the table and subject to community
property laws where applicable, the following individuals have sole voting and
investment control with respect to the shares beneficially owned by them. Unless
otherwise indicated, the business address for each of the individuals or
entities listed below is c/o ChannelPoint, Inc., 10155 Westmoor Drive, Suite
210, Westminster, Colorado 80021.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK STOCK
BENEFICIALLY BENEFICIALLY
OWNED BEFORE OWNED AFTER
THE OFFERING(a) THE OFFERING(a)
NAME AND ADDRESS ----------------------- ----------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Kenneth E. Hollen(b)............................. 6,203,890 % %
Capital Z Financial Services Fund II, L.P. and
affiliates(c).................................. 5,788,068
Mohr, Davidow Ventures IV, L.P. and
affiliates(d).................................. 5,398,440
Pacific Venture Group, L.P. and affiliates(e).... 5,207,692
James B. Hollen(f)............................... 4,435,014
Validus, L.P. and affiliates(g).................. 3,895,320
GE Capital Equity Investments, Inc. and
affiliates(h)..................................
Eric H. Corwin(i)................................ 1,570,000
Timothy D. Hoogheem(j)........................... 871,916
Peter Micciche(k)................................ 972,042
Frederick W. Rook III(l)......................... 506,000
Gregory D. Brenneman............................. --
Michael D. Fraizer............................... --
Steven M. Gluckstern(c).......................... 5,788,068
Eve M. Kurtin(e)................................. 5,207,692
Bernard F. McDonagh(g)........................... 3,895,320
Adam M. Mizel(c)................................. 5,788,068
Nancy J. Schoendorf(d)........................... 5,207,692
All directors and executive officers as a group
(16 persons)(m)................................ % %
</TABLE>
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<PAGE> 65
- ------------
(a) We have calculated percent of shares beneficially owned based on
shares of common stock outstanding (or issuable upon conversion
of shares of preferred stock outstanding) before this offering and
shares of common stock outstanding (or issuable upon conversion of shares
of preferred stock outstanding) after this offering.
(b) Includes 409,440 shares of common stock issued pursuant to an Early
Exercise Agreement that are subject to a repurchase option in favor of
ChannelPoint, 18,890 shares held by his spouse, 260,000 shares held by KHM
Investments LLLP, of which Mr. Hollen is a general partner, an aggregate of
30,000 shares held in trusts, of which Mr. Hollen is a trustee and 700,000
shares of common stock subject to stock options that are currently
exercisable, subject to a repurchase option.
(c) Consists of 5,788,068 shares of common stock issuable upon conversion of
2,878,742 shares of preferred stock held by Capital Z Financial Services
Fund II, L.P. and 15,292 shares of preferred stock held by Capital Z
Financial Services Private Fund II, L.P. The General Partner of Capital Z
Financial Services Fund II, L.P. and Capital Z Financial Services Private
Fund II, L.P. (collectively, "Capital Z") is Capital Z Partners, L.P. Its
General Partner is Capital Z Partners, Ltd. Capital Z Partners, Ltd. may be
deemed to indirectly beneficially own the shares owned by Capital Z. Mr.
Gluckstern, a director of ChannelPoint, is a general partner of Capital Z
Partners, Ltd. and may be deemed to be the indirect beneficial owner of the
shares owned by Capital Z. Mr. Gluckstern disclaims beneficial ownership of
the shares held by Capital Z, except to the extent of his pecuniary
interest arising therein. Mr. Mizel, a director of ChannelPoint, is a
general partner of Capital Z Partners, Ltd. and may be deemed to be the
indirect beneficial owner of the shares owned by Capital Z. Mr. Mizel
disclaims beneficial ownership of the shares held by Capital Z, except to
the extent of his pecuniary interest arising therein. The address of
Capital Z is 54 Thompson Street, New York, New York 10012.
(d) Consists of 5,398,440 shares of common stock issuable upon conversion of
2,588,759 shares of preferred stock held by Mohr, Davidow Ventures IV, L.P.
and 110,461 shares of preferred stock held by MDV Entrepreneurs' Network
Fund, L.P. The General Partner of Mohr, Davidow Ventures IV, L.P. ("Mohr")
and MDV Entrepreneurs' Network Fund, L.P. ("MDV") is Fourth MDV Partners
L.L.C. ("MDV Partners"). MDV Partners may be deemed to indirectly
beneficially own the shares owned by Mohr and MDV. Ms. Schoendorf, a
director of ChannelPoint, is a member of MDV Partners and may be deemed to
be the indirect beneficial owner of the shares owned by each of Mohr and
MDV. Ms. Schoendorf disclaims beneficial ownership of the shares held by
Mohr and MDV, except to the extent of her pecuniary interest arising
therein. The address of Mohr is 3000 Sand Hill Road, Suite 240, Menlo Park,
California 94025.
(e) Consists of 5,207,692 shares of common stock issuable upon conversion of
2,487,212 shares of preferred stock held by Pacific Venture Group, L.P. and
116,634 shares of preferred stock held by PVG Associates, L.P. The General
Partner of Pacific Venture Group, L.P. ("PVG") and PVG Associates, L.P.
("Associates") is PVG Equity Partners L.L.C. ("Equity Partners"). Equity
Partners may be deemed to indirectly beneficially own the shares owned by
PVG and Associates. Ms. Kurtin is a member of Equity Partners and may be
deemed to be the indirect beneficial owner of the shares owned by each of
PVG and Associates. Ms. Kurtin, a director of ChannelPoint, disclaims
beneficial ownership of the shares held by PVG and Associates, except to
the extent of her pecuniary interest arising therein. The address of PVG is
16830 Ventura Blvd., Suite 244, Encino, California 91436.
(f) Includes 579,832 shares of common stock issued pursuant to an Early
Exercise Agreement that are subject to a repurchase option in favor of
ChannelPoint, 260,000 shares held by JHH Investments LLLP, of which Mr.
Hollen is a general partner and an aggregate of 59,994 shares held in
trusts of which Mr. Hollen is a trustee.
(g) Consists of 3,895,320 shares of common stock issuable upon conversion of
1,709,225 shares of preferred stock held by Validus, L.P. ("Validus") and
238,435 shares of preferred stock held by United HealthCare Services, Inc.
("United"), the sole limited partner of Validus. The General Partner of
Validus L.P. ("Validus") is Validus Partners L.L.C. ("Validus Partners").
Validus Partners may be deemed to indirectly beneficially own the shares
owned by Validus. Mr. McDonagh, a director of ChannelPoint, is a member of
Validus Partners and may be deemed to be the indirect beneficial owner of
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<PAGE> 66
the shares owned by Validus. Mr. McDonagh disclaims beneficial ownership of
the shares held by Validus, except to the extent of his pecuniary interest
arising therein. The address of Validus is 9900 Bren Road, Minnetonka,
Minnesota 55343.
(h) Consists of 110,000 shares of common stock and shares of common
stock issuable upon conversion of shares of preferred stock. The
address of GE Capital Equity Investments is 120 Long Ridge Road, Stamford,
Connecticut 06927.
(i) Includes 238,334 shares of common stock issued pursuant to an Early
Exercise Agreement that are subject to a repurchase option in favor of
ChannelPoint and 140,000 shares of common stock subject to stock options
that are currently exercisable, subject to a repurchase option.
(j) Includes 80,865 shares of common stock issued pursuant to an Early Exercise
Agreement that are subject to a repurchase option in favor of ChannelPoint,
548,458 shares of common stock subject to stock options that are currently
exercisable, subject to a repurchase option and 60,000 shares held by his
children.
(k) Includes 972,042 shares of common stock subject to stock options that are
currently exercisable, subject to a repurchase option.
(l) Includes 506,000 shares of common stock subject to stock options that are
currently exercisable, subject to a repurchase option.
(m) Includes shares (including an aggregate of 1,999,999 shares of
common stock issued pursuant to Early Exercise Agreements that are subject
to a repurchase option in favor of the company) and 2,866,500 shares of
common stock subject to stock options that are currently exercisable,
subject to a repurchase option held by directors and executive officers of
ChannelPoint and entities affiliated with such persons. See Notes (b)
through (l) above.
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<PAGE> 67
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will
consist of shares of common stock, par value $.001 per share, and
shares of preferred stock, par value $.001 per share.
The following description of our securities reflects changes that will be
made to our certificate of incorporation and bylaws upon the closing of this
offering.
COMMON STOCK
As of the date of this prospectus, there are shares of common stock
outstanding and held of record by stockholders. Upon the closing of
this offering, there will be shares of common stock outstanding (assuming
no exercise of the underwriters' over-allotment option).
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of common stock are not
entitled to cumulative voting rights in the election of directors. Accordingly,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any
then-outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by our board of directors.
In the event we liquidate, dissolve or wind up our affairs, holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of our Series A,
Series B, Series C and Series D preferred stock will be converted at a rate of
two shares of common stock for each share of preferred stock into an aggregate
of 27,917,548 shares of common stock and our outstanding shares of Series E
preferred stock will be converted at a rate of shares of common stock for
each share of Series E preferred stock into an aggregate of shares of
common stock. Following the conversion, our certificate of incorporation will be
amended and restated to delete all references to such shares of preferred stock.
Under the restated certificate of incorporation that will become effective
upon the closing of this offering, our board of directors is authorized, without
further stockholder approval, to issue up to an aggregate of shares of
preferred stock in one or more series. The board of directors may fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series, and the dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption price or prices and liquidation preferences.
The issuance of preferred stock could:
- adversely affect the voting power of holders of common stock,
- adversely affect the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation, and
- delay, defer or prevent a change in control of ChannelPoint.
We have no present plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
After this offering, the holders of shares of common stock issued upon
conversion of our preferred stock, or their permitted transferees, are entitled
to certain rights with respect to the registration of such shares under the
Securities Act. If we propose to register any of our securities under the
Securities Act for our own account or the account of any of our stockholders
other than the holders of the registrable shares, holders of such registrable
shares are entitled, subject to certain limitations and conditions, to notice of
such registration and are, subject to certain conditions and limitations,
entitled to include registrable shares therein, provided,
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<PAGE> 68
among other conditions, that the underwriters of any such offering have the
right to limit the number of shares included in such registration. In addition,
commencing 180 days after the effective date of the registration statement of
which this prospectus is a part, we may be required to prepare and file a
registration statement under the Securities Act at our expense if we are
requested to do so by the holders of at least 30% of the registrable shares. We
are required to use our best efforts to effect such registration, subject to
certain conditions and limitations. We are not obligated to effect more than two
of such stockholder-initiated registrations. Further, holders of registrable
securities may require us to file additional registration statements on Form
S-3, subject to certain conditions and limitations.
In addition, the holders of 50,000 shares of common stock issued in
connection with our acquisition of Blaise Software, Inc. are entitled, subject
to limited exceptions, to include their shares in any registration statement we
file for our own account or the account of our other stockholders. These rights
are subject to the rights of the underwriters of the offering to limit the
number of shares included in that registration under certain circumstances.
We are required to bear substantially all costs incurred in connection with
any such registrations, other than underwriting discounts and commissions. The
foregoing registration rights could result in substantial future expenses and
adversely affect any future equity or debt offerings.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION
AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
that status with the approval of the corporation's board of directors or unless
the business combination is approved in a prescribed manner. "Business
combinations" include mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. With certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, fifteen percent (15%) or more
of a corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change-in-control attempts and,
accordingly, may discourage attempts to acquire us.
The following provisions of our restated certificate of incorporation and
amended and restated bylaws that will become effective upon the closing of this
offering may have an anti-takeover effect and may delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in its best
interest, including attempts that might result in a premium over the market
price for the common stock:
Board of Director Vacancies. The board of directors will be authorized to
fill vacant directorships and to increase the size of the board of directors.
This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies with its own nominees. In addition, stockholders will only
be entitled to remove directors for cause with a majority vote of the
stockholders entitled to vote.
Stockholder Action; Special Meetings of Stockholders. Our stockholders will
not be permitted to take action by written consent, but only at duly called
annual or special meetings of stockholders. In addition, special meetings of
stockholders may be called only by the chairman of the board, the chief
executive officer or a majority of the board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must deliver a written notice to our principal
executive offices within a prescribed time period. Our amended and restated
bylaws also set forth specific requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
the election of directors at an annual meeting of stockholders.
66
<PAGE> 69
Authorized but Unissued Shares. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. We may use these additional shares for a variety of corporate purposes,
including future public offerings to raise additional capital, acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated bylaws that will become effective upon the closing
of this offering provide that we will indemnify our directors and executive
officers to the fullest extent permitted by Delaware law and may indemnify our
other officers, employees and other agents to the fullest extent permitted by
Delaware law.
In addition, our restated certificate of incorporation that will become
effective upon the closing of this offering provides that, to the fullest extent
permitted by Delaware law, our directors will not be personally liable to us or
our stockholders for monetary damages for any breach of fiduciary duty as
directors. This provision of the restated certificate of incorporation does not
eliminate the directors' duty of care. In appropriate circumstances, equitable
remedies such as an injunction or other forms of non-monetary relief are
available under Delaware law. This provision also does not affect the directors'
responsibilities under any other laws, such as the federal securities laws and
state and federal environmental laws.
Each director will continue to be subject to liability for:
- breach of a director's duty of loyalty to us and our stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; and
- any transaction from which a director derived an improper personal
benefit.
We also intend to enter into indemnity agreements with our directors and
executive officers and to obtain directors' and officers' liability insurance.
Other than the claims in Jeffrey Bork v. ChannelPoint, Inc. and Ken Hollen,
there is no pending litigation or proceeding involving any of our directors or
officers as to which indemnification is being sought.
LISTING
We have applied for listing of the common stock on the Nasdaq National
Market under the trading symbol CHPT.
TRANSFER AGENT AND REGISTRAR
We have appointed Equiserve to serve as the transfer agent and registrar
for the common stock.
67
<PAGE> 70
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict what effect, if any, market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market, or the perception that such sales could
occur, could adversely affect the market price of the common stock and could
impair our future ability to raise capital through the sale of our equity
securities.
Upon the closing of this offering, we will have a total of shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option, no exercise of options and including shares of our common
stock issued in private transactions concurrent with the closing of this
offering. Of the outstanding shares, the shares being sold in this offering
will be freely tradable, except that any shares held by our "affiliates" may
only be sold in compliance with the limitations described below. The remaining
shares of common stock will be "restricted securities" that may be sold in
the public market only if they are registered under the Securities Act or if
they qualify for an exemption from registration under Rule 144, 144(k) or 701
promulgated under the Securities Act.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will become available for sale in
the public market as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES DATE
- --------- ----
<S> <C>
............................... Upon the date of this prospectus
............................... 180 days following the date of this
prospectus (lock-up agreements released)
</TABLE>
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, who has beneficially owned shares for
at least one year is entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of shares that does not
exceed the greater of (i) 1% of the then-outstanding shares of common stock
(approximately shares immediately after this offering) or (ii) the average
weekly trading volume of the common stock during the four calendar weeks
preceding the date on which notice of that sale is filed. In addition, a person
who is not considered an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years is entitled to sell such shares under Rule 144(k) without
regard to the volume limitations described above.
Our employees, directors, officers, consultants or advisers who purchased
common stock from us prior to the date we become subject to the reporting
requirements of the Securities Exchange Act of 1934, or the Exchange Act, under
written compensatory benefit plans or written contracts relating to the
compensation of these persons may rely on Rule 701 with respect to the resale of
that stock. Rule 701 also will apply to stock options we granted before we
became subject to the reporting requirements of the Exchange Act, along with the
shares acquired upon exercise of the options, including exercises after the date
of this prospectus. Shares of common stock we issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, persons other than
affiliates may sell those shares subject only to the manner of sale provisions
of Rule 144. Persons who are affiliates under Rule 144 may sell those shares
without compliance with its minimum holding period requirements.
In addition, following the closing of this offering, we intend to file a
registration statement to register for resale the shares of common stock
available for issuance under our stock plans. Accordingly, shares issued under
those plans will become eligible for resale in the public market from time to
time, subject to the lock-up agreements described below and, in the case of
affiliates of ChannelPoint, the volume limitations of Rule 144 described above.
As of the date of this prospectus, options and purchase rights to acquire a
total of shares of common stock are outstanding under our stock plans, all
of which are currently exercisable.
Directors, officers and all other stockholders have agreed not to sell or
otherwise dispose of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock without the
68
<PAGE> 71
prior written consent of Morgan Stanley & Co. Incorporated for a period of 180
days from the date of this prospectus.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, other
than the grant of options and purchase rights under our stock plans and the
issuance of common stock pursuant thereto.
Following this offering, certain of our stockholders will have rights to
have their shares of common stock registered for resale under the Securities
Act.
69
<PAGE> 72
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Chase Securities, Inc., FleetBoston
Robertson Stephens Inc. and Wit SoundView Corporation are acting as
representatives, have severally agreed to purchase, and we have agreed to sell
to them, severally, the number of shares indicated below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Chase Securities, Inc. .....................................
FleetBoston Robertson Stephens Inc. ........................
Wit SoundView Corporation ..................................
--------
Total.............................................
========
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept delivery
of the shares of our common stock offered hereby are subject to the approval of
certain legal matters by their counsel and to certain other conditions. The
underwriters are obligated to take and pay for all of the shares of common stock
offered by this prospectus, other than those covered by the over-allotment
option described below, if any such shares are taken.
The underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any underwriter
may allow, and such dealers may reallow, a concession not in excess of $ a
share to other underwriters or to certain dealers. After the initial offering of
the shares of common stock, the offering price and other selling terms may from
time to time be changed by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price set forth on the cover page
of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock offered by this prospectus. To the extent this option is exercised,
each underwriter will become obligated, subject to certain conditions, to
purchase about the same percentage of the additional shares of common stock as
the number located next to such underwriter's name in the preceding table bears
to the total number of shares of common stock set forth next to the names of all
underwriters in the preceding table. If the underwriters' option is exercised in
full, the total price to the public would be $ , the total underwriters'
discounts and commissions would be $ , and total proceeds to us would be
$ .
At our request, the underwriters expect to reserve for sale at the initial
public offering price up to shares offered in this prospectus for our
directors, officers, employees and business associates. The number of shares of
common stock for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered in this prospectus.
We, the directors, officers and all of our stockholders have each agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, we will not, during the period ending 180 days after
the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
70
<PAGE> 73
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock,
whether any such transaction described above is to be settled by delivery of
common stock or other such securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale of the shares to the underwriters and the sale of the shares in
the private transactions concurrent with this offering;
- the issuance by us of shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised in
writing;
- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of shares;
- issuance of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on
the date of the prospectus and consistent with past practices; or
- securities issued in connection with the acquisitions of businesses,
assets or technologies.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We have submitted an application to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "CHPT".
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the shares of common stock. Specifically, the underwriters may
overallot in connection with the offering. In addition, to cover over-allotments
or to stabilize the price of the common stock, the underwriters may bid for, and
purchase, shares of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common stock in the offering if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
From time to time, certain of the underwriters have provided, and may
continue to provide, investment banking services to us. In this regard, Morgan
Stanley & Co. Incorporated served as financial advisor to InsurQuote in
connection with our acquisition of InsurQuote, for which Morgan Stanley & Co.
Incorporated received customary fees and expenses.
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between the pricing committee of our board of directors and the representatives.
Among the factors to be considered in determining the initial public offering
price will be our record of operations, our current financial position and
future prospects, sales, earnings and certain of our other financial and
operating information in recent periods, and the price-earnings ratios,
price-sales ratios, market prices of securities and certain financial and
operating information of companies engaged in activities similar to ours. The
estimated initial public offering price range set forth on the cover page of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
71
<PAGE> 74
LEGAL MATTERS
Cooley Godward LLP, Boulder, Colorado will pass upon the validity of the
shares of common stock offered hereby. As of the date of this prospectus, an
investment fund created by Cooley Godward LLP owns an aggregate of 25,000 shares
of Series A preferred stock and 6,250 shares of Series C preferred stock (which,
upon the closing of this offering, will convert into 62,500 shares of common
stock). Davis Polk & Wardwell, New York, New York, will pass upon certain legal
matters in connection with the offering for the underwriters.
EXPERTS
The consolidated financial statements of ChannelPoint, Inc. as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of InsurQuote Systems, Inc. as of
June 30, 1999 and 1998 and December 31, 1999 and for the eleven months ended
June 30, 1997, the years ended June 30, 1999 and 1998 and the six months ended
December 31, 1999, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. Statements contained in this prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. In each instance, please refer to the copy of that contract, agreement
or document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information the company files at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings, including the registration statement, are also
available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended. In
accordance with those requirements, we will file periodic reports, proxy
statements and other information with the SEC. You may also inspect these
reports, proxy statements and other information at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing
audited financial statements and, upon request, with quarterly reports for the
first three quarters of each year containing interim financial information.
72
<PAGE> 75
CHANNELPOINT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHANNELPOINT, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheet................................ F-3
Consolidated Statement of Operations...................... F-4
Consolidated Statement of Changes in Stockholders'
Equity................................................. F-5
Consolidated Statement of Cash Flows...................... F-6
Notes to Consolidated Financial Statements................ F-7
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
INFORMATION
Overview.................................................. F-22
Pro Forma Unaudited Consolidated Condensed Balance
Sheet.................................................. F-23
Pro Forma Unaudited Consolidated Condensed Statement of
Operations............................................. F-24
Notes to Pro Forma Unaudited Consolidated Condensed
Financial Information.................................. F-25
INSURQUOTE SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors............................ F-27
Consolidated Balance Sheets............................... F-28
Consolidated Statement of Operations...................... F-29
Consolidated Statement of Shareholders' Equity
(Deficit).............................................. F-30
Consolidated Statement of Cash Flows...................... F-31
Notes to Consolidated Financial Statements................ F-32
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of ChannelPoint, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
ChannelPoint, Inc. 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 accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Broomfield, Colorado
March 24, 2000
F-2
<PAGE> 77
CHANNELPOINT, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AS OF
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- -------------
(NOTE 1)
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 24,449 $ 10,693
Short-term investments................................... -- 15,335
Accounts receivable, net................................. 127 113
Related party accounts receivable........................ 1,919 9,937
Other receivable -- related party........................ -- 1,389
Capitalized contract costs............................... 88 2,582
Prepaid expenses and other current assets................ 484 484
-------- --------
Total current assets............................. 27,067 40,533
Property and equipment, net................................ 1,897 9,856
Intangible assets, net..................................... -- 23,794
Other assets............................................... 460 341
-------- --------
Total assets..................................... $ 29,424 $ 74,524
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations........................................... $ 29 $ 1,283 $ 533
Accounts payable and accrued liabilities................. 1,485 10,239 10,239
Deferred revenue......................................... 3,822 6,430 6,430
-------- -------- --------
Total current liabilities........................ 5,336 17,952 17,202
Long-term capital lease obligations........................ 105 131 131
Deferred revenue........................................... 9,169 23,489 23,489
Commitments and contingencies (Note 9).....................
Stockholders' equity:
Preferred stock, $.001 par value per share; 15,000,000
shares authorized; 10,515,966, 13,613,986 and 0 shares
issued and outstanding at December 31, 1998, 1999 and
December 31, 1999 (pro forma), respectively........... 11 14 --
Common stock, $.001 par value; 50,000,000 and 64,000,000
shares authorized; 17,234,186, 16,974,692 and
44,252,664 shares issued and 16,234,186, 16,974,692
and 44,252,664 shares outstanding at December 31,
1998, 1999 and December 31, 1999 (pro forma),
respectively.......................................... 17 17 44
Treasury stock, at cost; 1,000,000 and no shares at
December 31, 1998 and 1999, respectively.............. (400) -- --
Additional paid-in capital............................... 35,325 110,263 111,000
Deferred compensation.................................... (332) (5,184) (5,184)
Accumulated deficit...................................... (19,807) (72,158) (72,158)
-------- -------- --------
Total stockholders' equity....................... 14,814 32,952 33,702
-------- -------- --------
Total liabilities and stockholders' equity....... $ 29,424 $ 74,524 $ 74,524
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 78
CHANNELPOINT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Revenue............................................... $ -- $ -- $ 680
Revenue -- related parties............................ -- 1,603 4,818
---------- ---------- -----------
-- 1,603 5,498
---------- ---------- -----------
Costs and expenses:
Cost of revenue....................................... -- 1,748 12,159
Product development................................... 3,983 7,829 18,212
Selling and marketing................................. 1,292 4,714 19,884
General and administrative............................ 609 1,428 8,595
---------- ---------- -----------
Total operating expenses...................... 5,884 15,719 58,850
Loss from operations.................................... (5,884) (14,116) (53,352)
Interest and other income, net.......................... 77 249 1,001
---------- ---------- -----------
Net loss................................................ $ (5,807) $ (13,867) $ (52,351)
========== ========== ===========
Basic and diluted net loss per common share............. $ (1.22) $ (1.72) $ (4.60)
========== ========== ===========
Weighted average common shares outstanding used in
computing basic and diluted net loss per common
share................................................. 4,743 8,077 11,378
========== ========== ===========
Pro forma basic and diluted net loss per common share
(unaudited)........................................... $ (1.55)
-----------
Weighted average common shares outstanding used in
computing pro forma basic and diluted net loss per
common share (unaudited).............................. 33,831
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 79
CHANNELPOINT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
------------------- ------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996................... 5,000,000 $ 5 11,450,000 $12 -- $ -- $ 4,959
Issuance of founders' stock.................... 3,090,000 3 14
Purchases of restricted common stock........... (260,000) -- (1)
Stock option exercises......................... 1,228,906 1 61
Issuance of Series B preferred stock, net...... 1,700,000 2 4,598
Net loss.......................................
---------- --- ---------- --- ---------- ----- --------
BALANCE AT DECEMBER 31, 1997................... 6,700,000 7 15,508,906 16 -- -- 9,631
---------- --- ---------- --- ---------- ----- --------
Issuance of common stock for services.......... 33,766 -- 5
Purchases of restricted common stock........... (55,436) -- (4)
Stock option exercises......................... 2,046,950 1 281
Issuance of Series B preferred stock........... 18,181 -- 50
Issuance of Series C preferred stock, net...... 3,797,785 4 24,602
Purchase of founders' stock.................... (1,300,000) (445) 439
Deferred compensation.......................... 366
Amortization of deferred compensation..........
Retirement of treasury stock................... (300,000) -- 300,000 45 (45)
Net loss.......................................
---------- --- ---------- --- ---------- ----- --------
BALANCE AT DECEMBER 31, 1998................... 10,515,966 11 17,234,186 17 (1,000,000) (400) 35,325
---------- --- ---------- --- ---------- ----- --------
Issuance of common stock for services.......... 18,000 -- 95
Common stock issued in connection with
acquisition.................................. 50,000 -- 266
Issuances of Series D preferred stock, net..... 3,098,020 3 64,720
Purchases of restricted common stock........... (809,484) -- (121)
Stock option exercises......................... 1,481,990 1 858
Deferred compensation, net..................... 9,519
Amortization of deferred compensation..........
Retirement of treasury stock................... (1,000,000) (1) 1,000,000 400 (399)
Net loss.......................................
---------- --- ---------- --- ---------- ----- --------
BALANCE AT DECEMBER 31, 1999................... 13,613,986 $14 16,974,692 $17 -- $ -- $110,263
========== === ========== === ========== ===== ========
<CAPTION>
TOTAL
DEFERRED ACCUMULATED STOCKHOLDERS
COMPENSATION DEFICIT EQUITY
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996................... $ -- $ (131) $ 4,845
Issuance of founders' stock.................... (2) 15
Purchases of restricted common stock........... (1)
Stock option exercises......................... 62
Issuance of Series B preferred stock, net...... 4,600
Net loss....................................... (5,807) (5,807)
------- -------- --------
BALANCE AT DECEMBER 31, 1997................... -- (5,940) 3,714
------- -------- --------
Issuance of common stock for services.......... 5
Purchases of restricted common stock........... (4)
Stock option exercises......................... 282
Issuance of Series B preferred stock........... 50
Issuance of Series C preferred stock, net...... 24,606
Purchase of founders' stock.................... (6)
Deferred compensation.......................... (366) --
Amortization of deferred compensation.......... 34 34
Retirement of treasury stock................... --
Net loss....................................... (13,867) (13,867)
------- -------- --------
BALANCE AT DECEMBER 31, 1998................... (332) (19,807) 14,814
------- -------- --------
Issuance of common stock for services.......... 95
Common stock issued in connection with
acquisition.................................. 266
Issuances of Series D preferred stock, net..... 64,723
Purchases of restricted common stock........... (121)
Stock option exercises......................... 859
Deferred compensation, net..................... (9,519) --
Amortization of deferred compensation.......... 4,667 4,667
Retirement of treasury stock................... --
Net loss....................................... (52,351) (52,351)
------- -------- --------
BALANCE AT DECEMBER 31, 1999................... $(5,184) $(72,158) $ 32,952
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 80
CHANNELPOINT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(5,807) $(13,867) $(52,351)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 149 450 3,249
Non-cash compensation and consulting expense.............. -- 39 4,762
Changes in operating assets and liabilities:
Accounts receivable, net.................................. (22) (2,024) (8,004)
Other receivables -- related party........................ -- -- (1,389)
Capitalized costs on contracts............................ -- (88) (2,494)
Prepaid and other assets.................................. (25) (498) 119
Accounts payable and accrued liabilities.................. 187 1,125 8,754
Deferred revenue.......................................... 1,000 11,991 16,928
------- -------- --------
Net cash used in operating activities............. (4,518) (2,872) (30,426)
------- -------- --------
INVESTING ACTIVITIES:
Purchase of restricted investments.......................... (300) (120) --
Purchase of short-term investments, net..................... -- -- (15,335)
Purchase of property and equipment, net..................... (725) (1,615) (9,631)
Cash paid in connection with acquisitions................... -- -- (1,315)
------- -------- --------
Net cash used in investing activities............. (1,025) (1,735) (26,281)
------- -------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt borrowings..................... 750 -- --
Principal repayments of capital lease obligations and
long-term debt............................................ -- (761) (314)
Proceeds from issuance of common stock...................... 77 282 859
Purchase of common stock.................................... (1) (4) (121)
Proceeds from issuance of preferred stock, net.............. 4,600 24,656 42,527
------- -------- --------
Net cash provided by financing activities......... 5,426 24,173 42,951
------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (117) 19,566 (13,756)
Cash and cash equivalents at beginning of period............ 5,000 4,883 24,449
------- -------- --------
Cash and cash equivalents at end of period.................. $ 4,883 $ 24,449 $ 10,693
======= ======== ========
SUPPLEMENTAL DISCLOSURES OF OTHER CASH AND NON-CASH
TRANSACTIONS
Cash paid for interest...................................... $ 48 $ 80 $ 54
Capital lease obligations for purchases of equipment........ -- 145 94
Liability incurred for purchase of treasury stock........... -- 6 --
Secured debt issued in connection with acquisition.......... -- -- 750
Convertible promissory note issued in connection with
acquisition............................................... -- -- 750
Common stock issued in connection with acquisition.......... -- -- 266
Preferred stock issued in connection with acquisition....... -- -- 22,196
Property and equipment acquired in connection with
acquisitions.............................................. -- -- 325
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 81
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ChannelWorks, Inc., a Delaware corporation, was formed December 5, 1996 and
was renamed ChannelPoint, Inc. on February 27, 1997. ChannelPoint, Inc. (the
"Company") is developing and will provide business-to-business Internet exchange
services that enable end-to-end automation of insurance and benefits products.
The Company complements its technology offerings with a professional services
organization that provides consulting services including process reengineering,
customization, implementation services and project management.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, ChannelPoint Insurance Services,
Inc., which was formed in 1999. All significant inter-company balances and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes software license fee and services revenue in
accordance with the provisions of Statement of Position ("SOP") 97-2, "Software
Revenue Recognition", as amended. The Company derives revenue from license fees
and services which include maintenance, installation, implementation and
consulting under the terms of both fixed price and time-and-materials contracts.
In arrangements where the services are not essential to the functionality
of the delivered software, the Company recognizes license revenue when a license
agreement has been signed, delivery has occurred, the fee is fixed or
determinable and collectibility is probable. Where applicable, fees from such
arrangements involving multiple elements are unbundled and recorded as revenue
as the elements are delivered to the extent that vendor specific objective
evidence of fair value exists. If vendor specific objective evidence of fair
value does not exist, fees from such arrangements are deferred until the earlier
of the date that vendor specific objective evidence of fair value does exist or
all of the elements are delivered.
License fees and services revenue, other than maintenance revenue,
generated from fixed price contracts, where the services are essential to the
functionality of the delivered software, is recognized using the
completed-contract method of accounting. Costs incurred on contracts in-progress
are capitalized and amounts billed are recorded as deferred revenue because the
total costs to fulfill the arrangement are not reasonably estimable at contract
signing. The Company may encounter budget and schedule overruns on fixed price
contracts caused by increased material, labor or overhead costs. Adjustments to
cost estimates are made in the periods in which the facts requiring such
revisions become known. Estimated losses, if any, are recorded in the period in
which current estimates of total contract revenue and contract costs indicate a
loss. Revenue from services provided pursuant to time-and-materials arrangements
is recognized as the services are performed.
Annual maintenance revenue is recorded as deferred revenue and is
recognized ratably over the service period, which is generally twelve months.
Revenue from consulting or training services is recognized as the
F-7
<PAGE> 82
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
services are performed. When maintenance or other services are bundled with the
original license fee arrangement, their fair value is deferred and recognized
during the period such services are provided.
Effective for transactions entered into after December 31, 1999, the
Company will adopt the provisions of SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition With Respect to Certain Transactions." The adoption
of this statement is not expected to have a material impact on the Company's
financial position or results of operations.
The AICPA issued technical questions and answers on financial and reporting
issues related to SOP 97-2 in January 1999. The adoption of this guidance will
not have a material impact on the Company's financial condition or results of
operations.
SOFTWARE DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" requires the
capitalization of certain software development costs once technological
feasibility is established. To date, the period between achieving technological
feasibility and the general availability of such software has been short.
Consequently, software development costs qualifying for capitalization have been
insignificant and therefore, the Company has not capitalized any software
development costs to date.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. All cash
equivalents are carried at cost, which approximates fair value. Short-term
investments consist of high-grade corporate bonds and U.S. governmental
securities maturing within one year. Such short-term investments are classified
as held-to-maturity, as defined in SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and accordingly carried at amortized
cost.
RESTRICTED INVESTMENTS
The Company maintains certificates of deposit ("CDs") with a bank. These
CDs are held by the bank for collateral against irrevocable letters of credit
issued by the bank to secure two of the Company's facility leases. The balance
of these restricted investments was $420,000 at December 31, 1998 and 1999. At
December 31, 1999, $120,000 is classified as other current assets and $300,000
is classified as non-current other assets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives of three to five years.
Leasehold improvements are amortized over the shorter of the life of the related
asset or the life of the lease. Assets under capital lease are recorded at the
lower of fair market value or the present value of the future minimum lease
payments and are amortized using the straight-line method over the lease term.
Maintenance and repairs are expensed as incurred.
ACQUIRED INTANGIBLE ASSETS
During 1999, the Company has acquired customer lists, software and
technology, goodwill and other intangible assets in acquisitions of other
companies. For business combinations accounted for using the purchase method,
acquired intangible assets include the amount of purchase price allocated to
identified intangible assets and goodwill at the date of each respective
acquisition. Goodwill represents the excess of the purchase price over fair
value of the net assets acquired. Amortization of intangible assets is computed
on a straight-line basis over the related estimated useful lives, which is
generally two to five years. The amortization
F-8
<PAGE> 83
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of acquired intangible assets is included in the respective expense category to
which the asset relates. Amortization expense related to intangible assets for
the year ended December 31, 1999 was $1.2 million.
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, primarily property and equipment, and goodwill, under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. The carrying value of long-lived assets is considered impaired when the
separately identifiable undiscounted cash flows from the asset are less than its
carrying value. In addition, the recoverability of goodwill is further evaluated
under the provisions of Accounting Principles Board Opinion No. 17, Intangible
Assets, based upon undiscounted cash flows. In the event that the carrying
amount exceeds undiscounted cash flows, a loss is recognized based on the amount
by which the carrying value exceeds the fair value of the asset. Fair value is
determined using the anticipated cash flows discounted at a rate commensurate
with the risk involved.
STOCK-BASED COMPENSATION PLAN
The Company applies Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations in
accounting for stock-based compensation arrangements. The Company has included
the pro-forma disclosures required under SFAS No. 123, "Accounting for Stock-
Based Compensation," in Note 5.
NET LOSS PER COMMON SHARE
Earnings per common share is computed in accordance with SFAS No. 128,
"Earnings Per Share." Basic earnings per common share is calculated by dividing
the income or loss by the weighted average number of common shares outstanding
during the period, net of shares subject to repurchase provisions. Diluted
earnings per share is computed by dividing the income or loss by the weighted
average number of common shares outstanding plus the weighted average number of
dilutive potential common shares outstanding. Potential common shares, including
shares issuable upon conversion of preferred stock, issuable upon conversion of
a promissory note, issuable upon the exercise of outstanding stock options and
contingently issuable shares subject to repurchase by the Company have been
excluded from the computation of diluted loss per share as the effect of their
inclusion would be anti-dilutive. The total number of shares excluded from the
calculation of diluted loss per share was 41,905,933 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,
including the pro forma effects of the automatic conversion of the Company's
Series A, Series B, Series C and Series D convertible preferred stock and the
convertible promissory note into shares of the Company's Common Stock effective
upon the closing of the Company's initial public offering as if such conversion
occurred on January 1, 1999. Pro forma diluted net loss per share is computed
using the pro forma weighted average number of common shares only, as potential
common shares are anti-dilutive.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents,
short-term investments, accounts receivable, restricted investments, accounts
payable and accrued liabilities, and borrowings under long-term obligations. As
of December 31, 1998 and 1999, the carrying amounts of financial instruments
approximated fair value due to their short maturities or variable rates of
interest.
F-9
<PAGE> 84
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
short-term investments and accounts receivable. The Company has cash investment
policies that limit investments to investment grade securities and certificates
of deposit. The Company performs an ongoing evaluation of its customers'
financial condition and does not require any collateral.
During the years ended December 31, 1998 and 1999, the Company recognized a
substantial portion of its consolidated revenue from the following customers,
all of which are related parties:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Customer A.................................................. 100% 31%
Customer B.................................................. -- 46%
Customer C.................................................. -- 11%
</TABLE>
As of December 31, 1998, Customer A accounted for 88% of accounts
receivable, and as of December 31, 1999, Customers A, B and C comprised 96% of
total receivables.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
The Board of Directors has authorized management of the Company to file a
registration statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public. If the Company's
initial public offering ("IPO") is consummated under the terms presently
anticipated, all of the convertible preferred stock outstanding and the
convertible promissory note will automatically convert into 27,277,972 shares of
common stock. Unaudited pro forma stockholders' equity as of December 31, 1999,
as set forth on the accompanying consolidated balance sheet, is adjusted for the
anticipated conversion of such preferred stock and promissory note.
SEGMENT REPORTING
The Company operates as a single segment and will evaluate additional
segment disclosure requirements as the Company's operations are expanded.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
SFAS No. 133, as amended, is effective for fiscal years beginning after June 15,
2000. To date, the Company has not entered into any derivative financial
instruments or hedging activities.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 provides specific
guidance, among other things, as to the recognition of revenue related to
up-front non-refundable fees and service charges received in connection with a
contractual arrangement. We have applied the provisions of SAB 101 for the year
ended December 31, 1999. The adoption of SAB 101 did not have a material impact
on our financial condition or results of operations.
F-10
<PAGE> 85
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- -----------
<S> <C> <C>
Accounts receivable:
Trade.................................................... $ 127,000 $ 387,000
Trade -- related party................................... 1,919,000 9,937,000
---------- -----------
2,046,000 10,324,000
Less: allowance for doubtful accounts...................... -- (274,000)
---------- -----------
$2,046,000 $10,050,000
========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- -----------
<S> <C> <C>
Property and equipment:
Computers, peripherals and software...................... $2,156,000 $10,418,000
Office furniture, equipment and leasehold improvements... 332,000 2,120,000
---------- -----------
2,488,000 12,538,000
Less: accumulated depreciation and amortization............ (591,000) (2,682,000)
---------- -----------
$1,897,000 $ 9,856,000
========== ===========
</TABLE>
Property and equipment includes $145,000 and $239,000 of assets under
capital leases with accumulated amortization of $21,000 and $76,000 at December
31, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Intangible assets:
Customer lists............................................ $ 5,138,000
Purchased software and technology......................... 3,568,000
Goodwill.................................................. 15,389,000
Other intangibles......................................... 857,000
-----------
24,952,000
Less: accumulated amortization.............................. (1,158,000)
-----------
$23,794,000
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- -----------
<S> <C> <C>
Accounts payable and accrued liabilities:
Accounts payable......................................... $ 516,000 $ 4,151,000
Accrued compensation..................................... 380,000 2,232,000
Expense advance from related party....................... -- 1,389,000
Accrued vacation......................................... 306,000 759,000
Other.................................................... 283,000 1,708,000
---------- -----------
$1,485,000 $10,239,000
========== ===========
</TABLE>
F-11
<PAGE> 86
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
In connection with the acquisition of Blaise Software, Inc. (see Note 8),
the Company issued a secured promissory note of $750,000 and a convertible
promissory note of $750,000. The secured promissory note bears interest at 8.5%
per annum, with principal and interest payable monthly through June 2000. At
December 31, 1999, it has a balance due of approximately $476,000. The
convertible promissory note bears interest at 8.5% per annum, and automatically
converts into 50,000 shares of common stock upon an initial public offering of
the Company's common stock. This note matures in December 2000 and no principal
or interest payments are due until maturity.
4. CAPITAL STOCK
COMMON STOCK
On December 17, 1999, the Board of Directors declared a two-for-one common
stock split effective in the form of a 100% stock dividend. All common stock
share and per share amounts in the accompanying consolidated financial
statements have been restated to give retroactive effect to the stock dividend
for all periods presented.
PREFERRED STOCK
The Company had the following series of preferred stock (the "Preferred
Stock") authorized, issued and outstanding:
<TABLE>
<CAPTION>
ISSUED AND OUTSTANDING
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
No series, $.001 par value; 3,868,650 and 425,842 shares
authorized at December 31, 1998 and 1999, respectively.... -- --
Series A convertible, $.001 par value; liquidation
preference of $1.00 per share; 5,000,000 shares authorized
at December 31, 1998 and 1999............................. 5,000,000 5,000,000
Series B convertible, $.001 par value; liquidation
preference of $2.75 per share; 1,718,181 shares authorized
at December 31, 1998 and 1999............................. 1,718,181 1,718,181
Series C convertible, $.001 par value; liquidation
preference of $6.50 per share; 4,413,169 shares authorized
at December 31, 1998 and 1999............................. 3,797,785 3,797,785
Series D convertible, $.001 par value, liquidation
preference of $20.97 per share; no shares and 3,442,808
shares authorized at December 31, 1998, and 1999,
respectively.............................................. -- 3,098,020
</TABLE>
Pursuant to commitments made in September 1999, and upon satisfaction of
certain regulatory requirements the Company completed its Series D preferred
stock offering on February 2, 2000 by closing on the sale of an additional
344,788 shares to existing stockholders which resulted in proceeds to the
Company of $7.2 million.
The Preferred Stock is convertible, at the option of the holder, into
common stock at a conversion rate of two shares of common stock for each share
of preferred stock subject to certain anti-dilution provisions. Each share of
the Preferred Stock automatically converts into common stock upon the earlier of
the consent of the holders of at least two-thirds of the outstanding shares of
preferred, or immediately upon the closing of a firmly underwritten public
offering of common stock subject to a minimum price of $20.97 and aggregate
F-12
<PAGE> 87
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
proceeds of $40 million. The Company has reserved 30,000,000 common shares for
issuance upon conversion of the Preferred Stock.
Additionally, the Preferred Stock has certain voting rights on an
as-converted basis, dividend participation rights and a liquidation preference
equal to the original purchase price plus all declared but unpaid dividends
thereon (aggregate liquidation preference as of December 31, 1999 was
approximately $99.4 million). Holders of shares of the Company's Preferred
Stock, in preference to the holders of common stock, are entitled to receive,
when and as declared by the Board of Directors, non-cumulative cash dividends at
the rate of 8% of the original issue price per share of the related preferred
stock. In the event dividends are paid on common stock, an additional dividend
shall be paid with respect to all outstanding shares of preferred stock in an
amount equal (on an as-converted to common stock basis) to the amount paid per
share of common stock. No dividends on common stock have been declared by the
Board of Directors.
At the time of the closing of the Series D preferred stock, the Company
entered into agreements with certain Series D preferred stockholders allowing
them to acquire shares of the Company's common stock concurrently with the
consummation of the initial public offering ("IPO") at a purchase price equal to
the IPO price. Three stockholders are entitled to purchase common stock having
an aggregate purchase price of up to $18.3 million and is entitled to purchase
an amount of additional securities up to 2% of the Company's fully diluted
capitalization.
The Company entered into an agreement with a stockholder of the Company's
Series D preferred stock allowing the Company to repurchase 119,217 shares of
Series D preferred stock at the original price paid per share if the Company and
the stockholder do not execute a strategic agreement.
FOUNDERS' STOCK
The Company had 10,150,000 shares of founders' stock outstanding at
December 31, 1998 and 1999. The shares vested one-third upon the closing of the
Company's Series A preferred stock financing with the remainder vesting ratably
over four years. Unvested shares are subject to repurchase by the Company at the
original price paid per share upon termination of employment.
In January 1997, other employees of the Company purchased shares of common
stock. At December 31, 1998 and 1999, the Company had 2,830,000 of these shares
outstanding. These shares vest over four years, with 25% vesting after one-year
and the remainder vesting monthly thereafter. In the event of termination of
employment, the unvested shares are subject to repurchase by the Company at the
original price paid per share.
During 1998, the Company repurchased 1,300,000 shares from the founders and
amended the vesting schedule for one of the founder's remaining 927,730 unvested
shares. The remaining unvested shares vest ratably on a monthly basis over four
years beginning November 28, 1998.
As of December 31, 1998 and 1999, an aggregate of 4,150,274 and 2,251,921
shares, respectively, of common stock issued to founders and employees were
subject to repurchase by the Company.
5. STOCK OPTION PLAN
In March 1997, the Company established the 1997 Stock Option Plan (the
"Plan"). Pursuant to the Plan, the Company may grant incentive and non-statutory
stock options to purchase up to 14,776,662 shares of the Company's common stock
to employees, officers, and consultants, of which 140,922 shares are available
for grant as of December 31, 1999. Under the Plan, incentive stock options are
granted at an exercise price not less than the fair value of common stock on the
date of grant, as determined by the Company's Board of Directors. Non-statutory
stock options are granted at an exercise price as determined by the Board of
Directors.
F-13
<PAGE> 88
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options granted generally vest over four years, expire no more than ten
years from the date of grant, and provide for exercise before vesting occurs.
Shares issued in exchange for options exercised prior to vesting, continue to
vest on the same schedule as the related options. The Company reserves the right
to repurchase all unvested shares from a stockholder, within 90 days of
termination of employment, at a price equal to the price per share paid by the
stockholder. As of December 31, 1999, an aggregate of 1,633,226 shares of common
stock issued upon exercise of options prior to vesting were subject to
repurchase by the Company.
The following table is a summary of stock option activity:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE OPTIONS AVERAGE
NUMBER OF EXERCISE VESTED AND EXERCISE
OPTIONS PRICE EXERCISABLE PRICE
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
OUTSTANDING AT JANUARY 1, 1997............. -- --
Granted.................................. 2,989,306 $ .09
Exercised................................ (1,228,906) .05
Forfeited................................ (40,000) .05
---------- ----- --------- -----
OUTSTANDING AT DECEMBER 31, 1997........... 1,720,400 .12 20,400 $ .05
Granted.................................. 6,004,546 .26
Exercised................................ (2,046,950) .14
Forfeited................................ (137,750) .15
---------- ----- --------- -----
OUTSTANDING AT DECEMBER 31, 1998........... 5,540,246 .26 222,251 .13
Granted.................................. 8,925,850 5.10
Exercised................................ (1,481,990) .58
Forfeited................................ (2,241,292) .76
---------- ----- --------- -----
OUTSTANDING AT DECEMBER 31, 1999........... 10,742,814 $4.13 1,246,443 $1.25
========== ===== ========= =====
</TABLE>
For the years ended December 31, 1998 and 1999, the Company repurchased
55,436 and 809,484 shares of common stock at the original price paid per share
from employees who had exercised options prior to their vesting and subsequently
terminated employment. The Company paid approximately $4,000 and $121,000 for
repurchase of the common stock, which was subsequently retired. The options were
reinstated to the available to be granted option pool.
Based on calculations using the Black-Scholes minimum value option-pricing
model, the weighted average grant date fair value of common stock options
granted during 1997, 1998 and 1999 was $0.02, $0.04 and $1.01 per share,
respectively, using the following assumptions by year:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate.......................... 5.7 - 6.6% 4.2 - 5.6% 4.6 - 6.0%
Expected life.................................... 4 years 4 years 4 years
Expected dividend yield.......................... -- -- --
Volatility....................................... -- -- --
</TABLE>
F-14
<PAGE> 89
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation expense for the Plan been determined based on the fair
values at the grant dates for awards under the Plan consistent with the method
of accounting prescribed by SFAS No. 123, the Company's net loss and net loss
per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net loss as reported........................ $(5,807,000) $(13,867,000) $(52,351,000)
Net loss per common share as reported....... (1.22) (1.72) (4.60)
Net loss -- pro forma....................... (5,821,000) (13,910,000) (53,109,000)
Net loss per common share -- pro forma...... (1.23) (1.72) (4.67)
</TABLE>
The above pro forma disclosures are not necessarily representative of the
effects on reported income or loss for future years as additional grants are
made each year and options vest over several years.
The following table summarizes information about stock options outstanding
and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -----------------------------------
WEIGHTED AVERAGE
REMAINING
NUMBER OF CONTRACTUAL LIFE WEIGHTED AVERAGE
EXERCISE PRICE SHARES (YEARS) NUMBER OF SHARES EXERCISE PRICE
- -------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ .05......................... 122,000 7.17 93,833 $ .05
.15......................... 1,389,563 8.35 553,932 .15
.40......................... 1,462,751 8.83 326,856 .40
.50......................... 885,650 9.08 23,249 .50
1.00......................... 472,700 9.19 37,500 1.00
2.50......................... 663,900 9.33 1,666 2.50
3.50......................... 1,096,000 9.42 57,000 3.50
6.00......................... 840,200 9.51 49,158 6.00
7.50......................... 1,435,350 9.59 91,660 7.50
9.00......................... 2,374,700 9.84 11,589 9.00
----------- ---- --------- -----
10,742,814 9.25 1,246,443 $1.25
=========== ==== ========= =====
</TABLE>
Certain options granted to employees during the years ended December 31,
1998 and 1999 resulted in deferred compensation of $366,000 and $8.7 million,
respectively. The amounts recorded represent the difference between the exercise
price and the deemed fair value of the Company's common stock for shares subject
to the options granted. Deferred compensation is reflected as a reduction of
stockholders' equity and is generally being amortized as a charge to operations
over the 48-month vesting period of the options using an accelerated method as
described in Financial Accounting Standard Board Interpretation No. 28. For the
years ended December 31, 1998 and 1999, the amortization of deferred
compensation related to employee stock options was $34,000 and $4.4 million,
respectively. Subsequent to December 31, 1999, the Company has granted 3,233,500
stock options to employees.
During 1999, the Company granted options to non-employees to purchase
133,000 shares of common stock at a weighted average exercise price of $6.59 per
share and a weighted average fair value on the date of the grant of $4.25 per
share. These options were granted in exchange for consulting services. The
Company valued these options using a Black-Scholes valuation model and recorded
an additional $855,000 of deferred compensation related to these options. The
Company recognized amortization of deferred compensation related to these
non-employee stock options of $250,000 during 1999. These options will be
subject to variable accounting treatment until the related services are
completed. During 1999, the Company has entered into various agreements with
service providers and consultants which provide that upon completion of services
and
F-15
<PAGE> 90
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
achievement of certain objectives, the Company will grant stock options to
purchase 38,000 shares of the Company's common stock.
6. INCOME TAXES
Deferred tax assets (liabilities) are comprised of the following as of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Start-up costs.......................................... $ 26,000 $ 18,000
Deferred revenue........................................ 1,717,000 1,807,000
Accrued liabilities..................................... 179,000 322,000
Intangible amortization................................. -- 147,000
Research and development credit carryforwards........... 556,000 1,346,000
Net operating loss carryforwards........................ 5,461,000 22,939,000
----------- ------------
Total deferred tax assets....................... 7,939,000 26,579,000
----------- ------------
Deferred tax liabilities:
Property and equipment.................................. (3,000) (87,000)
----------- ------------
7,936,000 26,492,000
Valuation allowance....................................... (7,936,000) (26,492,000)
----------- ------------
Net deferred tax assets......................... $ -- $ --
=========== ============
</TABLE>
As of December 31, 1999, the Company had net operating loss carryforwards
of approximately $61.5 million, which begin expiring in 2011, and research and
development credit carryforwards of $1.3 million, which begin expiring in 2012.
As a result of certain changes in the Company's ownership which occurred in
1998, the utilization of $5.3 million of the Company's net operating loss
carryforwards is limited. These restricted carryforwards are subject to an
annual utilization limitation of approximately $3.8 million. Future ownership
changes may further limit the ability of the Company to utilize its current and
future net operating loss carryforwards.
At December 31, 1998 and 1999, a valuation allowance has been recorded
against all net deferred tax assets. Based on the weight of available evidence,
both positive and negative, including the Company's history of losses, the net
deferred tax asset has been reduced to zero as it is more likely than not that
such benefits will not be realized.
The benefit from income taxes differs from the amounts computed by applying
the federal statutory rate to income before income taxes. The amounts are
reconciled as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Federal income benefit at statutory rate.................. $(4,715,000) $(17,799,000)
State income tax, net of federal benefit.................. (457,000) (1,728,000)
Research and development tax credit....................... (386,000) (790,000)
Increase in valuation allowance........................... 5,548,000 18,556,000
Stock compensation expense................................ -- 1,587,000
Other..................................................... 10,000 174,000
----------- ------------
Benefit from income taxes................................. $ -- $ --
=========== ============
</TABLE>
F-16
<PAGE> 91
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. EMPLOYEE BENEFIT PLAN
The Company's 401(k) Plan (the "401(k) Plan") is available to all full-time
employees with eligibility commencing on the first day of employment. Employees
may contribute up to 25% of their eligible compensation, not to exceed the
amounts allowed by law. The 401(k) Plan allows for discretionary matching
contributions to be made by the Company. No matching contributions were made for
1997, 1998 or 1999.
8. ACQUISITIONS
The Company completed two acquisitions during the year ended December 31,
1999. Both acquisitions were accounted for using the purchase method and,
accordingly, the total purchase price of each company was allocated to the
acquired assets at their fair values as of the closing dates of the
acquisitions. No liabilities were assumed as part of either acquisition. For
purposes of allocating the purchase price to the identified acquired assets, the
term "fair value" is defined as fair market value, or the price at which an
asset would change hands between a willing buyer and a willing seller when the
former is not under any compulsion to buy and the latter is not under any
compulsion to sell, and both parties are able, as well as willing, to trade and
are well-informed about the asset and the market for that asset. The Company's
consolidated statements of operations do not include any revenue or expenses
related to the acquisitions prior to their closing dates.
For each of the acquisitions, the Company retained an independent appraiser
to assist with assigning the fair values to the tangible and intangible assets
acquired. The valuations relied on methodologies that most closely related to
the fair market value assignment with the economic benefits provided by each
asset and the risks associated with the assets.
BLAISE SOFTWARE, INC.
On June 7, 1999, the Company acquired certain assets of Blaise Software,
Inc. ("Blaise"), a provider of healthcare insurance carrier information to
insurance brokers. The purchase price included $1.2 million in cash, a secured
promissory note of $750,000, a convertible promissory note of $750,000 and
50,000 shares of the Company's common stock valued at $266,000. See also Note 3.
The purchase price of approximately $3.0 million, including expenses, was
allocated to the acquired assets based on their fair values as of June 7, 1999.
Acquired intangible assets consisted of the customer list which had an allocated
value of $1.2 million, $400,000 was allocated to the technology, $370,000 was
allocated to other intangibles and $1.0 million was allocated to goodwill. The
customer list and goodwill will be amortized over a five year useful life. All
other intangible assets will be amortized over a three year useful life. The
purchase price allocation was generally based upon the projected net after-tax
incremental income attributable to the assets acquired.
P.D.,Q.
On November 15, 1999, the Company acquired the assets related to Policy
Data, Quickly ("p.d.,q."), an agency management software package designated for
broker general agents in the individual life insurance market, from an affiliate
of General Electric Capital Corporation ("GE Capital"). ChannelPoint acquired
p.d.,q. in exchange for 1,058,450 shares of its Series D preferred stock.
The aggregate purchase price of approximately $22.3 million, including
expenses, has been allocated based on the fair value of the assets acquired.
Recorded assets include $14.4 million of goodwill, the customer list of $3.9
million, purchased software and technology of $3.2 million, other intangibles of
$0.5 million and tangible assets of $0.3 million. Goodwill is being amortized
over four years. The remaining intangible assets acquired are being amortized
over two to three years.
F-17
<PAGE> 92
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depending on the characteristics of the assets, the allocation of the
purchase price to the assets acquired, as determined by an independent
third-party, consisted of applying one or more of the following approaches:
determining market value of comparative assets, calculating the present value of
projected income derived from the assets or the estimating the cost of replacing
the asset. The value of the customer list was determined primarily by
calculating the present value of the net cash flows attributable to the
customers acquired from p.d.,q. using a discount rate of 20%. The technology was
valued comparing the results from two approaches; analyzing how much it would
cost to replace the utility of the existing technology, and the present value of
the benefit from not paying royalties to an outside provider. The valuation of
goodwill was derived by subtracting the fair value of the acquired tangible and
intangible assets from the purchase price.
The affiliate of GE Capital agreed to pay operating costs of approximately
$1.4 million to the Company in order to maintain and support the p.d.,q.
products and customers. The Company will amortize this amount by reducing the
associated operating costs of p.d.,q. over two years.
The unaudited pro forma combined results of operations of ChannelPoint,
Blaise and p.d.,q. for the years ended December 31, 1998 and 1999 after giving
effect to certain pro forma adjustments are as follows:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenue.......................................... $ 2,589,000 $ 5,989,000
Net loss......................................... (15,007,000) (54,700,000)
Basic and diluted net loss per share............. $ (1.86) $ (4.81)
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain office facilities and equipment pursuant to
non-cancelable operating leases, which expire at various dates through July 31,
2004. Total rent expense under these leases for the years ended December 31,
1997, 1998 and 1999 approximated $220,000, $532,000 and $1.1 million,
respectively.
The aggregate future minimum non-cancelable commitments as of December 31,
1999 for capital leases and non-cancelable operating leases with initial terms
in excess of one year are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES CAPITAL LEASES
---------------- --------------
<S> <C> <C>
2000............................................. $1,338,000 $ 80,000
2001............................................. 830,000 84,000
2002............................................. 715,000 62,000
2003............................................. 379,000 10,000
2004............................................. 368,000 3,000
---------- --------
Minimum lease payments........................... $3,630,000 239,000
==========
Less amounts representing interest............... (51,000)
--------
188,000
Less portion due within one year................. (57,000)
--------
$131,000
========
</TABLE>
Subsequent to December 31, 1999, the Company entered into a facility lease
agreement which requires future minimum payments of $290,000, $589,000 and
$349,000 for the years ended December 31, 2000, 2001 and 2002, respectively.
F-18
<PAGE> 93
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LEGAL
FirePond, Inc. filed suit in the United States District Court for the
District of Minnesota on February 26, 1999 against a current employee of the
Company and former employee of the plaintiff. FirePond subsequently added the
Company as a defendant in the suit. FirePond alleges that the employee breached
a non-competition agreement with FirePond by accepting employment with the
Company. FirePond also alleges misappropriation of FirePond's trade secrets,
breach of fiduciary duty, unfair competition and tortious interference with
FirePond's noncompetition agreement with the employee. On April 15, 1999,
FirePond amended the complaint and added the Company as a party. On July 30,
1999, the court upheld FirePond's motion for temporary injunction against the
employee on the basis that his noncompetition agreement enjoined him from
working for the Company from July 30, 1999 to September 25, 1999. The court
denied FirePond's motion for temporary injunction against ChannelPoint and the
employee on the basis of misappropriation of trade secrets. The Company believes
that FirePond's claims are without merit and intends to pursue its defenses
vigorously. However, due to the inherently uncertain nature of litigation and
the fact that discovery has not yet been completed, the Company cannot determine
the possible loss, if any, that it may ultimately incur either in the context of
a trial or as a result of a negotiated settlement. The Company's defense of this
litigation, regardless of its outcome, could result in the expenditure of
significant financial and managerial resources.
A former employee of the Company filed a suit in District Court, Boulder
County, Colorado on February 9, 2000 against the Company and its President and
Chief Executive Officer. The plaintiff seeks a declaratory judgment that, among
other things, his options for shares of the Company's common stock have
accelerated according to the terms of an employment agreement with the Company.
The former employee also claims breach of contract, right to unpaid wages,
securities fraud, conversion and tortious interference with a contract. The
former employee seeks to accelerate options to acquire 655,286 shares of the
Company's common stock and unspecified damages. On February 25, 2000, the
Company filed a motion to change venue to El Paso County, Colorado. The Company
believes that the former employee's claims are without merit and intend to
pursue our defenses vigorously. However, due to the inherently uncertain nature
of litigation and the fact that discovery has not yet begun, the Company cannot
determine the possible loss, if any, that it may ultimately incur either in the
context of a trial or as a result of a negotiated settlement. The Company's
defense of this litigation, regardless of its outcome, could result in the
expenditure of significant financial and managerial resources.
In addition, the Company is involved in other litigation that arises in the
normal course of business operations. As of the date of this prospectus,
management does not believe that any of this litigation will have a material
adverse effect on our business, results of operations or financial condition.
10. RELATED PARTY TRANSACTIONS
The Company has a long-term software licensing and services agreement with
a related party which, at December 31, 1999, indirectly owns approximately 14%
of the Company's issued and outstanding preferred stock. During 1998 and 1999,
the Company recognized revenue of $1.6 million and $1.7 million from this
related party, and had recorded deferred revenue of $7.7 million and $10.6
million at December 31, 1998 and 1999, respectively, from this related party.
The Company has an agreement to provide various services and products with
a separate company which indirectly owns approximately 21% of the Company's
issued and outstanding preferred stock. During 1999, the Company recognized
revenue of approximately $2.5 million under this agreement. At December 31, 1998
and 1999, the Company had recorded deferred revenue of $5.0 million and $16.9
million, respectively, from this related party. The Company also had $9.7
million of accounts receivable at December 31, 1999 from this related party.
F-19
<PAGE> 94
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1999, the Company entered into a strategic alliance with an
affiliate of GE Capital, which indirectly owns 13% of the Company's issued and
outstanding preferred stock. During 1999, the Company recognized revenue of
$623,000 from this related party. At December 31, 1999, the Company had deferred
revenue of $553,000 and total receivables of $1.6 million from this related
party.
During 1999, the Company entered into a professional services agreement
with a related party which indirectly owns approximately 3% of the Company's
issued and outstanding preferred stock. The Company had deferred revenue of
$417,000 from this related party at December 31, 1999.
11. SUBSEQUENT EVENTS
ACQUISITIONS
InsurQuote Systems, Inc.
On February 1, 2000, the Company signed a definitive agreement to merge
with InsurQuote Systems, Inc. ("InsurQuote") based in Provo, Utah. InsurQuote
provides and develops software which enables insurance carriers and agents to
distribute and access property and casualty insurance rating information over
the Internet. The Company will issue shares of its common stock, stock options
and warrants equal to 22.5% of the Company's fully-diluted common stock
outstanding as of the closing date subject to certain adjustments. The
acquisition is intended to be accounted for using the purchase method of
accounting and is expected to close during April 2000.
LifeLink Corporation
On March 24, 2000, the Company acquired the assets related to LifeLink
Corporation, an illustration software company which provides life insurance
quoting services. The purchase price of $8.9 million consisted of secured
promissory notes totaling $6 million, payable with accrued interest at 7%, due
upon the successful completion of this IPO or one year from the date of
issuance, subject to certain contingencies, and 333,333 shares of the Company's
common stock. The Company will place $2.0 million in escrow for a period of 12
to 18 months to satisfy potential indemnification claims. The acquisition will
be accounted for using the purchase method of accounting and the purchase price
will be allocated to the acquired tangible and intangible assets based upon
their fair values on the date of acquisition based upon an independent
third-party valuation.
12. SUBSEQUENT EVENTS (UNAUDITED)
SERIES E PREFERRED STOCK
In March 2000, the Company's Board of Directors authorized 500,000 and the
Company issued 300,000 shares of Series E preferred stock in a private placement
at a purchase price of $100.00 per share to certain existing stockholders of the
Company and one new investor. The Series E preferred stock is convertible into
shares of the Company's common stock upon the earlier of the closing of an IPO,
a private financing, acquisition of the Company, agreement of the Company and
holders representing two-thirds of the outstanding shares of the Series E
preferred stock or 18 months after the issuance date. Depending on the event
which causes the conversion, the Series E preferred stock will convert into
common stock at a conversion rate based on the IPO price per share of common
stock, the per share price in the private financing, $15.00 per share in the
event of an acquisition of the Company, or the fair market value of a share of
common stock 18 months after the issuance date, in each case less a discount of
one-half of one percent per month such preferred stock has been outstanding. If,
prior to the occurrence of any of the specified events or 18 months, the Company
and the holders of the Series E preferred stock agree to convert the Series E
preferred stock into common stock, the conversion rate is based on the fair
market value of a share of the common stock on the date of conversion.
F-20
<PAGE> 95
CHANNELPOINT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INITIAL PUBLIC OFFERING
On March 27, 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission that would
permit the Company to sell shares of the Company's common stock in connection
with a proposed IPO.
F-21
<PAGE> 96
CHANNELPOINT, INC.
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED FINANCIAL INFORMATION
OVERVIEW
Pursuant to the February 1, 2000 merger agreement between ChannelPoint,
Inc. ("ChannelPoint") and InsurQuote Systems, Inc. ("InsurQuote"), ChannelPoint
will acquire all of the outstanding common stock of InsurQuote. Upon completion
of the acquisition, the existing InsurQuote stockholders will own approximately
22.5% of the outstanding common stock of the combined company as of December 31,
1999 based on each Company's respective capitalization on such date subject to
certain adjustments. The acquisition will be accounted for using the purchase
method of accounting, and accordingly, the purchase price will be allocated to
the tangible and intangible assets acquired and liabilities assumed on the basis
of their fair values on the acquisition date based on an appraisal performed by
an independent third party. The allocation is preliminary and is subject to
adjustment upon finalization of the purchase accounting.
The total purchase price of approximately $140.4 million is based upon the
22.5% of outstanding common stock of the combined company and includes an
estimated 14,590,840 shares and stock options and warrants to purchase an
aggregate of 996,294 shares of ChannelPoint's common stock, subject to certain
adjustments, with an estimated fair value of approximately $136.3 million and
acquisition related expenses of approximately $4.1 million. Acquired intangible
assets include $122.7 million of goodwill, the customer list of $3.2 million,
purchased software and technology of $2.7 million and assembled workforce of
$14.9 million and non-compete agreements of $2.9 million. The acquired
intangible assets will be amortized over their estimated useful lives of two to
four years. The Company also assumed net liabilities of $7.3 million.
Approximately $1.3 million of the purchase price will be allocated to the
acquired in-process research and development efforts. The in-process research
and development efforts relate to the development of software which had not
progressed to a stage where they met technological feasibility.
The following unaudited pro forma combined condensed balance sheet as of
December 31, 1999 combines ChannelPoint's December 31, 1999 balance sheet with
InsurQuote's December 31, 1999 balance sheet as if the acquisition had been
consummated on that date. The unaudited pro forma combined condensed statement
of operations gives effect to the pending acquisition as if it had occurred on
January 1, 1999. This statement combines the ChannelPoint results of operations
with the results of operations of InsurQuote for the year ended December 31,
1999.
The unaudited pro forma combined condensed information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or operating results that would have actually occurred if the
acquisition had been consummated as of the dates indicated, nor is it
necessarily indicative of future financial position or operating results. The
pro forma adjustments are based on the information currently available at the
date of this Prospectus and are subject to change based upon completion of the
transaction and final purchase price allocation, including determination of the
fair value of the ChannelPoint shares issued in the acquisition.
The unaudited pro forma consolidated condensed financial statements
presented herein should be read in conjunction with the historical audited
financial statements of ChannelPoint and InsurQuote included elsewhere in this
Prospectus.
F-22
<PAGE> 97
CHANNELPOINT, INC.
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CHANNELPOINT INSURQUOTE ADJUSTMENTS COMBINED
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 10,693 $ 3,276 $ -- $ 13,969
Short-term investments.................. 15,335 -- -- 15,335
Accounts receivable, net................ 10,050 1,845 -- 11,895
Other receivable -- related party....... 1,389 -- -- 1,389
Capitalized contract costs.............. 2,582 -- -- 2,582
Prepaid expenses and other current
assets............................... 484 283 -- 767
-------- -------- -------- --------
Total current assets............ 40,533 5,404 -- 45,937
Property and equipment, net............... 9,856 4,212 -- 14,068
Intangible assets, net.................... 23,794 158 146,432 (A) 170,384
Other assets.............................. 341 -- -- 341
-------- -------- -------- --------
Total assets.................... $ 74,524 $ 9,774 $146,432 $230,730
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt and
capital lease obligations............ $ 1,283 $ 256 $ -- $ 1,539
Accounts payable and accrued
liabilities.......................... 10,239 3,213 4,060 (A) 17,512
Deferred revenue........................ 6,430 3,051 -- 9,481
-------- -------- -------- --------
Total current liabilities....... 17,952 6,520 4,060 28,532
Long-term debt and capital lease
obligations............................. 131 9,007 -- 9,138
Other liabilities......................... -- 1,553 -- 1,553
Deferred revenue.......................... 23,489 -- -- 23,489
Mandatorily redeemable preferred stock.... -- 5,000 (5,000)(B) --
Stockholders' equity:
Preferred stock......................... 14 27,473 (27,473)(B) 14
Common stock............................ 17 1,741 (1,726)(A)(B) 32
Additional paid-in capital.............. 110,263 123 136,228 (A)(B) 246,614
Deferred compensation................... (5,184) -- -- (5,184)
Accumulated deficit..................... (72,158) (41,643) 40,343 (A)(B) (73,458)
-------- -------- -------- --------
Total stockholders' equity
(deficit)..................... 32,952 (12,306) 147,372 168,018
-------- -------- -------- --------
Total liabilities and
stockholders' equity.......... $ 74,524 $ 9,774 $146,432 $230,730
======== ======== ======== ========
</TABLE>
See accompanying Notes to Pro Forma Consolidated Condensed Financial Information
F-23
<PAGE> 98
CHANNELPOINT, INC.
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CHANNELPOINT INSURQUOTE ADJUSTMENTS COMBINED
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue.................................... $ 5,498 $ 10,533 $ -- $ 16,031
----------- -------- -------- -----------
Costs and expenses:
Cost of revenue.......................... 12,159 3,830 9,785(E) 25,774
Product development...................... 18,212 3,542 -- 21,754
Selling and marketing.................... 19,884 21,759 (18,583)(E) 23,060
General and administrative............... 8,595 -- 8,798(E) 17,393
Amortization of assets acquired.......... -- -- 38,270(C) 38,270
----------- -------- -------- -----------
Total operating expenses......... 58,850 29,131 38,270 126,251
----------- -------- -------- -----------
Loss from operations....................... (53,352) (18,598) (38,270) (110,220)
Interest and other income, net............. 1,001 (269) -- 732
----------- -------- -------- -----------
Net loss................................... (52,351) (18,867) (38,270) (109,488)
Preferred stock dividend................... -- (996) 996(D) --
----------- -------- -------- -----------
Net loss applicable to common
shareholders............................. $ (52,351) $(19,863) $(37,274) $ (109,488)
=========== ======== ======== ===========
Basic and diluted net loss per common
share.................................... $ (4.60) $ (4.22)
=========== ===========
Weighted average common shares outstanding
used in computing basic and diluted net
loss per common share.................... 11,378 25,969
=========== ===========
Pro forma basic and diluted net loss per
common share (unaudited)................. $ (1.55) $ (2.26)
=========== ===========
Weighted average common shares outstanding
used in computing pro forma basic and
diluted net loss per common share
(unaudited).............................. 33,831 48,422
=========== ===========
</TABLE>
See accompanying Notes to Pro Forma Consolidated Condensed Financial
Information.
F-24
<PAGE> 99
CHANNELPOINT, INC.
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
The total purchase price of InsurQuote reflects the issuance of an
estimated 14,590,840 shares of ChannelPoint's common stock and the assumption of
options and warrants to purchase approximately 996,294 shares of the Company's
common stock. The total estimated purchase price was $140.4 million, including
$4.1 million of direct acquisition expenses.
The valuation of ChannelPoint's common stock is based on valuations
prepared in connection with the proposed initial public offering. The valuation
of options and warrants assumed by ChannelPoint is based upon the Black-Scholes
valuation model with the following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate.................................... 6%
Expected life of the options............................... 4 years
Volatility................................................. 80%
Dividend yield............................................. --
</TABLE>
The total purchase price of the InsurQuote acquisition has been allocated
to acquired assets based on estimates of their fair value. The following table
presents the allocation of the purchase price (in thousands):
<TABLE>
<S> <C>
Acquired in-process research and development.............. $ 1,300
Goodwill.................................................. 122,732
Customer list............................................. 3,200
Technology................................................ 2,700
Assembled workforce....................................... 14,900
Non-compete agreements.................................... 2,900
Net fair value of tangible assets acquired and liabilities
assumed................................................. (7,306)
--------
$140,426
========
</TABLE>
The amount of purchase price allocated to InsurQuote's in-process research
and development will be expensed upon consummation of the merger as the
underlying technology has not reached technological feasibility and, in the
opinion of management, has no alternative future use. This amount has not been
reflected in the accompanying pro forma statement of operations as a
nonrecurring charge, but has been reflected as an adjustment to accumulated
deficit in the accompanying pro forma balance sheet.
The adjustments to the pro forma consolidated balance sheet as of December
31, 1999 are as follows:
(A) To reflect goodwill and other intangibles of approximately $146.4
million resulting from the acquisition of InsurQuote and to reflect the
purchase price paid as follows: issuance of ChannelPoint common stock,
options and warrants valued at approximately $136.3 million and acquisition
related expenses payable of approximately $4.1 million.
(B) To eliminate the historical equity of InsurQuote.
The adjustments to the pro forma combined condensed statements of
operations for the year ended December 31, 1999 assume the acquisition occurred
as of January 1, 1999 and are as follows:
(C) To reflect the amortization of approximately $38.3 million of
estimated goodwill, with a four year life, and other intangibles resulting
from the acquisition. The intangible assets will be amortized ratably over
an estimated useful life of two to four years.
(D) To reflect the elimination of dividends on the preferred stock
issued by InsurQuote which were exchanged for ChannelPoint common stock.
(E) To reflect the reclassification of certain InsurQuote expenses to
conform to Channelpoint's presentation.
F-25
<PAGE> 100
INSURQUOTE SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998,
ELEVEN MONTHS ENDED JUNE 30, 1997
AND SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-27
Consolidated Financial Statements
Consolidated Balance Sheets................................. F-28
Consolidated Statements of Operations....................... F-29
Consolidated Statements of Shareholders' Equity (Deficit)... F-30
Consolidated Statements of Cash Flows....................... F-31
Notes to Consolidated Financial Statements.................. F-32
</TABLE>
F-26
<PAGE> 101
REPORT OF INDEPENDENT AUDITORS
Board of Directors
InsurQuote Systems, Inc.
We have audited the accompanying consolidated balance sheets of InsurQuote
Systems, Inc. and subsidiary (the Company) as of June 30, 1998 and 1999 and
December 31, 1999, and the related consolidated statements of operations,
shareholders' equity (deficit), and cash flows for the eleven months ended June
30, 1997, the years ended June 30, 1998 and 1999 and the six months 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of InsurQuote
Systems, Inc. and subsidiary at June 30, 1998 and 1999 and December 31, 1999,
and the consolidated results of their operations and their cash flows for the
eleven months ended June 30, 1997, the years ended June 30, 1998 and 1999 and
the six months ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred losses since
inception, has limited access to additional resources, and its continued
existence is dependent upon its ability to obtain additional financing. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
January 20, 2000, except for
Note 12, as to which the date is
February 1, 2000
F-27
<PAGE> 102
INSURQUOTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30
--------------------------- DECEMBER 31
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 8,032,178 $ 11,539,387 $ 3,275,848
Accounts receivable, less allowance of $248,775, $313,893
and $297,930, respectively.............................. 903,426 919,756 1,845,356
Other..................................................... 68,920 335,835 282,671
------------ ------------ ------------
Total current assets............................... 9,004,524 12,794,978 5,403,875
Equipment:
Office equipment.......................................... 392,744 1,083,125 1,127,752
Computer equipment........................................ 1,775,673 3,802,446 4,679,842
Leasehold improvements.................................... 164,189 328,754 400,661
------------ ------------ ------------
2,332,606 5,214,325 6,208,255
Accumulated depreciation.................................. (665,946) (1,307,013) (1,995,592)
------------ ------------ ------------
1,666,660 3,907,312 4,212,663
Other assets, net of accumulated amortization of $1,543,191,
$3,761,102 and $4,687,322, respectively................... 3,587,823 1,283,244 158,333
------------ ------------ ------------
Total assets....................................... $ 14,259,007 $ 17,985,534 $ 9,774,871
============ ============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 852,748 $ 821,204 $ 281,066
Accrued liabilities....................................... 1,962,563 2,270,210 2,932,233
Current portion of notes payable to related parties....... -- 200,000 200,000
Current portion of notes payable and capital lease
obligation.............................................. 229,229 59,003 55,923
Deferred revenue.......................................... 1,524,886 2,175,216 3,051,303
------------ ------------ ------------
Total current liabilities.......................... 4,569,426 5,525,633 6,520,525
Notes payable to related parties, less current portion...... 9,100,000 8,900,000 8,900,000
Capital lease obligation, less current portion.............. -- 137,282 107,099
Other accrued liabilities................................... 366,759 981,341 1,553,120
Series C redeemable convertible preferred stock; no par
value; 145,414 shares authorized, issued and
outstanding............................................... 5,000,000 5,000,000 5,000,000
Shareholders' deficit:
Series A convertible preferred stock; no par value;
167,399 shares authorized, 103,500 and 119,475 shares
issued and outstanding at June 30, 1998 and 1999 and at
December 31, 1999, respectively......................... 279,000 279,000 329,002
Series B convertible preferred stock; no par value;
705,089 shares authorized; 603,164 shares issued and
outstanding............................................. 2,773,994 2,773,994 2,773,994
Series D convertible preferred stock; no par value;
320,203 shares authorized, issued and outstanding....... 4,469,886 4,469,886 4,469,886
Series F convertible preferred stock; no par value;
426,856 shares authorized, issued and outstanding....... -- 19,900,000 19,900,000
Common stock; no par value; 7,000,000 shares authorized;
970,844, 1,121,309 and 1,122,862 issued and outstanding
at June 30, 1998 and 1999 and December 31, 1999,
respectively............................................ 1,717,762 1,737,285 1,741,017
Additional paid-in-capital................................ -- 125,000 123,000
Accumulated deficit....................................... (14,015,820) (31,841,887) (41,642,772)
Treasury stock, 371 shares................................ (2,000) (2,000) --
------------ ------------ ------------
Total shareholders' deficit........................ (4,777,178) (2,558,722) (12,305,873)
------------ ------------ ------------
Total liabilities and shareholders' deficit........ $ 14,259,007 $ 17,985,534 $ 9,774,871
============ ============ ============
</TABLE>
See accompanying notes.
F-28
<PAGE> 103
INSURQUOTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
ELEVEN MONTHS YEAR ENDED JUNE 30 DECEMBER 31
ENDED JUNE 30 -------------------------- -------------------------
1997 1998 1999 1998 1999
------------- ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $ 3,499,786 $11,907,974 $ 9,918,518 $ 4,658,961 $ 5,273,696
Operating Expenses
Cost of sales................. 2,783,233 1,673,760 3,045,402 975,491 2,106,970
Selling, general and
administrative expenses.... 2,119,431 16,275,983 20,487,057 9,703,064 10,628,091
Research and development...... 1,056,125 2,077,394 3,149,276 1,500,388 1,892,903
----------- ----------- ------------ ----------- -----------
Loss from operations............ (2,459,003) (8,119,163) (16,763,217) (7,519,982) (9,354,268)
Other income (expense):
Interest expense.............. (352,575) (909,960) (879,503) (349,332) (357,483)
Interest income............... 45,640 226,633 315,310 136,841 194,918
Other......................... -- -- -- -- 337,642
----------- ----------- ------------ ----------- -----------
Net loss........................ (2,765,938) (8,802,490) (17,327,410) (7,732,473) (9,179,191)
Preferred stock dividend........ -- (96,700) (498,657) (124,330) (621,694)
----------- ----------- ------------ ----------- -----------
Net loss applicable to common
shareholders.................. $(2,765,938) $(8,899,190) $(17,826,067) $(7,856,803) $(9,800,885)
=========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
F-29
<PAGE> 104
INSURQUOTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TREASURY STOCK
----------------------- ---------------------- PAID-IN- ACCUMULATED ----------------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT SHARES AMOUNT
--------- ----------- --------- ---------- ---------- ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1996....... 706,664 $ 3,052,994 600,000 $ 146,020 $ (2,350,692)
Net loss..................... (2,765,938)
--------- ----------- --------- ---------- -------- ------------ ---- -------
BALANCE AT JUNE 30, 1997....... 706,664 3,052,994 600,000 146,020 (5,116,630)
Issuance of Common Stock for
the purchase of certain
assets of ACP............. 37,094 71,962
Issuance of Series D,
convertible preferred
stock..................... 320,203 4,469,886
Issuance of Common Stock,
(net of issuance costs of
$130,334)................. 333,750 1,499,780
Repurchase of shares......... (371) $(2,000)
Preferred stock dividend..... (96,700)
Net Loss..................... (8,802,490)
--------- ----------- --------- ---------- -------- ------------ ---- -------
BALANCE AT JUNE 30, 1998....... 1,026,867 7,522,880 970,844 1,717,762 (14,015,820) (371) (2,000)
Exercise of stock options and
other..................... 150,465 19,523
Issuance of Series F,
convertible preferred
Stock, (net of issuance
costs of $100,000)........ 426,856 19,900,000
Issuance of warrants with
notes payable............. $125,000
Preferred stock dividend..... (498,657)
Net Loss..................... (17,327,410)
--------- ----------- --------- ---------- -------- ------------ ---- -------
BALANCE AT JUNE 30, 1999....... 1,453,723 27,422,880 1,121,309 1,737,285 125,000 (31,841,887) (371) (2,000)
Exercise of stock options.... 1,924 3,732
Exercise of preferred stock
warrant................... 15,975 50,002
Retirement of treasury
stock..................... (371) (2,000) 371 2,000
Preferred stock dividend..... (621,694)
Net Loss..................... (9,179,191)
--------- ----------- --------- ---------- -------- ------------ ---- -------
BALANCE AT DECEMBER 31, 1999... 1,469,698 $27,472,882 1,122,862 $1,741,017 $123,000 $(41,642,772) -- $ --
========= =========== ========= ========== ======== ============ ==== =======
<CAPTION>
TOTAL
------------
<S> <C>
BALANCE AT JULY 31, 1996....... $ 848,322
Net loss..................... (2,765,938)
------------
BALANCE AT JUNE 30, 1997....... (1,917,616)
Issuance of Common Stock for
the purchase of certain
assets of ACP............. 71,962
Issuance of Series D,
convertible preferred
stock..................... 4,469,886
Issuance of Common Stock,
(net of issuance costs of
$130,334)................. 1,499,780
Repurchase of shares......... (2,000)
Preferred stock dividend..... (96,700)
Net Loss..................... (8,802,490)
------------
BALANCE AT JUNE 30, 1998....... (4,777,178)
Exercise of stock options and
other..................... 19,523
Issuance of Series F,
convertible preferred
Stock, (net of issuance
costs of $100,000)........ 19,900,000
Issuance of warrants with
notes payable............. 125,000
Preferred stock dividend..... (498,657)
Net Loss..................... (17,327,410)
------------
BALANCE AT JUNE 30, 1999....... (2,558,722)
Exercise of stock options.... 3,732
Exercise of preferred stock
warrant................... 50,002
Retirement of treasury
stock..................... --
Preferred stock dividend..... (621,694)
Net Loss..................... (9,179,191)
------------
BALANCE AT DECEMBER 31, 1999... $(12,305,873)
============
</TABLE>
See accompanying notes.
F-30
<PAGE> 105
INSURQUOTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
ELEVEN MONTHS YEAR ENDED JUNE 30 DECEMBER 31
ENDED JUNE 30 -------------------------- --------------------------
1997 1998 1999 1998 1999
------------- ----------- ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................ $(2,765,938) $(8,802,490) $(17,327,410) $(7,732,473) $(9,179,191)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation...................................... 142,553 392,597 818,927 299,875 655,620
Amortization...................................... 295,821 1,247,370 2,217,911 1,006,145 1,124,911
Loss from disposal of assets...................... -- -- 23,258 -- --
Interest expense on warrants...................... -- -- 125,000 -- --
Impairment of intangible assets................... -- 980,000 -- -- --
Changes in operating assets and liabilities:
Accounts receivable............................. 489,616 437,179 (16,330) (726,785) (925,600)
Other assets.................................... 225,310 (90,260) (180,247) 154,189 53,164
Accounts payable and accrued liabilities........ 356,906 989,119 392,028 (245,748) 71,970
Deferred revenue................................ (366,348) 248,297 650,330 1,138,626 876,087
----------- ----------- ------------ ----------- -----------
Net cash used in operating activities............... (1,622,080) (4,598,188) (13,296,533) (6,106,171) (7,323,039)
INVESTING ACTIVITIES
Purchases of property and equipment................. (313,598) (889,173) (2,886,552) (983,947) (994,234)
Acquisitions, net of working capital acquired....... (2,501,000) (512,661) -- -- --
----------- ----------- ------------ ----------- -----------
Net cash used in investing activities............... (2,814,598) (1,401,834) (2,886,552) (983,947) (994,234)
FINANCING ACTIVITIES
Proceeds from notes payable to related parties...... 6,500,000 8,900,000 3,000,000 -- --
Principal payments on notes payable to related
parties........................................... (4,291) (6,519,539) (3,000,000) -- --
Principal payments on notes payable................. (35,521) (2,243,518) -- -- --
Payments on debt.................................... -- -- (229,229) (229,229) --
Net proceeds from issuance of common stock.......... -- 1,499,780 -- -- --
Proceeds from exercise of stock options............. -- -- 19,523 -- 3,732
Proceeds from issuance of redeemable convertible
preferred stock................................... -- 5,000,000 -- -- --
Proceeds from issuance of convertible preferred
stock............................................. -- 4,469,886 19,900,000 -- --
Proceeds from exercise of preferred stock warrant... -- -- -- -- 50,002
Purchase of treasury stock.......................... -- (2,000) -- -- --
Other............................................... 83,308 (3,698) -- -- --
----------- ----------- ------------ ----------- -----------
Net cash provided by financing activities........... 6,543,496 11,100,911 19,690,294 (229,229) 53,734
----------- ----------- ------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... 2,106,818 5,100,889 3,507,209 (7,319,347) (8,263,539)
Cash and cash equivalents at beginning of year...... 824,471 2,931,289 8,032,178 8,032,178 11,539,387
----------- ----------- ------------ ----------- -----------
Cash and cash equivalents at end of year............ $ 2,931,289 $ 8,032,178 $ 11,539,387 $ 712,831 $ 3,275,848
=========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
F-31
<PAGE> 106
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
InsurQuote Systems, Inc. (the Company) commenced operations in 1989 and is
engaged in the business of developing, selling and maintaining software used by
independent insurance agents and companies to price and rate insurance coverage
offered by certain insurance companies. In July 1997, the Company acquired
certain assets of Automated Call Processing (ACP), a company principally engaged
in the business of providing automobile pricing and insurance information.
During 1997, the Company changed its fiscal year end from July 31 to June
30. Accordingly, the statements of operations, cash flows and shareholders'
equity (deficit) for fiscal 1997 reflect results of operations and cash flows
for the eleven months ended June 30, 1997. All references to the year ended June
30, 1997 in the footnotes reflect the eleven month period then ended.
As discussed in Note 12, the Company has entered into a definitive
agreement to be acquired by ChannelPoint, Inc. In connection with ChannelPoint's
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission and because ChannelPoint, Inc. has a December 31 year end, the six
month interim periods ended December 31, 1999 and 1998 have been included herein
with the Company's audited financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiary Insurance Automation Systems, Inc.
(IAS). All intercompany accounts and transactions have been eliminated in
consolidation.
INTERIM FINANCIAL INFORMATION
The financial statements for the six months ended December 31, 1998 and
related notes are unaudited but include all adjustments (consisting solely of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the financial position and results of operations for
the interim periods. The results of operations for the six-month periods ended
December 31, 1998 and 1999 are not necessarily indicative of the operating
results to be expected for the full year.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash, cash equivalents and accounts
receivable. Risks associated with cash and cash equivalents are mitigated by
banking with creditworthy institutions.
The Company grants credit to substantially all of its customers without
requiring collateral. The Company has established provisions for potential
credit losses that are expected to be incurred.
MAJOR CUSTOMER
The Company had no net sales greater than 10% to one customer for the year
ended June 30, 1999 and six months ended December 31, 1999 and net sales to one
customer of 22% and 11% of consolidated net sales for the year ended June 30,
1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents.
F-32
<PAGE> 107
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUIPMENT
Equipment is stated at cost, less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
respective assets, generally three to five years. Leasehold improvements are
depreciated using the straight-line method over the shorter of the estimated
useful lives of the assets or the remaining lives of the related leases.
OTHER ASSETS
Other current assets include prepaid assets and deposits. Other long-term
assets are comprised primarily of purchased intangibles including contracts,
software and copyrights, goodwill and the value assigned to non-compete
agreements acquired in connection with the purchase of IAS and ACP (see Notes 3
and 4). Software and copyrights of approximately $4.2 million and goodwill are
being amortized over a three year period based on the estimated useful life of
the technology. The value assigned to the non-compete agreements is being
amortized over three years, the term of the agreements. The value assigned to
contracts acquired is being amortized over the life of the contracts, which
range from one to three and a half years.
STOCK BASED COMPENSATION
The Company has elected to account for stock based compensation
arrangements under the provisions of Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees, rather than adopting the alternative
fair value accounting provided under Statement of Financial Accounting Standard
("SFAS") No. 123, Accounting for Stock based Compensation.
REVENUE RECOGNITION
The Company recognizes revenue primarily from software licensing,
maintenance and related services. Revenue from software license fees is
recognized when the software is delivered, there are no uncertainties
surrounding product acceptance, the fees are fixed and determinable, and
collection is considered probable. Revenue from services and support is
recognized at the time the services and support are rendered. Revenue from
maintenance contracts and service agreements, which are typically pre-paid, is
deferred when received and recognized ratably over the term of the contract or
agreement.
INCOME TAXES
The Company uses an asset and liability method of accounting for income
taxes. The provision for income taxes is based on income or loss for financial
reporting purposes as required by SFAS No. 109, Accounting for Income Taxes.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and revenues and expenses.
Actual results could differ from the estimates and assumptions used.
SOFTWARE DEVELOPMENT COSTS
Software development costs have been accounted for in accordance with SFAS
No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed. Under the standard, capitalization of software development
costs begins upon the establishment of technological feasibility which, for the
Company, is upon completion of a working model. To date, all such amounts have
been insignificant prior to
F-33
<PAGE> 108
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
general release of the software. Accordingly, the Company has charged all
software development costs to expenses.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
SFAS No. 133, as amended, is effective for fiscal years beginning after June 15,
2000. To date, the Company has not entered into any derivative financial
instruments or hedging activities.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 provides specific
guidance, among other things, as to the recognition of revenue related to
up-front non-refundable fees and service charges received in connection with a
contractual arrangement. We do not anticipate that the adoption of SAB 101 will
have a material impact on our financial condition or results of operations.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
RECLASSIFICATIONS
Certain prior year amounts have been reclassed to conform with the current
year presentation.
2. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has an accumulated deficit
of $41,642,772, $31,841,887 and $14,015,820 at December 31, 1999, June 30, 1999
and June 30, 1998, respectively, including a net loss of $9,179,191 for the six
months ended December 31, 1999, $17,327,410 in fiscal 1999 and $8,802,490 in
fiscal 1998. The Company also has limited immediate access to additional capital
resources. Therefore, the Company's continued existence is dependent upon its
ability to obtain additional financing. Management intends to seek additional
financing to fund continuing operations until such time as the Company is able
to generate cash flows from sales sufficient to fund its operations.
3. ACQUISITIONS
On March 7, 1997, the Company completed the purchase of substantially all
the assets of IAS. Accordingly, the results of operations of IAS have been
included in the Company's financial statements since the date of acquisition.
IAS is engaged in the business of designing, developing and selling comparative
rating software. The aggregate purchase price was approximately $5.1 million
consisting of $2.5 million paid at closing, the issuance of a $1.8 million one
year promissory note to the seller with the remaining balance comprised of
liabilities assumed by the Company. The promissory note carried an interest of
9% with interest and principal due on March 7, 1998, and was secured by
substantially all of the assets of IAS. The note was paid during 1998.
On July 1, 1997, the Company purchased certain assets of Automated Call
Processing, a company engaged in the business of providing automobile pricing
and insurance information. The aggregate purchase price of approximately $2.2
million consisted of $512,661 in cash, the issuance of a $750,000 promissory
note and 37,094 shares of common stock of the Company to the seller, with the
remaining balance comprised of liabilities assumed by the Company.
F-34
<PAGE> 109
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OTHER ASSETS
Other assets relate primarily to intangible assets acquired in the purchase
of IAS and ACP and are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30
------------------------- DECEMBER 31
1998 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Software and copyrights....................... $ 4,170,655 $ 4,170,655 $ 4,170,655
Goodwill, contract rights and other assets.... 960,359 873,691 675,000
----------- ----------- -----------
5,131,014 5,044,346 4,845,655
Accumulated amortization...................... (1,543,191) (3,761,102) (4,687,322)
----------- ----------- -----------
$ 3,587,823 $ 1,283,244 $ 158,333
=========== =========== ===========
</TABLE>
Accumulated amortization for software and copyrights was approximately $1.1
million and $3.15 million at June 30, 1998 and 1999, respectively.
During fiscal year 1998 certain intangible assets purchased in conjunction
with the acquisition of ACP became impaired when a customer failed to renew
contracts which would have provided the Company with a future revenue stream. As
a result, the accompanying 1998 financial statements reflect a charge to
selling, general and administrative expenses of $980,000 to adjust the value of
the intangible assets to their estimated fair values based on a discounted cash
flow projection of expected future revenues from remaining contracts with the
customer. Revenue and expenses associated with the impairment represented
approximately 27% of 1998 net sales and 10% of 1998 total operating expenses.
5. NOTES PAYABLE
Notes payable to related parties represent amounts that are payable to
certain stockholders and directors of the Company and consisted of the
following:
<TABLE>
<CAPTION>
JUNE 30
----------------------- DECEMBER 31
1998 1999 1999
---------- ---------- -----------
<S> <C> <C> <C>
Unsecured note payable, interest at 10.5%,
interest payable monthly, principal due in full
on
June 6, 2000................................... $ 100,000 $ 100,000 $ 100,000
Unsecured note payable, interest at 10.5%,
interest payable monthly, principal due in full
on March 28, 2000.............................. 100,000 100,000 100,000
Unsecured subordinated note payable, interest at
7.5%, interest payable quarterly, principal due
in full on February 10, 2003................... 8,900,000 8,900,000 8,900,000
---------- ---------- ----------
9,100,000 9,100,000 9,100,000
Less current portion............................. -- (200,000) (200,000)
---------- ---------- ----------
$9,100,000 $8,900,000 $8,900,000
========== ========== ==========
</TABLE>
In January 1999, the Company borrowed $3,000,000 from a board member. The
note carried an interest rate of 12% and included a detachable warrant to
purchase 9,604 shares of Series B preferred stock with an exercise price of
$37.48 per share. The note was repaid in March 1999. As of December 31, 1999,
the warrant remained outstanding.
F-35
<PAGE> 110
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of notes payable and notes payable to related parties for each
of the next five fiscal years ended December 31 and thereafter are as follows:
<TABLE>
<S> <C>
2000.................................................... $ 200,000
2001.................................................... --
2002.................................................... --
2003.................................................... 8,900,000
2004 and thereafter..................................... --
----------
$9,100,000
==========
</TABLE>
The Company paid approximately $235,000, $950,000, $881,000, and $334,000
in cash for interest for the eleven months ended June 30, 1997, years ended June
30, 1998 and 1999, and six months ended December 31, 1999, respectively.
6. INCOME TAXES
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $35,187,000 and $34,089,000, respectively.
The Company also had federal research and development tax credit carryforwards
of approximately $592,000. The net operating loss and credit carryforwards will
expire at various dates beginning in 2005 through 2019, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
As of December 31, 1999, the Company had deferred tax assets of
approximately $15,310,000 and deferred tax liabilities of approximately $4,000.
As of June 30, 1999 and 1998, the Company had deferred tax assets of
approximately $11,641,000 and $5,371,000, respectively, and deferred tax
liabilities of approximately $8,000 and $16,000, respectively. The net deferred
tax assets have been fully offset by a valuation allowance. The net valuation
allowance was increased by $3,673,000 during the six months ended December 31,
1999 and $6,278,000 for the year ended June 30, 1999. Deferred tax assets relate
primarily to: 1) net operating loss carryforwards; 2) research credits; and 3)
use of extended tax amortization periods for intangible assets.
7. COMMITMENTS
The Company has various operating and capital lease commitments. As of
December 31, 1999, future minimum lease payments under these commitments for
each of the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
---------- --------
<S> <C> <C>
2000........................................................ $1,109,928 $ 70,219
2001........................................................ 971,570 76,083
2002........................................................ 498,450 35,033
2003........................................................ 485,952 3,808
2004 and thereafter......................................... 200,436 --
---------- --------
Total future minimum lease payments......................... $3,266,336 185,143
==========
Less amount representing interest........................... (22,121)
--------
163,022
Less current portion........................................ (55,923)
--------
Long-term capital lease obligation.......................... $107,099
========
</TABLE>
F-36
<PAGE> 111
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The operating lease agreements are subject to predetermined rate increases
in accordance with the signed rental agreements. Rent expense under operating
leases for eleven months ended June 30, 1997 and the years ended June 30, 1998
and 1999 was approximately $191,000, $618,000 and $888,000, respectively. Rent
expense for the six months ended December 31, 1999 was approximately $520,000.
Equipment under capital lease, net of accumulated depreciation of $45,000,
$9,000 and $30,000, was approximately $135,000, $194,000 and $173,000 at June
30, 1998, June 30, 1999 and December 31, 1999, respectively.
8. SHAREHOLDERS' DEFICIT
PREFERRED STOCK
The Company has authorized 3,000,000 shares of preferred stock without par
value, of which 167,399 shares have been designated as Series A, 705,089 shares
have been designated as Series B, 145,414 shares have been designated as Series
C, 320,203 shares have been designated as Series D, 100 shares have been
designated as Series E, of which none have been issued, 426,856 shares have been
designated as Series F, and 1,234,939 shares are undesignated as of December 31,
1999.
The Series A, Series B, Series D and Series E preferred stock are
non-cumulative voting shares that are entitled to receive an annual dividend at
a rate of $0.2426, $0.4139, $0.8250 and $0.8065 per share, respectively. The
Series F preferred stock is cumulative, voting and is entitled to receive an
annual dividend at a rate of $2.3427 per share. Series C shareholders purchasing
shares in the initial sale of these shares are entitled to an annual dividend
rate of $1.7190 per share. Dividends on preferred stock Series A, B, D and E,
are non-cumulative and are not payable unless declared. Dividends on Series C
and F preferred stock are cumulative and are accrued quarterly from the date of
issuance. The Company cannot make distributions nor declare dividends on its
common stock unless and until dividends, including accrued but unpaid dividends
on Series C preferred stock, are paid or declared and set apart, upon all shares
of preferred stock. As of December 31, 1999, the Board has not declared any
dividends payable on preferred or common stock.
CONVERSION PRIVILEGES
Each share of preferred stock is convertible at any time, at the option of
the holder, into fully paid and nonassessable shares of common stock that is
equal to the original issue price for such series divided by the conversion
price. The conversion rate is subject to adjustment in a number of
circumstances, including subsequent issuances of common stock. At December 31,
1999, June 30, 1999 and June 30, 1998 each share of preferred stock was
convertible into one share of common stock.
Each share of Series A and B preferred stock automatically will be
converted into shares of common stock, based upon the current conversion rate,
immediately upon the closing of a fully underwritten public offering under the
Securities Act of 1933, as amended, that results in net proceeds to the Company
of at least $20 million.
Each share of Series D preferred automatically shall be converted into
shares of common stock at the then-effective conversion rate, immediately prior
to the consummation of the purchase of securities of the Company by the holder
of the Series D preferred stock pursuant to the exercise of the option held by
that investor to purchase additional stock of the Company.
Each share of Series E preferred automatically shall be converted to common
stock at the then-effective conversion rate, immediately prior to any sale,
assignment, transfer, pledge, encumbrance or disposition of the Company to any
person or entity other than the holder of the Series E preferred, its parent or
majority-owned subsidiary.
F-37
<PAGE> 112
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Each share of Series F preferred automatically shall be converted to common
stock at the then-effective conversion rate upon a majority vote of the Series F
holders or upon the closing of a fully underwritten public offering with an
initial public offering per share of at least the Series F preferred conversion
price plus accumulated but unpaid dividends on the Series F preferred.
VOTING RIGHTS
Series A and B preferred shareholders are entitled to vote on all matters
with the common shareholders and are entitled to the number of votes equal to
the number of common shares into which their preferred shares are convertible.
Series C and D preferred shareholders are not entitled to vote such shares
for the election of directors or on any other matter except (i) any amendment to
the Articles of Incorporation that alters the rights, preferences or privileges
of that series of preferred stock and (ii) following the closing of the exercise
of the option described below, each holder of shares of Series C preferred shall
be entitled to the number of votes equal to the number of common stock into
which such shares of Series C preferred held by such holder of Series C
preferred could then be converted.
Series E and Series F preferred shareholders are entitled to vote on all
matters with common shareholders and are entitled to a number of votes based on
a calculation of Series E and Series F preferred outstanding and total common
stock outstanding.
Except as outlined above, preferred shareholders are entitled to vote on
all matters with the common shareholders. Each share of common stock is entitled
to one vote.
OTHER RIGHTS
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, holders of preferred stock are entitled to
payment in an amount equal to approximately $2.70 per share or $322,000, $4.60
per share or $2,774,000, $34.38 per share or $4,999,333, $13.96 per share or
$4,470,033, $10.00 per share and $46.85 per share or $20,000,000 for Series A,
Series B, Series C, Series D, Series E and Series F, respectively, plus all
declared and unpaid dividends, or accrued but unpaid dividends for Series C and
Series F preferred stock, before any payment will be made to common
shareholders. If the assets to be distributed to the holders of preferred stock
are insufficient, then the assets will be distributed ratably to the holders of
the preferred stock.
On the fifth anniversary of the issuance of Series C preferred stock, the
Company is to redeem all outstanding shares of Series C preferred at a
redemption price per share equal to the liquidation preferences together with
accrued and unpaid dividends. In the event the Company anticipates a public
offering and to the extent the Company has sufficient funds, the Company may
elect to redeem any or all of the outstanding shares of Series C preferred
stock.
In March 1999, the Company entered into a securities purchase agreement
with an investor wherein the Company received net proceeds of $19,900,000 in
exchange for 426,856 shares of Series F preferred stock. Under the terms of this
agreement, if any person acquires voting control or all or substantially all of
the capital stock or assets of the Company, the investor may require the
acquiring person to purchase the Series F preferred stock from the investor at a
pre-determined price per share or the fair market value, whichever is greater.
In February 1998, the Company entered into a securities purchase agreement
with an investor wherein the Company received $20,000,000 in exchange for
145,414 shares of Series C preferred stock, 320,203 shares of Series D preferred
stock, 333,750 shares of common stock and a promissory note for $8,900,000.
Additionally, under the terms of the securities purchase agreement, at any time
after July 1, 2000 and until as
F-38
<PAGE> 113
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
late as July 1, 2010, under certain conditions, the investor has the option to
purchase sufficient shares of the Company's common stock at the then fair market
value to cause the investor to have at least a 51% voting interest in the
Company. This right is terminated if not exercised prior to the closing of an
initial public offering of the Company's common stock. If this right is
exercised, Series E preferred stock carrying super voting rights will be issued
to the investor. All classes of stock issued in this transaction are subject to
certain anti-dilution provisions. The Company also issued a warrant to purchase
440,350 shares of common stock in connection with this agreement.
STOCK OPTIONS
The Company has an Employee Stock Option Plan (the Plan) for which 579,000
common shares have been reserved. The Plan allows grants of incentive options
and nonqualified options to purchase common shares at a price that is not less
than the fair market value on the date of grant. The option prices are
determined by the Board of Directors. Generally, the options have a ten year
life from the date of grant and vest pursuant to one of the following schedules:
1) year 5-40%; year 6-40%; year 7-20%, 2) 1/36th per month vests beginning one
month after the grant date, 3) 25% vests on the first anniversary of the grant
date and the remainder vests quarterly thereafter based on a four year vesting
and 4) 1/12th per month vests beginning one month after the grant date.
Pro forma information regarding net loss and loss per share has been
determined as if the Company had accounted for its employee stock options under
the fair market value method. The fair value of these options was estimated at
the date of grant using a Minimum Value option pricing model with the following
weighted average assumptions for fiscal years ended June 30, 1999 and 1998 and
six months ended December 31, 1999, respectively; risk-free interest rate of
approximately 6%, 6.1% and 6%; dividend yield of 0% and a weighted-average
expected life of the option of 8 years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. Because the effect of
SFAS No. 123, Accounting for Stock Based Compensation is prospective, the
initial impact on pro forma net income (loss) may not be representative of
compensation expense in future years. The effect on the Company's pro forma
results for each of the fiscal years ended June 30, 1999 and 1998 and six months
ended December 31, 1999 was not material (<1% impact on net loss).
A summary of stock option activity, and related information for the eleven
months ended June 30, 1997, years ended June 30, 1998 and 1999 and six months
ended December 31, 1999 follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED JUNE 30 SIX MONTHS ENDED
JUNE 30 ------------------------------------------ DECEMBER 31
1997 1998 1999 1999
------------------- ------------------- -------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- --------- ------- --------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period....................... 395,724 $0.13 401,224 $0.15 398,636 $0.18 345,223 $ 1.65
Granted........................ 5,500 1.94 5,137 1.94 98,682 5.25 69,450 15.14
Exercised...................... -- -- -- (150,465) 0.13 (1,924) 1.94
Canceled....................... -- (7,725) 0.10 (1,630) 0.11 (2,409) 1.94
------- ------- -------- -------
Outstanding at end of period... 401,224 $0.15 398,636 $0.18 345,223 $1.65 410,340 $ 4.12
======= ======= ======== =======
Weighted-average fair value of
options granted during the
period....................... $ 0.77 $ 0.75 $ 2.00 $ 5.77
</TABLE>
F-39
<PAGE> 114
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Exercise prices for options outstanding as of December 31, 1999 ranged from
$0.10 to $16.04. There were approximately 40,000 exercisable options outstanding
at December 31, 1999. The weighted average remaining contractual life of the
options is 6 years. Below are the segregated exercise prices as of December 31,
1999:
<TABLE>
<CAPTION>
RANGE OF EXERCISE PRICES
------------------------------------------------
$0.10-1.94 $3.32-4.43 $9.37 $14.02-16.04
---------- ---------- ------- ------------
<S> <C> <C> <C> <C>
Options outstanding......................... 271,390 40,000 7,500 91,450
Weighted-average exercise price of options
outstanding............................... $ 0.31 $ 3.88 $ 9.37 $ 15.11
Weighted-average remaining contractual life
of options outstanding.................... 5 years 8 years 9 years 10 years
</TABLE>
WARRANTS
During 1995, the Company received $300,000 from an investor upon the
issuance of three $100,000 promissory notes. Attached to each of these notes are
warrants to purchase shares of Series A preferred stock at $3.13 per share. As
of December 31, 1999 and June 30, 1999, warrants to purchase 47,924 and 63,899
shares, respectively, of Series A preferred stock remain outstanding. The
warrants expire in March and June of 2005 if not exercised earlier.
In connection with previous debt agreements, the Company issued warrants to
purchase 7,693 and 84,628 shares of Series B preferred stock which expire on
December 23, 2001 and February 25, 2002, respectively. Under the terms of each
issuance, half of the shares are exercisable at $16.13 per share and the
remaining shares are exercisable at $48.87 per share.
During fiscal 1998, in connection with the issuance of a $8,900,000
promissory note, the Company issued a warrant to the investor to acquire an
additional 440,350 shares of common stock at a price of $20.21 per share. The
warrant is exercisable by the holder through February 10, 2008.
As discussed in Note 5, 9,604 warrants with an exercise price of $37.48
were issued in connection with a related party note payable.
In connection with a software development agreement, the Company issued
warrants to purchase 10,000 shares of common stock which expire on January 1,
2004, with an exercise price of $5.06 per share. Under the terms of the
agreement, the warrant shall become exercisable ratably over a three year
period.
9. EMPLOYEE BENEFIT PLAN
In 1998, the Company formally adopted a retirement plan that is qualified
under Section 401(k) of the Internal Revenue Code, which covers all eligible
employees. Participants may contribute a portion of their compensation not
exceeding a limit set annually by the Internal Revenue Service. The Company
makes a matching contribution based on the contribution made by the employee.
Total expense under the plan was approximately $10,300, $61,700, $87,000 and
$54,400 for the eleven months ended June 30, 1997, years ended June 30, 1998 and
1999 and six months ended December 31, 1999, respectively.
10. RELATED PARTY TRANSACTION
The Company is obligated to pay one of its shareholders commissions for the
sale of certain of its products and services under a sales agreement.
Commissions incurred during the years ended June 30, 1998 and 1999 and six
months ended December 31, 1999 totaled approximately $0, $381,000 and $482,000,
respectively. In addition, the Company incurred interest expense totaling
approximately $91,000, $667,500 and $333,750, respectively, on a note payable to
the same shareholder. See Note 5. As of June 30, 1998 and 1999 and December 31,
1999, the Company had accrued interest to this shareholder of $91,000, $93,000
and $96,000, respectively.
F-40
<PAGE> 115
INSURQUOTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. YEAR 2000 ISSUE -- UNAUDITED
The Company has identified no significant issues related to the impact of
the Year 2000 on its computer systems and does not anticipate any future
financial or operational problems associated therewith.
12. SUBSEQUENT EVENT
On February 1, 2000, the Company signed a definitive agreement to merge
with ChannelPoint, Inc. (ChannelPoint), a software development company. Subject
to certain adjustments, each shareholder of the Company will receive shares of
ChannelPoint common stock in the following ratios based on the respective series
of common or preferred stock held at the time of the merger: common
stock -- 3.60916; Series A -- 3.75266; Series B -- 3.85400; Series C -- 5.62254;
Series D -- 4.35237; and Series F -- 6.21775.
F-41
<PAGE> 116
[CHANNELPOINT LOGO]
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the registrant in connection
with the sale of the common stock being registered hereby. All amounts shown are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $19,800.00
NASD filing fee............................................. 8,000.00
Nasdaq National Market initial listing application fee...... 5,000.00
Blue Sky fees and expenses.................................. *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Directors' and officers' insurance.......................... *
Transfer agent and registrar fees........................... *
Miscellaneous expenses...................................... *
----------
TOTAL............................................. *
==========
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The company's amended and restated bylaws that will become effective upon
the closing of this offering provide that the company will indemnify its
directors and executive officers to the fullest extent permitted by Delaware law
and may indemnify its other officers, employees and other agents to the fullest
extent permitted by Delaware law.
In addition, the company's restated certificate of incorporation that will
become effective upon the closing of this offering provides that, to the fullest
extent permitted by Delaware law, its directors will not be personally liable to
the company or its stockholders for monetary damages for any breach of fiduciary
duty as directors. This provision of the restated certificate of incorporation
does not eliminate the directors' duty of care. In appropriate circumstances,
equitable remedies such as an injunction or other forms of non-monetary relief
are available under Delaware law. This provision also does not affect the
directors' responsibilities under any other laws, such as the federal securities
laws and state and federal environmental laws.
Each director will continue to be subject to liability for:
- breach of a director's duty of loyalty to the company and its
stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; and
- any transaction from which a director derived an improper personal
benefit.
The company also intends to enter into indemnity agreements with its
directors and executive officers and to obtain directors' and officers'
liability insurance.
There is no pending litigation or proceeding involving any of the company's
directors or officers as to which indemnification is being sought. The company
is not aware of any pending or threatened litigation that may result in a claim
for indemnification.
II-1
<PAGE> 118
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The company has issued and sold the following securities since March 1,
1997:
On various dates between March 1997 and March 28, 2000, the Company
authorized the grant of stock options to employees, consultants, directors and
officers to purchase an aggregate of 35,693,202 shares of its common stock at an
exercise prices ranging from $0.05 per share to $15.00 per share. Of these
option grants, 18,356,484 shares have been exercised at a weighted average
exercise price of $4.99 per share, with 3,288,733 of such shares being subject
to repurchase by the Company should the optionee terminate his/her employment
with the Company. The Company relied on the exemption provided by Rule 701 of
the Securities Act.
On September 9, 1997, the Company issued an aggregate of 1,700,000 shares
of its Series B preferred stock to two accredited investors at a purchase price
of $2.75 per share for cash proceeds in the amount of $4,675,000.00. The Company
relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.
On March 20, 1998, the Company issued an aggregate of 10,908 shares of its
common stock at a price of $0.30 per share to two of its consultants in exchange
for services rendered to the Company. The Company relied on the exemption
provided by Rule 701 of the Securities Act.
On April 7, 1998, the Company issued an additional 18,181 shares of its
Series B preferred stock to one accredited investor at a purchase price of $2.75
per share for cash proceeds in the amount of $49,997.75. The Company relied on
the exemption provided by Rule 506 of Regulation D under the Securities Act.
On October 13, 1998, the Company issued an aggregate of 3,797,785 shares of
its Series C preferred stock to eleven accredited investors at a purchase price
of $6.50 per share for cash proceeds in the amount of $24,685,602.50. The
Company relied on the exemption provided by Rule 506 of Regulation D under the
Securities Act.
On April 29, 1999, the Company issued an aggregate of 22,858 shares of its
common stock at a price of $0.80 per share to three of its consultants in
exchange for services rendered to the Company. The Company relied on the
exemption provided by Rule 701 of the Securities Act.
On June 6, 1999, the Company issued 10,000 shares of its common stock at a
price of $0.80 per share to one of its consultants in exchange for services
rendered to the Company. The Company relied on the exemption provided by Rule
701 of the Securities Act.
On June 7, 1999, the Company issued a convertible promissory note
automatically convertible into 50,000 shares of its common stock at value of
$3.00 per share upon the closing of the Company's initial public offering to one
accredited investor. The Company relied on the exemption provided by Rule 506 of
Regulation D under the Securities Act.
On August 6, 1999, the Company issued an aggregate of 8,000 shares of its
common stock at a price of $6.00 per share to two of its consultants in exchange
for services rendered to the Company. The Company relied on the exemption
provided by Rule 701 of the Securities Act.
Between September 14, 1999 and February 2, 2000, the Company sold an
aggregate of 5,482,378 shares of Series D preferred stock in a private placement
at a purchase price of $20.97 per share to eight accredited investors for cash
proceeds in the amount of $114,965,466.66. The Company relied on the exemption
provided by Rule 506 of Regulation D under the Securities Act.
On November 15, 1999, the Company issued 1,058,450 shares of Series D
preferred stock to one accredited investor in a non-cash transaction in
consideration for the acquisition of Policy Data, Quickly, an agency management
software package. The Company relied on the exemption provided by Rule 506 of
Regulation D under the Securities Act.
II-2
<PAGE> 119
On December 16, 1999, the Company declared a 1:1 stock dividend for each
outstanding shares of its common stock for the issuance of an aggregate of
8,487,354 shares. The Company relied on the exemption provided by Section 4(2)
and 4(6) of the Securities Act.
On March 24, 2000, the Company issued 333,333 shares of common stock
pursuant to the Agreement and Plan of Merger between the Company and LifeLink.
The Company relied on the exemption provided by Section 4(2) and 4(6) of the
Securities Act.
On March 27, 2000, the Company issued 300,000 shares of Series E preferred
stock to three accredited investors. The Company relied on the exemption
provided by Rule 506 of Regulation D of the Securities Act.
On April , 2000, the Company issued shares of common stock pursuant
to the Agreement and Plan of Merger between the Company and InsurQuote. The
Company relied on the exemption provided by Section 4(2) and 4(6) of the
Securities Act.
The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view for
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Merger between the Company and
InsurQuote.
3.1 -- Restated Certificate of Incorporation of the Company.
3.2* -- Form of Restated Certificate of Incorporation of the
Company to become effective upon the closing of the
offering.
3.3 -- Amended and Restated Bylaws of the Company.
3.4* -- Amended and Restated Bylaws of the Company to become
effective upon the closing of the offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.4.
4.2* -- Specimen stock certificate representing shares of Common
Stock of the Company.
5.1* -- Opinion of Cooley Godward LLP regarding the legality of
the securities being registered.
10.1* -- 2000 Equity Incentive Plan of the Company.
10.2* -- 2000 Employee Stock Purchase Plan of the Company.
10.3* -- Form of Grant Notice and Stock Option Agreement.
10.4 -- Attachment IV to the Stock Option Grant Notice of the
1997 Stock Option Plan of the Company.
10.5 -- Executive Severance Benefit Plan of the Company.
10.6 -- InsurQuote 1994 Stock Option Plan, as amended, along with
form of Stock Option Agreement.
10.7 -- Termination and Release Agreement between InsurQuote and
CCC Information Services, Inc.
10.8 -- Employment Agreement between InsurQuote and William B.
Woahn, as amended by Letter Agreement, dated February 1,
2000, by and among the Company, InsurQuote and William B
Woahn.
</TABLE>
II-3
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.9 -- Employment Agreement between InsurQuote and David
Whetten, as amended by Letter Agreement, dated February
1, 2000, by and among the Company, InsurQuote and David
Whetten.
10.10 -- Fifth Amended and Restated Investor Rights Agreement
among the Company and certain of its stockholders.
10.11 -- Fifth Amended and Restated Stockholders Agreement among
the Company and certain of its stockholders.
10.12 -- Sublease between the Company and MCI Systemhouse Corp.
for 36,246 square feet in Colorado Springs, Colorado.
10.13 -- Lease between the Company and Westmoor Business Park Ltd,
LLLP for 9040 square feet in Westminster, Colorado.
10.14 -- Sublease between the Company and Quantum Corporation for
150,000 square feet in Colorado Springs, Colorado.
10.15 -- Lease between InsurQuote and The Jacobsen Group for
40,000 square feet in Provo, Utah.
10.16 -- Sublease between InsurQuote and Park East Realty Co. for
31,480 square feet in Beachwood, Ohio.
10.17* -- Commerce Exchange Platform Agreement by and between the
Company and Zurich Financial Services and Zurich
Insurance Company.
10.18** -- Business and Technology Partnership Agreement between the
Company and United HealthCare Services, Inc.
10.19** -- Assignment Agreement between the Company and First Colony
Life Insurance Company.
10.20** -- Business and Technology Strategic Alliance Agreement
between the Company and GE Financial Assurance Holdings,
Inc.
21.1 -- Subsidiaries of the Company.
23.1* -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 -- Consent of Ernst & Young LLP, Independent Auditors.
24.1 -- Powers of attorney (included on Page II-5).
27 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
** The Company is applying for confidential treatment with respect to portions
of these exhibits.
(b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-4
<PAGE> 121
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the 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 of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Colorado
Springs, County of El Paso, State of Colorado, on March 28, 2000.
By: /s/ KENNETH E. HOLLEN
----------------------------------
Kenneth E. Hollen
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth E. Hollen and Timothy D. Hoogheem
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KENNETH E. HOLLEN Chairman of the Board, March 28, 2000
- ----------------------------------------------------- President and Chief Executive
Kenneth E. Hollen Officer (Principal Executive
Officer)
/s/ TIMOTHY D. HOOGHEEM Senior Vice President, Chief March 28, 2000
- ----------------------------------------------------- Financial Officer, Finance
Timothy D. Hoogheem and Administration and
Treasurer (Principal
Financial Officer)
/s/ CONRAD A. MCCARTY Corporate Controller and Chief March 28, 2000
- ----------------------------------------------------- Accounting Officer (Principal
Conrad A. McCarty Accounting Officer)
/s/ MICHAEL D. FRAIZER Director March 28, 2000
- -----------------------------------------------------
Michael D. Fraizer
/s/ STEVEN M. GLUCKSTERN Director March 28, 2000
- -----------------------------------------------------
Steven M. Gluckstern
/s/ JAMES B. HOLLEN Director March 28, 2000
- -----------------------------------------------------
James B. Hollen
</TABLE>
II-6
<PAGE> 123
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EVE M. KURTIN Director March 28, 2000
- -----------------------------------------------------
Eve M. Kurtin
/s/ BERNARD F. MCDONAGH Director March 28, 2000
- -----------------------------------------------------
Bernard F. McDonagh
/s/ ADAM M. MIZEL Director March 28, 2000
- -----------------------------------------------------
Adam M. Mizel
/s/ NANCY J. SCHOENDORF Director March 28, 2000
- -----------------------------------------------------
Nancy J. Schoendorf
/s/ GREGORY D. BRENNEMAN Director March 28, 2000
- -----------------------------------------------------
Gregory D. Brenneman
</TABLE>
II-7
<PAGE> 124
SCHEDULE II
CHANNELPOINT, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------------------- ---------- ----------
ADDITIONS
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31,
1997:
Provision for doubtful Accounts... $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
For the year ended December 31,
1998:
Provision for doubtful Accounts... $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
For the year ended December 31,
1999:
Provision for doubtful Accounts... $ -- $ -- $ 381(1) $ 107(2) $ 274
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Receivables acquired from Blaise Software, Inc.
(2) Doubtful accounts written off
S-1
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Merger between the Company and
InsurQuote.
3.1 -- Restated Certificate of Incorporation of the Company.
3.2* -- Form of Restated Certificate of Incorporation of the
Company to become effective upon the closing of the
offering.
3.3 -- Amended and Restated Bylaws of the Company.
3.4* -- Amended and Restated Bylaws of the Company to become
effective upon the closing of the offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.4.
4.2* -- Specimen stock certificate representing shares of Common
Stock of the Company.
5.1* -- Opinion of Cooley Godward LLP regarding the legality of
the securities being registered.
10.1* -- 2000 Equity Incentive Plan of the Company.
10.2* -- 2000 Employee Stock Purchase Plan of the Company.
10.3* -- Form of Grant Notice and Stock Option Agreement.
10.4 -- Attachment IV to the Stock Option Grant Notice of the
1997 Stock Option Plan of the Company.
10.5 -- Executive Severance Benefit Plan of the Company.
10.6 -- InsurQuote 1994 Stock Option Plan, as amended, along with
form of Stock Option Agreement.
10.7 -- Termination and Release Agreement between InsurQuote and
CCC Information Services, Inc.
10.8 -- Employment Agreement between InsurQuote and William B.
Woahn, as amended by Letter Agreement, dated February 1,
2000, by and among the Company, InsurQuote and William B
Woahn.
10.9 -- Employment Agreement between InsurQuote and David
Whetten, as amended by Letter Agreement, dated February
1, 2000, by and among the Company, InsurQuote and David
Whetten.
10.10 -- Fifth Amended and Restated Investor Rights Agreement
among the Company and certain of its stockholders.
10.11 -- Fifth Amended and Restated Stockholders Agreement among
the Company and certain of its stockholders.
10.12 -- Sublease between the Company and MCI Systemhouse Corp.
for 36,246 square feet in Colorado Springs, Colorado.
10.13 -- Lease between the Company and Westmoor Business Park Ltd,
LLLP for 9040 square feet in Westminster, Colorado.
10.14 -- Sublease between the Company and Quantum Corporation for
150,000 square feet in Colorado Springs, Colorado.
10.15 -- Lease between InsurQuote and The Jacobsen Group for
40,000 square feet in Provo, Utah.
10.16 -- Sublease between InsurQuote and Park East Realty Co. for
31,480 square feet in Beachwood, Ohio.
10.17* -- Commerce Exchange Platform Agreement by and between the
Company and Zurich Financial Services and Zurich
Insurance Company.
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
10.18** -- Business and Technology Partnership Agreement between the
Company and United HealthCare Services, Inc.
10.19** -- Assignment Agreement between the Company and First Colony
Life Insurance Company.
10.20** -- Business and Technology Strategic Alliance Agreement
between the Company and GE Financial Assurance Holdings,
Inc.
21.1 -- Subsidiaries of the Company.
23.1* -- Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 -- Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 -- Consent of Ernst & Young LLP, Independent Auditors.
24.1 -- Powers of attorney (included on Page II-5).
27 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
** The Company is applying for confidential treatment with respect to portions
of these exhibits.
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 1, 2000
BY AND AMONG
CHANNELPOINT, INC.,
GOLD ACQUISITION CORP.
AND
INSURQUOTE SYSTEMS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE 1 Definitions............................................................................................2
ARTICLE 2 The Transaction........................................................................................2
2.1 Merger.........................................................................................2
2.2 Closing........................................................................................2
2.3 Closing Events.................................................................................2
(a) Articles and Plan of Merger..................................................2
(b) Deliveries by the Company....................................................2
(c) Deliveries by Buyer and Merger Sub...........................................3
2.4 Effect of Merger...............................................................................3
(a) General......................................................................3
(b) Corporate Organization.......................................................3
(c) Conversion of Company's Shares...............................................3
(d) Company Treasury Shares......................................................4
(e) Conversion of Merger Sub's Stock.............................................4
(f) Adjustments to Conversion Amounts............................................4
2.5 Exchange Procedures............................................................................5
(a) Exchange Procedures..........................................................5
(b) Distributions with Respect to Unsurrendered Certificates.....................5
(c) No Further Ownership Rights in Company Shares................................5
(d) Lost Certificates............................................................5
(e) Withholding Rights...........................................................6
(f) Stock Transfer Books.........................................................6
(g) Dissenters' Rights...........................................................6
(h) Stock Options................................................................6
(i) Warrants.....................................................................7
2.6 Issuance of Common Stock to CCC................................................................7
ARTICLE 3 Representations and Warranties of the Company..........................................................8
3.1 Organization and Qualification; Subsidiaries...................................................8
3.2 Capitalization of the Company and its Subsidiaries.............................................8
3.3 Authority, Corporate Action...................................................................10
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
3.4 Financial Statements..........................................................................10
3.5 No Undisclosed Liabilities....................................................................11
3.6 Absence of Changes............................................................................11
3.7 Consents and Approvals; No Violations.........................................................12
3.8 No Default....................................................................................12
3.9 Real Property.................................................................................13
3.10 Litigation....................................................................................13
3.11 Compliance With Applicable Law................................................................13
3.12 Employee Plans................................................................................14
3.13 Labor Matters.................................................................................15
3.14 Environmental Matters.........................................................................15
3.15 Tax Matters...................................................................................17
3.16 Material Contracts............................................................................18
3.17 Insurance.....................................................................................19
3.18 Customers.....................................................................................20
3.19 Intellectual Property.........................................................................20
3.20 Year 2000.....................................................................................23
3.21 Termination Agreement.........................................................................23
3.22 Company Affiliate Agreements..................................................................23
3.23 Accounts Receivable...........................................................................23
3.24 Brokers.......................................................................................23
3.25 Opinion of Financial Advisor..................................................................24
3.26 Takeover Statute; Dissenters' Rights..........................................................24
3.27 HSR Matters...................................................................................24
3.28 Disclosure....................................................................................24
ARTICLE 4 Representations and Warranties of Buyer and Merger Sub................................................24
4.1 Organization and Qualification; Subsidiaries..................................................24
4.2 Capitalization of Buyer and its Subsidiaries..................................................24
4.3 Authority, Corporate Action...................................................................25
4.4 Financial Statements..........................................................................26
4.5 No Undisclosed Liabilities....................................................................26
4.6 Absence of Changes............................................................................26
4.7 Consents and Approvals; No Violations.........................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
4.8 No Default....................................................................................27
4.9 Litigation....................................................................................27
4.10 Compliance With Applicable Law................................................................27
4.11 Employee Plans................................................................................28
4.12 Labor Matters.................................................................................29
4.13 Environmental Matters.........................................................................29
4.14 Tax Matters...................................................................................30
4.15 Material Contracts............................................................................31
4.16 Intellectual Property.........................................................................31
4.17 Year 2000.....................................................................................32
4.18 Customers.....................................................................................32
4.19 Brokers.......................................................................................32
4.20 Obligations to Related Parties................................................................32
4.21 Registration Rights...........................................................................33
4.22 HSR Matters...................................................................................33
4.23 Disclosure....................................................................................33
ARTICLE 5 Events Prior to Closing...............................................................................33
5.1 Conduct of Business of the Company............................................................33
5.2 Conduct of Business of Buyer..................................................................35
5.3 Access to Information.........................................................................36
5.4 Buyer Disclosure Memorandum...................................................................36
5.5 Purchaser Representative......................................................................36
5.6 Company Shareholder Approval..................................................................36
5.7 Execution of Certain Documents................................................................37
5.8 Certain Buyer Actions.........................................................................37
5.9 Reasonable Best Efforts.......................................................................37
5.10 Other Filings.................................................................................37
5.11 Notice of Developments........................................................................38
5.12 Public Announcements..........................................................................38
5.13 Tax-Free Reorganization Treatment.............................................................38
5.14 Employee Matters..............................................................................38
5.15 Acquisition Proposals.........................................................................39
5.16 Fees and Expenses.............................................................................39
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
5.17 Director and Officer Indemnification..........................................................40
5.18 Certain Financings............................................................................41
5.19 Delivery of Company Financial Statements......................................................41
5.20 HSR Approval..................................................................................41
ARTICLE 6 Conditions to Closing.................................................................................41
6.1 Conditions of Each Party......................................................................41
6.2 Conditions of Buyer and Merger Sub............................................................42
6.3 Conditions of the Company.....................................................................43
ARTICLE 7 Survival of Representations, Warranties, Covenants and Agreements; Escrow
Provisions............................................................................................44
7.1 Survival of Representations, Warranties, Covenants and Agreements.............................44
7.2 Escrow Provisions.............................................................................45
(a) Establishment of the Escrow Fund............................................45
(b) Recourse to the Escrow Fund.................................................45
(c) Escrow Period; Distribution of Escrow Fund upon Termination of Escrow
Period......................................................................46
(d) Protection of Escrow Fund...................................................46
(e) Claims Upon Escrow Fund.....................................................46
(f) Objections to Claims........................................................47
(g) Resolution of Conflicts.....................................................47
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
7.3 Shareholder Representative; Power of Attorney.................................................48
(a) Shareholder Representative..................................................48
(b) Exculpation.................................................................48
(c) Actions of the Shareholder Representative...................................48
7.4 Third Party Claims............................................................................48
7.5 Depositary Agent's Duties.....................................................................49
(a) Limitation on Duties of Depositary Agent....................................49
(b) Compliance with Orders......................................................49
(c) Limitations on Liability of Depositary Agent................................49
(d) Good Faith of Depositary Agent..............................................50
(e) Non-responsibility of Depositary Agent......................................50
(f) Indemnification of Depositary Agent.........................................50
(g) Resignation of Depositary Agent.............................................50
(h) Fees........................................................................51
ARTICLE 8 Termination, Amendment and Waiver.....................................................................51
8.1 Termination by Mutual Agreement...............................................................51
8.2 Termination by Either Buyer or the Company....................................................51
8.3 Termination by the Company....................................................................52
8.4 Termination by Buyer..........................................................................52
8.5 Effect of Termination and Abandonment.........................................................52
8.6 Amendment.....................................................................................52
8.7 Extension; Waiver.............................................................................52
ARTICLE 9 Miscellaneous.........................................................................................53
9.1 Confidentiality...............................................................................53
9.2 Registration of Buyer Common Stock Underlying Company Stock Options...........................53
9.3 Notices.......................................................................................53
9.4 Further Assurances............................................................................54
9.5 Entire Agreement..............................................................................54
9.6 Assignment....................................................................................54
9.7 No Third Party Beneficiaries..................................................................55
9.8 Severability..................................................................................55
9.9 Captions......................................................................................55
9.10 Construction..................................................................................55
9.11 Counterparts..................................................................................55
9.12 Governing Law.................................................................................55
9.13 Jurisdiction and Venue........................................................................55
9.14 Binding Effect................................................................................55
9.15 No Waiver of Fraud............................................................................55
</TABLE>
v
<PAGE> 7
Exhibits
--------
Exhibit A Form of Voting Agreement
Exhibit B Forms of Employment Letters
Exhibit C Form of Termination Agreement
Exhibit D Form of Company Affiliate Agreement
Exhibit E Form of Amended and Restated Articles of Incorporation of the Company
Exhibit F Form of Buyer Investor Rights Agreement
Exhibit G Form of Buyer Stockholders Agreement
vi
<PAGE> 8
MERGER AGREEMENT
This Agreement and Plan of Merger is entered into as of February 1,
2000 by and among ChannelPoint, Inc., a Delaware corporation ("Buyer"), Gold
Acquisition Corp., a Utah corporation and direct, wholly-owned subsidiary of
Buyer ("Merger Sub"), and InsurQuote Systems, Inc., a Utah corporation (the
"Company").
BACKGROUND
A. This Agreement (as such term is defined in ANNEX I) contemplates a
transaction in which Merger Sub will merge with and into the Company (the
"Merger"), with (i) the Company surviving the Merger and becoming a direct,
wholly-owned subsidiary of Buyer and (ii) all of the issued and outstanding
capital stock of the Company being converted into the right to receive shares of
common stock, par value $.001 per share, of Buyer ("Buyer Common Stock").
B. A portion of the shares of Buyer Common Stock otherwise issuable or
reserved for issuance by Buyer in connection with the Merger shall be placed in
escrow by Buyer, the release of which shall be governed by the provisions of
Article 7.
C. As an inducement to Buyer and Merger Sub to enter into this
Agreement, certain shareholders of the Company have concurrently herewith
entered into a Voting Agreement in the form attached hereto as EXHIBIT A (the
"Voting Agreement"), pursuant to which such shareholders have agreed to vote all
shares of capital stock of the Company owned by them in favor of the Merger.
D. As a further inducement to Buyer and Merger Sub to enter into this
Agreement, the Company and the employees of the Company identified therein have
concurrently herewith entered into amendments to their current employment
agreements (or new employment agreements, as applicable) in the forms attached
hereto as EXHIBITS B-1, B-2, B-3, B-4 and B-5, each of which agreements shall
become effective as of the Effective Time (as such term is defined in Section
2.4(a)).
E. As a further inducement to Buyer and Merger Sub to enter into this
Agreement, the Company and certain shareholders of the Company have concurrently
herewith entered into a Termination Agreement in the form attached hereto as
EXHIBIT C (the "Termination Agreement") pursuant to which the Co-Sale Agreement,
the Company Investment Agreement and the Company Registration Rights Agreement
(as such terms are defined in ANNEX I) shall each be terminated and no longer be
of force or in effect as of the Effective Time.
F. As a further inducement to Buyer and Merger Sub to enter into this
Agreement, each "affiliate" of the Company for purposes of Rule 145 under the
Securities Act (as such term is defined in ANNEX I) has executed and delivered
to Buyer and Merger Sub a letter in the form attached hereto as EXHIBIT D (each,
a "Company Affiliate Agreement").
<PAGE> 9
G. For federal income Tax (as such term is defined in Section 3.15)
purposes, it is intended that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the Code (as such term is defined in
ANNEX I).
Now, therefore, in consideration of their mutual promises and intending
to be legally bound, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Certain capitalized terms used in this Agreement are defined in ANNEX
I.
ARTICLE 2
THE TRANSACTION
2.1 MERGER. Upon the terms and subject to the conditions of this
Agreement, Merger Sub shall merge with and into the Company at the Effective
Time. The Company shall be the corporation surviving the Merger (the "Surviving
Corporation").
2.2 CLOSING. The closing of the transactions contemplated by this
Agreement ("Closing") shall take place at the offices of Weil, Gotshal & Manges
LLP, Dallas, Texas, on the second business day after satisfaction or waiver of
the conditions set forth in Article 6 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions at the Closing).
2.3 CLOSING EVENTS. At Closing, the following events shall take place,
all of which shall be considered to take place concurrently:
(a) ARTICLES AND PLAN OF MERGER. The Company shall execute
articles of merger in form and substance reasonably satisfactory to the Parties
(the "Articles of Merger"), to which a plan of merger consistent with the terms
hereof and otherwise reasonably satisfactory to the Parties (the "Plan of
Merger") shall be attached as an exhibit, and shall file the Articles of Merger
with the Division of Corporations and Commercial Code of the State of Utah (the
"Division") in accordance with the Utah Revised Business Corporation Act (the
"Act").
(b) DELIVERIES BY THE COMPANY. The Company shall make or cause the
following deliveries to Buyer and Merger Sub:
(i) the Company shall deliver an Officer's Certificate to
Buyer and Merger Sub certifying that the conditions to Buyer's
obligation to effect the Closing set forth in Section 6.2(a) and
Section 6.2(b) (as to representations, warranties and covenants) have
been satisfied; and
(ii) the Company shall deliver the written resignations,
effective as of the Effective Time, of all of the Company's incumbent
directors other than those whom Buyer has specified by Notice to the
Company at least five (5) days prior to Closing.
2
<PAGE> 10
(c) DELIVERIES BY BUYER AND MERGER SUB. Buyer and Merger Sub shall
make the following deliveries:
(i) Buyer and Merger Sub shall deliver the shares of Buyer
Common Stock issuable or reserved for issuance pursuant to the Merger
in accordance with Sections 2.5(a) and 7.2(a) and shall deliver the
shares of Buyer Common Stock pursuant to Section 2.6; and
(ii) Buyer and Merger Sub shall deliver a joint Officers'
Certificate to the Company (for delivery to the Shareholder
Representative) certifying that the conditions to the Company's
obligation to effect the Closing set forth in Section 6.3(a) and
Section 6.3(b) (as to representations, warranties and covenants) have
been satisfied.
2.4 EFFECT OF MERGER.
(a) GENERAL. The Merger shall become effective at the time of
filing of the Articles of Merger with the Division (the "Effective Time"). The
Merger shall have the effects as set forth in the applicable provisions of the
Act. The Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the name and on
behalf of either the Company or Merger Sub in order to carry out and give effect
to the Merger.
(b) CORPORATE ORGANIZATION. As of the Effective Time, the Articles
of Incorporation of the Company shall be amended and restated (and filed with
the Division as an exhibit to the Plan of Merger) as set forth in the Articles
of Amendment and Restatement attached hereto as EXHIBIT E and such Amended and
Restated Articles of Incorporation shall be the articles of incorporation of the
Surviving Corporation. As of the Effective Time, the by-laws, officers and
directors of Merger Sub shall be the by-laws, officers and directors of the
Surviving Corporation.
(c) CONVERSION OF COMPANY'S SHARES. At and as of the Effective
Time, and subject to adjustment as provided in Section 2.4(f), each share of:
(i) the Company's Common Stock, no par value ("Common Stock")
issued and outstanding immediately prior to the Effective Time (other
than any Dissenting Share) shall be converted into the right to receive
3.60916 fully paid and non-assessable shares of Buyer Common Stock;
(ii) Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting
Share) shall be converted into the right to receive 3.75266 fully paid
and non-assessable shares of Buyer Common Stock;
(iii) Series B Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting
Share) shall be converted into the right to receive 3.85400 fully paid
and non-assessable shares of Buyer Common Stock;
3
<PAGE> 11
(iv) Series C Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting
Share) shall be converted into the right to receive 5.62254 fully paid
and non-assessable shares of Buyer Common Stock;
(v) Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting
Share) shall be converted into the right to receive 4.35237 fully paid
and non-assessable shares of Buyer Common Stock; and
(vi) Series F Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting
Share) shall be converted into the right to receive 6.21775 fully paid
and non-assessable shares of Buyer Common Stock.
All such shares of Buyer Common Stock issued pursuant to this Section 2.4(c), as
adjusted (if applicable) pursuant to Section 2.4(f), are collectively referred
to herein as the "Merger Consideration."
(d) COMPANY TREASURY SHARES. At and as of the Effective Time, each
share of Common Stock owned by the Company shall become one share of common
stock of the Surviving Corporation and shall be held in treasury.
(e) CONVERSION OF MERGER SUB'S STOCK. At and as of the Effective
Time, each share of Merger Sub's common stock, no par value, shall be converted
into one share of common stock of the Surviving Corporation.
(f) ADJUSTMENTS TO CONVERSION AMOUNTS. In the event that any of
the following occurs, the aggregate number of shares of Buyer Common Stock which
will be issuable as a result of the Merger in accordance with Section 2.4(c)
will be increased or decreased (as applicable) such that the aggregate number of
shares of Buyer Common Stock which will be issuable as a result of the Merger in
accordance with Section 2.4(c) (plus (i) the shares of Buyer Common Stock
represented by any Dissenting Shares had such shares been exchanged in the
Merger, (ii) the shares of Buyer Common Stock to be issued pursuant to Section
2.6 and (iii) all shares of Buyer Common Stock that may be issuable at any time
following the Merger (whether or not such Warrants or Company Stock Options are
immediately exercisable at the time of the Merger) upon the exercise of any
Warrants and Company Stock Options, including Company Stock Options that are
authorized but not yet issued under the Company Option Plan) will be equal to
22.500% of the Buyer Fully-Diluted Common Stock (with such increase or decrease,
as applicable, being allocated among the respective classes and series of
capital stock of the Company in accordance with the proportionate per share
amounts to be received pursuant to Section 2.4(c) by the holders of each such
class or series):
(i) any split, combination or reclassification of the Buyer
Common Stock;
(ii) any issuance of any class or series of capital stock of
the Company or Company Common Stock Equivalents (other than any such
issuance to Buyer or any issuance upon the exercise of any Warrant or
Company Stock Option); or
4
<PAGE> 12
(iii) any issuance of Buyer Common Stock or Buyer Common
Stock Equivalents (other than any Excluded Buyer Issuance).
2.5 EXCHANGE PROCEDURES.
(a) EXCHANGE PROCEDURES. Prior to the Effective Time, Buyer shall
prepare and deliver to each holder of a certificate or certificates (the
"Certificates") representing outstanding shares of Common Stock, or any series
of the Company's preferred stock, no par value (the "Preferred Stock"), (i) a
letter of transmittal in customary form and having such provisions as Buyer may
reasonably specify and (ii) instructions for effecting the surrender of such
Certificates in exchange for the Merger Consideration upon consummation of the
Merger. As soon as practicable following the Effective Time, upon surrender of a
Certificate to the Surviving Corporation together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Surviving
Corporation, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) shares of Buyer Common Stock representing, in the
aggregate, the number of shares that such holder has the right to receive
pursuant to Section 2.4(c) (after taking into account all Common Stock and
Preferred Stock then held by such holder), less the number of shares of Buyer
Common Stock that are to be contributed on the holder's behalf and deposited
into the Escrow Fund, and (B) a check in the amount equal to the cash that such
holder has the right to receive pursuant to the provisions of this Article 2,
including cash in lieu of any dividends and other distributions pursuant to
Section 2.5(b). No interest will be paid or will accrue on any cash payable
pursuant to Section 2.5(b).
(b) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No
dividends or other distributions declared or made with respect to shares of
Buyer Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Buyer
Common Stock that such holder would be entitled to receive upon surrender of
such Certificate until such holder shall surrender such Certificate in
accordance with Section 2.5(a). Subject to the effect of applicable Laws,
following surrender of any such Certificate, there shall be paid to such holder
of shares of Buyer Common Stock issuable in exchange therefor, without interest,
promptly after the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Buyer Common Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. All shares of
Buyer Common Stock issued and cash paid upon conversion of the Common Stock and
Preferred Stock in accordance with the terms of Article 2 (including any cash
paid pursuant to Sections 2.5(b)) shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to the Common Stock and Preferred
Stock, as applicable.
(d) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity by
such Person against any claim that may be made against the Surviving Corporation
with respect to such Certificate, the Surviving Corporation will deliver in
exchange for such lost,
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stolen or destroyed Certificate the applicable Merger Consideration with respect
to the Common Stock or Preferred Stock, as the case may be, formerly represented
thereby, together with any unpaid dividends and distributions on shares of Buyer
Common Stock payable in respect thereof in accordance with Section 2.5(b).
(e) WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Buyer shall be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of Common Stock or
Preferred Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, the rules and regulations
promulgated thereunder, or any provision of a Tax Law. To the extent that
amounts are so withheld by the Surviving Corporation or Buyer, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Common Stock or Preferred Stock in respect
to which such deduction and withholding was made by the Surviving Corporation or
Buyer, as the case may be.
(f) STOCK TRANSFER BOOKS. The stock transfer books of the Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of Certificates thereafter on the records of
the Company.
(g) DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement
to the contrary, those shares of Common Stock or Preferred Stock ("Dissenting
Shares") that are issued and outstanding immediately prior to the Effective Time
and which are held by shareholders who have complied with all of the relevant
provisions of Section 16-10a-1301, et seq., of the Act, or have otherwise
perfected dissenter's rights ("Dissenting Shareholders"), shall not be converted
into or be exchangeable for the right to receive the Merger Consideration, but
shall instead represent only the rights of a dissenting shareholder under the
Act, including the right to obtain payment for the estimated fair value of those
shares, plus accrued interest, as provided under the Act, unless and until such
holders shall have failed to perfect or shall have effectively withdrawn or lost
their rights to appraisal under the Act. If any Dissenting Shareholder shall
have failed to perfect or shall have effectively withdrawn or lost such right,
such holder's shares of Common Stock or Preferred Stock shall thereupon be
converted into and become exchangeable for the right to receive, as of the
Effective Time, the Merger Consideration without any interest thereon. The
Company shall give Buyer (i) prompt notice of any written demands for appraisal
of any shares of Common Stock or Preferred Stock, attempted withdrawals of such
demands and any other instruments served pursuant to the Act and received by the
Company relating to shareholders' rights of appraisal and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for
appraisal. The Company shall not, except with the prior written consent of
Buyer, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment.
(h) STOCK OPTIONS. As of the Effective Time, each option to
purchase shares of Common Stock (each, a "Company Stock Option") held by any
optionholder pursuant to the Company's 1994 Incentive Stock Option Plan (the
"Company Option Plan") which is then outstanding shall be assumed by Buyer and,
in accordance with the provisions of Section 12(c) of the Company Option Plan,
shall thereafter confer the right to acquire (in lieu of shares of Common Stock)
the number of shares of Buyer Common Stock that would have been received by such
holder as a result of the Merger in respect of such Company Stock Option if such
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Company Stock Option had been exercised immediately prior to the Effective Time
and the shares of Common Stock received upon such exercise had been converted
into the right to receive Buyer Common Stock as a result of the Merger (and the
exercise price for each share of Buyer Common Stock to be acquired upon exercise
thereof shall be appropriately adjusted so that the aggregate exercise price
payable upon exercise of all Company Stock Options held by such holder shall not
be modified as a result of the Merger); provided, however, that in the case of
any Company Stock Option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the conversion formula shall be
adjusted, if necessary, to comply with Section 424(a) of the Code. Each Company
Stock Option so assumed shall be subject to the same expiration date, vesting
provisions and other limitations as were applicable to such Company Stock Option
immediately prior to the Effective Time. Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of the options described above. As soon as
practicable following the date of this Agreement (and in any event prior to the
Closing), the Company shall obtain any necessary consents of holders of Company
Stock Options in order to fully effect the provisions of this Section 2.5(h).
(i) WARRANTS. As of the Effective Time, each warrant to purchase
shares of Common Stock or Preferred Stock (each, a "Warrant") which is then
outstanding shall be assumed or reissued by Buyer and, in accordance with the
provisions of such Warrant, shall confer the right to acquire (in lieu of shares
of Common Stock or Preferred Stock, as applicable) the number of shares of Buyer
Common Stock that would have been received in respect of such Warrant by the
holder of such Warrant as a result of the Merger if such Warrant had been
exercised immediately prior to the Effective Time and the shares of Common Stock
or Preferred Stock received upon such exercise had been converted into the right
to receive Buyer Common Stock as a result of the Merger (and the exercise price
for each share of Buyer Common Stock to be acquired upon exercise thereof shall
be appropriately adjusted so that the aggregate exercise price payable upon
exercise of all Warrants held by such holder shall not be modified as a result
of the Merger). Each Warrant so assumed shall be subject to the same expiration
date and other limitations as were applicable to such converted Warrant
immediately prior to the Effective Time. Buyer shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of the Warrants described above. As soon as
practicable following the date of this Agreement (and in any event prior to the
Closing), the Company shall obtain any necessary consents of holders of Warrants
in order to fully effect the provisions of this Section 2.5(i).
2.6 ISSUANCE OF COMMON STOCK TO CCC. Concurrently with the Merger, in
accordance with the provisions of that certain letter agreement dated as of
January 31, 2000, between CCC Information Services Group, Inc. ("CCC") and the
Company, Buyer will issue shares of Buyer Common Stock to CCC in an amount equal
to the number of shares of Buyer Common Stock CCC would be entitled to receive
if it held only fifty thousand (50,000) shares of Common Stock immediately prior
to the Merger in full consideration for the cancellation of the CCC Option (as
defined in such letter agreement).
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Buyer and Merger Sub to enter into this
Agreement, the Company represents and warrants to Buyer and Merger Sub as
follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each of its subsidiaries is a corporation or
legal entity duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its organization and has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its businesses as now conducted and proposed by the
Company to be conducted.
(b) Schedule 3.1(b) sets forth a list of all subsidiaries of the
Company and their respective jurisdictions of organization. Except as listed in
Schedule 3.1(b), the Company does not own, directly or indirectly, beneficially
or of record, any shares of capital stock or other security of any other entity
or any other investment in any other entity.
(c) Except as set forth in Schedule 3.1(c), each of the Company
and its subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing has not had and would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) The Company has heretofore delivered or made available to
Buyer and Merger Sub accurate and complete copies of the articles and
certificates of incorporation and bylaws, as currently in effect, of the Company
and each of its subsidiaries.
(e) The Company has heretofore delivered or made available to
Buyer and Merger Sub accurate and complete copies of the corporate minutebooks
and stock records of the Company and each of its subsidiaries. The corporate
minute books of the Company and each of its subsidiaries contain accurate and
complete records of all meetings and corporate actions taken by written consent
of the Company's and each of its subsidiaries' respective boards of directors
and shareholders.
3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The Company's authorized capital stock consists of 10,000,000
shares of Common Stock and 7,000,000 shares of Preferred Stock, consisting of
167,399 shares designated as Series A Preferred Stock, 705,089 shares designated
as Series B Preferred Stock, 145,414 shares designated as Series C Preferred
Stock, 320,203 shares designated as Series D Preferred Stock, 100 shares
designated as Series E Preferred Stock and 426,856 shares designated as Series F
Preferred Stock.
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(b) As of the date hereof, the Company has 1,122,862 shares of
Common Stock issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable, and none of which was issued in violation
of the Securities Act or any state securities or other Law or in violation of
any preemptive rights. The Company holds no issued shares of Common Stock in
treasury. No Common Stock is held by any subsidiary. Any additional shares of
Common Stock issued prior to the Effective Time as a result of the exercise of
any Company Stock Options or Warrants, or as a result of the conversion of any
Preferred Stock will be, as of the date of any such issuance, duly authorized,
validly issued, fully paid and nonassessable, and none of such additional shares
of Common Stock will have been issued in violation of the Securities Act or any
state securities or other Law or in violation of any preemptive rights.
(c) As of the date hereof, the Company has 1,615,112 shares of
Preferred Stock issued and outstanding, consisting of 119,475 shares of Series A
Preferred Stock, 603,164 shares of Series B Preferred Stock, 145,414 shares of
Series C Preferred Stock, 320,203 shares of Series D Preferred Stock and 426,856
shares of Series F Preferred Stock, all of which are duly authorized, validly
issued, fully paid and nonassessable, and none of which was issued in violation
of the Securities Act or any state securities or other Law or in violation of
any preemptive rights. The Company holds no issued shares of Preferred Stock in
treasury (including through any subsidiary).
(d) As of the date hereof, there are outstanding Company Stock
Options to purchase a total of 414,340 shares of Common Stock as listed on
Schedule 3.2(d). Schedule 3.2(d) correctly sets forth with respect to each
Option, the name of the holder thereof, the number of underlying shares, the
date of grant, the applicable vesting schedule and the exercise price
thereunder.
(e) As of the date hereof, there are outstanding Warrants to
purchase a total of 450,350 shares of Common Stock, 47,924 shares of Series A
Preferred Stock and 101,925 shares of Series B Preferred Stock, each as listed
on Schedule 3.2(e). Schedule 3.2(e) correctly sets forth with respect to each
Warrant, the name of the holder thereof, the number and type of underlying
shares, the date of grant and the exercise price thereunder.
(f) Except as set forth in Sections 3.2(b) and 3.2(c) and on
Schedule 3.2(f), there are no outstanding shares of capital stock or other
equity securities of the Company nor are there any equity equivalents, interests
in the ownership or earnings of the Company or other similar rights (including
stock appreciation rights). Except as disclosed on Schedule 3.2(d), Schedule
3.2(e) and Schedule 3.1(f), there are no securities of the Company convertible
into or exchangeable for shares of capital stock or other equity securities of
the Company or options, warrants, calls, puts, subscription rights, conversion
rights or other contracts to which the Company is party or by which the Company
is bound providing for the Company's issuance of any Preferred Stock or Common
Stock or any other equity securities.
(g) Except as set forth on Schedule 3.2(g) and except for the (i)
Company Investment Agreement, (ii) Co-Sale Agreement and (ii) voting provisions
under Article Three of the Company's Articles of Incorporation, there are no
shareholders agreements, buy-sell agreements, voting trusts or other contracts
to which the Company is a party or by which it is
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<PAGE> 17
bound relating to the voting or disposition of any shares of Preferred Stock or
Common Stock or creating any obligation of the Company to repurchases, redeem or
otherwise acquire or retire any shares of Preferred Stock, Common Stock, Company
Stock Options or any Warrant.
(h) All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided as a matter of
Law). There are no securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the Company
or its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company.
3.3 AUTHORITY, CORPORATE ACTION.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(b) The Board of Directors of the Company (the "Company Board")
has, by unanimous vote of those present (who constituted 100% of the directors
then in office), duly and validly authorized the execution and delivery of this
Agreement and approved the consummation of the transactions contemplated hereby,
and has taken all corporate actions required to be taken by the Company Board
for the consummation of the transactions, including the Merger, contemplated
hereby and has resolved to recommend that the shareholders of Company approve
and adopt the Plan of Merger. The Company Board has directed that this Agreement
and the Plan of Merger be submitted to the shareholders of Company for their
approval. The affirmative approval of (i) a majority of the holders of Common
Stock, the holders of Series A Preferred Stock, the holders of the Series B
Preferred Stock, and the holders of the Series F Preferred Stock (voting as a
single class on an as-converted basis), (ii) the majority of the holders of each
series of all series of Preferred Stock, each voting together as a separate
class, and (iii) a majority of the holders of the Series C Preferred Stock,
voting together as a separate class (the "Shareholder Approval"), are the only
votes of the holders of any class or series of capital stock of Company
necessary to adopt this Agreement and approve the transactions contemplated
hereby, including the Merger. No other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger and
this Agreement, the Shareholder Approval). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
3.4 FINANCIAL STATEMENTS. The Company has delivered copies of the
Company Financial Statements to Buyer and Merger Sub. The Company Financial
Statements fairly present, in conformity with GAAP (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates
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thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments). Since June 30,
1999, there has not been any change, or any application or request for any
change, by the Company or any of its subsidiaries in accounting principles,
methods or policies for financial accounting or Tax purposes (subject, in the
case of the unaudited interim financial statements, to normal year-end
adjustments).
3.5 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 3.5, as
of June 30, 1999, none of the Company or its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which have had or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
3.6 ABSENCE OF CHANGES. Except as set forth on Schedule 3.6, since
September 30, 1999, the Company and its subsidiaries have conducted their
business in the Ordinary Course of Business and there has not been:
(a) any event, occurrence or development which has had or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or any repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any Company securities;
(c) any amendment of any term of any outstanding security of the
Company or any of its subsidiaries that would materially increase the
obligations of the Company or any such subsidiary under such security;
(d) (i) any incurrence or assumption by the Company or any of its
subsidiaries of any indebtedness for borrowed money (other than purchase money
indebtedness incurred in the ordinary course of business consistent with past
practice), or (ii) any guarantee, endorsement or other incurrence or assumption
of liability (whether directly, contingently or otherwise) by the Company or any
of its subsidiaries for the obligations of any other person (other than any
wholly-owned subsidiary of the Company);
(e) any creation or assumption by the Company or any of its
subsidiaries of any Lien on any material asset of the Company or any of its
subsidiaries;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any of its subsidiaries other than
(i) loans, advances or capital contributions to or investments in wholly-owned
subsidiaries of the Company or (ii) loans or advances to employees of the
Company or any of its subsidiaries made in the Ordinary Course of Business;
(g) (i) any contract or agreement entered into by the Company or
any of its subsidiaries on or relating to any material acquisition or
disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by the Company or any of its
subsidiaries of any contract, license or other right (including any insurance
policy
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naming it as a beneficiary or a loss payable payee) that does or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect;
(h) any material change in any method of accounting or accounting
principles or practice by the Company or any of its subsidiaries, except for any
such change required by reason of a change in GAAP; or
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any of its subsidiaries; (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any of its subsidiaries; (iii) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements; or (iv) increase in compensation, bonus or other benefits
payable to directors, officers or employees of the Company or any of its
subsidiaries other than, in the case of clause (iv) only, increases prior to the
date hereof in compensation, bonus or other benefits payable to employees of the
Company or any of its subsidiaries in the Ordinary Course of Business consistent
with past practice or merit increases in salaries of employees at regularly
scheduled times in customary amounts consistent with past practices.
3.7 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the filing and
recordation of the Articles of Merger as required by the Act, any consents,
filings or approvals as may be required under the HSR Act and as otherwise set
forth in Schedule 3.7, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby. Except
as set forth in Schedule 3.7, neither the execution, delivery and performance of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective certificate or articles of incorporation or
bylaws (or similar governing documents) of the Company or any of its
subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound or (iii)
violate any Law applicable to the Company or any of its subsidiaries or any of
their respective properties or assets.
3.8 NO DEFAULT. Neither the Company nor any of its subsidiaries is in
violation of any term of (i) its articles or certificate of incorporation,
bylaws or other organizational documents, (ii) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it is
a party or by which it is bound or (iii) any foreign or domestic law, order,
writ, injunction, decree, ordinance, award, stipulation, statute, judicial or
administrative doctrine, rule or regulation entered by a Governmental Entity
("Law") applicable to the Company, its subsidiaries or any of their respective
properties or assets, except for any such violation referred to in clause (i),
(ii) or (iii) above (A) that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect or (B)
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that does or would reasonably be expected to prevent or materially delay the
performance of this Agreement by the Company.
3.9 REAL PROPERTY.
(a) There is no real property owned in fee by the Company or any
of its subsidiaries.
(b) Schedule 3.9(b) sets forth all leases, subleases and other
agreements (the "Real Property Leases") under which the Company or any of its
subsidiaries uses or occupies or has the right to use or occupy, now or in the
future, any real property. The Company has heretofore delivered or made
available to Buyer true, correct and complete copies of all Real Property Leases
(and all modifications, amendments and supplements thereto and all side letters
to which the Company or any of its subsidiaries is a party affecting the
obligations of any party thereunder). Each Real Property Lease constitutes the
valid and legally binding obligation of the Company or its subsidiaries,
enforceable against it in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. Each of the Company and its subsidiaries has a good and valid
leasehold interest in each parcel of real property leased by it free and clear
of all Liens, except Permitted Liens.
(c) No party to any such Real Property Leases has given notice to
Company or any of its subsidiaries of or made a claim against Company or any of
its subsidiaries with respect to any material breach or default thereunder.
3.10 LITIGATION. Except as set forth on Schedule 3.10, there is no
material suit, claim, action, proceeding or investigation pending or, to the
Company's Knowledge, threatened against the Company or any of its subsidiaries
or any of their respective properties or assets. Except as set forth on Schedule
3.10, none of the Company or any of its subsidiaries is subject to any
outstanding material order, writ, injunction or decree.
3.11 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"). Schedule 3.11 sets forth a
listing of (i) all Company Permits or licenses that have been granted by any
insurance regulatory authority and (ii) all Company Permits or licenses for
which any application has been made to any insurance regulatory authority but
which have not yet been issued or granted (together with a description of when
such application was made and the status of such application). The Company and
each of its subsidiaries are in material compliance with the terms of the
Company Permits. The businesses of the Company and each of its subsidiaries are
being conducted, in all material respects in compliance with all Laws applicable
to the Company or any of its subsidiaries. To the Company's Knowledge, no
investigation or review by any Governmental Entity with respect to the Company
or any of its subsidiaries is pending or threatened, nor, to the Company's
Knowledge, has any Governmental Entity indicated an intention to conduct the
same.
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3.12 EMPLOYEE PLANS.
(a) Schedule 3.12(a) sets forth: (i) all "employee benefit plans",
as defined in Section 3(3) of ERISA, and all other employee benefit arrangements
or payroll practices, including, without limitation, bonus plans, consulting or
other compensation agreements, incentive, equity or equity-based compensation,
or deferred compensation arrangements, stock purchase, severance pay, sick
leave, vacation pay and scholarship programs, maintained by the Company or any
of its subsidiaries or to which the Company or any of its subsidiaries
contributed or is obligated to contribute thereunder for current or former
employees of the Company and any of its subsidiaries (the "Company Employees")
(the "Company Plans"). Neither the Company, any of its subsidiaries nor any
trade or business (whether or not incorporated) which is or has ever been under
common control, or which is or has ever been treated as a single employer, with
any of them under Section 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate") has ever contributed or been obligated to contribute to an "employee
benefit plan" subject to Title IV of ERISA, a multiemployer plan, as defined in
Section 3(37) of ERISA, or an "employee benefit plan" subject to Sections 4063
or 4064 of ERISA. None of the Company Plans provide for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidate Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA").
(b) True, correct and complete copies of the following documents,
with respect to each of the Company Plans, have been made available or delivered
to Buyer by the Company, to the extent applicable: (i) any plans, all amendments
thereto and related trust documents, and amendments thereto; (ii) the most
recent Forms 5500 and all schedules thereto and the most recent actuarial
report, if any; (iii) the most recent IRS determination letter; (iv) summary
plan descriptions; (v) written communications to employees relating to the
Company Plans; and (vi) written descriptions of all non-written agreements
relating to the Company Plans.
(c) The Company Plans have been maintained, in all material
respects, in accordance with their terms and with all applicable provisions of
ERISA, the Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations, and neither the Company, its
subsidiaries nor any "party in interest" or "disqualified person" with respect
to the Company Plans has engaged in a non-exempt "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA. No fiduciary
has any liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the assets of any
Seller Plan.
(d) The Company Plans intended to qualify under Section 401 of the
Code are so qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
with respect to the operation of the Company Plans which could cause the loss of
such qualification or exemption or the imposition of any liability, penalty or
tax under ERISA or the Code.
(e) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans or by law (without regard to any waivers granted under Section
412 of the Code), to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof
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(including any valid extension), and all contributions for any period ending on
or before the Closing Date which are not yet due will have been paid or accrued
on or prior to the Closing Date.
(f) There are no pending actions, claims or lawsuits which have
been asserted or instituted against the Company Plans, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Company Plans with respect to the operation of such
plans (other than routine benefit claims), nor does the Company have knowledge
of facts which could form the basis for any such claim or lawsuit.
(g) All amendments and actions required to bring the Company Plans
into conformity in all material respects with all of the applicable provisions
of the Code, ERISA and other applicable laws have been made or taken except to
the extent that such amendments or actions are not required by law to be made or
taken until a date after the Closing Date.
(h) Except as set forth on Schedule 3.12(h), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby (either alone or together with any other actions or events)
will (i) result in any payment becoming due to any employee (current, former or
retired) of the Company or any of its subsidiaries, (ii) increase any benefits
otherwise payable under any Seller Plan or (iii) result in the acceleration of
the time of payment or vesting of any such benefits under any such plan.
3.13 LABOR MATTERS. None of the Company Employees is represented in his
or her capacity as an employee of the Company or any of its subsidiaries by any
labor organization, nor is there any union organization activity involving any
of the Company Employees, pending or threatened, nor has there ever been union
representation involving any of the Company Employees. There is no picketing,
strikes, slowdowns, work stoppages, other job actions, lockouts, arbitrations,
grievances or other labor disputes involving any of the Company Employees,
pending or, to the Company's Knowledge, threatened. There are no complaints,
charges or claims against the Company or any of its subsidiaries pending or, to
the Company's Knowledge, threatened which could be brought or filed, with any
public or governmental authority, arbitrator or court based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment or failure to employ by the Company or any of its subsidiaries, of
any individual. The Company and its subsidiaries are in compliance in all
material respects with all laws, regulations and orders relating to the
employment of labor, including all such laws, regulations and orders relating to
wages, hours, the Worker Adjustment and Retraining Notification Act and any
similar state or local "mass layoff" or "plant closing" law ("WARN"), collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax. There has been no "mass layoff" or "plant
closing" as defined by WARN with respect to the Company or its subsidiaries
within the six (6) months prior to Closing.
3.14 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 3.14:
(a) Each of the Company and its subsidiaries is, and has been at
all times, in compliance in all material respects with all applicable
Environmental Laws and Occupational Safety and Health Laws, and the Company is
not aware of any facts, circumstances or conditions
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which would prevent material compliance in the future, except for where the
failure to have been or to be in such compliance has not had and would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b) Neither the Company nor any other Person for whose conduct the
Company or any of its subsidiaries may be held responsible has received, and to
the Company's Knowledge, there is no basis to expect the Company, any of its
subsidiaries, or any other Person for whose conduct the Company may be held
responsible to receive, any Notice from any Governmental Entity, any private
citizen acting in the public interest, the current or prior owner or operator of
any current or former facility, or any other Person, of (i) any actual or
potential violation or failure to comply with any of the Environmental Laws or
(ii) any actual or potential Cleanup Liability or other environmental liability,
except for where such Notice has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
(c) To the Company's Knowledge, neither the Company, any of its
subsidiaries, nor any other Person for whose conduct the Company or any of its
subsidiaries may be held responsible has any Cleanup Liability or other
environmental liability in respect of any current or former facility of the
Company or any of its subsidiaries, any property adjoining any current or former
facility, or any assets used or useful in the conduct of the business, and no
such current or, to the Company's Knowledge, former facility of the Company or
any of its subsidiaries contains or contained (i) any underground storage tanks,
(ii) any landfills, dumps or surface impoundments, (iii) any asbestos-containing
materials, or (iv) any polychlorinated biphenyls, except for such responsibility
or containment which has not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(d) Except for Hazardous Materials stored or used in the Ordinary
Course of Business and in compliance in all material respects with all
applicable Environmental Laws, there are no Hazardous Materials at any facility
of the Company or any of its subsidiaries (whether or not in storage tanks or
other containers). To the Company's Knowledge, except for Hazardous Activities
conducted in the Ordinary Course of Business and in compliance in all material
respects with all applicable Environmental Laws, neither the Company, any of its
subsidiaries, nor any other Person for whose conduct the Company may be held
responsible has permitted or conducted any Hazardous Activity at any current or
former facility of the Company or any of its subsidiaries.
(e) To the Company's Knowledge, there has been no Release or
threatened Release by the Company or any of its subsidiaries or any other Person
of any Hazardous Materials at or from any current or former facility of the
Company or any of its subsidiaries, or any property adjoining any such current
or former facility.
None of the exceptions on Schedule 3.14 are reasonably likely to result in the
Company or any of its subsidiaries incurring costs and liabilities which would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company has delivered or made available copies to
Buyer and Subsidiary of all reports, studies, analyses, tests, monitoring or
indemnification agreements possessed or initiated by the Company or any of its
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subsidiaries relating to Hazardous Materials or Hazardous Activities at any
current or former facility of the Company or any of its subsidiaries, or
compliance by the Company, or any other Person for whose conduct the Company may
be held responsible, with applicable Environmental Laws.
3.15 TAX MATTERS. Except as set forth on Schedule 3.15:
(a) The Company and each of its subsidiaries has properly prepared
and duly and timely filed or had filed on its behalf, after giving effect to any
applicable extensions, all Tax Returns required to be filed by it. All such Tax
Returns are true, complete and correct in all material respects. The Company and
each of its subsidiaries has paid (or the Company has paid on its subsidiaries'
behalf) all Taxes due with respect to such Tax Returns.
(b) No deficiencies for any Taxes have been proposed, asserted or
assessed by any taxing authority against the Company or any of its subsidiaries
that have not been fully paid or adequately provided for in the appropriate
financial statements of the Company and its subsidiaries. No agreement, waiver
or other document or arrangement extending or having the effect of extending the
period for assessment or collection of Taxes is pending. No power of attorney
with respect to any Taxes has been executed or filed with any taxing authority
which power of attorney is currently in force. Neither the Company nor any of
its subsidiaries has executed or entered into a closing agreement pursuant to
Section 7121 of the Code or any predecessor provision or any similar provision
of state, local or foreign Tax law or requested any extension of time within
which to file any Tax Return, which Tax Return has since not been filed.
(c) No liens for Taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory liens
for Taxes not yet due.
(d) None of the Company or any of its subsidiaries is a party to
or is bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes pursuant to which it
will have any obligation to make any payment after the Closing Date.
(e) None of the Company or any of its subsidiaries has taken or
agreed to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(f) There are no employment, severance or termination agreements,
or other compensation arrangements covering any person that, individually or
collectively (either alone or upon the occurrence of any additional or
subsequent event), could give rise to a payment which is nondeductible by reason
of Section 280G of the Code. There are no employment, severance or termination
agreements, or other compensation arrangements which provide for any
reimbursement of Taxes payable by reason of the receipt of any payment under
such agreements or arrangements.
(g) The Company and its subsidiaries have withheld and paid all
Taxes required to be withheld in connection with any amounts paid or owing to
any employee, creditor, independent contractor or other third party.
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(h) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of the
Company or its subsidiaries and neither the Company nor any of its subsidiaries
has received a written notice of any pending audit or proceeding.
(i) Neither the Company nor any of its subsidiaries has (i) agreed
to or is required to make any adjustment under Section 481(a) of the Code or any
similar provision of state, local or foreign law, or (ii) with regard to any
assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(j) To the Company's Knowledge, no claim has been made by a taxing
authority in a jurisdiction where Company or any of its subsidiaries does not
file Tax Returns to the effect that the Company or any of its subsidiaries is or
may be subject to taxation by that jurisdiction.
For purposes of this Agreement, "Tax" or "Taxes" shall mean all federal, state,
local or foreign Taxes, assessments, duties, levies or similar charges of any
kind, including, without limitation, all net income, gross receipts, capital,
sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation, property and estimated
Taxes, customs duties, fees, assessments and charges of any kind whatsoever,
together with any interest and any penalties, fines, additions to Tax or
additional amounts imposed by any taxing authority (domestic or foreign). "Tax
Return" shall mean any report, return, document, declaration, claim for refund
or any other information return or statement relating to Taxes or any amendment
thereto, and including any schedule or attachment thereto.
3.16 MATERIAL CONTRACTS.
(a) Schedule 3.16 sets forth a list of all Material Contracts (as
hereinafter defined). The Company has heretofore made available to Buyer true,
correct and complete copies of all written or oral contracts and agreements (and
all amendments, modifications and supplements thereto and all side letters to
which the Company or any of its subsidiaries is a party affecting the
obligations of any party thereunder) in existence as of the date hereof to which
the Company or any of its subsidiaries is a party or by which any of its
properties or assets are bound that are material to the business, properties or
assets of the Company and its subsidiaries taken as a whole ("Material
Contracts"), including, without limitation, all of the following:
(i) employment, severance, product design or development,
personal services, consulting, noncompetition or indemnification
contracts (provided, that a customer contract entered into in the
Ordinary Course of Business need not be listed on such schedule merely
because it contains standard indemnification provisions);
(ii) contracts granting a right of first refusal or first
negotiation;
(iii) partnership or joint venture agreements;
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(iv) agreements for the acquisition, sale or lease of
material properties or assets of the Company (by merger, purchase or
sale of assets or stock or otherwise);
(v) contracts or agreements with any Governmental Entity;
(vi) loan or credit agreements, mortgages, indentures or
other agreements or instruments evidencing indebtedness for borrowed
money by the Company or any of its subsidiaries or any such agreement
pursuant to which indebtedness for borrowed money may be incurred;
(vii) agreements that purport to limit, curtail or restrict
the ability of the Company or any of its subsidiaries to compete in any
geographic area or line of business;
(viii) any contracts or agreements that would be required to
be filed as exhibits to a Form 10-K filed by the Company with the SEC
if the Company were required to file reports under the Exchange Act;
(ix) agreements with customers providing for revenue to the
Company or any of its subsidiaries in excess of $50,000 in any year;
(x) agreements that provide for total payments to or from the
Company or any of its subsidiaries that are likely to exceed $100,000;
(xi) agreements under which the Company or any of its
subsidiaries leases any tangible personal property and which provide
for lease payments in any year in excess of $50,000; and
(xii) any commitments and agreements to enter into any of the
foregoing.
(b) Each of the Material Contracts constitutes the valid and
legally binding obligation of the Company or its subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting creditors' rights
or by general equity principles) and is in full force and effect. There is no
default under any Material Contract so listed either by the Company or, to the
Company's Knowledge, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or, to the Company's Knowledge, any other
party thereto.
(c) No party to any such Material Contract has given notice to the
Company of or made a claim against the Company with respect to any material
breach or default thereunder.
3.17 INSURANCE. The Company and each of its subsidiaries have insurance
policies in full force and effect in scope and coverage consistent with
customary industry practice and as are sufficient for material compliance with
all requirements of Law and of all contracts to which the Company or any of its
subsidiaries is a party or by which it is bound. The Company has
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heretofore delivered or made available to Buyer and Merger Sub accurate and
complete copies of all insurance policies held by the Company and each of its
subsidiaries.
3.18 CUSTOMERS. To the Company's Knowledge, as of the date hereof,
neither the Company nor any of its subsidiaries has been notified by any current
material customer of such customer's intention to terminate or materially
curtail its relationship with the Company or such subsidiary.
3.19 INTELLECTUAL PROPERTY.
(a) Schedule 3.19(a) lists (i) all patents and patent applications
and all registered and unregistered trademarks, service marks and trade names,
domain names and registered copyrights included in the Intellectual Property
Rights of the Company or any of its subsidiaries, including the jurisdictions in
which each such Intellectual Property Right has been issued or registered or in
which any application for such issuance or registration has been filed, (ii) all
licenses, sublicenses and other agreements to which the Company or any of its
subsidiaries is a party and pursuant to which any person or entity is authorized
to use any Intellectual Property or Intellectual Property Right of the Company
(other than (A) "shrink-wrap" and similar widely available commercial end-user
licenses and (B) other end-user licenses and related agreements with respect to
the Company's products and its subsidiaries' products that have been entered
into by the Company or its respective subsidiary in the Ordinary Course of
Business), (iii) all licenses, sublicenses and other agreements to which the
Company or any of its subsidiaries is a party and pursuant to which the Company
or any of its subsidiaries is authorized to use any third party Intellectual
Property or Intellectual Property Rights ("Third Party Intellectual Property
Rights") that are incorporated in, are, form a part of, used in the manufacture
or provision of or used in connection with any product or service of the Company
or any of its subsidiaries (other than (A) "shrink-wrap" and similar widely
available commercial end-user licenses and (B) other end-user licenses and
related agreements with respect to the Company's products and its subsidiaries'
products that have been entered into by the Company or its respective subsidiary
in the Ordinary Course of Business) and (iv) any proceedings or actions before
any court, tribunal (including, without limitation, the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Intellectual Property of the Company.
(b) The Company and all of its subsidiaries own, or are licensed
or otherwise possess legally enforceable rights to use all Intellectual
Property, including, without limitation, all Registered Intellectual Property,
listed in Schedule 3.19(b) free and clear of any Liens or other encumbrances
(other than the terms of any applicable licenses).
(c) To the extent that any Intellectual Property has been
developed or created, discovered, conceived or reduced to practice independently
or jointly by any person or entity for and on behalf of the Company or any of
its subsidiaries, the Company or the respective subsidiary has a written
agreement with such person or entity with respect thereto whereby the Company or
the respective subsidiary has obtained ownership of all such Intellectual
Property and all related Intellectual Property Rights by operation of law or by
valid assignment.
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(d) Except as set forth on Schedule 3.19(d), neither the Company
nor any of its subsidiaries have transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Rights that is or was Intellectual Property of the Company
to any person or entity.
(e) Except as set forth on Schedule 3.19(e), neither the Company
nor any of its subsidiaries have licensed any of Intellectual Property of the
Company in source code form to any party.
(f) Neither the Company nor any of its subsidiaries is not, nor
will be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to any Intellectual Property of the
Company or Third Party Intellectual Property Rights.
(g) Except as set forth on Schedule 3.19(g), the Intellectual
Property of the Company constitutes all the Intellectual Property and
Intellectual Property Rights used in and/or necessary to the conduct of the
business of the Company and its subsidiaries as it currently is conducted,
including, without limitation, the design, development, manufacture, use,
import, marketing, sale, distribution and provision of products, technology and
services (including, without limitation, products, technology or services
currently under development).
(h) Except as set forth in Schedule 3.19(h), no third party who
has licensed Intellectual Property or Intellectual Property Rights to the
Company or any of its subsidiaries has any ownership rights or license rights to
any improvements made by or for the Company or any of its subsidiaries to such
Intellectual Property or Intellectual Property Rights.
(i) Other than (i) "shrink-wrap" and similar widely available
commercial end-user licenses and (ii) other end-user licenses and related
agreements with respect to the Company's products or its subsidiaries' products
that have been entered into by the Company or any of its subsidiaries in the
Ordinary Course of Business), Schedule 3.19(i) lists all contracts, licenses and
agreements between the Company or any of its subsidiaries and any person or
entity whereby the Company or any of its subsidiaries have agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, defend, hold
harmless, guaranty or otherwise assume or incur any obligation or liability or
provide a right of rescission with respect to the infringement or
misappropriation by the Company or any of its subsidiaries or such person or
entity of any Intellectual Property Rights of any person or entity other than
the Company or any of its subsidiaries.
(j) The operation of the business of the Company and its
subsidiaries as it currently is conducted by the Company, including, but not
limited to, the design, development, use, import, manufacture, market, sale,
distribution and provision of the products, technology or services (including,
without limitation, products, technology or services currently under
development) does not infringe or misappropriate the Intellectual Property
Rights of any person or entity, violate the rights of any person or entity
(including, without limitation, rights to privacy or publicity) or constitute
unfair competition or trade practices under the laws of any jurisdiction.
Neither the Company nor any of its subsidiaries have been sued in any suit,
action or proceeding,
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received written notice from any person or entity claiming that any operation or
any act, product, technology or service (including, without limitation,
products, technology or services currently under development) of the Company or
any of its subsidiaries infringes or is a misappropriation of the Intellectual
Property Rights of any person or entity or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor is the Company aware of
any basis therefor).
(k) Except as set forth on Schedule 3.19(k), neither the Company
nor any of its subsidiaries brought any action, suit or proceeding or asserted
any claim against any person or entity for infringement of any Intellectual
Property or breach of any license or agreement involving Intellectual Property.
(l) No Intellectual Property of the Company or any of its
subsidiaries, or product or service of the Company or any of its subsidiaries,
is subject to any proceeding or outstanding decree, order, judgment, settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or any of its subsidiaries, or affects the
validity, use or enforceability of any Intellectual Property of the Company.
(m) To the best of the Company's Knowledge, there is no
unauthorized use, disclosure, infringement or misappropriation of Intellectual
Property of the Company, or of any Intellectual Property Right of any person or
entity to the extent licensed by or through the Company or any of its
subsidiaries, by any person or entity, including, without limitation, any
employee or former employee of the Company or any of its subsidiaries.
(n) All Registered Intellectual Property Rights are valid and
subsisting, and all necessary registration, maintenance, renewal and other
relevant filing fees due through the date hereof in connection with such
Registered Intellectual Property Rights have been timely paid and all necessary
documents and certificates in connection with such Registered Intellectual
Property Rights have been timely filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property Rights.
(o) In each case in which the Company or any of its subsidiaries
has acquired from any person or entity (including, without limitation, all
consultants and employees) who contributed to the creation or development of
such Intellectual Property or Intellectual Property Rights that the Company or
any of its subsidiaries do not already own by operation of law, the Company or
its respective subsidiary has secured a valid and enforceable assignment
sufficient to irrevocably transfer all rights, title and interest in such
Intellectual Property and the associated Intellectual Property Rights (including
the right to seek past and future damages with respect thereto) to the Company
or its respective subsidiary, except as provided otherwise by law.
(p) There are no contracts, licenses or agreements between the
Company or any of its subsidiaries and any other person or entity with respect
to Intellectual Property of the Company under which there is currently any
material dispute regarding the scope of such agreement or performance under such
agreement (including, without limitation, with respect to any payments to be
made or received by the Company or any of its subsidiaries thereunder).
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(q) The Company and each of its subsidiaries has taken all
reasonable steps that are required to protect the Company's rights and its
subsidiaries' rights in confidential information and trade secrets of the
Company or any of its subsidiaries, or provided by any other person or entity to
the Company or any of its subsidiaries. Without limiting the foregoing, the
Company and each of its subsidiaries have, and enforces, a policy requiring each
of its employees, consultants and contractors to execute proprietary
information, confidentiality and assignment agreements substantially in the
Company's standard forms, and all current and former employees, consultants and
contractors of the Company and each of its subsidiaries have executed such
agreements substantially in the Company's standard form.
3.20 YEAR 2000. All of the Company's products or its subsidiaries'
products that contain or use a calendar function (including, without limitation,
any function indexed to a CPU clock and any function providing specific dates or
days or calculating spans of dates or days) and records, stores, processes,
provides, and where appropriate, inserts true and accurate calendar dates and
calculation for all such dates and spans will (i) not produce errors in the
calculation or processing of date data related to the year change from 1999 to
2000 (collectively, "Year 2000 Compliant"), and (ii) lose no internal
functionality with respect to the introduction of records or data containing
dates falling on or after January 1, 2000. The Company and each of its
subsidiaries have taken reasonable steps to confirm that all of the Company's
Information Technology (as defined below) is Year 2000 Compliant and will not
cause an interruption in the ongoing operations of the Company's business or its
subsidiaries' business on or after January 1, 2000. Except as set forth on
Schedule 3.20, neither the Company nor any of its subsidiaries have given any
assurances, warranties or indemnities nor undertaken any obligation with respect
to products or technology sold or licensed by the Company or any of its
subsidiaries being Year 2000 Compliant. For purposes of the foregoing, the term
"Company's Information Technology" shall mean and include all software,
hardware, firmware, telecommunications systems, embedded systems and other
systems, components and/or services that are owned or used by the Company and
each of its subsidiaries in the conduct of its business, or purchased by the
Company or any of its subsidiaries from third party suppliers.
3.21 TERMINATION AGREEMENT. The Termination Agreement has been executed
and delivered by all requisite Persons in order to cause each of the Co-Sale
Agreement, the Company Investment Agreement and the Company Registration Rights
Agreement, automatically as of the Effective Time without any further action
necessary on the part of any Person, to terminate in their entirety and be of no
further force and effect.
3.22 COMPANY AFFILIATE AGREEMENTS. The Company Affiliate Agreements
have been executed and delivered by all Persons who are "affiliates" of the
Company for purposes of Rule 145 under the Securities Act.
3.23 ACCOUNTS RECEIVABLE. The accounts receivable of the Company and
its subsidiaries represent valid obligations and have arisen solely out of bona
fide sales and deliveries of goods, performance of services and other business
transactions made in the Ordinary Course of Business and, to the Company's
Knowledge, are not subject to valid defenses (other than defenses that arise in
the Ordinary Course of Business for customer contracts and which are not
material in amount), set-off or counterclaims.
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3.24 BROKERS. No broker, finder or investment banker (other than Morgan
Stanley & Co. Incorporated, a true and correct copy of whose engagement
agreement has been provided to Buyer) is entitled to any brokerage, finder's or
other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company or any of its affiliates.
3.25 OPINION OF FINANCIAL ADVISOR. Morgan Stanley & Co. Incorporated
has delivered to the Company Board its opinion, dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration is fair
to the Shareholders from a financial point of view.
3.26 TAKEOVER STATUTE; DISSENTERS' RIGHTS. Company has taken all action
required to be taken by it in order to exempt this Agreement and the
transactions contemplated hereby from, and this Agreement and the transactions
contemplated hereby (the "Covered Transactions") are exempt from, the
requirements of any "moratorium," "control share," "fair price," "affiliate
transaction," "business combination" or other antitakeover Laws and regulations
of any state (collectively, "Takeover Statutes"), or any antitakeover provision
in Company's articles of incorporation and bylaws.
3.27 HSR MATTERS. The Company is its own "ultimate parent entity" as
defined in the HSR Act. The Company does not have "total assets" or "annual net
sales" (as such terms are used for purposes of 15 U.S.C. Section 18(a)) of
$100,000,000 or more.
3.28 DISCLOSURE. No representation or warranty by the Company and its
subsidiaries contained in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements in such representation or warranty not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
In order to induce the Company to enter into this Agreement, Buyer
and Merger Sub represent and warrant to the Company as follows:
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Buyer and each of its
subsidiaries is a corporation or legal entity duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its organization and
has all requisite corporate, partnership or similar power and authority to own,
lease and operate its properties and to carry on its businesses as now conducted
and proposed by Buyer to be conducted.
4.2 CAPITALIZATION OF BUYER AND ITS SUBSIDIARIES.
(a) Buyer's authorized capital stock consists of 64,000,000 shares
of Buyer Common Stock and 15,000,000 shares of preferred stock, $.001 par value
per share ("Buyer Preferred Stock"), consisting of 5,000,000 shares designated
as Series A Preferred Stock, 1,718,181 shares designated as Series B Preferred
Stock, 4,413,169 shares designated as Series C Preferred Stock and 3,442,808
shares designated as Series D Preferred Stock.
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(b) As of the date hereof, Buyer has 17,008,692 shares of Buyer
Common Stock issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable, and none of which was issued in violation
of the Securities Act or any state securities or other Law or in violation of or
subject to any preemptive rights. Buyer holds no issued shares of Buyer Common
Stock in treasury (including through any subsidiary). No Buyer Common Stock is
held by any subsidiary.
(c) As of the date hereof, Buyer has 13,613,986 shares of Buyer
Preferred Stock issued and outstanding, consisting of 5,000,000 shares of Series
A Preferred Stock, 1,718,181 shares of Series B Preferred Stock, 3,797,785
shares of Series C Preferred Stock and 3,098,020 shares of Series D Preferred
Stock, all of which are duly authorized, validly issued, fully paid and
nonassessable, and none of which was issued in violation of the Securities Act
or any state securities or other Law or in violation of or subject to any
preemptive rights. Buyer holds no issued shares of Preferred Stock in treasury
(including through any subsidiary).
(d) As of the date hereof, there are outstanding options to
purchase a total of 12,052,350 shares of Buyer Common Stock.
(e) Except as set forth in Sections 4.2(b) and 4.2(c), as of the
date hereof, there are no outstanding shares of capital stock or other equity
securities of Buyer nor are there any equity equivalents, interests in the
ownership or earnings of Buyer or other similar rights (including stock
appreciation rights). Except as set forth in Section 4.2(d), and except for (i)
any rights that any person may have to buy shares of Buyer Common Stock at or
following the time of Buyer's initial public offering at the initial public
offering price and (ii) 50,000 shares of Buyer Common Stock issuable to former
stockholders of Blaise Software, Inc. in connection with the acquisition of such
entity by Buyer on June 7, 1999, as of the date hereof, there are no securities
of Buyer convertible into or exchangeable for shares of capital stock or other
equity securities of Buyer or options, warrants, calls, puts, subscription
rights, conversion rights or other contracts to which Buyer is party or by which
Buyer is bound providing for Buyer's issuance of any Buyer Preferred Stock or
Buyer Common Stock or any other equity securities.
(f) Except for the (i) Old Buyer Investor Rights Agreement, (ii)
Old Buyer Stockholders Agreement, and (iii) voting provisions under Article Four
of Buyer's Restated Certificate of Incorporation, there are no shareholders
agreements, buy-sell agreements, voting trusts or other contracts to which Buyer
is a party or by which it is bound relating to the voting or disposition of any
Buyer Common Stock or creating any obligation of Buyer to repurchases, redeem or
otherwise acquire or retire any shares of Buyer Common Stock or any options to
acquire Buyer Common Stock.
(g) Except for the issued and outstanding capital stock of Merger
Sub (all of which are owned beneficially and of record by Buyer), Buyer does not
own any shares of capital stock of or other equity interest in any corporation
or other Person.
4.3 AUTHORITY, CORPORATE ACTION.
(a) Buyer and Merger Sub have all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
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(b) The Board of Directors of Buyer (the "Buyer Board") and the
Board of Directors of Merger Sub have duly and validly authorized the execution
and delivery of this Agreement and approved the consummation of the transactions
contemplated hereby, and taken all corporate actions required to be taken by
such Boards of Directors for the consummation of the transactions, including the
Merger, contemplated hereby. The Board of Directors of Merger Sub has
recommended that the sole shareholder of Merger Sub approve and adopt this
Agreement and the Plan of Merger, and such sole shareholder has validly approved
the Plan of Merger in accordance with the applicable provisions of the Act. No
other corporate proceedings on the part of Buyer or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer and
Merger Sub and constitutes a valid, legal and binding agreement of Buyer and
Merger Sub, enforceable against each of them in accordance with its terms.
4.4 FINANCIAL STATEMENTS. Buyer has delivered copies of the Buyer
Financial Statements to the Company. The Buyer Financial Statements fairly
present, in conformity with GAAP (except as may be indicated in the notes
thereto), the consolidated financial position of Buyer and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments and, in the case of unaudited year-end financial
statements, to normal audit adjustments). Since December 31, 1999, there has not
been any change, or any application or request for any change, by Buyer or any
of its subsidiaries in accounting principles, methods or policies for financial
accounting or Tax purposes (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
4.5 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.5, as
of December 31, 1999, none of Buyer or any of its subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and whether due or to become due or asserted or unasserted, which
have had or would reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
4.6 ABSENCE OF CHANGES. Except as set forth on Schedule 4.6, since
December 31, 1999, Buyer and each of its subsidiaries have conducted their
business in the Ordinary Course of Business and there has not been:
(a) any event, occurrence or development which has had or would
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Buyer, or any
repurchase, redemption or other acquisition by Buyer or any subsidiary of any
Buyer securities (other than for repurchases by Buyer from departing employees
made in the Ordinary Course of Business);
(c) any amendment of any term of any outstanding security of Buyer
or any subsidiary that would materially increase the obligations of Buyer or
such subsidiary under such security;
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(d) any material change in any method of accounting or accounting
principles or practice by Buyer or any subsidiary, except for any such change
required by reason of a change in GAAP;
(e) any material incurrence of indebtedness by Buyer or its
subsidiaries other than in the Ordinary Course of Business;
(f) any modification, amendment, assignment, termination or
relinquishment by Buyer or any of its subsidiaries of any contract, license or
other right (including any insurance policy naming it as a beneficiary or a loss
payable payee) material to Buyer and its subsidiaries taken as a whole that does
or would reasonably be expected to have, individually or in the aggregate, a
Buyer Material Adverse Effect; or
(g) any material acquisition (other than in which Buyer issues or
will isue securities of Buyer that do not exceed the limitations set forth in
Section 5.2) or disposition of any assets or business by Buyer or any of its
subsidiaries other than in the Ordinary Course of Business.
4.7 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the filing and
recordation of the Articles of Merger as required by the Act and any consents,
filings or approvals as may be required under the HSR Act or required in
connection with any permits or licenses of Company and its subsidiaries, no
filing with or notice to, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution and delivery by Buyer or
Merger Sub of this Agreement or the consummation by Buyer or Merger Sub of the
transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement by Buyer or Merger Sub nor the consummation by
Buyer or Merger Sub of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective certificate or
articles of incorporation or bylaws (or similar governing documents) of Buyer or
any of its subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or Lien)
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Buyer or any of its subsidiaries is a party or by which any
of them or any of their respective properties or assets may be bound or (iii)
violate any Law applicable to Buyer or any of its subsidiaries or any of their
respective properties or assets.
4.8 NO DEFAULT. Neither Buyer nor any of its subsidiaries is in
violation of any term of (i) its articles or certificate of incorporation,
bylaws or other organizational documents, (ii) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it is
a party or by which it is bound, or (iii) any Law applicable to Buyer, its
subsidiaries or any of their respective properties or assets, except for any
such violation referred to in clause (i), (ii) or (iii) above (A) that has had
or would reasonably be expected to have, individually or in the aggregate, a
Buyer Material Adverse Effect or (B) that does or would reasonably be expected
to prevent or materially delay the performance of this Agreement by Buyer or
Merger Sub.
4.9 LITIGATION. Except as set forth on Schedule 4.9, there is no suit,
claim, action, proceeding or investigation pending or, to Buyer's Knowledge,
threatened against Buyer or any
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of its subsidiaries or any of their respective properties or assets which has
had or would reasonably be expected to have, individually or in the aggregate, a
Buyer Material Adverse Effect. None of Buyer or its subsidiaries is subject to
any outstanding material order, writ, injunction or decree.
4.10 COMPLIANCE WITH APPLICABLE LAW. Buyer and each of its subsidiaries
hold all material permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses and Buyer and each of its subsidiaries are in material
compliance with the terms of such permits, except for any of the foregoing the
absence of which has not had and would not reasonably be expected to have,
individually or in the aggregate, a Buyer Material Adverse Effect. Schedule 4.10
sets forth a listing of (i) all of Buyer's permits or licenses that have been
granted by any insurance regulatory authority and (ii) all of Buyer's permits or
licenses for which any application has been made to any insurance regulatory
authority but which have not yet been issued or granted (together with a
description of when such application was made and the status of such
application). The businesses of Buyer and its subsidiaries are being conducted,
in all material respects in compliance with all Laws applicable to Buyer or its
subsidiaries, except for where the failure to do so has not had and would not
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect. To Buyer's Knowledge, no investigation or review by any
Governmental Entity with respect to Buyer or its subsidiaries is pending or
threatened, nor, to Buyer's Knowledge, has any Governmental Entity indicated an
intention to conduct the same, in any such case which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
4.11 EMPLOYEE PLANS.
(a) Schedule 4.11(a) sets forth: (i) all "employee benefit plans",
as defined in Section 3(3) of ERISA, and all other employee benefit arrangements
or payroll practices, including, without limitation, bonus plans, consulting or
other compensation agreements, incentive, equity or equity-based compensation,
or deferred compensation arrangements, stock purchase, severance pay, sick
leave, vacation pay and scholarship programs, maintained by Buyer or any of its
subsidiaries or to which Buyer or any of its subsidiaries contributed or is
obligated to contribute thereunder for current or former employees of Buyer and
its subsidiaries (the "Buyer Plans"). Neither Buyer, any of its subsidiaries,
nor any ERISA Affiliate has ever contributed or ever been obligated to
contribute to an "employee benefit plan" subject to Title IV of ERISA, a
"multiemployer plan", as defined in Section 3(37) of ERISA, or an "employee
benefit plan" subject to Sections 4063 or 4064 of ERISA. None of the Buyer Plans
provide for post-employment life or health insurance, benefits or coverage for
any participant or any beneficiary of a participant, except as may be required
under COBRA.
(b) The Buyer Plans have been maintained, in all material
respects, in accordance with their terms and with all applicable provisions of
ERISA, the Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations.
(c) The Buyer Plans intended to qualify under Section 401 of the
Code are so qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
with respect to the operation of the
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Buyer Plans which could cause the loss of such qualification or exemption or the
imposition of any liability, penalty or tax under ERISA or the Code.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Buyer Plans or by law (without regard to any waivers granted under Section
412 of the Code), to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the Closing
Date which are not yet due will have been paid or accrued on or prior to the
Closing Date.
4.12 LABOR MATTERS. None of the current or former employees of Buyer
and any of its subsidiaries (the "Buyer Employees") is represented in his or her
capacity as an employee of Buyer or any of its subsidiaries by any labor
organization, nor is there any union organization activity involving any of the
Buyer Employees, pending or threatened, nor has there ever been union
representation involving any of the Buyer Employees. There is no picketing,
strikes, slowdowns, work stoppages, other job actions, lockouts, arbitrations,
grievances or other labor disputes involving any of the Buyer Employees, pending
or, to Buyer's Knowledge, threatened. Buyer and each of its subsidiaries are in
compliance with all laws, regulations and orders relating to the employment of
labor, including all such laws, regulations and orders relating to wages, hours,
WARN, collective bargaining, discrimination, civil rights, safety and health,
workers' compensation and the collection and payment of withholding and/or
social security taxes and any similar tax, except for where the failure to do so
has not had and would not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect. There has been no "mass layoff" or
"plant closing" as defined by WARN with respect to Buyer or its subsidiaries
within the six (6) months prior to Closing.
4.13 ENVIRONMENTAL MATTERS. Except as has not had and would not
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect:
(a) Each of Buyer and its subsidiaries is, and has been at all
times, in compliance in all material respects with all applicable Environmental
Laws and Occupational Safety and Health Laws, and Buyer is not aware of any
facts, circumstances or conditions which would prevent material compliance in
the future.
(b) Neither Buyer nor any other Person for whose conduct Buyer or
any of its subsidiaries may be held responsible has received, and to Buyer's
Knowledge, there is no basis to expect Buyer, any of its subsidiaries, or any
other Person for whose conduct Buyer may be held responsible to receive, any
Notice from any Governmental Entity, any private citizen acting in the public
interest, the current or prior owner or operator of any current or former
facility, or any other Person, of (i) any actual or potential violation or
failure to comply with any of the Environmental Laws or (ii) any actual or
potential Cleanup Liability or other environmental liability.
(c) To Buyer's Knowledge, neither Buyer, any of its subsidiaries,
nor any other Person for whose conduct Buyer or any of its subsidiaries may be
held responsible has any Cleanup Liability or other environmental liability in
respect of any current or former facility of
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Buyer or any of its subsidiaries, any property adjoining any current or former
facility, or any assets used or useful in the conduct of the business, and no
such current or, to Buyer's Knowledge, former facility of Buyer or any of its
subsidiaries contains or contained (i) any underground storage tanks, (ii) any
landfills, dumps or surface impoundments, (iii) any asbestos-containing
materials, or (iv) any polychlorinated biphenyls.
(d) Except for Hazardous Materials stored or used in the Ordinary
Course of Business and in compliance in all material respects with all
applicable Environmental Laws, there are no Hazardous Materials at any facility
of Buyer or any of its subsidiaries (whether or not in storage tanks or other
containers). To Buyer's Knowledge, except for Hazardous Activities conducted in
the Ordinary Course of Business and in compliance in all material respects with
all applicable Environmental Laws, neither Buyer, any of its subsidiaries, nor
any other Person for whose conduct Buyer may be held responsible has permitted
or conducted any Hazardous Activity at any current or former facility of Buyer
or any of its subsidiaries.
(e) To Buyer's Knowledge, there has been no Release or threatened
Release by Buyer or any of its subsidiaries or any other Person of any Hazardous
Materials at or from any current or former facility of Buyer or any of its
subsidiaries, or any property adjoining any such current or former facility.
4.14 TAX MATTERS. Except as set forth on Schedule 4.14:
(a) Each of Buyer and its subsidiaries has properly prepared and
duly and timely filed or had filed on its behalf, after giving effect to any
applicable extensions, all material Tax Returns required to be filed by it. All
such Tax Returns are true, complete and correct in all material respects. Buyer
and each of its subsidiaries have paid (or Buyer has paid on its subsidiaries'
behalf) all Taxes shown due on such Tax Returns.
(b) No material deficiencies for any Taxes have been proposed,
asserted or assessed by any taxing authority against Buyer or any of its
subsidiaries that have not been fully paid or adequately provided for in the
appropriate financial statements of Buyer and each of its subsidiaries. No
agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes is pending.
No power of attorney with respect to any Taxes has been executed or filed with
any taxing authority which power of attorney is currently in force. Neither
Buyer nor any of its subsidiaries has executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision or
any similar provision of state, local or foreign Tax law or requested any
extension of time within which to file any Tax Return, which Tax Return has
since not been filed.
(c) No liens for Taxes exist with respect to any material assets
or properties of Buyer or any of its subsidiaries, except for statutory liens
for Taxes not yet due.
(d) Neither Buyer nor any of its subsidiaries has taken or agreed
to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
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(e) Each of Buyer and its subsidiaries has withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(f) As of the date hereof, no material audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or Tax Returns of Buyer or any of its subsidiaries
and neither Buyer nor any of its subsidiaries has received a written notice of
any pending material audit or proceeding.
4.15 MATERIAL CONTRACTS. Each of Buyer's material contracts constitutes
the valid and legally binding obligation of Buyer or any of its subsidiaries,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. There is no default under any of Buyer's material contracts
either by Buyer or, to Buyer's Knowledge, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder by Buyer or, to Buyer's Knowledge, any
other party thereto.
4.16 INTELLECTUAL PROPERTY.
(a) Buyer owns, or is licensed or otherwise possesses legally
enforceable rights to use all material Intellectual Property, including, without
limitation, all Registered Intellectual Property used by Buyer in its business.
(b) Buyer has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any material Intellectual
Property or material Intellectual Property Rights that is or was Intellectual
Property of Buyer to any person or entity.
(c) Buyer has not (i) licensed any of Intellectual Property of the
Company in source code form to any party or (ii) entered into any exclusive
agreements relating to material Intellectual Property of Buyer with any person
or entity.
(d) Buyer is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any material license, sublicense or other agreement
relating to any Intellectual Property of Buyer or Third Party Intellectual
Property Rights.
(e) Except as has not had and would not reasonably be expected to
have a Buyer Material Adverse Effect, the operation of the business of Buyer as
it currently is conducted or currently is anticipated by Buyer, including, but
not limited to, the design, development, use, import, manufacture, market, sale,
distribution and provision of the products, technology or services (including,
without limitation, products, technology or services currently under
development) does not infringe or misappropriate the Intellectual Property
Rights of any person or entity, violate the rights of any person or entity
(including, without limitation, rights to privacy or publicity) or constitute
unfair competition or trade practices under the laws of any jurisdiction. Except
as has not had and would not reasonably be expected to have a Buyer Material
Adverse
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Effect, Buyer has not been sued in any suit, action or proceeding, received
written notice from any person or entity claiming that any operation or any act,
product, technology or service (including, without limitation, products,
technology or services currently under development) of Buyer infringes or is a
misappropriation of the Intellectual Property Rights of any person or entity or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor is Buyer aware of any basis therefor).
(f) No material Intellectual Property of Buyer or product or
service of Buyer is subject to any proceeding or outstanding decree, order,
judgment, settlement agreement or stipulation that restricts in any manner the
use, transfer or licensing thereof by Buyer or affects the validity, use or
enforceability of any Intellectual Property of Buyer.
(g) All material Registered Intellectual Property Rights are valid
and subsisting, and all necessary registration, maintenance, renewal and other
relevant filing fees due through the date hereof in connection with such
Registered Intellectual Property Rights have been paid and all necessary
documents and certificates in connection with such Registered Intellectual
Property Rights have been filed with the relevant patent, copyright, trademark
or other authorities in the United States or foreign jurisdictions, as the case
may be, for the purposes of maintaining such Registered Intellectual Property
Rights.
(h) There are no material contracts, licenses or agreements
between Buyer and any other person or entity with respect to Intellectual
Property of Buyer under which there is currently any dispute regarding the scope
of such agreement or performance under such agreement (including, without
limitation, with respect to any payments to be made or received by Buyer
thereunder).
4.17 YEAR 2000. Except as has not and would not reasonably be expected
to have, individually or in the aggregate, a Buyer Material Adverse Effect, all
of Buyer's products that contain or use a calendar function (including, without
limitation, any function indexed to a CPU clock and any function providing
specific dates or days or calculating spans of dates or days) and records,
stores, processes, provides, and where appropriate, inserts true and accurate
calendar dates and calculation for all such dates and spans will (i) not produce
errors in the calculation or processing of date data related to the year change
from 1999 to 2000 and (ii) lose no internal functionality with respect to the
introduction of records or data containing dates falling on or after January 1,
2000. Buyer has taken reasonable steps to confirm that all of Buyer's
Information Technology (as defined below) is Year 2000 Compliant and will not
cause an interruption in the ongoing operations of Buyer's business on or after
January 1, 2000. For purposes of the foregoing, the term "Buyer's Information
Technology" shall mean and include all software, hardware, firmware,
telecommunications systems, embedded systems and other systems, components
and/or services that are owned or used by Buyer in the conduct of its business,
or purchased by Buyer from third party suppliers.
4.18 CUSTOMERS. Except as set forth on Schedule 4.18, to Buyer's
Knowledge, as of the date hereof, Buyer has not been notified by any current
material customer of such customer's intention to terminate or materially
curtail its relationship with Buyer.
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4.19 BROKERS. Other than Goldman Sachs & Co., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Buyer, Merger Sub or any of their affiliates.
4.20 OBLIGATIONS TO RELATED PARTIES. There are no obligations of Buyer
or Merger Sub to officers, directors, stockholders or employees of Buyer other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of Buyer and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Buyer
Board). Buyer is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation other than wholly-owned subsidiaries of Buyer.
4.21 REGISTRATION RIGHTS. Except pursuant to the Old Buyer Investor
Rights Agreement, Buyer is presently not under any obligation, and has not
granted any rights, to register under the Securities Act any of Buyer's
presently outstanding securities or any of its securities that may hereafter be
issued.
4.22 HSR MATTERS. Buyer is its own "ultimate parent entity" as defined
in the HSR Act. To Buyer's Knowledge, as of the date hereof, Buyer does not have
"total assets" or "annual net sales" (as such terms are used in 15 U.S.C.
Section 18(a)) of $100,000,000 or more.
4.23 DISCLOSURE. No representation or warranty by Buyer and any of its
subsidiaries contained in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements in such representation or warranty not misleading.
ARTICLE 5
EVENTS PRIOR TO CLOSING
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
Agreement, during the period from the date hereof to the Effective Time, the
Company will, and will cause each of its subsidiaries to, conduct its operations
in the Ordinary Course of Business, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its current
business organizations, seek to keep available the service of its current
officers and employees and seek to preserve its relationships with customers,
suppliers and others having business dealings with it to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, neither the Company nor
any of its subsidiaries will, without the prior written consent of Buyer:
(a) amend its articles of incorporation or bylaws (or other
similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities
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convertible into or exchangeable for any stock or any equity equivalents
(including, without limitation, any stock options or stock appreciation rights),
except (i) for the issuance of shares of Common Stock pursuant to the exercise
of any outstanding Company Stock Option or Warrant, (ii) for the issuance of
shares of Common Stock upon the conversion of outstanding shares of Preferred
Stock, (iii) as specifically provided in Section 5.18 and (iv) as specifically
set forth in that certain letter agreement dated as of January 31, 2000, between
the Company and CCC;
(c) (i) split, combine or reclassify any shares of its capital
stock; (ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; (iii) make any other actual, constructive or deemed
distribution in respect of any shares of its capital stock or otherwise make any
payments to stockholders in their capacity as such; or (iv) redeem, repurchase
or otherwise acquire any of its securities or any securities of any of its
subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Plan of Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue
any debt securities or other indebtedness for borrowed money; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except for
obligations of the wholly-owned subsidiaries of the Company; (iii) make any
loans, advances or capital contributions to, or investments in, any other person
(other than to the wholly-owned subsidiaries of the Company or customary loans
or advances to employees in the Ordinary Course of Business and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of capital stock of the Company or any of its subsidiaries; or
(v) mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to exist any material Lien thereupon;
(g) except as may be required by Law or as contemplated by this
Agreement, enter into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund, award or other arrangement for
the benefit or welfare of any director, officer or employee in any manner, or
(except as set forth in Schedule 5.1(g), and as required under existing
agreements) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units);
(h) acquire, sell, lease or dispose of any assets outside the
Ordinary Course of Business or any assets which in the aggregate are material to
the Company and any of its subsidiaries taken as a whole, enter into any
commitment or transaction outside the Ordinary Course of Business or grant any
exclusive distribution rights;
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(i) except as may be required as a result of a change in Law or in
GAAP, change any of the accounting principles or practices used by it;
(j) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the Ordinary Course of Business or as required
by GAAP;
(k) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement, other than in the Ordinary Course of Business or amend in any
material respect any of the Material Contracts or the agreements referred to in
Section 3.17; (iii) authorize any new capital expenditure or expenditures which,
in the aggregate, are in excess of $100,000; or (iv) enter into or amend any
contract, agreement, commitment or arrangement providing for the taking of any
action that would be prohibited hereunder;
(l) make or revoke any Tax election, or settle or compromise any
Tax liability, or change (or make a request to any taxing authority to change)
any aspect of its method of accounting for Tax purposes;
(m) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the Ordinary
Course of Business of liabilities reflected or reserved against in, the Company
Financial Statements and its subsidiaries or incurred in the Ordinary Course of
Business or waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any of
its subsidiaries is a party;
(n) settle or compromise any pending or threatened suit, action or
claim that is material or that relates to the transactions contemplated hereby;
(o) take any action (including any action otherwise permitted by
this Section 5.1) that would prevent or impede the Merger from qualifying as a
reorganization under Section 368 of the Code;
(p) enter into any agreement or arrangement that limits or
otherwise restricts the Company or any of its subsidiaries or any successor
thereto or that could, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Buyer) or any successor thereto, from
engaging or competing in any line of business or in any geographic area;
(q) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through 5.1(p) or any
action which would make any of the representations or warranties of the Company
contained in this Agreement (i) which are qualified as to materiality untrue or
incorrect or (ii) which are not so qualified untrue or incorrect in any material
respect.
5.2 CONDUCT OF BUSINESS OF BUYER. Except as contemplated by this
Agreement, during the period from the date hereof to the Effective Time, Buyer
will, and will cause each of its subsidiaries to, conduct its operations in the
Ordinary Course of Business, with no less
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diligence and effort than would be applied in the absence of this Agreement.
Notwithstanding the foregoing, nothing in this Section 5.2 shall prevent Buyer
from (i) issuing any of its securities (A) as specifically provided in Section
5.18 or (B) in connection with any acquisitions which in the aggregate do not
involve the issuance of more than 1,962,963 shares of Buyer Common Stock (or
other securities of Buyer which may be converted into or exchanged for more than
1,962,963 shares of Buyer Common Stock) or (ii) taking any actions it deems
necessary or appropriate in connection with the preparation of Buyer's initial
public offering. Without limiting the foregoing, Buyer will not take any action
(including any action otherwise permitted by this Section 5.2) that would
prevent or impede the Merger from qualifying as a reorganization under Section
368 of the Code.
5.3 ACCESS TO INFORMATION. Pending Closing, each Party shall (i) give
the other Party and its representatives (including counsel, financial advisors
and accountants) access during normal business hours (but without unreasonable
interference with operations) to the facilities of such Party and to such
Party's books, records, ledgers, files, documents, correspondence, lists,
reports, creative materials, advertising and promotional materials and other
printed or written materials and (ii) make the officers and employees of such
Party available for questioning. Each Party shall furnish the other Party and
its representatives with all information and copies of all documents concerning
such Party. Neither Party shall contact any of the other Party's customers
without first notifying such other Party, and each Party hereby agrees to
cooperate in arranging and participating in any such meetings with customers.
5.4 BUYER DISCLOSURE MEMORANDUM. As promptly as practicable following
the date of this Agreement, Buyer shall prepare and deliver to the Company's
shareholders a private disclosure memorandum (the "Buyer Disclosure Memorandum")
intended to meet the requirements of Rule 502(b) under the Securities Act;
provided, however, that the delivery of the Buyer Disclosure Memorandum to any
shareholder of the Company shall be conditioned upon the prior receipt by Buyer
of a confidentiality agreement, in a form reasonably satisfactory to Buyer, duly
executed by such shareholder. Promptly following any request by Buyer, the
Company will furnish to Buyer any information regarding the Company reasonably
requested by Buyer for inclusion in the Buyer Disclosure Memorandum or otherwise
useful by Buyer in preparation of the Buyer Disclosure Memorandum. All such
information provided by the Company to Buyer in accordance with this Section 5.4
shall be accurate and complete in all material respects as of the date of its
delivery to Buyer. The Company shall immediately notify Buyer if, at any time
subsequent to the delivery of such information but prior to the Shareholder
Approval, any of such information shall no longer be accurate and complete in
all material respects.
5.5 PURCHASER REPRESENTATIVE. As promptly as practicable following the
date of this Agreement, the Company shall use its reasonable best efforts to
cause the Company's shareholders who are not "accredited investors" (as defined
in Rule 501 under the Securities Act) to retain a "purchaser representative,"
within the meaning of Rule 501(h) under the Securities Act, to assist such
shareholders in evaluating the merits and risks of their prospective investment
in the Buyer Common Stock received in connection with the Merger.
5.6 COMPANY SHAREHOLDER APPROVAL. The Company shall take all lawful
action to (i) obtain the Shareholder Approval through the execution by each of
its shareholders of a
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Unanimous Written Consent of Shareholders approving this Agreement and the Plan
of Merger ("Company Shareholder Consent") or (ii) cause a special meeting of its
shareholders (the "Company Shareholder Meeting") to be duly called by the
Company Board or the Company's shareholders for the purpose of voting on the
approval and adoption of this Agreement and the Plan of Merger and solicit
proxies from its shareholders to obtain the Shareholder Approval. Such actions
shall include the preparation and delivery to shareholders of the Company of any
disclosure materials that are necessary to be delivered to such shareholders in
connection with obtaining the Shareholder Approval, the information in which
materials will be accurate and complete in all material respects. Buyer shall be
provided with the opportunity to review and comment on such materials prior to
their distribution. The Company shall take the actions described in clause (i)
or clause (ii) of the initial sentence of this Section 5.6 and the immediately
preceding sentence as soon as practicable after the date of this Agreement;
provided, however, that (a) no signature of any shareholder to the Unanimous
Written Consent of Shareholders described in clause (i) of the immediately
preceding sentence shall be obtained, and (b) the Company Shareholder Meeting
shall not occur, as applicable, until the date that is five (5) business days
following the date on which Buyer has delivered the Buyer Disclosure Memorandum
to the Company's shareholders. In connection with taking the actions described
in clause (i) or clause (ii) of the first sentence of this Section 5.6, the
Company shall take all actions (including, but not limited to, the giving of
proper notices of shareholder meetings, actions to be taken without shareholder
meetings and dissenting shareholder rights) necessary or required under the Act
and the Company's Articles of Incorporation and by-laws. The Company Board shall
recommend approval and adoption of this Agreement and the Merger by the
Company's shareholders and, except as expressly provided in Section 5.15, shall
not withdraw, amend, or modify in a manner adverse to Buyer such recommendation.
5.7 EXECUTION OF CERTAIN DOCUMENTS. The Company shall use its
reasonable best efforts to cause each of its shareholders to execute and
deliver, concurrently with the execution of the Company Shareholder Consent or
concurrently with the Company Shareholder Meeting, as applicable, (i) an
investor suitability questionnaire and representation letter (the "Shareholder
Questionnaire") in a form supplied by Buyer (and reasonably satisfactory to the
Company) and (ii) a counterpart signature page to each of the Buyer Investor
Rights Agreement and the Buyer Stockholders Agreement.
5.8 CERTAIN BUYER ACTIONS. Buyer shall use its reasonable best efforts
to cause: (i) the amendment to Buyer's certificate of incorporation to increase
the authorized number of shares of Buyer Common Stock to 80,500,000 (the "Buyer
Charter Amendment") to be filed with the Secretary of State of the State of
Delaware prior to or concurrently with the Closing; (ii) the Buyer Investor
Rights Agreement to become effective upon the Effective Time (in complete
replacement of the Old Buyer Investor Rights Agreement); and (iii) the Buyer
Stockholders Agreement to become effective upon the Effective Time (in complete
replacement of the Old Buyer Stockholders Agreement).
5.9 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each Party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate the Merger
and the other transactions contemplated by this Agreement and each
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Party agrees not take any action to delay or prevent the Merger from being
consummated later than March 30, 2000.
5.10 OTHER FILINGS. As promptly as practicable after the date of this
Agreement, Buyer and the Company, as applicable, shall use its reasonable best
efforts to give each Notice, make each filing and obtain each Permit or other
Consent listed on Schedule 3.7 or Schedule 4.7, if any. To the extent that the
cooperation of any Party is necessary or, in the another Party's reasonable
judgment, desirable, such Party shall reasonably cooperate in regard to all such
Notices, filings, Permits and other Consents.
5.11 NOTICE OF DEVELOPMENTS. Pending Closing, each Party shall promptly
give Notice to the other of: (i) any fact or circumstance of which any Party
becomes aware that causes or constitutes a material inaccuracy in or a material
breach of any of such Party's representations and warranties in Article 3 or
Article 4, as applicable, on the date of this Agreement; (ii) any fact or
circumstance of which any Party becomes aware that would cause or constitute a
material inaccuracy in or a material breach of any of such Party's
representations and warranties in Article 3 or Article 4, as applicable, if its
representations and warranties were made on and as of the date of occurrence or
discovery of the fact or circumstance; (iii) any breach of or default of any
Party's obligations under this Article 5; or (iv) the occurrence of any event
makes satisfaction of any of the conditions in Article 6 impossible or unlikely;
provided, however, that the delivery of any notice pursuant to this Section 5.11
shall not cure such breach or non-compliance or limit or otherwise affect the
rights, obligations or remedies available hereunder to any Party.
5.12 PUBLIC ANNOUNCEMENTS. Each of Buyer, Merger Sub and the Company
will consult with one another, and obtain the approval of the other Party,
before issuing any press release or otherwise making any public statements in
respect of the transactions contemplated by this Agreement, including the
Merger, except as may be required by applicable Law.
5.13 TAX-FREE REORGANIZATION TREATMENT. The Parties hereto intend that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code. Each of the Parties hereto shall use its reasonable best efforts to
cause the Merger to so qualify.
5.14 EMPLOYEE MATTERS. Buyer will cause the Surviving Corporation to
honor the obligations of the Company or any of its subsidiaries under the
provisions of all Company Plans and employee arrangements, subject to Buyer's
right to amend or terminate any such benefit plan or employee arrangement in
accordance with its terms. After the Effective Time, the employees of the
Company will be eligible to participate in the Company Plans or, if so
determined by Buyer, the applicable Buyer Plans, as such plans (or any successor
plans thereto) may be in effect from time to time, and at Buyer's sole
discretion, will become employees of Buyer. Buyer agrees, or shall cause the
Surviving Corporation to agree, to cause the applicable Company Plans (other
than the Company's "Personal Time Off Benefits" policy) or Buyer Plans, as such
plans (or any successor plans thereto) may be in effect from time to time,
covering the Company Employees following the Effective Time to recognize all
service with the Company or its affiliates prior to the Effective Time for the
purpose of eligibility, participation, vesting and accrual of benefits;
provided, however, that for calendar year 2000, a Company Employee's vacation
entitlement shall be computed under the Company's "Personal Time Off Benefits"
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policy and for calendar years 2001 and thereafter, a Company Employee's vacation
entitlement shall be computed under the applicable vacation program then in
effect; and provided, further, however, that prior service shall not be
recognized to the extent that such recognition would result in the duplication
of benefits. Buyer agrees, or shall cause the Surviving Corporation to agree,
that the applicable group health plan or plans covering the Company Employees
and their eligible dependents following the Effective Time shall not contain any
pre-existing condition limitation or exclusion applicable to their participation
therein and shall give each Company Employee credit toward applicable
deductibles and annual out-of-pocket limits for expenses incurred prior to the
Effective Time during the 2000 calendar year. At Buyer's sole discretion,
administrative functions, including but not limited to payroll processing, may
be transferred to processors of Buyer's choosing.
5.15 ACQUISITION PROPOSALS. The Company will not, nor will it permit
any of its subsidiaries to, nor will it authorize or permit any officer,
director or employee of or any investment banker, attorney, accountant or other
advisor or representative of the Company or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information in respect of, or take any
other action to facilitate, any Acquisition Proposal or any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal. The Company shall notify Buyer of any Acquisition
Proposal as promptly as practicable after its receipt thereof, and shall provide
Buyer with a copy of any written Acquisition Proposal or amendments or
supplements thereto. "Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving the Company or any of its subsidiaries: (w) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (x) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or any portion of the assets or securities of the
Company and/or its subsidiaries in a single transaction or series of related
transactions (other than immaterial transfers of assets in the Ordinary Course
of Business of the Company and other than any financings pursuant to Section
5.18). The Company Board will not withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Buyer, its recommendation of the Merger unless
the Company Board after consultation with independent legal counsel, determines
in good faith that such action is necessary for the Company Board to comply with
its duties to the Company's shareholders under applicable Law. No such
withdrawal or modification shall be a basis for the Company to terminate this
Agreement nor shall it in any way affect or diminish any of the Company's
obligations under this Agreement (including, but not limited to, the Company's
obligations under this Section 5.15 and the Company's obligations pursuant to
Section 5.6 to use its best efforts to obtain the requisite written consent of
its shareholders for the Plan of Merger or to cause the Company Shareholder
Meeting to be held for the purpose of voting on the approval and adoption of the
Plan of Merger.
5.16 FEES AND EXPENSES. Regardless of whether the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
Expenses. As used in this Agreement, "Expenses" includes all out-of-pocket
expenses (including all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a Party hereto and its affiliates) incurred
by a
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Party or on its behalf in connection with, or related to, the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby.
5.17 DIRECTOR AND OFFICER INDEMNIFICATION.
(a) From and after the Effective Time, Buyer and the Surviving
Corporation shall, and Buyer shall cause the Surviving Corporation to the
fullest extent permitted by applicable Law to, indemnify, defend, and hold
harmless each person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a director or officer of the
Company or any subsidiary thereof (each an "Indemnified Party" and,
collectively, the "Indemnified Parties") against all losses, expenses
(including, reasonable attorneys' fees and expenses), claims, damages, costs or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time and whether asserted or claimed prior to, at or after the
Effective Time that are in whole or in part based on, or arising out of the fact
that such person is or was a director or officer of such Party or a subsidiary
of such Party. Without limiting the foregoing, in the event of any such loss,
expense, claim, damage, cost or liability (whether or not arising before the
Effective Time), (A) Buyer and the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received and otherwise advance to such
Indemnified Party upon request for reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the Act and
upon receipt of any affirmation and undertaking required by the Act, (B) the
Surviving Corporation will cooperate in the vigorous defense of any such matter
and (C) any determination required to be made in respect of whether an
Indemnified Party's conduct complies with the standards set forth under the Act
and the Surviving Corporation's articles of incorporation or by-laws shall be
made by independent counsel mutually acceptable to the Surviving Corporation and
the Indemnified Party; provided, however, that neither Buyer nor the Surviving
Corporation shall be liable for any settlement effected without their written
consent (which consent shall not be unreasonably withheld). The Indemnified
Parties as a group may retain only one law firm in respect of each related
matter except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more
Indemnified Parties.
(b) For a period of three (3) years after the Effective Time,
Buyer or the Surviving Corporation shall cause to be maintained in effect, with
respect to the actions taken or events occurring prior to the Effective Time,
the policies of directors' and officers' liability insurance maintained by the
Company for the benefit of those persons who are covered by such policies at the
Effective Time (or Buyer or the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms not less
advantageous to the insured parties in respect of matters occurring prior to the
Effective Time), to the extent that such liability insurance can be maintained
annually at a cost to Buyer or the Surviving Corporation not greater than one
hundred and fifty percent (150%) of the premium for the current Company
directors' and officers' liability insurance; provided, however, that if such
insurance cannot be so maintained or obtained at such costs, Buyer or the
Surviving Corporation shall maintain or obtain as much of such insurance as can
be so maintained or obtained at a cost equal to one
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hundred and fifty percent (150%) of the current annual premiums of the Company
for such insurance.
(c) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity or such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set for in this Section 5.17.
(d) The provisions of this Section 5.17 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs, and his or her representatives.
5.18 CERTAIN FINANCINGS. If it is necessary for either Buyer or the
Company to effect any private equity financing prior to the Effective Time, such
Party will notify the other Party, and the Parties will use their reasonable
best efforts to coordinate such financing in order to achieve the best possible
terms. If the Parties are unable to so coordinate such financing, the Party
desiring to effect such financing nevertheless may effect such financing,
provided that such financing will not adversely affect (i) the ability of such
Party to perform its obligations under this Agreement or (ii) the ability of any
of the Parties to consummate the transactions contemplated by this Agreement on
a timely basis. In addition, the Company will not issue any securities as part
of any such financing, to any Person that is not an "accredited investor" for
purposes of Regulation D under the Securities Act. In no event will the Company
be permitted to undertake any equity financing that might result in any other
Person being entitled to acquire any securities of Buyer or the Company
following the Effective Time.
5.19 DELIVERY OF COMPANY FINANCIAL STATEMENTS. The Company shall cause
Ernst & Young LLP to deliver to the Company and Buyer as promptly as
practicable, but no later than February 4, 2000, its audit opinions (which shall
not be qualified, except for a "going-concern" qualification) on the Company's
financial statements as of and for the year ended June 30, 1999 and the twelve
months ended December 31, 1999.
5.20 HSR APPROVAL.
(a) If required, each Party hereto shall make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act in respect of
the transactions contemplated hereby as promptly as practicable and in any event
within ten (10) business days of the date Buyer determines such filing is
required and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and use its
reasonable best efforts to take, or cause to be taken, all other actions
consistent with this Section 5.20 necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable.
(b) Each of Buyer and the Company shall, in connection with the
efforts referenced in Section 5.20(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act, use its reasonable best efforts to: (i) cooperate in all respects with each
other in connection with any filing or submission and in
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connection with any investigation or other inquiry, including any proceeding
initiated by a private Party; (ii) keep the other Party informed in all material
respects of any material communication received by such Party from, or given by
such Party to, the Federal Trade Commission (the "FTC"), the Antitrust Division
of the Department of Justice (the "DOJ") or any other Governmental Entity and of
any material communication received or given in connection with any proceeding
by a private Party, in each case regarding any of the transactions contemplated
hereby; and (iii) permit the other Party to review any material communication
given by it to, and consult with each other in advance of any meeting or
conference with, the FTC, the DOJ or any such other domestic or foreign
Governmental Entity or, in connection with any proceeding by a private party,
with any other person, and to the extent permitted by the FTC, the DOJ or such
other applicable domestic or foreign Governmental Entity or other person, give
the other Party the opportunity to attend and participate in such meetings and
conferences.
(c) In furtherance and not in limitation of the covenants of the
Parties contained in Sections 5.20(a) and (b), each of Buyer and the Company
shall use its reasonable best efforts to resolve such objections if any, as may
be asserted by a Governmental Entity or other person in respect of the
transactions contemplated hereby under any antitrust law. In connection with the
foregoing, if any administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as violative of any
antitrust law, each of Buyer and the Company shall cooperate in all material
respects with each other and use its respective reasonable best efforts to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.20 shall (i) limit a Party's right to
terminate this Agreement pursuant to Article 8 so long as such Party has up to
then complied in all material respects with its obligations under this Section
5.20, (ii) require Buyer to dispose or hold separate any part of its business or
operations or agree not to compete in any geographic area or line of business or
(iii) require Buyer to dispose or hold separate any part of the Company's
business or operations or agree to cause the Company not to compete in any
geographic area or line of business which would in any such case impair any of
the benefits intended to be derived by Buyer after the Effective Time as a
result of the Merger.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS OF EACH PARTY. The respective obligations of each Party
to consummate the Merger and to take the other actions that they are
respectively required to take at Closing are subject to the satisfaction or
written waiver by each of the Parties of each of the following conditions prior
to or at Closing:
(a) the Plan of Merger shall have received the Shareholder
Approval either by a requisite vote at the Company Shareholder Meeting or by the
execution of the Company Shareholder Consent with respect thereto;
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(b) since the date of this Agreement, no Suit shall have been
initiated or threatened by any Governmental Authority that challenges or seeks
damages or other relief in connection with this Agreement or the Merger or that
could have the effect of preventing, delaying, making illegal or otherwise
interfering with the Merger;
(c) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be effect; provided, however, that prior to invoking this condition, each Party
shall have used its reasonable best efforts to have any such decree, ruling,
injunction or order vacated, except as otherwise contemplated by this Agreement;
(d) the Buyer Charter Amendment shall have been filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect; and
(e) any waiting periods applicable to the Merger under the HSR Act
shall have expired or early termination thereof shall have been granted.
6.2 CONDITIONS OF BUYER AND MERGER SUB. The respective obligations of
Buyer and Merger Sub to consummate the Merger and to take the other actions that
they are respectively required to take at Closing are subject to the
satisfaction of each of the following conditions prior to or at Closing:
(a) (i) the Company's representations and warranties in Article 3
(without taking into account any materiality or Company Material Adverse Effect
qualifiers set forth therein) shall be true on the Closing Date except as has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, except that such representations
and warranties that expressly speak only as of an earlier date (without taking
into account any materiality or Company Material Adverse Effect qualifiers set
forth therein), shall have been true as of such earlier date except as has not
had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect; and (ii) the Company's
representations and warranties in Section 3.19 shall have been true in all
material respects as of the date hereof and shall be true in all material
respects as of the Closing Date; and (iii) the Company's representations and
warranties in Section 3.18 shall have been true in all material respects as of
the date hereof;
(b) the Company shall have executed and delivered all of the
documents and instruments that it is required to execute and deliver or enter
into prior to or at Closing, and shall have performed, complied with, or
satisfied in all material respects all of its other obligations, agreements and
conditions under this Agreement that it is required to perform, comply with or
satisfy prior to or at Closing;
(c) each Company Permit designated with an asterisk on Schedule
3.11 or other Consent designated with an asterisk on Schedule 3.7, if any, shall
have been obtained and shall be in full force;
(d) holders of shares of Common Stock and Preferred Stock
representing no more than ten percent (10%) of the outstanding Common Stock and
Preferred Stock (on an as-converted basis) shall have exercised and not
withdrawn, forfeited or otherwise permitted to
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lapse appraisal, dissenter's or similar rights under applicable Law with respect
to their shares of Common Stock or Preferred Stock in connection with the
Merger;
(e) the Co-Sale Agreement, the Company Investor Agreement, the
Company Registration Rights Agreement, the CCC Purchase Agreement and the CCC
Note shall have been terminated and cancelled and no longer be of force or in
effect;
(f) each of the Company's shareholders shall have validly executed
and delivered all of the documents and instruments that they are required to
execute and deliver or enter into prior to or at Closing, including, but not
limited to, the Shareholder Questionnaire;
(g) each of the Company's officers, directors and shareholders
holding more than two percent (2%) of the Common Stock (on a fully converted and
diluted basis) shall have executed and delivered or entered into, prior to the
Closing, the Buyer Stockholders Agreement;
(h) either (i) the offer and sale of the Merger Consideration
issued to the shareholders of the Company in connection with the Merger shall be
deemed, in Buyer's reasonable discretion, to be a transaction not involving any
public offering within the meaning of Section 4(2) of the Securities Act
pursuant to Rule 506 under the Securities Act or (ii) (A) Wilson Sonsini
Goodrich & Rosati shall have issued its legal opinion to Buyer dated as of the
Closing Date, in form and substance satisfactory to Buyer, to the effect that
the offer and sale of such Merger Consideration is not required to be registered
under the Securities Act and (B) Buyer shall be reasonably satisfied that a
valid exemption exists under applicable state "blue sky" or securities laws from
any qualification or registration requirement that could be applicable; and
(i) Buyer shall have received an opinion of Weil, Gotshal & Manges
LLP, dated as of the Closing Date, to the effect that the Merger will constitute
a reorganization under Section 368(a) of the Code. In rendering such opinion,
Weil, Gotshal & Manges LLP shall receive and may rely upon representations
contained in certificates of Buyer, the Company and certain shareholders of the
Company substantially in the forms agreed to on or prior to the date hereof.
Buyer and Merger Sub may waive any condition specified in this Section 6.2 by a
written waiver delivered to the Company at any time prior to or at Closing.
6.3 CONDITIONS OF THE COMPANY. The obligation of the Company to
consummate the Merger and to take the other actions that it is required to take
at Closing is subject to the satisfaction of each of the following conditions
prior to or at Closing:
(a) the representations and warranties of Buyer and Merger Sub in
Article 4 (without taking into account any materiality or Buyer Material Adverse
Effect qualifiers set forth therein) shall be true on the Closing Date except as
has not had and would not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect, except that such representations and
warranties that expressly speak only as of an earlier date (without taking into
account any materiality or Buyer Material Adverse Effect qualifiers set forth
therein), shall have been true as of such earlier date except as has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Buyer Material Adverse Effect;
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(b) Buyer and Merger Sub shall have executed and delivered all of
the documents and instruments that they are required to execute and deliver or
enter into prior to or at Closing, and shall have performed, complied with or
satisfied in all material respects all of their other obligations, agreements
and conditions under this Agreement that they are required to perform, comply
with or satisfy prior to or at Closing;
(c) Buyer shall have executed and delivered the Buyer Investor
Rights Agreement and the Buyer Stockholders Agreement to all Persons acquiring
Buyer Common Stock pursuant to the Merger who have executed and delivered
counterpart signature pages to such agreements;
(d) each Permit or other Consent designated with an asterisk on
Schedule 4.7, if any, shall have been obtained and shall be in full force;
(e) Buyer shall have effected the Buyer Charter Amendment and
filed the same with the Secretary of State of the State of Delaware; and
(f) the Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, dated as of the Closing Date, to the effect that the Merger
will constitute a reorganization under Section 368(a) of the Code. In rendering
such opinion, Wilson Sonsini Goodrich & Rosati shall receive and may rely upon
representations contained in certificates of Buyer, the Company and certain
shareholders of the Company substantially in the forms agreed to on or prior to
the date hereof.
The Company may waive any condition specified in this Section 6.3 by a written
waiver delivered to Buyer and Merger Sub at any time prior to or at Closing.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; ESCROW PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Buyer, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Buyer, Merger Sub or the Company, each
Party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other Party contained in this Agreement or in
any instrument required to be delivered hereunder. The covenants and agreements
of Buyer and Merger Sub contained in this Agreement or in any instrument
delivered pursuant to this Agreement that by their terms apply or are to be
performed in whole or in part after the Effective Time shall survive the
Effective Time. The representations and warranties of Buyer and Merger Sub
contained in this Agreement shall not survive the Merger. The representations
and warranties of the Company contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger and continue in
full force and effect until the one (1) year anniversary of the Closing Date
(the "Expiration Date"). Each Party agrees that, except for the representations
and warranties contained in this Agreement, none of Buyer, Merger Sub or the
Company has made any representations or warranties, and except for the
representations and warranties contained in this Agreement, each of Buyer,
Merger Sub and the Company acknowledges that no representations or warranties
have
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been made by, and it has not relied upon any representations or warranties made
by any Party or any of their respective officers, directors, employees, agents,
financial and legal advisors or other representatives (collectively,
"Representatives") with respect to this Agreement and the transactions
contemplated hereby, and the documents and instruments referred to herein,
notwithstanding the delivery or disclosure to such Party or its Representatives
of any documentation or other information with respect to any one or more of the
foregoing.
7.2 ESCROW PROVISIONS.
(a) ESTABLISHMENT OF THE ESCROW FUND. "Escrow Amount" and "Escrow
Fund" means the number of shares of Buyer Common Stock obtained by multiplying
(i) the aggregate number of shares of Buyer Common Stock issuable by Buyer at
the Effective Time to holders of Common Stock and Preferred Stock in accordance
with Section 2.4(c) and to CCC in accordance with Section 2.6 by (ii) 10%. At
the Effective Time, the Escrow Amount, without any act of any shareholder, will
be deposited with Harris Trust and Savings Bank (the "Depositary Agent") (plus
thereafter a proportionate share of any additional shares of Buyer Common Stock
as may be issued upon any stock splits, stock dividends or recapitalizations
effected by Buyer following the Effective Time). The Escrow Fund will be
governed by the terms set forth herein and shall be maintained at Buyer's sole
cost and expense. The portion of the Escrow Amount contributed on behalf of each
shareholder shall be in proportion to the aggregate number of shares of Buyer
Common Stock to which such holder would otherwise be entitled under Section
2.4(c) or Section 2.6, and each such shareholder shall be the record owner of
the shares of Buyer Common Stock representing such shareholder's applicable
portion of the Escrow Account. For Tax purposes, the Escrow Fund shall be
treated as owned by the Shareholders. At Closing, the Company shall deliver to
the Depositary Agent a list of all Shareholders (with names, addresses,
percentage ownership of the Escrow Fund and social security or tax
identification numbers) and the Shareholder Representative shall deliver any
updates to such list prior to the distribution of any portion of the Escrow Fund
pursuant to this Section 7.2.
(b) RECOURSE TO THE ESCROW FUND. The Escrow Fund shall be
available (and shall be the sole and exclusive remedy after the Effective Time)
to hold Buyer and the Surviving Corporation, and their respective officers,
directors, employees and agents, harmless for any and all Losses (whether or not
involving a Third Party Claim), incurred or sustained by Buyer or the Surviving
Corporation, their respective officers, directors, employees or agents, directly
or indirectly, as a result of any inaccuracy or breach of any representation,
warranty, covenant or agreement of the Company contained herein or in any
certificate or other document delivered pursuant hereto (or, in the case of any
representation or warranty of the Company contained herein, as a result of the
failure of such representation or warranty to be true as of the Closing Date,
unless such representation or warranty speaks only as of an earlier time);
provided, however, that Buyer and the Surviving Corporation may not make any
claims against the Escrow Fund unless the aggregate Losses incurred or sustained
exceed $1,000,000 (at which time claims may be made for all such Losses incurred
or sustained in excess of such amount). For purposes of this Agreement, "Losses"
shall mean all losses, expenses (including reasonable attorneys' fees and
expenses), damages, liabilities, fines, penalties, judgments, actions, claims
and costs including any Tax imposed on any payment received from the Escrow Fund
as well as Taxes resulting from the circumstances giving rise to the Loss. The
Escrow Fund also shall be available, if applicable, for recovery by Buyer of the
number of shares of Buyer Common Stock
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with a value (as determined in accordance with Section 7.2(e)) equal to the
Company Cash Deficiency, without regard to the deductible provided for in the
first sentence of this Section 7.2(b).
(c) ESCROW PERIOD; DISTRIBUTION OF ESCROW FUND UPON TERMINATION OF
ESCROW PERIOD. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at
5:00 p.m., New York City time, on the Expiration Date (the period of time from
the Effective Time through and including the Expiration Date is referred to
herein as the "Escrow Period"); and, immediately following the termination of
the Escrow Period, all shares of Buyer Common Stock remaining in the Escrow Fund
shall be distributed as set forth in the last sentence of this Section 7.2(c);
provided, however, that the Escrow Period shall not terminate with respect to
such amount (or some portion thereof) that is necessary in the reasonable
judgment of Buyer, subject to the objection of the Shareholder Representative
and the subsequent resolution of the matter in the manner as provided in Section
7.2(g) hereof, to satisfy any unsatisfied written claims under this Section 7.2
concerning facts and circumstances existing prior to the termination of such
Escrow Period which claims are specified in any Officer's Certificate delivered
to the Depositary Agent prior to termination of such Escrow Period. As soon as
all such claims, if any, have been resolved, the Depositary Agent shall deliver
to the Shareholders the remaining portion of the Escrow Fund not required to
satisfy such claims and Buyer shall use all its commercially reasonable efforts
to have such shares delivered within five (5) business days of such resolution.
Upon receipt by the Depositary Agent of written instructions signed by Buyer and
the Shareholder Representative, the shares of Buyer Common Stock remaining in
the Escrow Fund shall be delivered to the Shareholders ratably in proportion to
the respective contributions on their behalf to the Escrow Fund.
(d) PROTECTION OF ESCROW FUND. The Depositary Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Buyer and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof. Any shares of Buyer Common Stock, or other
securities which, by their terms, are or may be exercisable, convertible or
exchangeable for or into Buyer Common Stock, that are issued or distributed by
Buyer ("New Shares") in respect of Buyer Common Stock in the Escrow Fund which
have not been released from the Escrow Fund shall be added to the Escrow Fund.
New Shares issued in respect of shares of Buyer Common Stock which have been
released from the Escrow Fund shall not be added to the Escrow Fund, but shall
be distributed to the record holders thereof. Cash dividends on Buyer Common
Stock in the Escrow Fund shall not be added to the Escrow Fund, but shall be
distributed to the record holders of the Buyer Common Stock on the record date
set for any such dividend, and each such record holder shall have voting rights
with respect to the shares of Buyer Common Stock in the Escrow Fund that are
held of record by such holder.
(e) CLAIMS UPON ESCROW FUND. Upon receipt by the Depositary Agent,
at any time on or before the last day of the Escrow Period, but (in the case of
breaches of representations or warranties) in each case prior to the Expiration
Date, of an Officer's Certificate delivered by Buyer: (A) stating that Buyer has
paid or properly accrued or reasonably anticipates that it will have to pay or
accrue Losses, directly or indirectly, as a result of any inaccuracy or breach
of any representation, warranty, covenant or agreement of the Company
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contained herein (provided that, in the case of any such breach of covenant or
agreement by the Company, such breach occurred prior to the Effective Time) and
(B) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or properly accrued, or
the basis for such anticipated liability, and the nature of the
misrepresentation or breach of warranty, agreement or covenant to which such
item is related (including the specific provision breached) (or specifying the
Company Cash Deficiency, if applicable), the Depositary Agent shall, subject to
the provisions of Section 7.2(f) hereof, deliver to Buyer out of the Escrow
Fund, as promptly as practicable, shares of Buyer Common Stock held in the
Escrow Fund in an amount equal to any such Losses as they are actually incurred
(or equal to the Company Cash Deficiency, if applicable). For the purposes of
determining the number of shares of Buyer Common Stock to be delivered to Buyer
out of the Escrow Fund pursuant to this Section 7.2(e) with respect to any
Losses incurred, each share of Buyer Common Stock shall be valued as follows. If
the Buyer Common Stock is then listed on any stock exchange or included on any
automated quotation system, such value shall be the average closing price or
average last sale price, as applicable, of the Buyer Common Stock for the ten
(10) trading days immediately preceding the date on which such shares are
delivered to Buyer out of the Escrow Fund. If the Buyer Common Stock is not then
listed on any stock exchange or included on any automated quotation system, such
value shall be as agreed by Buyer and the Seller Representative or, if they
cannot agree, Buyer and the Seller Representative shall each select a nationally
recognized accounting or valuation firm, and each firm so selected shall select
a third firm, and the value shall be determined by the mutual agreement of such
firms. Upon the calculation or determination of the value of Buyer Common Stock
in accordance with this Section 7.2(e), Buyer and the Shareholder Representative
shall deliver written instructions, signed by each of them, to the Depositary
Agent setting forth such value and the calculation of the number of shares of
Buyer Common Stock to be delivered to Buyer.
(f) OBJECTIONS TO CLAIMS. At the time of delivery by Buyer of any
Officer's Certificate to the Depositary Agent, a duplicate copy of such
certificate shall be delivered to the Shareholder Representative and, for a
period of thirty (30) days after receipt by the Depositary Agent, the Depositary
Agent shall make no delivery to Buyer of any Escrow Amounts pursuant to Section
7.2(e) hereof unless the Depositary Agent shall have received written
authorization from the Shareholder Representative to make such delivery. After
the expiration of such thirty (30) day period, the Depositary Agent shall make
delivery of shares of Buyer Common Stock from the Escrow Fund in accordance with
Section 7.2(e) hereof, provided that no such payment or delivery may be made if
the Shareholder Representative shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Depositary Agent prior to the expiration of such thirty (30) day period.
(g) RESOLUTION OF CONFLICTS. In case the Shareholder
Representative shall object in writing to any claim or claims made in any
Officer's Certificate, the Shareholder Representative and Buyer shall attempt in
good faith to agree upon the rights of the respective Parties with respect to
each of such claims. If the Shareholder Representative and Buyer should so
agree, joint written instructions setting forth such agreement shall be prepared
and signed by both Parties and shall be furnished to the Depositary Agent. The
Depositary Agent shall be entitled to rely on any such instructions and
distribute shares of Buyer Common Stock from the Escrow Fund in accordance with
the terms thereof. If no such agreement can be reached after good faith
negotiation, either Buyer or the Shareholder Representative may commence
litigation
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or, upon written consent of Buyer and the Shareholder Representative, binding
arbitration to resolve the dispute.
7.3 SHAREHOLDER REPRESENTATIVE; POWER OF ATTORNEY.
(a) SHAREHOLDER REPRESENTATIVE. In the event that Shareholder
Approval is obtained, effective upon such approval, and without further act of
any Shareholder, the Shareholder Representative shall be appointed as agent and
attorney-in-fact for each Shareholder (except such Shareholders, if any, as
shall have perfected their dissenters' rights under Utah Law), for and on behalf
of Shareholders, to give and receive notices and communications, to authorize
delivery to Buyer of shares of Buyer Common Stock from the Escrow Fund in
satisfaction of claims by Buyer, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand litigation or
arbitration and comply with orders and awards of courts and arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Shareholder Representative for the accomplishment of the
foregoing. Such agency may be changed by the Shareholders from time to time upon
not less than thirty (30) days prior written notice to Buyer; provided, however,
that the Shareholder Representative may not be removed unless holders of a
two-thirds interest in the Escrow Fund agree to such removal and to the identity
of the substituted shareholder representative. Any vacancy in the position of
Shareholder Representative shall be filled by David L. Whetten. No bond shall be
required of the Shareholder Representative, and the Shareholder Representative
shall not receive compensation for their services. Notices or communications to
or from the Shareholder Representative shall constitute notice to or from each
of the Shareholders.
(b) EXCULPATION. The Shareholder Representative shall not be
liable for any act done or omitted hereunder as Shareholder Representative while
acting in good faith and in the exercise of reasonable judgment.
(c) ACTIONS OF THE SHAREHOLDER REPRESENTATIVE. A decision, act,
consent or instruction of the Shareholder Representative shall constitute a
decision for all of the Shareholders for whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund, and shall be final,
binding and conclusive upon each of such Shareholders, and the Depositary Agent
and Buyer may rely upon any such decision, act, consent or instruction of the
Shareholder Representative as being the decision, act, consent or instruction of
every such shareholder of the Company. The Depositary Agent, Buyer and the
Surviving Corporation are hereby relieved from any liability to any Person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Shareholder Representative.
7.4 THIRD PARTY CLAIMS. In the event Buyer or the Surviving Corporation
receives written notice of a third-party claim (a "Third Party Claim") which
Buyer reasonably expects may result in a demand against the Escrow Fund, Buyer
shall provide the Shareholder Representative with reasonably prompt written
notice thereof. The Shareholder Representative, as representative for the
Shareholders, shall have the right to participate in or, by giving written
notice to Buyer, to assume the defense of any Third Party Claim at the expense
of the Escrow Fund and by counsel selected by the Shareholder Representative
(which counsel must be reasonably satisfactory to Buyer), and Buyer will
cooperate in good faith (and shall be permitted to participate at Buyer's
expense) in such defense; provided, however, that the Shareholder
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Representative shall not be entitled to assume control of the defense of any
Third Party Claim that (i) could reasonably be expected to have any impact on
the ongoing operations or goodwill of the Surviving Corporation or Buyer or
their intellectual property or (ii) could reasonably be expected to result in
Losses in excess of the Escrow Fund. Buyer shall have the right in its sole
discretion to settle any Third Party Claim contemplated by clause (i) or (ii)
above; provided, however, that if Buyer settles any such Third Party Claim
without the Shareholder Representative's written consent (which consent shall
not be unreasonably withheld or delayed), Buyer may not make a claim against the
Escrow Fund with respect to the amount of Losses incurred by Buyer in such
settlement unless the Shareholder Representative unreasonably withheld or
delayed such consent; provided, further, that the Shareholder Representative may
not settle any Third Party Claim without Buyer's written consent (which consent
shall not be unreasonably withheld or delayed). In the event that the
Shareholder Representative has consented to any such settlement, the Shareholder
Representative shall have no power or authority to object under any provision of
this Article 7 to the amount of any claim by Buyer against the Escrow Fund with
respect to the amount of Losses incurred by Buyer in such settlement as
consented to by the Shareholder Representative.
7.5 DEPOSITARY AGENT'S DUTIES.
(a) LIMITATION ON DUTIES OF DEPOSITARY AGENT. The Depositary Agent
shall be obligated only for the performance of such duties as are specifically
set forth herein, and as set forth in any additional written escrow instructions
which the Depositary Agent may receive after the date of this Agreement which
are signed by an officer of Buyer and the Shareholder Representative, and may
rely and shall be protected in relying or refraining from acting, in good faith,
on any instrument reasonably believed to be genuine and to have been signed or
presented by the proper Party or Parties. The Depositary Agent shall not be
liable for any act done or omitted hereunder as Depositary Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(b) COMPLIANCE WITH ORDERS. The Depositary Agent is hereby
expressly authorized to comply with and obey orders of any court of law or
Governmental Authority or regulatory authority, notwithstanding any notices,
warnings or other communications from any Party or any other Person to the
contrary. In case the Depositary Agent obeys or complies with any such order,
the Depositary Agent shall not be liable to any of the Parties hereto or to any
other Person by reason of such compliance, notwithstanding any such order being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction or proper authority.
(c) LIMITATIONS ON LIABILITY OF DEPOSITARY AGENT. The Depositary
Agent shall not be liable in any respect on account of the identity, authority
or rights of the Parties executing or delivering or purporting to execute or
deliver this Agreement or any documents or papers deposited or called for
hereunder, or for the expiration of any rights under any statute of limitations
with respect to this Agreement or any documents deposited with the Depositary
Agent.
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(d) GOOD FAITH OF DEPOSITARY AGENT. In performing any duties under
the Agreement, the Depositary Agent shall not be liable to any Party for
damages, losses or expenses, except for damages, losses or expenses attributable
to the gross negligence or willful misconduct of the Depositary Agent. The
Depositary Agent shall not incur any such liability for (i) any act or failure
to act made or omitted in good faith, or (ii) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Depositary Agent shall in good faith
believe to be genuine, nor will the Depositary Agent be liable or responsible
for forgeries, fraud, impersonations or determining the scope of any
representative authority. In addition, the Depositary Agent may consult with
legal counsel in connection with the Depositary Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered or permitted
by the Depositary Agent in good faith in accordance with the advice of counsel.
The Depositary Agent is not responsible for determining and verifying the
authority of any Person acting or purporting to act on behalf of any Party to
this Agreement.
(e) NON-RESPONSIBILITY OF DEPOSITARY AGENT. If any controversy
arises between the Parties to this Agreement, or with any other party,
concerning the subject matter of this Agreement, its terms or conditions, the
Depositary Agent will not be required to determine the controversy or to take
any action regarding it. The Depositary Agent may hold all documents and shares
of Buyer Common Stock and may wait for settlement of any such controversy by
final appropriate legal proceedings or other means as, in the Depositary Agent's
discretion, the Depositary Agent may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Depositary Agent will not be
liable for any damages. Furthermore, the Depositary Agent may at its option,
file an action of interpleader requiring the Parties to answer and litigate any
claims and rights among themselves. The Depositary Agent is authorized to
deposit with the clerk of the court all documents and shares of Buyer Common
Stock held in the Escrow Fund, except all costs, expenses, charges and
reasonable attorneys' fees incurred by the Depositary Agent due to the
interpleader action and which Buyer and the Shareholder Representative, on
behalf of the Shareholders, jointly and severally agree to pay. Upon initiating
such action, the Depositary Agent shall be fully released and discharged of and
from all obligations and liability imposed by the terms of this Agreement.
(f) INDEMNIFICATION OF DEPOSITARY AGENT. Buyer agrees to indemnify
and hold the Depositary Agent harmless against any and all Losses incurred by
the Depositary Agent in connection with the performance of the Depositary
Agent's duties under this Agreement, including but not limited to any litigation
from this Agreement or involving its subject matter. Costs and expenses of
enforcing this right of indemnification shall also be paid by Buyer. This right
of indemnification shall survive the termination of this Agreement and the
removal or resignation of the Depositary Agent.
(g) RESIGNATION OF DEPOSITARY AGENT. The Depositary Agent may
resign at any time upon giving at least thirty (30) days' written notice to the
Parties; provided, however, that no such resignation shall become effective
until the appointment of a successor Depositary Agent which shall be
accomplished as follows: the Parties shall use their best efforts to mutually
agree on a successor Depositary Agent within thirty (30) days after receiving
such notice. If the Parties fail to agree upon a successor Depositary Agent
within such time, the Depositary Agent shall have the right to appoint a
successor Depositary Agent authorized to do business in the
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State of New York. The successor Depositary Agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers and duties of the
predecessor Depositary Agent as if originally named as Depositary Agent. Upon
such succession, the original Depositary Agent shall be discharged from any
further duties and liability under this Agreement.
(h) FEES. All fees of the Depositary Agent for performance of its
duties hereunder shall be paid by Buyer. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Depositary Agent renders
any service not provided for in this Agreement, or if the Parties request a
substantial modification of its terms, or if any controversy arises, or if the
Depositary Agent is made a party to, or intervenes in, any action or proceeding
pertaining to the Escrow Fund or its subject matter, the Depositary Agent shall
be reasonably compensated for such extraordinary services and reimbursed for all
costs, attorneys' fees and expenses occasioned by such default, delay,
controversy or action or proceeding.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the Shareholder Approval, by mutual written consent of the
Company and Buyer by action of their respective boards of directors.
8.2 TERMINATION BY EITHER BUYER OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the either the Company Board or the Buyer Board if:
(a) the Merger shall not have been consummated by March 31, 2000,
whether such date is before or after the date of the Shareholder Approval (the
"Termination Date"); provided, however, that if (i) the condition set forth in
Section 6.2(c) or any condition with respect to any requisite approval of any
Governmental Authority has not been fulfilled or waived prior to March 31, 2000
and remains reasonably capable of satisfaction, (ii) the Company Shareholder
Meeting has not been held prior to March 31, 2000 or (iii) the Company Board and
the Buyer Board mutually agree, the Termination Date shall be automatically
extended to June 15, 2000;
(b) the Shareholder Approval shall not have been obtained at the
Company Shareholder Meeting or at any adjournment or postponement thereof; or
(c) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the Shareholder Approval);
provided, however, that the right to terminate this Agreement pursuant to this
Section 8.2 shall not be available to any Party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the Merger to
be consummated.
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8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the Shareholder Approval, by action of the Company Board if
there is a breach by Buyer or Merger Sub of any representation, warranty,
covenant or agreement contained in this Agreement that cannot be cured and would
cause a condition set forth in Section 6.3(a) or 6.3(b) to be incapable of being
satisfied as of the Termination Date.
8.4 TERMINATION BY BUYER. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by Buyer, if:
(a) there is a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement that cannot be cured
and would cause a condition set forth in Section 6.2(a) or 6.2(b) to be
incapable of being satisfied as of the Termination Date; or
(b) Buyer has not received, on or before February 4, 2000, the
audit opinions required by Section 5.19, so long as such audit opinions shall
still not have been obtained at the time Buyer requests termination of this
Agreement pursuant to this Section 8.4(b).
8.5 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article 8,
this Agreement (other than this Section 8.5, Section 5.15 and Article 9) shall
become void and of no effect with no liability on the part of any Party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors, or other representatives); provided, however, that except as otherwise
provided herein, no such termination shall relieve any Party of any liability or
damages resulting from any intentional prior breach of this Agreement.
8.6 AMENDMENT. This Agreement may be amended by action taken by the
Company, Buyer and Merger Sub at any time before or after Shareholder Approval,
but after any such approval, no amendment shall be made which changes the amount
or form of the Merger Consideration. This Agreement may not be amended except by
an instrument in writing signed on behalf of the Parties.
8.7 EXTENSION; WAIVER. At any time prior to the Effective Time, each
Party hereto (for these purposes, Buyer and Merger Sub shall together be deemed
one Party and the Company shall be deemed the other Party) may (i) extend the
time for the performance of any of the obligations or other acts of the other
Party, (ii) waive any inaccuracies in the representations and warranties of the
other Party contained herein or in any document, certificate or writing
delivered pursuant hereto, or (iii) waive compliance by the other Party with any
of the agreements or conditions contained herein. Any agreement on the part of
either Party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such Party. The failure of
any Party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
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ARTICLE 9
MISCELLANEOUS
9.1 CONFIDENTIALITY. Pending Closing, the agreement executed by the
Parties on October 13, 1999 concerning confidentiality shall remain in full
force and effect.
9.2 REGISTRATION OF BUYER COMMON STOCK UNDERLYING COMPANY STOCK
OPTIONS. Buyer will, no later than the time of filing of any such registration
statement with respect to other stock options of Buyer, prepare and file with
the SEC a registration statement on Form S-8 (or any successor form thereto) to
register under the Securities Act the shares of Buyer Common Stock issuable upon
the exercise of the Company Stock Options assumed by Buyer in accordance with
Section 2.5(h).
9.3 NOTICES. All Notices under this Agreement shall be in writing and
sent by certified or registered mail, overnight messenger service, telecopier or
personal delivery, as follows:
(a) if to the Company, to:
InsurQuote Systems, Inc.
533 East 1860 South
Provo, Utah 84606
Attention: General Counsel
Telecopier: (801) 373-4017
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Michael J. Kennedy
Telecopier: (650) 493-6811
(b) if to Buyer and Merger Sub, to:
ChannelPoint, Inc.
10155 Westmoor Drive, Suite 210
Westminster, Colorado 80021
Attention: General Counsel
Telecopier: (303) 404-2263
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with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: R. Jay Tabor
Telecopier: (214) 746-7777
(c) if to the Shareholder Representative, to:
William B. Woahn
533 East 1860 South
Provo, Utah 84606
Telecopier: (801) 373-4017
(d) if to the Depositary Agent, to:
Harris Trust & Savings Bank
311 W. Monroe 12th Floor
Chicago, Illinois 60606
Attention: Linda Garcia
Telecopier: (312) 461-3525
All Notices sent by certified or registered mail shall be considered to have
been given three (3) business days after being deposited in the mail. All
Notices sent by overnight courier service, telecopier or personal delivery shall
be considered to have been given when actually received by the intended
recipient. A Party, the Depositary Agent or the Shareholder Representative may
change its address for purposes of this Agreement by Notice in accordance with
this Section 9.3.
9.4 FURTHER ASSURANCES. Each Party agrees (i) to furnish upon request
to the other Party such further information, (ii) to execute and deliver to the
other Party such other documents and (iii) to do such other acts and things, as
the other Party reasonably requests for the purpose of carrying out the intent
of this Agreement and the documents and instruments referred to in this
Agreement.
9.5 ENTIRE AGREEMENT. This Agreement supersedes all prior agreements
between the Parties with respect to its subject matter and constitutes (together
with the disclosure schedules and the Parties' Closing Documents) a complete and
exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement signed by the Party to be charged with the amendment.
9.6 ASSIGNMENT. No Party may assign any of its rights under this
Agreement prior to the Closing without the prior written consent of the other
Party or Parties. In addition, no Person may assign (other than by will or
virtue of death) any right that it has to receive shares that are held pursuant
to Article 7 by the Depositary Agent unless such transferee or assignee agrees
to be bound by all the terms, conditions and agreements applicable to
Shareholders set forth in this Agreement.
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<PAGE> 63
9.7 NO THIRD PARTY BENEFICIARIES. Except as expressly provided in
Section 5.17 or Article 7, nothing in this Agreement shall be considered to give
any Person other than the Parties any legal or equitable right, claim or remedy
under or in respect of this Agreement or any provision of this Agreement. This
Agreement and all of its provisions are for the sole and exclusive benefit of
the Parties and their respective successors and permitted assigns.
9.8 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by a court of competent jurisdiction, the other provisions of this
Agreement shall remain in full force and effect. Any provision of this Agreement
which is held invalid or unenforceable only in part shall remain in full force
and effect to the extent not held invalid or unenforceable.
9.9 CAPTIONS. The captions of articles and sections of this Agreement
are for convenience only and shall not affect this the construction or
interpretation of this Agreement.
9.10 CONSTRUCTION. All references in this Agreement to "Section" or
"Sections" refer to the corresponding section or sections of this Agreement. All
words used in this Agreement shall be construed to be of the appropriate gender
or number as the context requires. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
9.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original copy of this
Agreement and all of which, when taken together, shall be considered to
constitute one and the same agreement.
9.12 GOVERNING LAW. This Agreement shall be governed by the Laws of the
State of New York without regard to conflict of laws principles, except to the
extent any provisions of this Agreement are required to be governed by the Laws
of the State of Utah.
9.13 JURISDICTION AND VENUE. The Parties agree that any suit, action or
proceeding arising out of or relating to this Agreement shall be instituted only
in the United States District Court for the District of New York, United States
of America or the New York Supreme Court. Each Party waives any objection it may
have now or hereafter to the laying of the venue of any such suit, action or
proceeding, and irrevocably submits to the jurisdiction of any such court in any
such suit, action or proceeding.
9.14 BINDING EFFECT. This Agreement shall apply to, be binding in all
respects upon and inure to the benefit of Parties and their respective
successors and permitted assigns.
9.15 NO WAIVER OF FRAUD. Nothing contained in this Agreement shall be
deemed to constitute a waiver by any Party of any right it may have to pursue
any remedy as a result of fraud of another Party.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed on its behalf as of the date first written above.
INSURQUOTE SYSTEMS, INC.
By: /s/ David L. Whetten
-----------------------------------
Name: David L. Whetten
---------------------------------
Title: CEO
--------------------------------
CHANNELPOINT, INC.
By: /s/ Kenneth E. Hollen
-----------------------------------
Name: Kenneth E. Hollen
---------------------------------
Title: CEO
--------------------------------
GOLD ACQUISITION CORP.
By: /s/ Kenneth E. Hollen
-----------------------------------
Name: Kenneth E. Hollen
---------------------------------
Title: President
--------------------------------
This Agreement is countersigned by the undersigned Depositary Agent as of the
date first above written to acknowledge and agree to the provisions of Article 7
that pertain to the Depositary Agent.
HARRIS TRUST AND SAVINGS BANK,
as Depositary Agent
By: /s/ L. Garcia
-----------------------------------
Name: L. Garcia
---------------------------------
Title: Trust Officer
--------------------------------
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ANNEX I
DEFINITIONS
Act is defined in Section 2.3(a)
Acquisition Proposal is defined in Section 5.15.
Agreement means this Agreement and Plan of Merger, dated as of February
1, 2000, by and among Buyer, Merger Sub and the Company, together with all
Exhibits and Schedules attached hereto or delivered herewith.
Articles of Incorporation means the Company's Third Amended and
Restated Articles of Incorporation, as amended.
Articles of Merger is defined in Section 2.3(a).
Authorized Officer means a corporate officer of a corporation who is
duly authorized to perform the specified action.
Buyer is defined in the Preamble.
Buyer Board is defined in Section 4.3(b).
Buyer Charter Amendment is defined in Section 5.8.
Buyer Common Stock is defined in the Background Section A.
Buyer Common Stock Equivalents means, without duplication with any
other Buyer Common Stock or Buyer Common Stock Equivalents, any security of
Buyer which is convertible into, exercisable for or exchangeable for, directly
or indirectly, Buyer Common Stock, whether at such time or upon the passage of
time or the occurrence of some future event. Without limiting the foregoing,
immediately upon consummation of the Merger, "Buyer Common Stock Equivalents"
will include all shares of Buyer Common Stock that may be issuable (whether at
such time or thereafter upon the passage of time or occurrence of other
conditions) upon the exercise of (i) Company Stock Options that have been issued
or that are available for issuance under the Company Option Plan and (ii)
outstanding Warrants.
Buyer Disclosure Memorandum is defined in Section 5.4.
Buyer Employees is defined in Section 4.12.
Buyer Financial Statements means (i) Buyer's audited consolidated
financial statements, together with the notes thereto, as of and for the year
ended December 31, 1997 and (ii) Buyer's unaudited consolidated financial
statements as of and for the year ended December 31, 1998 and 1999.
Buyer Fully-Diluted Common Stock means the number of shares of Buyer
Common Stock that is equal to the sum of: (i) all shares of Buyer Common Stock
outstanding
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immediately upon consummation of the Merger (including but not limited to all
shares of Buyer Common Stock issuable as a result of the Merger in respect of
shares of capital stock of the Company pursuant to Section 2.4 or issuable
pursuant to Section 2.6), plus (without duplication) (ii) all shares of Buyer
Common Stock issuable, whether at such time or upon the passage of time or the
occurrence of future events, upon the conversion, exercise or exchange of all
then outstanding Buyer Common Stock Equivalents, plus (without duplication) all
shares of Buyer's authorized Series D Preferred Stock; provided, however, that
there shall be excluded from such calculation any Buyer Common Stock or Buyer
Common Stock Equivalents (A) up to 1,962,963 shares of Buyer Common Stock (or
other securities of Buyer which may be converted into or exchanged for up to
1,962,963 shares of Buyer Common Stock) that are issued or to be issued in
connection with acquisitions by Buyer, (B) that are issued at Buyer's initial
public offering price per share of Buyer Common Stock (after taking into account
any price paid upon issuance and any price to be paid upon exercise or
conversion, if applicable) or that are issued in other equity financings
approved in advance by the Shareholder Representative, (C) that are issued or
issuable to former stockholders of Blaise Software, Inc. in connection with the
acquisition of such entity by Buyer on June 7, 1999 (provided that the aggregate
amount of shares of Buyer Common Stock or Buyer Common Stock Equivalents to be
issued to such former owners will not exceed 50,000 shares) or (D) represented
by options issued after December 31, 1999 and prior to the Merger under any
stock option plan of Buyer.
Buyer Investor Rights Agreement means the Fourth Amended and Restated
Investor Rights Agreement, dated as of the Closing Date, by and among Buyer and
the stockholders of Buyer signatory thereto, in substantially the form attached
hereto as EXHIBIT F.
Buyer Material Adverse Effect means a material adverse effect on the
business, operations, financial position or assets of Buyer and its subsidiaries
taken as a whole, except for (i) any effect resulting from the announcement of
the transactions contemplated by this Agreement (but not including any such
effects which were known, or should have been known by Buyer as of the date
hereof and which were not disclosed to the Company); (ii) any effect resulting
solely from the actions of the Company and (iii) any effect resulting solely
from Buyer complying with its obligations under this Agreement.
Buyer Plans is defined in Section 4.11(a).
Buyer Preferred Stock is defined in Section 4.2(a).
Buyer Stockholders Agreement means the Fourth Amended and Restated
Stockholders Agreement, dated as of the Closing Date, by and among Buyer and the
stockholders of Buyer signatory thereto, in substantially the form attached
hereto as EXHIBIT G.
Buyer's Information Technology is defined in Section 4.17.
CCC is defined in Section 2.6.
CCC Note means that Subordinated Note, dated February 10, 1998 and
payable by the Company to CCC Information Services Inc., in the principal amount
of $8,900,000.
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CCC Purchase Agreement means the Securities Purchase Agreement, dated
as of February 10, 1998, by and between the Company and CCC Information Services
Inc., as amended on March 30, 1999.
Certificates is defined in Section 2.5(a).
Cleanup Liability means any liability under any Environmental Law for
corrective action, including any investigation, cleanup, removal, containment or
other remedial or response action or activity of the type covered by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
Closing is defined in Section 2.2.
Closing Date means the date that Closing occurs.
Closing Documents means, in respect of a Party, the documents,
instruments and agreements that it is required to deliver or enter into at
Closing pursuant to the terms of this Agreement.
COBRA is defined in Section 3.12(a).
Code means the U.S. Internal Revenue Code of 1986, as amended.
Common Stock is defined in Section 2.4(c).
Company is defined in the Preamble.
Company Affiliate Agreement is defined in Background Section F.
Company Board is defined in Section 3.3(b).
Company Cash Deficiency means the sum of (i) $3,500,000 plus (ii) the
amount of any Company Transaction Expenses that either have not yet been paid by
the Company or that have been paid by the Company out of the proceeds of any
debt or equity investment by Buyer in the Company (with the payment of any such
Company Transaction Expenses being deemed to have been made out of the proceeds
of such investment to the extent that the Company has received proceeds of any
such investment), less the amount of actual cash and cash equivalents of the
Company immediately prior to the Effective Time. If the calculation of the
Company Cash Deficiency results in a negative number, the Company Cash
Deficiency shall equal $0.00.
Company Common Stock Equivalents means, without duplication with any
other Common Stock or Company Common Stock Equivalents, any security of the
Company which is convertible into, exercisable for or exchangeable for, directly
or indirectly, Common Stock, whether at such time or upon the passage of time or
the occurrence of some future event.
Company Employees is defined in Section 3.12(a).
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Company Financial Statements means (i) the Company's audited
consolidated financial statements, together with the notes thereto, as of and
for the years ended June 30, 1998 and 1997 and (ii) the Company's unaudited
consolidated financial statements as of and for the year ended June 30, 1999 and
the twelve months ended December 31, 1999.
Company Investment Agreement means the Amended and Restated Investment
Agreement, dated March 30, 1999, by and among the Company and certain
shareholders of the Company signatory thereto.
Company Material Adverse Effect means a material adverse effect on the
business, operations, financial position or assets of the Company and its
subsidiaries taken as a whole, except for (i) any effect resulting from the
announcement of the transactions contemplated by this Agreement (but not
including any such effects which were known, or should have been known by the
Company as of the date hereof and which were not disclosed to Buyer); (ii) any
effect resulting solely from the actions of Buyer and (iii) any effect resulting
solely from the Company complying with its obligations under this Agreement.
Company Option Plan is defined in Section 2.5(h).
Company Permits is defined in Section 3.11.
Company Plans is defined in Section 3.12(a).
Company Registration Rights Agreement means the Amended and Restated
Registration Rights Agreement, dated as of March 30, 1999, by and among, the
Company and certain shareholders of the Company signatory thereto.
Company Shareholder Consent is defined in Section 5.6.
Company Shareholder Meeting is defined in Section 5.6.
Company Stock Option is defined in Section 2.5(h).
Company's Information Technology is defined in Section 3.20.
Company Transaction Expenses means all Expenses of the Company and/or
any of its subsidiaries, including, but not limited to, the expenses of Morgan
Stanley & Co. Incorporated, Wilson Sonsini Goodrich & Rosati, Ernst & Young LLP
and the fees of the "purchaser representative" retained in accordance with
Section 5.5
Consent means any approval, consent, ratification, waiver or other
authorization.
Co-Sale Agreement means the Amended and Restated Co-Sale Agreement,
dated as of September 26, 1995, by and among the Company and certain
shareholders of the Company signatory thereto.
Covered Transactions is defined in Section 3.26.
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Depositary Agent is defined in Section 7.2(a).
Dissenting Shares is defined in Section 2.5(g).
Dissenting Shareholders is defined in Section 2.5(g).
Division is defined in Section 2.3(a).
DOJ is defined in Section 5.20.
Effective Time is defined in Section 2.4(a).
Environmental Law means any applicable federal, state, local or foreign
Law (including common Law), statute, rule, regulation, ordinance, decree or
other legal requirement relating to the protection of natural resources, the
environment and public and employee health and safety or pollution or the
release or exposure to Hazardous Materials (as hereinafter defined) and shall
include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et. seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act
(33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. ss. 7401 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) and the
regulations promulgated pursuant thereto, and any such applicable state or local
statutes, and the regulations promulgated pursuant thereto, as such Laws have
been and may be amended or supplemented through the Closing Date;
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations issued by the Internal Revenue Service and
Department of Labor.
ERISA Affiliate is defined in Section 3.12(a).
Escrow Amount is defined in Section 7.2(a).
Escrow Fund is defined in Section 7.2(a).
Escrow Period is defined in Section 7.2(c).
Exchange Act means the Securities Exchange Act of 1934, as amended, and
the related rules and regulations issued by the SEC thereunder.
Excluded Buyer Issuance means any issuance of Buyer Common Stock or
Buyer Common Stock Equivalents (i) pursuant to the Merger or otherwise to
securityholders of the Company in connection with the Merger, (ii) to the extent
that the proceeds thereof are invested by Buyer in the Company, whether in the
form of an equity investment or a debt investment, (iii) issued in connection
with acquisitions by Buyer that does not exceed in the aggregate 1,962,963
shares of Buyer Common Stock (or other securities of Buyer which may be
converted into or
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exchanged for not more than 1,962,963 shares of Buyer Common Stock), (iv) to the
extent such Buyer Common Stock or Buyer Common Stock Equivalents are, as of the
date of this Agreement, included in the definition of the Buyer Fully-Diluted
Common Stock, (v) upon any exercise or conversion of any Buyer Common Stock
Equivalents, (vi) to former stockholders of Blaise Software, Inc. in connection
with the acquisition of such entity by Buyer on June 7, 1999 (provided that the
aggregate amount of shares of Buyer Common Stock or Buyer Common Stock
Equivalents to be issued to such former owners will not exceed 50,000 shares) or
(vii) that are represented by options issued after December 31, 1999 and prior
to the Merger under any stock option plan of Buyer.
Expenses is defined in Section 5.16.
Expiration Date is defined in Section 7.1.
FTC is defined in Section 5.20.
GAAP means United States generally accepted accounting principles,
applied on a consistent basis.
Governmental Authority means (i) any federal, state, provincial, local,
municipal, foreign or other government and (ii) any governmental or
quasi-governmental body of any kind (including any administrative or regulatory
agency, department, branch, commission or other entity).
Governmental Entity is defined in Section 3.7
Hazardous Activity means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use of Hazardous
Materials.
Hazardous Material means any substance, material or waste which is
regulated, classified or otherwise characterized as hazardous, toxic, pollutant,
contaminant or words of similar meaning or regulatory effect by any Governmental
Entity or the United States, and includes, without limitation, petroleum,
petroleum by-products and wastes, asbestos and polychlorinated biphenyls;
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
Indemnified Party or Indemnified Parties is defined in Section 5.17(a).
Intellectual Property shall mean any or all of the following: (i) works
of authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, records and data, (ii) inventions (whether or not
patentable), improvements and technology, (iii) proprietary and confidential
information, trade secrets and know how, (iv) databases, data compilations, data
collections and technical data, (v) logos, trade names, trade dress, trademarks
and service marks,
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(vi) domain names, web addresses and web sites, (vii) tools, methods and
processes and (viii) all physical embodiments of the foregoing in any form and
embodied in any media.
Intellectual Property of Buyer means any Intellectual Property and
Intellectual Property Rights that are owned by or exclusively licensed to Buyer
or that constitutes assets.
Intellectual Property of the Company means any Intellectual Property
and Intellectual Property Rights that are owned by or exclusively licensed to
the Company or any of its subsidiaries, or that constitute assets.
Intellectual Property Rights shall mean worldwide common law and
statutory rights associated with (i) patents and patent applications, (ii)
copyrights, copyright registrations, copyright applications and "moral" rights,
(iii) the protection of trade secrets, industrial secrets and confidential
information, (iv) other proprietary rights relating to intangible intellectual
property, (v) trademarks, service marks, and trade names, and all registrations
and applications of all of the foregoing, (vi) analogous rights to those set
forth above and (vii) divisions, continuations, renewals, reissuances and
extensions of the foregoing (as applicable).
Knowledge means, in respect of the Company or Buyer, the actual
awareness by an officer of the Company or Buyer, as the case may be, of a
particular fact or other specified matter.
Law is defined in Section 3.8.
Lien means any lien, security interest, claim, option, pledge, right of
first refusal or other encumbrance or similar restriction.
Losses is defined in Section 7.2(b).
Material Contracts is defined in Section 3.16(a).
Merger is defined in Background Section A.
Merger Consideration is defined in Section 2.4(c).
Merger Sub is defined in the Preamble.
New Shares is defined in Section 7.2(d).
Notice or Notices means any notice, demand, charge, complaint or other
communication from any Person.
Occupational Safety and Health Laws means the Occupational Safety and
Health Act of 1970, as amended, and all other applicable Laws and Orders
intended to provide safe and healthful working conditions and to reduce
occupational safety and health hazards.
Officer's Certificate means a certificate signed by an Authorized
Officer whose responsibilities extend to the subject matter of the certificate.
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Old Buyer Investor Rights Agreement means the Third Amended and
Restated Investor Rights Agreement dated as of September 14, 1999, by and among
Buyer and the stockholders of Buyer signatory thereto.
Old Buyer Stockholders Agreement means the Third Amended and Restated
Investor Rights Agreement dated as of September 14, 1999, by and among Buyer and
the stockholders of Buyer signatory thereto.
Order means any order, judgment, decree, ruling, consent decree,
settlement agreement, stipulation, injunction or subpoena entered or issued by
any court, Governmental Authority or arbitrator.
Ordinary Course of Business means an action taken by it which is
consistent with its past practices and is taken in the ordinary course of the
normal day-to-day operations.
Party means both Buyer and Merger Sub (or either one of them, as the
context requires) or the Company, and Parties means all of them.
Permitted Liens means (i) Liens for Taxes not yet due and payable, (ii)
mechanics' or materialmen's Liens arising in the Ordinary Course of Business and
(iii) other immaterial Liens arising in the Ordinary Course of Business that do
not materially detract from the value, and do not interfere with the use, of the
underlying property.
Person means any individual, corporation, general or limited
partnership, limited liability company, joint venture, association,
organization, estate, trust or other entity or any Governmental Authority.
Plan of Merger is defined in Section 2.3(a).
Preferred Stock is defined in Section 2.5(a).
PTO is defined in Section 3.19(a).
Real Property Leases is defined in Section 3.9(b).
Registered Intellectual Property Rights shall mean Intellectual
Property Rights that have been registered, filed, certified or otherwise
perfected by recordation with any state, government or other public legal
authority.
Representatives is defined in Section 7.1.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and the
related rules and regulations issued by the SEC thereunder.
Series A Preferred Stock means Series A Preferred Stock, no par value,
of the Company.
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Series B Preferred Stock means Series B Preferred Stock, no par value,
of the Company.
Series C Preferred Stock means Series C Preferred Stock, no par value,
of the Company.
Series D Preferred Stock means Series D Preferred Stock, no par value,
of the Company.
Series E Preferred Stock means Series E Preferred Stock, no par value,
of the Company.
Series F Preferred Stock means Series F Preferred Stock, no par value,
of the Company.
Shareholder means a Person who is the owner of record of one or more
shares of Common Stock as of the Closing.
Shareholder Approval is defined in Section 3.3(b).
Shareholder Questionnaire is defined in Section 5.7.
Shareholder Representative means William B. Woahn.
Suit means any action, suit, proceeding, arbitration, audit, hearing or
investigation (whether civil, criminal, administrative or investigative in
nature, and whether formal or informal) by, before or in any court, Governmental
Authority or arbitrator.
Surviving Corporation is defined in Section 2.1.
Takeover Statutes is defined in Section 3.26.
Tax or Taxes is defined in Section 3.15.
Tax Return is defined in Section 3.15.
Termination Agreement is defined in Background Section E.
Termination Date is defined in Section 8.2(a).
Third Party Claim is defined in Section 7.4.
Third Party Intellectual Property Right is defined in Section 3.19(a).
Voting Agreement is defined in Background Section C.
WARN is defined in Section 3.13.
Warrant is defined in Section 2.5(i).
Year 2000 Compliant is defined in Section 3.20.
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EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION OF
CHANNELPOINT, INC.
KENNETH E. HOLLEN hereby certifies that:
1. He is the duly elected and acting President and Chief Executive
Officer of ChannelPoint, Inc., a Delaware corporation. The Company was
originally incorporated on December 5, 1996. A Restated Certificate of
Incorporation was filed with the Secretary of State on February 27, 1997,
changing the name of the corporation from "ChannelWorks, Inc." to "ChannelPoint,
Inc."
2. The Certificate of Incorporation of this corporation is hereby
restated to read as follows:
I.
The name of the corporation is ChannelPoint, Inc. (the "Corporation" or
the "Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805-1297
The name of the Corporation's registered agent at said address is
Corporation Service Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Ninety Seven Million
Four Hundred Thousand (97,400,000) shares, Eighty Two Million Three Hundred
Thousand (82,300,000) shares of which shall be Common Stock (the "Common Stock")
and Fifteen Million One Hundred Thousand (15,100,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one-tenth of one cent ($.001) per share and the Common Stock shall have
a par value of one-tenth of one cent ($.001) per share.
B. Subject to the limitations and restrictions stated in this Restated
Certificate of Incorporation, the number of authorized shares of Common Stock
may be increased or decreased (but not below the number of shares of Common
Stock then outstanding) by the affirmative vote of the holders of a majority of
the stock of the Corporation (voting together on an as-if-converted basis).
C. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Restated Certificate, to fix or alter the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
<PAGE> 2
redemption (including sinking fund provisions), the redemption price or prices,
the liquidation preferences of any wholly unissued series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
D. Of the authorized shares of Preferred Stock, five million
(5,000,000) shares are hereby designated Series A Preferred Stock (the "Series A
Preferred"); one million seven hundred eighteen thousand one hundred eighty-one
(1,718,181) shares are hereby designated Series B Preferred Stock (the "Series B
Preferred"); four million four hundred thirteen thousand one hundred sixty-nine
(4,413,169) shares are hereby designated Series C Preferred Stock (the "Series C
Preferred"), three million four hundred forty two thousand eight hundred eight
(3,442,808) shares are hereby designated Series D Preferred Stock (the "Series D
Preferred") and five hundred thousand (500,000) shares are hereby designated
Series E Preferred Stock (the "Series E Preferred"). The Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, and Series E
Preferred are referred to collectively as the "Preferred."
E. The rights, preferences, privileges, restrictions and other matters
relating to the Preferred are as follows:
1. DIVIDEND RIGHTS.
(a) Holders of the then outstanding shares of the Preferred, in
preference to the holders of the Common Stock of the Company, shall be entitled
to receive, pari passu, when and as declared by the Board of Directors, but only
out of funds that are legally available therefor, cash dividends at the rate of
eight percent (8%) of the "Original Issue Price" per annum on each outstanding
share of Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The Original Issue
Price of the Series A Preferred shall be one dollar ($1.00); the Original Issue
Price for the Series B Preferred shall be two dollars and seventy-five cents
($2.75); the Original Issue Price for the Series C Preferred shall be six
dollars and fifty cents ($6.50), the Original Issue Price for the Series D
Preferred shall be twenty dollars and ninety seven cents ($20.97), and the
Original Issue Price for the Series E Preferred shall be one hundred dollars
($100.00). Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be not be cumulative.
(b) So long as any shares of Preferred shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on the Common Stock, nor shall any shares of any
Common Stock of the Company be purchased, redeemed or otherwise acquired for
value by the Company (except for acquisitions of Common Stock by the Company
pursuant to agreements which permit the Company to repurchase such shares upon
termination of services to the Company or in exercise of the Company's right of
first refusal upon a proposed transfer) until all dividends (set forth in
Section 1(a) above) on the Preferred shall have been paid or declared and set
apart. In the event dividends are paid on any share of Common Stock, an
additional dividend shall be paid with respect to all outstanding shares of
Preferred in an amount equal per share (on an as-if-converted to Common Stock
basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock or (ii) any repurchase of any outstanding securities of
the Company that is unanimously approved by the Company's Board of Directors.
2.
<PAGE> 3
2. VOTING RIGHTS.
(a) GENERAL RIGHTS. Except as otherwise provided herein or as required
by law, the Preferred shall be voted equally with the shares of the Common Stock
of the Company and not as a separate class, at any annual or special meeting of
stockholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either case upon the following basis: each holder of
shares of Preferred shall be entitled to such number of votes as shall be equal
to the whole number of shares of Common Stock into which such holder's aggregate
number of shares of Preferred are convertible (pursuant to Section 4 hereof)
immediately after the close of business on the record date fixed for such
meeting or the effective date of such written consent.
(b) SEPARATE VOTE OF THE PREFERRED. For so long as any shares of
Preferred remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding Preferred, voting
together on an as-converted basis, shall be necessary for effecting or
validating the following actions:
(i) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c));
(ii) The payment of any dividends on the Common Stock;
(iii) Any amendment of Section 46 (Right of First Refusal)
of the Company's Bylaws; or
(iv) Any increase in the number of authorized directors of
the Company to more than eleven (11).
(v) The authorization or designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
security convertible into equity securities of the Company ranking senior or
pari passu to the Series A, Series B, Series C, Series D or Series E Preferred
in right of redemption, liquidation preference, or voting dividends.
(c) SEPARATE VOTE OF SERIES A PREFERRED. For so long as any shares of
Series A Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding Series A
Preferred shall be necessary for effecting or validating the following actions:
(1) Any amendment, alteration, or repeal of any provision of the
Restated Certificate or the Bylaws of the Company (including any filing of a
Certificate of Designation), that affects adversely the voting powers,
preferences, or other special rights or privileges, qualifications, limitations,
or restrictions of the Series A Preferred; or
(2) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series A Preferred
Stock.
(d) SEPARATE VOTE OF SERIES B PREFERRED. For so long as any shares of
Series B Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding Series B
Preferred shall be necessary for effecting or validating the following actions:
3.
<PAGE> 4
(1) Any amendment, alteration, or repeal of any provision of the
Restated Certificate or the Bylaws of the Company (including any filing of a
Certificate of Designation), that affects adversely the voting powers,
preferences, or other special rights or privileges, qualifications, limitations,
or restrictions of the Series B Preferred; or
(2) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series B Preferred
Stock.
(e) SEPARATE VOTE OF SERIES C PREFERRED. For so long as any shares of
Series C Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding Series C
Preferred shall be necessary for effecting or validating the following actions:
(1) Any amendment, alteration, or repeal of any provision of the
Restated Certificate or the Bylaws of the Company (including any filing of a
Certificate of Designation), that affects adversely the voting powers,
preferences, or other special rights or privileges, qualifications, limitations,
or restrictions of the Series C Preferred; or
(2) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series C Preferred
Stock.
(f) SEPARATE VOTE OF SERIES D PREFERRED. For so long as any shares of
Series D Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding Series D
Preferred shall be necessary for effecting or validating the following actions:
(1) Any amendment, alteration, or repeal of any provision of the
Restated Certificate or the Bylaws of the Company (including any filing of a
Certificate of Designation), that affects adversely the voting powers,
preferences, or other special rights or privileges, qualifications, limitations,
or restrictions of the Series D Preferred; or
(2) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series D Preferred
Stock.
(g) SEPARATE VOTE OF SERIES E PREFERRED. For so long as any shares of
Series E Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
lease sixty-six and two-thirds percent (66-2/3%) of the outstanding Series E
Preferred shall be necessary for effecting or validating the following actions:
(1) Any amendment, alteration, or repeal of any provision of the
Restated Certificate or the Bylaws of the Company (including any filing of a
Certificate of Designation), that affects adversely the voting powers,
preferences, or other special rights or privileges, qualification, limitations,
or restrictions of the Series E Preferred; or
(2) Any increase or decrease (other than by redemption or
conversion) in the total number of authorized shares of Series E Preferred
Stock.
(h) VOTING FOR THE ELECTION OF DIRECTORS. As long as a majority of the
shares of Series A Preferred originally issued remain outstanding, the holders
of the outstanding shares of Series A Preferred shall be entitled to elect two
(2) directors of the Company at each annual election of directors. As long as a
majority of the shares of Series B Preferred originally issued remain
outstanding, the holders
4.
<PAGE> 5
of the outstanding shares of Common Stock and the holders of the outstanding
shares of Series B Preferred (voting together as a single class and on an
as-converted basis), shall be entitled to elect one (1) director of the Company
at each annual election of directors. As long as a majority of the shares of
Series C Preferred originally issued remain outstanding, the holders of the
outstanding shares of Series C Preferred shall be entitled to elect one (1)
director of the Company at each annual meeting of directors. As long as a
majority of the shares of Series D Preferred originally issued remain
outstanding, the holders of the outstanding shares of Series D Preferred shall
be entitled to elect one (1) director of the Company at each annual meeting of
directors. The holders of the outstanding shares of Common Stock shall be
entitled to elect two (2) directors of the Company at each annual election of
directors. The holders of the Preferred Stock and the holders of the Common
Stock (voting together as a single class and on an as-converted basis) shall be
entitled to elect any remaining directors of the Company.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 2(h), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class or series), elect a successor or
successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
(i) DEEMED CONVERSION PRICE OF SERIES E PREFERRED STOCK FOR
PURPOSE OF DETERMINING VOTING RIGHTS. If at any time after the Original Issue
Date and prior to the Series E Preferred Pricing Date, a vote or written consent
of the Company's stockholders is to be taken, then solely for purposes of
determining the number of votes to which the holders of Series E Preferred Stock
are entitled under this Section 2, the Series E Conversion Price shall be deemed
to be $10.485, as adjusted to reflect any of the events described in Sections
4(f), (g), (h), (i), (j) or (k) below.
3. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of Common Stock, the holders of Preferred shall be
entitled, pari passu, to receive, prior and in preference to any distribution of
any of the assets or surplus funds of the Company to the holders of the Common
Stock by reason of their ownership thereof, an amount per share equal to the
Original Issue Price plus all declared and unpaid dividends on the Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of the Preferred held by
them.
(b) After the payment of the full liquidation preference of the
Preferred as set forth in Section 3(a) above, the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(c) The following events shall be considered a liquidation under
this Section:
(1) (a) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or merger of any other
corporation into the Company or any other
5.
<PAGE> 6
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than 50% of the
Company's voting power immediately after such consolidation, merger or
reorganization, or (b) any transaction or series of related transactions in
which in excess of fifty percent (50%) of the Company's voting power is
transferred (any of the foregoing, an "Acquisition"); or
(2) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(d) If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to all
holders of Preferred of the liquidation preference set forth in Section 3(a),
then such assets shall be distributed among the holders of Preferred at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
4. CONVERSION RIGHTS. The holders of the Preferred shall have the
following rights with respect to the conversion of the Preferred into shares of
Common Stock (the "Conversion Rights"):
(a) CONVERSION OF SERIES E PREFERRED STOCK.
(1) OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Series E Preferred may, at the
option of the holder, be converted, at any time on or following the Series E
Preferred Pricing Date, but in any event, no earlier than the Series E Preferred
Pricing Date, into fully-paid and nonassessable shares of Common Stock. The
number of shares of Common Stock to which a holder of Series E Preferred shall
be entitled upon conversion shall be the product obtained by multiplying the
"Series E Conversion Rate" then in effect (determined as provided in Section
4(c) below) by the number of shares of Series E Preferred being converted. The
"Series E Preferred Pricing Date" shall be the earliest to occur of the
following: (i) the closing of the Company's first firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company (the "IPO"); (ii) an Asset Transfer or Acquisition; (iii)
the date on which the Company completes a private sale to investors of its
preferred stock in which (A) at least twenty percent (20%) of the proceeds come
from a new investor or new investors who are not affiliates of either the
Company or any existing holder of the Company's securities, and (B) the gross
proceeds are least twenty million dollars ($20,000,000) (the "New Series
Preferred"); (iv) the date which is eighteen (18) months after the date on which
the Company first sells shares of its Series E Preferred (the "18 Month
Anniversary"); or (v) the date upon which the Company and the holders of the
outstanding shares of Series E Preferred Stock agree to fix the Series E
Conversion Price as described in Section 4(a)2(z) below.
(2) SERIES E CONVERSION PRICE. The "Series E Conversion
Price" shall be: (v) the price per share to the public, less a discount
calculated at the rate of 0.50% per month (prorated on a daily basis based upon
the actual number of days elapsed in any partial month) from the Original Issue
Date through the date of closing of the IPO, in the event the Series E Preferred
Pricing Date is the date of the IPO; (w) the conversion price of the New Series
Preferred, less a discount calculated at the rate of 0.50% per month (prorated
on a daily basis based upon the actual number of days elapsed in any partial
month) from the Original Issue Date through the date on which the Company first
completes the sale of shares of New Series Preferred, in the event the Series E
Preferred Pricing Date is the date on which the Company first completes the sale
of shares of New Series Preferred; (x) $15.00, less a discount calculated at the
rate of 0.50% per month (prorated on a daily basis based upon the actual number
of days elapsed in any partial month) from the Original Issue Date through the
date on which the Asset Transfer or Acquisition is completed, in the event the
Series E Preferred Pricing Date is the date of an Asset Transfer or Acquisition;
(y) the fair market value of a share of Common Stock as of the 18 Month
Anniversary
6.
<PAGE> 7
(such fair market value to be determined by agreement of the Company and the
holders of a majority of the outstanding shares of Series E Preferred or, if
such parties cannot agree, by an independent nationally recognized investment
bank selected by the Company and the holders of a majority of the outstanding
shares of Series E Preferred), less a discount calculated at the rate of 0.50%
per month (prorated on a daily basis based upon the actual number of days
elapsed in any partial month) from the Original Issue Date through the 18 Month
Anniversary, in the event the Series E Preferred Pricing Date is the 18 Month
Anniversary; or (z) the Series E Conversion Price established by the agreement
of the Company and the holders of at least 66-2/3% of the outstanding shares of
Series E Preferred Stock; provided that such Series E Conversion Price is not
less than the fair market value of a share of Common Stock on the date of such
agreement (such fair market value to be determined by an independent nationally
recognized investment bank selected by the Company and the holders of at least
66-2/3% of the outstanding shares of Series E Preferred). If the Series E
Conversion Price is being determined under clause (x) above, and if there shall
have occurred one or more of the events described in Sections 4(f), (g), (h),
(i), (j) or (k) between the date a share of the Series E Preferred Stock is
first issued ("Original Issue Date") and the Series E Preferred Pricing Date,
the Series E Conversion Price shall be adjusted to reflect any such events as if
the Series E Conversion Price had been established at $15.00 as of the Original
Issue Date of the Series E Preferred Stock.
(b) OPTIONAL CONVERSION OF SERIES A PREFERRED, SERIES B PREFERRED,
SERIES C PREFERRED AND SERIES D PREFERRED. Subject to and in compliance with the
provisions of this Section 4, any shares of Preferred (other than shares of
Series E Preferred) may, at the option of the holder, be converted at any time
into fully-paid and nonassessable shares of Common Stock. The number of shares
of Common Stock to which a holder of Preferred (other than shares of Series E
Preferred) shall be entitled upon conversion shall be the product obtained by
multiplying the "Series A Conversion Rate," "Series B Conversion Rate," "Series
C Conversion Rate," and "Series D Conversion Rate," as applicable, then in
effect (determined as provided in Section 4(c)) by the number of shares of
Series A Preferred, Series B Preferred, Series C Preferred, or Series D
Preferred being converted.
(c) CONVERSION RATES. The conversion rate in effect at any time
for conversion of the Series A Preferred (the "Series A Conversion Rate") shall
be the quotient obtained by dividing the Original Issue Price of the Series A
Preferred by the "Series A Conversion Price," calculated as provided in Section
4(d). The conversion rate in effect at any time for conversion of the Series B
Preferred (the "Series B Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series B Preferred by the "Series B
Conversion Price," calculated as provided in Section 4(d). The conversion rate
in effect at any time for conversion of the Series C Preferred (the "Series C
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series C Preferred by the "Series C Conversion Price," calculated
as provided in Section 4(d). The conversion rate in effect at any time for
conversion of the Series D Preferred (the "Series D Conversion Rate") shall be
the quotient obtained by dividing the Original Issue Price of the Series D
Preferred by the "Series D Conversion Price," calculated as provided in Section
4(d). The conversion rate in effect at any time for conversion of the Series E
Preferred (the "Series E Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series E Preferred by the "Series E
Conversion Price," calculated as provided in Section 4(a)(2).
(d) CONVERSION PRICES. After giving effect to the common stock
dividend effected on December 17, 1999, the conversion prices of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are as follows:
<TABLE>
<S> <C>
Series A Conversion Price $0.500
Series B Conversion Price $1.375
Series C Conversion Price $3.250
Series D Conversion Price $10.485
</TABLE>
7.
<PAGE> 8
The Series E Conversion Price shall be determined in accordance with Section
4(a)(2) above. Such Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be adjusted from time to time in accordance with this Section 4. All
references to the Series A Conversion Price, Series B Conversion, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price herein
shall mean the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price as so
adjusted.
(e) MECHANICS OF CONVERSION. Each holder of Preferred who desires
to convert the same into shares of Common Stock pursuant to this Section 4 shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or any transfer agent for the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred, as the
case may be, and shall give written notice to the Company at such office that
such holder elects to convert the same. Such notice shall state the number of
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and/or Series E Preferred being converted. Thereupon, the Company
shall promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay in cash or, to the extent sufficient funds are
not then legally available therefor, in Common Stock (at the Common Stock's fair
market value determined by the Board of Directors as of the date of such
conversion), any declared and unpaid dividends on the shares of Preferred being
converted. Such conversion shall be deemed to have been made at the close of
business on the date of such surrender of the certificates representing the
shares of Preferred to be converted, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such date. If
the conversion is in connection with an underwritten offering of the Company's
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Preferred for conversion,
be conditioned upon the closing of the sale of the Company's securities pursuant
to such underwritten offering, in which event the person(s) entitled to receive
the Common Stock issuable upon such conversion of the Preferred shall not be
deemed to have converted such Preferred until immediately prior to the closing
of such sale of the Company's securities. If the conversion is in connection
with an Acquisition or an Asset Transfer, the conversion may, at the option of
any holder tendering Preferred for conversion, be conditioned upon the closing
of such Acquisition or Asset Transfer, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Preferred shall
not be deemed to have converted such Preferred until immediately prior to the
closing of such Acquisition or Asset Transfer.
(f) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series E Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred, the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price in
effect immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Preferred,
the Series A Conversion Price, the Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(f) shall become effective at the close of
business on the date the subdivision or combination of the Common Stock becomes
effective.
8.
<PAGE> 9
(g) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date,
makes or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price that is then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price and Series E Conversion Price then in effect by a fraction (1) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price and Series E Conversion Price
shall be adjusted pursuant to this Section 4(g) to reflect the actual payment of
such dividend or distribution.
(h) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date 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 of the Company
other than shares of Common Stock, in each such event provision shall be made so
that the holders of Preferred shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount of
other securities of the Company which they would have received had their
Preferred been converted into Common Stock on the date of such event and had
they thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called for during such
period under this Section 4 with respect to the rights of the holders of the
Preferred or with respect to such other securities by their terms.
(i) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Preferred 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 an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Preferred shall have the right thereafter to convert such stock into 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 into which such shares of Preferred could have
been converted 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.
(j) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Preferred shall
9.
<PAGE> 10
thereafter be entitled to receive upon conversion of the Preferred the number of
shares of stock or other securities or property of the Company to which a holder
of the number of shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, subject to adjustment in respect
of such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of Preferred after the capital
reorganization to the end that the provisions of this Section 4 (including
adjustment of the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price and Series E Conversion Price then
in effect and the number of shares issuable upon conversion of the Preferred)
shall be applicable after that event and be as nearly equivalent as practicable.
(k) SALE OF SHARES BELOW SERIES A, SERIES B, SERIES C, SERIES D,
OR SERIES E CONVERSION PRICES.
(1) If at any time or from time to time after the Original
Issue Date, the Company issues or sells, or is deemed by the express provisions
of this subsection (k) to have issued or sold, Additional Shares of Common Stock
(as hereinafter defined), other than as a dividend or other distribution on any
class of stock as provided in Section 4(g) above, and other than a subdivision
or combination of shares of Common Stock as provided in Section 4(f) above, for
an Effective Price (as hereinafter defined) less than the then effective Series
A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series
D Conversion Price or Series E Conversion Price, then and in each such case the
then existing Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price or Series E Conversion Price shall
be reduced, as of the opening of business on the date of such issue or sale, to
a price determined by multiplying the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price by a fraction (i) the numerator of which shall be (A) the
number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale, plus (B) the number of shares of Common
Stock which the aggregate consideration received (as defined in subsection
(k)(2)) by the Company for the total number of Additional Shares of Common Stock
so issued would purchase at such Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price, and (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, and (B) the number of
shares of Common Stock into which the then outstanding shares of Preferred could
be converted if fully converted on the day immediately preceding the given date.
Notwithstanding the foregoing, if the issue or sale, or deemed issue or sale, of
Additional Shares of Common Stock occurs prior to the Series E Preferred Pricing
Date: (i) if the Series E Conversion Price is determined under Section
4(a)(2)(x), such price shall be adjusted as of the Series E Preferred Pricing
Date in the manner described in the last sentence of Section 4(a)(2); and (ii)
if the Series E Conversion Price is determined pursuant to clauses (v), (w), (y)
or (z) of Section 4(a)(2), no adjustment to the Series E Conversion Price under
this Section 4(k) shall be made.
(2) For the purpose of making any adjustment required under
this Section 4(k), the consideration received by the Company for any issue or
sale of securities shall (A) to the extent it consists of cash, be computed at
the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock,
10.
<PAGE> 11
Convertible Securities (as hereinafter defined) or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(3) For the purpose of the adjustment required under this
Section 4(k), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price, in each case the Company shall be deemed to have issued at the
time of the issuance of such rights or options or Convertible Securities the
maximum number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such rights or options or
Convertible Securities, plus, in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price, as adjusted upon the issuance of such rights, options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such rights or options or the
conversion of any such Convertible Securities. If any such rights or options or
the conversion privilege represented by any such Convertible Securities shall
expire without having been exercised, the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price as adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price
or Series E Conversion Price which would have been in effect had an adjustment
been made on the basis that the only Additional Shares of Common Stock so issued
were the Additional Shares of Common Stock, if any, actually issued or sold on
the exercise of such rights or options or rights of conversion of such
Convertible Securities, and such Additional Shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise, plus the consideration, if any, actually received by the Company for
the granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of
Preferred.
11.
<PAGE> 12
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4(k), whether or not subsequently reacquired or retired by the
Company other than (1) shares of Common Stock issued upon conversion of the
Preferred; (2) options, warrants or other rights to purchase up to 20,362,037
shares of Common Stock (provided that such number may be increased or decreased
by the action of a majority of the Board of Directors), and the Common Stock
issued pursuant to such options, warrants or other rights (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like) after the
Original Issue Date to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by a majority of the Board;
(3) shares of Common Stock issued in connection with a strategic alliance,
provided such issuance has been approved by the holders of at least 66-2/3% of
the Preferred; (4) shares of Common Stock to be issued to the shareholders of
InsurQuote, Inc. pursuant to the Agreement and Plan of Merger dated February 1,
2000; and (5) shares of Common Stock to be issued to the shareholders of
LifeLink, Inc. pursuant to the Agreement and Plan of Merger dated March 3, 2000.
The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Company under
this Section 4(k), into the aggregate consideration received, or deemed to have
been received by the Company for such issue under this Section 4(k), for such
Additional Shares of Common Stock.
(l) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price, or Series E Conversion Price for
the number of shares of Common Stock or other securities issuable upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred, the Company, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of Preferred at the holder's address as shown in the Company's books. 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 (1) the consideration received or deemed to be received by the
Company for any Additional Shares of Common Stock issued or sold or deemed to
have been issued or sold, (2) the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price at the time in effect, (3) the number of Additional Shares of
Common Stock and (4) the type and amount, if any, of other property which at the
time would be received upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred.
(m) 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, other than a dividend or other distribution payable in
additional shares of Common Stock or in securities of the Company which would
result in an adjustment of the applicable Conversion Price pursuant to Sections
4(g) and 4(h) hereof, respectively, or (ii) any Acquisition (as defined in
Section 3(c)) 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 corporation, or
merger of any other corporation into the Company, or any Asset Transfer (as
defined in Section 3(c)), or any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall mail to each holder
of Preferred at least twenty (20) 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
12.
<PAGE> 13
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.
(n) AUTOMATIC CONVERSION.
(1) Each share of Series A and Series B shall automatically
be converted into shares of Common Stock, based on the then-effective Series A
Conversion Price or Series B Conversion Price, (A) at any time upon the
affirmative election of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding shares of Preferred voting on an as-converted
basis, or (B) immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which (i) the per share price is at least ten dollars
and forty-eight and one-half cents ($10.485) (adjusted for any stock dividends,
splits, combinations or other recapitalizations), and (ii) the gross cash
proceeds to the Company (before underwriting discounts, commissions and fees)
are at least forty million dollars ($40,000,000). Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(e).
(2) Each share of Series C and Series D Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series C Conversion Price or Series D Conversion Price, (A) at
any time upon the affirmative election of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of Preferred voting on an
as-converted basis and sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of Series C and Series D Preferred voting on an as-converted
basis, provided, however, that if at the time of such vote the percentage of the
combined Series C and Series D Preferred votes held by holders of Series D
Preferred who do not hold any other series or class of capital stock of the
Company is less than thirty-nine percent (39%), the affirmative election of the
holders of at least sixty-six and two thirds percent (66-2/3%) of the
outstanding shares of Series D Preferred also shall be required to so
automatically convert the Series D Preferred, or (B) immediately upon the
closing of a firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Company in which (i)
the per share price is at least ten dollars and forty-eight and one-half cents
($10.485) (adjusted for any stock dividends, splits, combinations or other
recapitalizations), and (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least forty million dollars
($40,000,000). Upon such automatic conversion, any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 4(e).
(3) Each share of Series E Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series E
Conversion Price, (A) at any time following the Series E Preferred Pricing Date
upon the affirmative election of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of Series E Preferred, or
(B) immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company in which (i) the per share price is at least ten dollars and
forty-eight and one-half cents ($10.485) (adjusted for any stock dividends,
splits, combinations or other recapitalizations), and (ii) the gross cash
proceeds to the Company (before underwriting discounts, commissions and fees)
are at least forty million dollars ($40,000,000). Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(e).
(4) Upon the occurrence of the event specified in paragraph
(1), (2) or (3) above, the outstanding shares of Series A, Series B, Series C,
Series D or Series E Preferred, as applicable, shall
13.
<PAGE> 14
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series A, Series B, Series C, Series D or Series E Preferred, as
applicable, are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A, Series B, Series C, Series D or Series E Preferred,
as applicable, the holders of such shares of Preferred shall surrender the
certificates representing such shares at the office of the Company or any
transfer agent for the Preferred. Thereupon, there shall be issued and delivered
to such holder promptly at such office and in its name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which such shares of Preferred surrendered
were convertible on the date on which such automatic conversion occurred, and
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(e).
(o) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of any shares of Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's fair market value (as determined by the Board) on the date of
conversion.
(p) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. 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 conversion of
the shares of the Preferred, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Preferred, the Company will 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.
(q) NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(r) PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Preferred, 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 in which the shares of Preferred so converted were
registered.
(s) NO DILUTION OR IMPAIRMENT. Without the consent of the holders
of then-outstanding Preferred as required under Section 2, the Company shall not
amend its Restated Certificate of
14.
<PAGE> 15
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred against
dilution or other impairment.
5. REDEMPTION. The Preferred shall not be redeemable by the Company.
6. NO REISSUANCE OF PREFERRED. No share or shares of Preferred acquired
by the Corporation by reason of purchase, conversion or otherwise shall be
reissued.
7. NO PREEMPTIVE RIGHTS. Stockholders shall have no preemptive rights
except as granted by the Company pursuant to written agreements.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. 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 fixed exclusively
by one or more resolutions adopted by the Board of Directors, subject to Article
IV(E)(2)(b)(iv).
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders for a term of one year.
Each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
a majority of the voting power of all the then-outstanding shares of the Voting
Stock.
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
15.
<PAGE> 16
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of a
majority of the voting power of all of the then-outstanding shares of the Voting
Stock. The Board of Directors shall also have the power to adopt, amend, or
repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except (i) at an annual or special meeting of stockholders called in accordance
with the Bylaws or (ii) by written consent in accordance with the Bylaws.
4. Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of the shares entitled to cast
not less than ten percent (10%) of the votes at the meeting.
5. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. 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 and consistent with the terms hereof, except
as provided in paragraph B of this Article VII, and all rights conferred upon
the stockholders herein are granted subject to this reservation.
B. 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
16.
<PAGE> 17
holders of any particular class or series of the Voting Stock required by law,
this Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of a majority 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 Articles V, VI and VII.
* * * *
4. This Restated Certificate of Incorporation has been duly approved by
the Board of Directors of this Corporation.
5. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent is seventeen million two hundred sixty five
thousand two hundred twenty one (17,265,221) shares of Common Stock, five
million (5,000,000) shares of Series A Preferred Stock, one million seven
hundred eighteen thousand one hundred eighty-one (1,718,181) shares of Series B
Preferred Stock, three million seven hundred ninety seven thousand seven hundred
eighty five (3,797,785) shares of Series C Preferred Stock and three million
four hundred forty two thousand eight hundred eight (3,442,808) shares of Series
D Preferred Stock. A majority of the outstanding shares of Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock, voting together as a class, and the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding Preferred, voting
together on an as-converted basis, approved this Restated Certificate of
Incorporation by written consent in accordance with Section 228 of the General
Corporation Law of the State of Delaware and written notice of such approval was
given by the Corporation in accordance with said Section 228.
17.
<PAGE> 18
IN WITNESS WHEREOF, ChannelPoint, Inc. has caused this Restated
Certificate of Incorporation to be signed by the President in Colorado Springs,
Colorado this 24th day of March, 2000.
CHANNELPOINT, INC.
By: /s/ KENNETH E. HOLLEN
------------------------------
Kenneth E. Hollen
President and Chief Executive
Officer
18.
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
CHANNELPOINT, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES....................................................................................... 1
Section 1. Registered Office.................................................................... 1
Section 2. Other Offices........................................................................ 1
ARTICLE II CORPORATE SEAL................................................................................ 1
Section 3. Corporate Seal....................................................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS........................................................................ 1
Section 4. Place Of Meetings.................................................................... 1
Section 5. Annual Meeting....................................................................... 1
Section 6. Special Meetings..................................................................... 2
Section 7. Notice Of Meetings................................................................... 3
Section 8. Quorum............................................................................... 3
Section 9. Adjournment And Notice Of Adjourned Meetings......................................... 4
Section 10. Voting Rights........................................................................ 4
Section 11. Joint Owners Of Stock................................................................ 4
Section 12. List Of Stockholders................................................................. 4
Section 13. Action Without Meeting............................................................... 5
Section 14. Organization......................................................................... 5
ARTICLE IV DIRECTORS..................................................................................... 6
Section 15. Number And Term Of Office............................................................ 6
Section 16. Powers............................................................................... 6
Section 17. Term Of Directors.................................................................... 6
Section 18. Vacancies............................................................................ 6
Section 19. Resignation.......................................................................... 7
Section 20. Removal.............................................................................. 7
Section 21. Meetings............................................................................. 7
(a) Annual Meetings...................................................................... 7
(b) Regular Meetings..................................................................... 7
(c) Special Meetings..................................................................... 7
(d) Telephone Meetings................................................................... 7
(e) Notice Of Meetings................................................................... 8
(f) Waiver Of Notice..................................................................... 8
Section 22. Quorum And Voting.................................................................... 8
Section 23. Action Without Meeting............................................................... 8
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 24. Fees And Compensation................................................................ 8
Section 25. Committees........................................................................... 9
(a) Executive Committee.................................................................. 9
(b) Other Committees...................................................................... 9
(c) Term.................................................................................. 9
(d) Meetings............................................................................. 10
Section 26. Organization......................................................................... 10
ARTICLE V OFFICERS...................................................................................... 10
Section 27. Officers Designated.................................................................. 10
Section 28. Tenure And Duties Of Officers........................................................ 10
(a) General.............................................................................. 10
(b) Duties Of Chairman Of The Board Of Directors......................................... 11
(c) Duties Of President.................................................................. 11
(d) Duties Of Vice Presidents............................................................ 11
(e) Duties Of Secretary.................................................................. 11
(f) Duties Of Chief Financial Officer.................................................... 11
Section 29. Delegation Of Authority.............................................................. 12
Section 30. Resignations......................................................................... 12
Section 31. Removal.............................................................................. 12
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION........................................................ 12
Section 32. Execution Of Corporate Instruments................................................... 12
Section 33. Voting Of Securities Owned By The Corporation........................................ 13
ARTICLE VII SHARES OF STOCK............................................................................... 13
Section 34. Form And Execution Of Certificates................................................... 13
Section 35. Lost Certificates.................................................................... 13
Section 36. Transfers............................................................................ 14
Section 37. Fixing Record Dates.................................................................. 14
Section 38. Registered Stockholders.............................................................. 15
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION........................................................... 15
Section 39. Execution Of Other Securities........................................................ 15
ARTICLE IX DIVIDENDS..................................................................................... 16
</TABLE>
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<TABLE>
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Section 40. Declaration Of Dividends............................................................. 16
Section 41. Dividend Reserve..................................................................... 16
ARTICLE X FISCAL YEAR................................................................................... 16
Section 42. Fiscal Year.......................................................................... 16
ARTICLE XI INDEMNIFICATION............................................................................... 16
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents........................................... 16
(a) Directors And Executive Officers..................................................... 16
(b) Other Officers, Employees And Other Agents........................................... 17
(c) Expenses............................................................................. 17
(d) Enforcement.......................................................................... 17
(e) Non-Exclusivity Of Rights............................................................ 18
(f) Survival Of Rights................................................................... 18
(g) Insurance............................................................................ 18
(h) Amendments........................................................................... 18
(i) Saving Clause........................................................................ 18
(j) Certain Definitions.................................................................. 18
ARTICLE XII NOTICES....................................................................................... 19
Section 44. Notices.............................................................................. 19
(a) Notice To Stockholders ...............................................................19
(b) Notice To Directors.................................................................. 19
(c) Affidavit Of Mailing................................................................. 20
(d) Time Notices Deemed Given............................................................ 20
(e) Methods Of Notice.................................................................... 20
(f) Failure To Receive Notice............................................................ 20
(g) Notice To Person With Whom Communication Is Unlawful................................. 20
(h) Notice To Person With Undeliverable Address.......................................... 20
ARTICLE XIII AMENDMENTS.................................................................................... 21
Section 45. Amendments........................................................................... 21
ARTICLE XIV RIGHT OF FIRST REFUSAL........................................................................ 21
Section 46. Right Of First Refusal............................................................... 21
ARTICLE XV LOANS TO OFFICERS............................................................................. 24
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Section 47. Loans To Officers.................................................................... 24
ARTICLE XVI MISCELLANEOUS................................................................................. 24
Section 48. Annual Report........................................................................ 24
</TABLE>
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AMENDED AND RESTATED
BYLAWS
OF
CHANNELPOINT, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement
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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 business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
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directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given 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, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except
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where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, a majority of the outstanding shares of such class or classes
or series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, 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 which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
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
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hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the 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,
shall be 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.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) 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 the State 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.
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
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(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE.
The authorized number of directors of the corporation shall be fixed by the
Board of Directors from time to time.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. TERM OF DIRECTORS. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors.
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Any director elected in accordance with the preceding sentence shall hold office
for the remainder of the full term of the director for which the vacancy was
created or occurred and until such director's successor shall have been elected
and qualified. A vacancy in the Board of Directors shall be deemed to exist
under this Bylaw in the case of the death, removal or resignation of any
director.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least a majority of the voting power of all the then-outstanding
shares of the Voting Stock].
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall
be held immediately before or after the annual meeting of stockholders and at
the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear
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each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, postage prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the 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.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT 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 of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from
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serving the corporation in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors 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, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and 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 or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors 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, and, in addition, in the absence or disqualification of any
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.
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(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
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(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other
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duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless 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
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by any contract or engagement or to pledge its credit or to render it liable for
any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
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. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and 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. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
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give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) 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.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days of the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's
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registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. 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, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
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ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
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(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to 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, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer or officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) 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, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer or officer. Any right to
indemnification or advances granted by this Bylaw to a director or executive
officer or officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. [In connection with any claim by an [executive] officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that
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his conduct was lawful. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in
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settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(iii) The term 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 or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(iv) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(v) 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 believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
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(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that
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notice be given to such person shall be reinstated. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS.
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
fifty percent (50%) of the voting power of all of the then-outstanding shares of
the Voting Stock. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
ARTICLE XIV
RIGHT OF FIRST REFUSAL
SECTION 46. RIGHT OF FIRST REFUSAL. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of Common Stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any of his
shares of Common Stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(b) For fifteen (15) days following receipt of such notice, the
corporation shall have the option to purchase all or any lesser part of the
shares specified in the notice at the price and upon the terms set forth in such
notice. In the event the corporation elects to purchase all the shares, it shall
give written notice to the selling stockholder of its election and settlement
for said shares shall be made as provided below in paragraph (d).
(c) In the event the corporation does not elect to acquire all of the
shares specified in the selling stockholder's notice, the Secretary of the
corporation shall, within fifteen (15) days of receipt of said selling
stockholder's notice, give written notice thereof to the stockholders of the
corporation other than the selling stockholder. Said written notice shall state
the number of shares that the corporation has elected to purchase and the number
of shares remaining available for purchase (which shall be the same as the
number contained in said selling stockholder's notice, less any such shares that
the corporation has elected to purchase). Each of the other stockholders shall
have the option to purchase that proportion of the shares available for purchase
as the number of shares owned by each of said other stockholders (calculated on
an as-converted basis) bears to the total issued and outstanding shares of the
corporation (calculated on an as-converted basis), excepting those shares owned
by the selling stockholder. A stockholder
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electing to exercise such option shall, within ten (10) days after receipt of
the corporation's notice, give notice to the corporation specifying the number
of shares such stockholder will purchase. Within such ten (10) day period, each
of said other stockholders shall give written notice stating how many additional
shares such stockholder will purchase if additional shares are made available.
Failure to respond in writing to the notice given by the Secretary of the
corporation within said ten (10) day period shall be deemed a rejection of such
stockholder's right to acquire a proportionate part of the shares of the selling
stockholder. In the event one or more stockholders do not elect to acquire the
shares available to them, said shares shall be allocated on a pro rata basis to
the stockholders who requested shares in addition to their pro rata allotment.
(d) In the event the corporation and/or stockholders, other than the
selling stockholder, elect to acquire any of the shares of the selling
stockholder as specified in said selling stockholder's notice, the Secretary of
the corporation shall so notify the selling stockholder and settlement thereof
shall be made in cash within thirty (30) days after the Secretary of the
corporation receives said selling stockholder's notice; provided that if the
terms of payment set forth in said selling stockholder's notice were other than
cash against delivery, the corporation and/or its other stockholders shall pay
for said shares on the same terms and conditions set forth in said selling
stockholder's notice.
(e) In the event the corporation and/or its other stockholders do not
elect to acquire all of the shares specified in the selling stockholder's
notice, said selling stockholder may, within the sixty (60) day period following
the expiration of the option rights granted to the corporation and other
stockholders herein, sell elsewhere the shares specified in said selling
stockholder's notice which were not acquired by the corporation and/or its other
stockholders, in accordance with the provisions of paragraph (d) of this bylaw,
provided that said sale shall not be on terms and conditions more favorable to
the purchaser than those contained in the bona fide offer set forth in said
selling stockholder's notice. All shares so sold by said selling stockholder
shall continue to be subject to the provisions of this bylaw in the same manner
as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A stockholder's transfer of any or all of such stockholder's
shares to the corporation or to any other stockholder of the corporation.
(4) A stockholder's transfer of any or all of such stockholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
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(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
(8) A transfer by a stockholder to its affiliate. For purposes of
this bylaw, affiliate shall mean any subsidiary, parent, company under common
control with a stockholder, member or retired member of a stockholder. A company
is under common control with a stockholder if the same natural person or company
controls both the stockholder and the company by beneficially owning greater
than fifty percent (50%) of the outstanding voting securities of a stockholder
or company which is a corporation, or by beneficially owning a partnership or
limited liability company interest in greater than fifty percent (50%) of the
distributable profits or losses of a stockholder or company which is a
partnership or limited liability company.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of securities
of the corporation shall be null and void unless the terms, conditions, and
provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On December 18, 2006; or
(2) Upon the date of the corporation's Initial Public Offering.
(j) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS
PROVIDED IN THE BYLAWS OF THE CORPORATION."
ARTICLE XV
LOANS TO OFFICERS
SECTION 47. 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 these Bylaws 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 XVI
MISCELLANEOUS
SECTION 48. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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EXHIBIT 10.4
ATTACHMENT IV
TO
CHANNELPOINT, INC. STOCK OPTION GRANT NOTICE
(1997 STOCK OPTION PLAN)
In addition to the accelerated vesting provided by Section 10(b) of
the Plan, in the event of a Change in Control, the unvested portion of this
option shall be fifty percent (50%) vested and exercisable if you are providing
services as an Employee, Director or Consultant immediately prior to the
effective date of a Change in Control. The remainder of the unvested portion of
this option shall become vested and exercisable if (a) you are providing
services as an Employee, Director or Consultant immediately prior to the
effective date of a Change in Control and (b) your employment with the Company
terminates due to a Voluntary Termination for Good Reason or an Involuntary
Termination Without Cause, in either case within twenty-four (24) months
following the effective date of the Change in Control.
For purposes of the foregoing sentence, "Voluntary Termination for
Good Reason" shall mean that you voluntarily terminate your employment with the
Company after any of the following are undertaken without your express written
consent:
(a) the assignment to you of any duties or responsibilities which
result in a substantial diminution in your position or function (but not merely
a change in title or reporting relationships) as in effect immediately prior to
the effective date of the Change in Control;
(b) a five percent (5%) or greater reduction by the Company in your
annual base salary as in effect immediately prior to the effective date of the
Change in Control or as increased thereafter;
(c) any failure by the Company to continue in effect any benefit plan
or program, including incentive plans or plans with respect to the receipt of
securities of the Company, in which you are participating immediately prior to
the effective date of the Change in Control (hereinafter referred to as
"Benefit Plans"); or the taking of any action by the Company that would
adversely affect your participation in or reduce your benefits under the
Benefit Plans or deprive you of any fringe benefit that you enjoyed immediately
prior to the effective date of the Change in Control; provided, however, that
"good reason" shall not exist under this paragraph following a Change in
Control if the Company offers a range of benefit plans and programs which,
taken as a whole, are comparable to the Benefit Plans; or
(d) your relocation, or the relocation of the Company's principal
executive offices if your principal office is at such offices, to a location
more than sixty (60) miles from the location at which you were performing your
duties immediately prior to the effective date of the Change in Control, except
for required travel on the Company's business to an extent substantially
consistent with your business travel obligations immediately prior to the
effective date of the Change in Control.
<PAGE> 2
"Involuntary Termination Without Cause" shall mean your dismissal or
discharge by the Company for a reason other than your willful conduct that is
materially injurious to the business of the Company, whether financial or
otherwise. The termination of your employment will not be deemed to be an
"Involuntary Termination Without Cause" if your termination occurs as a result
of your death or disability.
For purposes of the foregoing, "Company" shall include the business
entity by which you are employed or for which you are performing services
following the Change in Control.
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EXHIBIT 10.5
CHANNELPOINT, INC.
EXECUTIVE SEVERANCE BENEFIT PLAN
SECTION 1. INTRODUCTION
The ChannelPoint, Inc. Executive Severance Benefit Plan (the "Plan")
is designed to provide separation pay and benefits to certain eligible
employees of the Company whose employment is involuntarily terminated without
cause or voluntarily terminated for good reason. This document constitutes the
written instrument under which the Plan is maintained and supersedes any prior
plan or practice of the Company that provides severance benefits to eligible
employees. The Plan was approved by the Board of Directors of the Company
effective October 23, 1998 and amended effective January 28, 1999.
SECTION 2. DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth below:
(a) "BASE SALARY" means your annual base salary (i) as in effect on
the effective date of a Change in Control, or as increased thereafter; or (ii)
in the event that you are terminated prior to a Change in Control, as in effect
during the regularly scheduled payroll date immediately prior to your
termination.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" means that, in the reasonable determination of the
Company, (i) you have committed an act that materially injures the business of
the Company; (ii) you have refused or failed to follow lawful and reasonable
directions of the Board or the appropriate individual to whom you report; (iii)
you have willfully or habitually neglected your duties for the Company; or (iv)
you have been convicted of a felony involving moral turpitude that is likely to
inflict or has inflicted material injury on the business of the Company.
Notwithstanding the foregoing, Cause based on the conduct described in clause
(ii) or clause (iii) shall not exist unless the conduct described in such
clause has not been cured within fifteen (15) days following your receipt of
written notice from the Company or the Board, as the case may be, specifying
the particulars of your conduct constituting Cause.
(d) "CHANGE IN CONTROL" means (i) a sale of substantially all of the
assets of the Company; (ii) a merger or consolidation in which the Company is
not the surviving corporation (other than a merger or consolidation in which
stockholders immediately before the merger or consolidation have, immediately
after the merger or consolidation, greater stock voting power); (iii) a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise (other than a reverse merger in which
stockholders immediately before the merger have,
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immediately after the merger, greater stock voting power); or (iv) any
transaction or series of related transactions in which in excess of 50% of the
Company's voting power is transferred.
(e) "COMPANY" means ChannelPoint, Inc., or following a Change in
Control, the surviving entity resulting from such transaction.
(f) "INVOLUNTARY TERMINATION WITHOUT CAUSE" means your dismissal or
discharge by the Company (or, if applicable, by any successor entity) for a
reason other than Cause. The termination of your employment will not be deemed
to be an "Involuntary Termination Without Cause" if your termination occurs as
a result of your death or disability.
(g) "VOLUNTARY TERMINATION FOR GOOD REASON" means that you voluntarily
terminate your employment with the Company after any of the following are
undertaken by the Company without your express written consent:
(i) the assignment to you of any duties or responsibilities which
result in a substantial diminution in your position or function (but not merely
a change in title or reporting relationships) as in effect immediately prior to
the effective date of the Change in Control;
(ii) a five percent (5%) or greater reduction by the Company in
your annual base salary as in effect immediately prior to the effective date of
the Change in Control or as increased thereafter;
(iii) any failure by the Company to continue in effect any benefit
plan or program, including incentive plans or plans with respect to the receipt
of securities of the Company, in which you are participating immediately prior
to the effective date of the Change in Control (hereinafter referred to as
"Benefit Plans"); or the taking of any action by the Company that would
adversely affect your participation in or reduce your benefits under the
Benefit Plans or deprive you of any fringe benefit that you enjoyed immediately
prior to the effective date of the Change in Control; provided, however, that
"Good Reason" shall not exist under this paragraph following a Change in
Control if the Company offers a range of benefit plans and programs which,
taken as a whole, are comparable to the Benefit Plans; or
(iv) your relocation, or the relocation of the Company's principal
executive offices if your principal office is at such offices, to a location
more than sixty (60) miles from the location at which you were performing your
duties immediately prior to the effective date of the Change in Control, except
for required travel on the Company's business to an extent substantially
consistent with your business travel obligations immediately prior to the
effective date of the Change in Control; provided, however, that "Good Reason"
shall not exist under this paragraph if your business office is located in
Colorado Springs, Colorado immediately prior to the effective date of the
Change in Control and is subsequently relocated to any of the following
counties in Colorado: Denver, Boulder, Jefferson, Arapahoe, Douglas or Elbert.
SECTION 3. ELIGIBILITY AND PARTICIPATION
You are eligible to participate in the Plan if you are a full-time
executive employee of the Company at the level of Vice President or above
immediately prior to your termination, and either (i) your employment with the
Company terminates due to an Involuntary Termination
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<PAGE> 3
Without Cause or a Voluntary Termination for Good Reason, in either case within
thirteen (13) months following the effective date of a Change in Control; or
(ii) prior to a Change in Control, your employment with the Company terminates
due to an Involuntary Termination Without Cause and the Company determines, in
its sole discretion, that you are eligible to participate in the Plan.
SECTION 4. BENEFITS
As a participant in the Plan, you are eligible to receive the
following benefits on the following conditions:
(a) SALARY CONTINUATION. The Company shall continue your Base Salary
for one of the following periods, as applicable:
(i) six (6) months if you are employed by the Company as a Vice
President immediately prior to the date of your Involuntary Termination Without
Cause or Voluntary Termination for Good Reason and such termination occurs
within thirteen (13) months following the effective date of a Change in
Control;
(ii) twelve (12) months if you are employed by the Company at a
level of Senior Vice President or above immediately prior to the date of your
Involuntary Termination Without Cause or Voluntary Termination for Good Reason
and such termination occurs within thirteen (13) months following the effective
date of a Change in Control; or
(iii) such period as the Company, in its sole discretion,
determines if your Involuntary Termination Without Cause occurs prior to the
effective date of a Change in Control.
Any salary continuation payments shall be paid to you in regular
installments on the normal payroll dates of the Company or over a shorter
period, as determined by the Company. Any such amount that you receive shall be
subject to all required tax withholding.
(b) CONTINUATION OF BENEFITS. Provided that you elect continued
coverage under federal COBRA law as applicable, the Company shall pay, on your
behalf, the portion of premiums of your group health and any life insurance,
disability insurance, and other Company-provided health and welfare benefits,
including coverage for your eligible dependents, that the Company paid prior to
your termination of employment; provided, however, that the Company will pay
such premiums for your eligible dependents only for coverage for which those
dependents were enrolled immediately prior to your termination of employment.
You will continue to be required to pay that portion of the premium of your
health and welfare coverage, including coverage for your eligible dependents,
that you were required to pay as an active employee immediately prior to your
termination of employment. The number of months of such premium payments shall
equal the number of months of your salary continuation payments, but in no
event shall such premium payments be made for a period exceeding eighteen (18)
months or be made following the effective date of your coverage by a health
plan of a subsequent employer. For the balance of the period that you are
entitled to coverage under federal COBRA law, you shall be entitled to maintain
coverage for yourself and your eligible dependents at your own expense.
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<PAGE> 4
(c) PARACHUTE PAYMENTS. If any payment or benefit you would receive
under this Plan, when combined with any other payment or benefit you receive
pursuant to the termination of your employment with the Company ("Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for
this sentence, be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then such Payment shall be either (x) the full amount of
such Payment or (y) such lesser amount (with cash payments being reduced before
stock option compensation) as would result in no portion of the Payment being
subject to the Excise Tax, whichever of the foregoing amounts, taking into
account the applicable federal, state and local employment taxes, income taxes,
and the Excise Tax results in your receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax.
(d) COMPANY DISCRETION. In cases of termination of employment prior to
a Change in Control, the Company's decision to pay or not pay salary
continuation and the amount of such payments shall be in the sole discretion of
the Company, and the Company's decision with respect to one employee shall not
in any way preclude a different decision with respect to another employee, even
if similarly situated.
SECTION 5. LIMITATIONS AND CONDITIONS ON BENEFITS
(a) RELEASE. To receive benefits under this Plan, you must execute a
release of claims in favor of the Company, in the form attached to this Plan as
Exhibit A or Exhibit B, as appropriate, and such release must become effective
in accordance with its terms.
(b) NON-COMPETITION AND NON-SOLICITATION. By accepting benefits under
this Plan, you acknowledge that as an employee of the Company, you have been
privy to extremely sensitive, confidential, and valuable commercial
information, and to trade secrets belonging to the Company, the disclosure of
which information and/or secrets would greatly harm the Company. You
acknowledge and agree that you have received information from and about the
Company in Colorado, and that Colorado law should govern this agreement
irrespective of the place of your residence. As a reasonable measure to protect
the Company from the harm of such disclosure and use of its information and
trade secrets against it, you agree to the following as a condition of your
receipt of benefits under this Plan:
(i) NON-COMPETITION. You agree and acknowledge that for a period of
[ 1-2 YEARS ] following your Involuntary Termination Without Cause or Voluntary
Termination for Good Reason you will not directly or indirectly engage in
(whether as an employee, consultant, proprietor, partner, director or
otherwise) or have any ownership interest in, or participate in the financing,
operation, management or control of, any person, firm, corporation,
partnership, joint venture or other business entity that is a "Restricted
Business" in a "Restricted Territory" (as defined below). For purposes of this
Plan, "Restricted Business" is an entity that competes with the Company or
provides or develops products similar to those the Company offers, plans to
offer, is developing or is planning to develop. "Restricted Territory" means
the cities, counties and states of the United States in which the Company is
doing business at the time of the Covered Termination. Your ownership of any
stock acquired before the effective date of this Plan shall not constitute a
violation of this paragraph. Your ownership of no more than 1% of
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<PAGE> 5
the outstanding voting stock of a publicly traded company acquired after the
effective date of this Plan shall not constitute a violation of this paragraph.
Nothing in this paragraph should be construed to narrow your obligations
imposed by any other provision herein, any other agreement, law or other
source.
(ii) NON-SOLICITATION. You further acknowledge that you are and
have been privy to highly sensitive personnel information, including (without
limitation) information concerning the skills, knowledge, and background of the
Company employees, performance evaluations of employees by the Company, salary,
compensation and benefits paid by the Company to its employees and other
confidential, private and commercially valuable information. You acknowledge
that disclosure of such information to others would be detrimental to the
Company and could lead to the loss of employees and knowledge critical to the
business of the Company. You also acknowledge that you are and have been privy
to valuable and confidential information concerning relationships between the
Company and customers, vendors, consultants, independent contractors and other
business entities and that severance or alteration of such relationships would
be highly detrimental to the Company. Accordingly, as a part of this Plan and
for a period of [__________] following your Involuntary Termination Without
Cause or Voluntary Termination for Good Reason, you agree not to solicit,
either directly or indirectly, any employee or director of the Company to
terminate or alter his or her relationship with the Company. You further agree
that, for a period of [_________] following your Involuntary Termination
Without Cause or Voluntary Termination for Good Reason, you will not, either
directly or indirectly, solicit or attempt to solicit any customer, client,
supplier, vendor, consultant or independent contractor of the Company to
terminate, reduce or negatively alter his, her or its relationship with the
Company. Nothing in this paragraph should be construed to narrow your
obligations imposed by any other provision herein or any other agreement, law
or other source.
(iii) REASONABLE. You agree and acknowledge that the time
limitation on the restrictions in this Section 5, combined with the geographic
scope, are reasonable. You also acknowledge and agree that this Section 5 is
reasonably necessary for the protection of the Company, that through this Plan
you shall receive adequate consideration for any loss of opportunity associated
with the provisions herein, and that these provisions provide a reasonable way
of protecting the Company's business value which was imparted to you. If any
restriction set forth in this Section 5 is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range
of activities or geographic area as to which it may be enforceable. You
acknowledge and agree that the provisions in this Section 5 are essential and
material to this Plan, and that upon breach of this Section 5 by you, the
Company is entitled to recover any payments or other consideration made
pursuant to this Plan, to withhold providing additional payments or
consideration, to equitable relief to prevent continued breach, to recover
damages and to seek any other remedies available to the Company.
(c) OFFSETS. Unless otherwise specified in a written agreement between
you and the Company or any successor to the Company or any affiliate thereof,
the total amount of severance benefits you may receive pursuant to this Plan
and any plan, practice or statutory obligation of the Company or any successor
to the Company or any affiliate thereof, or any agreement
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between you and the Company or any affiliate thereof, shall not exceed the
amount of severance benefits provided under this Plan, and the severance
benefits payable to you under this Plan shall be reduced to the extent of any
excess.
(d) TERMINATION OF BENEFITS. Benefits under this Plan shall terminate
immediately if you, at any time, violate any proprietary information or
confidentiality obligation to the Company.
(e) NON-DUPLICATION OF BENEFITS. You are not eligible to receive
benefits under this Plan more than one time.
SECTION 6. ADMINISTRATION AND OPERATION OF THE PLAN
The Company is the "Plan Sponsor" and the "Plan Administrator" of the
Plan, as such terms are defined in the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company, in its capacity as Plan Administrator of the
Plan, is the named fiduciary that has the authority to control and manage the
operation and administration of the Plan. The Company has the sole discretion
to make such rules, regulations, and interpretations of the Plan and to make
such computations and shall take such other action to administer the Plan as it
may deem appropriate in its sole discretion. Such rules, regulations,
interpretations, computations, and other actions shall be conclusive and
binding upon all persons. The Company may engage the services of such persons
or organizations to render advice or perform services with respect to its
responsibilities under the Plan as it shall determine to be necessary or
appropriate. Such persons or organizations may include (without limitation)
actuaries, attorneys, accountants and consultants.
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan. The responsibilities of the Company under
the Plan shall be carried out on its behalf by its directors, officers,
employees and agents, acting on behalf or in the name of the Company in their
capacity as directors, officers, employees and agents and not as individual
fiduciaries. The Company may delegate any of its fiduciary responsibilities
under the Plan to another person or persons pursuant to a written instrument
that specifies the fiduciary responsibilities so delegated to each such person.
SECTION 7. CLAIMS, INQUIRIES AND APPEALS
APPLICATIONS FOR BENEFITS AND INQUIRIES. Applications for benefits
should be in writing, signed and submitted to: Plan Administrator, Executive
Severance Benefit Plan, ChannelPoint, Inc., 5755 Mark Dabling Blvd., Suite 100,
Colorado Springs, CO 80919.
DENIAL OF CLAIMS. If any application for benefits is denied in whole
or in part, the Plan Administrator must notify you, in writing, of the denial
of the application, and of your right to review the denial. The written notice
of denial will be set forth in a manner designed to be understood, and will
include specific reasons for the denial, specific references to the Plan
provision upon which the denial is based, a description of any information or
material that the Plan Administrator needs to complete the review and an
explanation of the Plan's review procedure.
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<PAGE> 7
This written notice will be given to you within ninety (90) days after
the Plan Administrator receives the application, unless special circumstances
require an extension of time, in which case, the Plan Administrator has up to
an additional ninety (90) days for processing the application. If an extension
of time for processing is required, written notice of the extension will be
furnished to you before the end of the initial 90-day period.
This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application. If written notice of denial of
the application for benefits is not furnished within the specified time, the
application shall be deemed to be denied. You will then be permitted to appeal
the denial in accordance with the review procedure described below.
REQUEST FOR REVIEW. You (or your authorized representative) may appeal
a denied benefit claim by submitting a written request for a review to: Review
Panel, Executive Severance Benefit Plan, ChannelPoint, Inc., 5755 Mark Dabling
Blvd., Suite 100, Colorado Springs, CO 80919. The Review Panel shall be
comprised of two (2) or more persons to be appointed by the Company. Your
appeal must be submitted within sixty (60) days after the application is denied
(or deemed denied). The Review Panel will give you (or your representative) an
opportunity to review pertinent documents in preparing a request for a review.
A request for review must set forth all of the grounds on which it is
based, all facts in support of the request and any other matters that you or
your representative feel are pertinent. The Review Panel may require you or
your representative to submit additional facts, documents or other material as
it may find necessary or appropriate in making its review.
DECISION ON REVIEW. The Review Panel will act on each request for
review within sixty (60) days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional sixty
(60) days) for processing the request for a review. If an extension for review
is required, written notice of the extension will be furnished within the
initial 60-day period. The Review Panel will give written notice of its
decision to the applicant. In the event that the Review Panel confirms the
denial of the application for benefits in whole or in part, the notice will
outline the specific Plan provisions upon which the decision is based. If
written notice of the Review Panel's decision is not given within the time
prescribed above, the application will be deemed denied on review.
RULES AND PROCEDURES. The Plan Administrator and/or the Review Panel
may establish rules and procedures, consistent with the Plan and with ERISA, as
necessary and appropriate in carrying out their responsibilities in reviewing
benefit claims. If you wish to submit additional information in connection with
an appeal from the denial (or deemed denial) of benefits, you may be required
to do so at your own expense.
EXHAUSTION OF REMEDIES. No legal action for benefits under the Plan
may be brought until (i) a written application for benefits has been submitted
in accordance with the procedures described above, (ii) the person claiming
benefits has been notified by the Plan Administrator that the application is
denied (or the application is deemed denied due to the Plan Administrator's
failure to act on it within the time prescribed), (iii) a written request for a
review of the application has been submitted in accordance with the appeal
procedure described above
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<PAGE> 8
and (iv) the person appealing the denial has been notified in writing that the
Review Panel has denied the appeal (or the appeal is deemed to be denied due to
the Review Panel's failure to take any action on the claim within the time
prescribed).
SECTION 8. OTHER TERMINATIONS
You are NOT eligible for benefits under this Plan if (i) your
employment terminates due to death, disability or any other reason other than
an Involuntary Termination Without Cause that occurs prior to or within
thirteen (13) months following the effective date of a Change in Control or a
Voluntary Termination for Good Reason that occurs within thirteen (13) months
following the effective date of a Change in Control; (ii) you are terminated
within thirty (30) days of your refusal to accept an offer of comparable
employment by any successor to the Company (provided that "comparable
employment" shall mean employment with duties and responsibilities not
violative of Section 2(g)(i); with base salary in an amount not violative of
Section 2(g)(ii); with benefit plans and programs not violative of Section
2(g)(iii); and at a business office whose location is not violative of Section
2(g)(iv)); or (iii) your employment terminates prior to a Change in Control and
the Company, in its sole discretion, determines that you are not eligible for
benefits under this Plan.
SECTION 9. BASIS OF PAYMENTS TO AND FROM THE PLAN
All benefits under the Plan shall be paid by the Company. The Plan
shall be unfunded and benefits hereunder shall be paid only from the general
assets of the Company.
SECTION 10. AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate this Plan at any
time; provided, however, that this Plan may not be amended or terminated
following the effective date of a Change in Control.
SECTION 11. NON-ALIENATION OF BENEFITS
No Plan benefit may be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered or charged, and any attempt to do so will be
void.
SECTION 12. SUCCESSORS AND ASSIGNS
This Plan shall be binding upon any surviving entity resulting from a
Change in Control and upon any other person who is a successor by merger,
acquisition, consolidation or otherwise to the business formerly carried on by
the Company without regard to whether or not such person actively adopts or
formally continues the Plan. Covered Employees, to the extent they are
otherwise eligible for benefits under the Plan, are intended third party
beneficiaries of this provision.
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<PAGE> 9
SECTION 13. LEGAL CONSTRUCTION
This Plan shall be interpreted in accordance with ERISA and, to the
extent not preempted by ERISA, with the laws of the State of Colorado. This
Plan constitutes both a plan document and a summary plan description for
purposes of ERISA.
SECTION 14. OTHER PLAN INFORMATION
PLAN IDENTIFICATION NUMBER: 520
EMPLOYER IDENTIFICATION NUMBER: 84-1367639
ENDING OF THE PLAN'S FISCAL YEAR: December 31.
AGENT FOR THE SERVICE OF LEGAL PROCESS: The Plan's agent for service
of legal process is: Kenneth Hollen, ChannelPoint, Inc., 5755 Mark Dabling
Blvd., Suite 100, Colorado Springs, CO 80919.
SECTION 15. STATEMENT OF ERISA RIGHTS
As a participant in this Plan (which is a welfare benefit plan
sponsored by the Company) you are entitled to certain rights and protections
under ERISA, including the right to:
(a) Examine, without charge, at the Plan Administrator's office and at
other specified locations, such as work sites, all Plan documents and copies of
all documents filed by the Plan with the U.S. Department of Labor, such as
detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon
written request to the Plan Administrator. The Plan Administrator may make a
reasonable charge for the copies; and
(c) Receive a summary of the Plan's annual financial report, in the
case of a plan which is required to file an annual financial report with the
Department of Labor. (Generally, all pension plans and welfare plans with 100
or more participants must file these annual reports.)
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people responsible for the operation of the employee benefit
plan. The people who operate the Plan, called "fiduciaries" of the Plan, have a
duty to do so prudently and in the interest of you and other Plan participants
and beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising your rights under ERISA. If your claim for a Plan
benefit is denied in whole or in part, you must receive a written explanation
of the reason for the denial. You have the right to have the Plan review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in
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<PAGE> 10
a federal court. In such a case, the court may require the Plan Administrator
to provide the materials and pay you up to $100 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the
control of the Plan Administrator. If you have a claim for benefits that is
denied or ignored, in whole or in part, you may file suit in a state or federal
court. If it should happen that the Plan fiduciaries misuse the Plan's money,
or if you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a federal
court. The court will decide who should pay court costs and legal fees. If you
are successful, the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.
If you have any questions about this statement or about your rights
under ERISA, you should contact the nearest office of the Pension and Welfare
Benefits Administration, U.S. Department of Labor, listed in your telephone
directory, or the Division of Technical Assistance and Inquiries, Pension and
Welfare Benefit Administration, U.S. Department of Labor, 200 Constitution
Avenue N.W., Washington, D.C. 20210.
Exhibit A: Release (Individual Termination)
Exhibit B: Release (Group Termination)
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<PAGE> 11
EXHIBIT A
RELEASE
(INDIVIDUAL TERMINATION)
Certain capitalized terms used in this Release are defined in the
ChannelPoint, Inc. Executive Severance Benefit Plan (the "Plan") which I have
reviewed.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Release, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to the date I execute this Release, including, but not limited
to: all such claims and demands directly or indirectly arising out of or in any
way connected with my employment with the Company or the termination of that
employment, including but not limited to, claims of intentional and negligent
infliction of emotional distress, any and all tort claims for personal injury,
claims or demands related to salary, bonuses, commissions, stock, stock
options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance pay, or any other form of disputed
compensation; claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as amended
("ADEA"); the federal Employee Retirement Income Security Act of 1974, as
amended; the federal Americans with Disabilities Act of 1990; the California
Fair Employment and Housing Act, as amended; tort law; contract law; statutory
law; common law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed
in any way to release the Company from its obligation to indemnify me pursuant
to the Company's indemnification obligation pursuant to agreement or applicable
law or to reduce or eliminate any coverage I may have under the Company's
director and officer liability policy, if any.
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<PAGE> 12
I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under ADEA. I also acknowledge that the
consideration given under the Agreement for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this
writing, as required by the ADEA, that: (A) my waiver and release do not apply
to any rights or claims that may arise on or after the date I execute this
Release; (B) I have the right to consult with an attorney prior to executing
this Release; (C) I have twenty-one (21) days to consider this Release
(although I may choose to voluntarily execute this Release earlier); (D) I have
seven (7) days following the execution of this Release by the parties to revoke
the Release; and (E) this Release shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Release is executed by me.
[NAME OF EMPLOYEE]
Date:
-------------------------------- ------------------------------------
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<PAGE> 13
EXHIBIT B
RELEASE
(GROUP TERMINATION)
Certain capitalized terms used in this Release are defined in the
ChannelPoint, Inc. Executive Severance Benefit Plan (the "Plan") which I have
reviewed.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Release, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed (other than any claim for indemnification I may have as a result of
any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to the date I execute this Release, including, but not limited
to: all such claims and demands directly or indirectly arising out of or in any
way connected with my employment with the Company or the termination of that
employment, including but not limited to, claims of intentional and negligent
infliction of emotional distress, any and all tort claims for personal injury,
claims or demands related to salary, bonuses, commissions, stock, stock
options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance pay, or any other form of disputed
compensation; claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as amended
("ADEA"); the federal Employee Retirement Income Security Act of 1974, as
amended; the federal Americans with Disabilities Act of 1990; the California
Fair Employment and Housing Act, as amended; tort law; contract law; statutory
law; common law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed
in any way to release the Company from its obligation to indemnify me pursuant
to the Company's indemnification obligation pursuant to agreement or applicable
law or to reduce or eliminate any coverage I may have under the Company's
director and officer liability policy, if any.
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<PAGE> 14
I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under ADEA. I also acknowledge that the
consideration given under the Agreement for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this
writing, as required by the ADEA, that: (A) my waiver and release do not apply
to any rights or claims that may arise on or after the date I execute this
Release; (B) I have the right to consult with an attorney prior to executing
this Release; (C) I have forty-five (45) days to consider this Release
(although I may choose to voluntarily execute this Release earlier); (D) I have
seven (7) days following the execution of this Release by the parties to revoke
the Release; (E) this Release shall not be effective until the date upon which
the revocation period has expired, which shall be the eighth day after this
Release is executed by me; and (F) I have received with this Release a detailed
list of the job titles and ages of all employees who were terminated in this
group termination and the ages of all employees of all employees in the same
job classification or organizational unit who were not terminated.
[NAME OF EMPLOYEE]
Date:
-------------------------------- ------------------------------------
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<PAGE> 1
EXHIBIT 10.6
INSURQUOTE SYSTEMS, INC.
1994 STOCK PLAN
(AS AMENDED THROUGH MARCH 25, 1999)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means InsurQuote Systems, Inc., a Utah corporation.
(h) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such entity.
(i) "Director" means a member of the Board of Directors of the Company.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
<PAGE> 2
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
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<PAGE> 3
(r) "Option Agreement" means a written or electronic agreement between
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1994 Stock Plan.
(x) "Restricted Stock" means shares of Common Stock acquired pursuant to
a grant of a Stock Purchase Right under Section 11 below.
(y) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(z) "Service Provider" means an Employee, Director or Consultant.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 11 below.
(cc) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 579,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plans upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall
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<PAGE> 4
not become available for future distribution under the Plan, except that if
Shares of Restricted Stock are repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
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<PAGE> 5
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted
to Service Providers. Incentive Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10)
years from the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
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<PAGE> 6
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
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<PAGE> 7
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. Except in the case of Options granted to Officers, Directors
and Consultants, Options shall become exercisable at a rate of no less than 20%
per year over five (5) years from the date the Options are granted. Unless the
Administrator provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement (of at least six (6) months) to the extent the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Opinion as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement,
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<PAGE> 8
the Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. The Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The terms of the offer shall comply in all
respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse
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<PAGE> 9
at such rate as the Administrator may determine. Except with respect to Shares
purchased by Officers, Directors and Consultants, the repurchase option shall
in no case lapse at a rate of less than 20% per year over five (5) years from
the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the
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<PAGE> 10
extent it has not been previously exercised, an Option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable.
If an Option or Stock Purchase Right becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee in writing or electronically
that the Option or Stock Purchase Right shall be fully exercisable for a period
of fifteen (15) days from the date of such notice, and the Option or Stock
Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
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<PAGE> 11
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 12
INSURQUOTE SYSTEMS, INC.
1994 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
FIELD(Name)
FIELD(Address)
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number FIELD(Grant #)
Date of Grant FIELD(Date of Grant)
Vesting Commencement Date FIELD(Vesting Date)
Exercise Price per Share $FIELD(Exercise Price)
Total Number of Shares Granted FIELD(No. of Shares)
Total Exercise Price $FIELD(Total Price)
Type of Option: X Incentive Stock Option
---
Nonstatutory Stock Option
---
Term/Expiration Date: FIELD(Term)
Exercise and Vesting Schedule:
So long as Optionee is a Service Provider, this Option shall be exercisable
in whole or in part, and shall vest according to the following vesting schedule:
[Insert vesting schedule.]
<PAGE> 13
Termination Period:
This Option may be exercised, to the extent it is then vested, for 30 days
after Optionee ceases to be a Service Provider. Upon death or Disability of the
Optionee, this Option may be exercised, to the extent it is then vested, for six
(6) months after Optionee ceases to be Service Provider. In no event shall this
Option be exercised later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 13(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated
as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
forth in the Notice of Grant. Alternatively, at the election of the Optionee,
this option may be exercised in whole or in part at any time as to Shares which
have not yet vested. For purposes of this Stock Option Agreement, Shares subject
to the Option shall vest based on continued employment of Optionee with the
Company. Vested Shares shall not be subject to the Company's repurchase right
(as set forth in the Restricted Stock Purchase Agreement, attached hereto as
Exhibit C-1).
(ii) As a condition to exercising this Option for unvested Shares,
the Optionee shall execute the Restricted Stock Purchase Agreement.
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<PAGE> 14
(iii) This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. This Option shall be exercisable by delivery of
an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or
such other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
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<PAGE> 15
(d) surrender of other Shares which, (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Vesting Acceleration on Change of Control.
(a) Vesting Acceleration. In the event of a "Change of Control," all of
the Optionee's rights to purchase stock under this Agreement with the Company
shall be automatically vested in their entirety on an accelerated basis and be
fully exercisable:
(i) as of the date immediately preceding such "Change of Control" in
the event this stock option agreement is or will be terminated or
canceled (except by mutual consent) or any successor to the Company
fails to assume and agree to perform such stock option agreement as
provided in Section 7(a) hereof at or prior to such time as any such
person becomes a successor to the Company; or
(ii) as of the date immediately preceding such "Change of Control"
in the event the Optionee does not or will not receive upon exercise
of the Optionee's stock purchase rights under such stock option
agreement the same identical securities and/or other consideration
as is received by all other shareholders in any merger,
consolidation, sale, exchange or similar transaction occurring upon
or after such "Change of Control;" or
(iii) as of the date immediately preceding any "Involuntary
Termination" of the Optionee occurring upon or after any such
"Change of Control;"
whichever shall first occur (all quoted terms as defined below).
(b) Change of Control. "Change of Control" means the occurrence of any
of the; following events:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
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<PAGE> 16
(ii) A change in the composition of the Board of Directors of the
Company occurring within a two-year period as a result of which fewer than a
majority of the directors are "Incumbent Directors." "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of
Directors with the affirmative votes (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a nominee
for election as a director without objection to such nomination) of at least a
majority of the Incumbent Directors at the time of such election or nomination;
or
(iii) The consummation of (A) a merger or consolidation of the
Company with any other entity, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or the entity that
controls the Company or such surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity or the entity that controls the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(B) the sale or disposition by the Company of all or substantially all the
Company's assets; or
(iv) The shareholders approve a plan of complete liquidation of the
Company.
(c) Involuntary Termination. "Involuntary Termination" shall mean
without the Optionee's written consent: (i) a termination by the Company of the
Optionee's employment with the Company other than for Cause; (ii) a material
reduction of or variation in the Optionee's duties, authority or
responsibilities, relative to the Optionee's duties, authority or
responsibilities as in effect immediately prior to such reduction or variation;
(iii) a reduction by the Company in the base salary of the Optionee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company
in the kind or level of employee benefits, including bonuses, to which the
Optionee was entitled immediately prior to such reduction, with the result
that the Optionee's overall benefits package is materially reduced; (v) the
relocation of the Optionee to a facility or a location more than thirty (30)
miles from the Optionee's then present location; (vi) the failure of the Company
to obtain the assumption of this Agreement by any successor as required in
Section 8, or (vii) any act or set of facts that would under applicable law
constitute a constructive termination of Optionee.
(d) Cause. "Cause" shall mean (i) any willful act of personal
dishonesty, fraud or misrepresentation taken by the Optionee in connection with
his or her responsibilities as an employee which was intended to result in
substantial gain or personal enrichment of the Optionee at the expense of the
Company and was materially and demonstrably injurious to the Company; (ii) the
Optionee's conviction of a felony on account of any act which was materially
and demonstrably injurious to the Company; or (iii) the Optionee's willful and
continued failure to substantially perform his or her principal duties and
obligations of employment including under any written agreements (other than any
such failure resulting from incapacity due to physical or mental illness),
which failure is not remedied in a reasonable period of time after receipt of
written notice from the
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<PAGE> 17
Company. For the purposes of this Section 7(c), no act or failure to act shall
be considered "willful" unless done or omitted to be done in bad faith and
without reasonable belief that the act or omission was in or not opposed to the
best interests of the Company. Any act or failure to act based upon authority
given pursuant to a resolution duly adopted by the Board of Directors of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done or omitted to be done in good faith and in the
best interests of the Company.
(e) Voluntary Resignation. If the Optionee's continuous status as an
employee of the Company terminates by reason of the Optionee's voluntary
resignation or if the Optionee's continuous status as an employee of the Company
is terminated for Cause, in either case prior to such time as accelerated
vesting occurs as provided in Section 7(a) hereof, then the Optionee shall not
be entitled to receive accelerated vesting under Section 7(a) hereof.
8. Successors. Any successor to the Company (whether direct or indirect and
whether by purchase, merger or consolidation) shall assume the obligations under
this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. The terms
of this Agreement and all rights of the Optionee hereunder shall inure to the
benefit of, and be enforceable by, the Optionee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
9. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of the
Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date of
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will be
no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of ISO Following Disability. If the Optionee ceases to be
an Employee as a result of a disability that is not a total and permanent
disability as defined in Section
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<PAGE> 18
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for income tax purposes. In the case of an
ISO, if Shares transferred pursuant to the Option are held for at least one year
after exercise and at least two years after the Date of Grant, any gain realized
on disposition of the Shares will also be treated as long-term capital gain for
federal income tax purposes. If Shares purchased under an ISO are disposed of
within one year after exercise or two years after the Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the difference between the Exercise
Price and the lesser of (i) the Fair Market Value of the Shares on the date of
exercise, or (ii) the sale price of the Shares. Different rules may apply if the
Shares are subject to a substantial risk of forfeiture (within the meaning of
Section 83) at the time of purchase. Any additional gain will be taxed as
capital gain, short-term depending on the period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (i) the date two years after the Date of Grant, or (ii) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
(f) Section 83(b) Election for Unvested Shares Purchased Pursuant to
Options. With respect to the exercise of an Option for unvested Shares, an
election may be filed by the Optionee with the Internal Revenue Service, within
30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code to be taxed currently on any difference between the purchase price of the
Shares and their Fair Market Value on the date of purchase. In the case of a
Nonstatutory Stock Option, this will result in a recognition of taxable income
to the Optionee on the date of exercise, measured by the excess, if any, of the
fair market value of the Shares, at the time the Option is exercised over the
purchase price for the Shares. Absent such an election, taxable income will be
measured and recognized by Optionee at the time or times on which the Company's
Repurchase Option lapses. In the case of an Incentive Stock Option, such an
election will result in a recognition of income to the Optionee for alternative
minimum tax purposes on the date of exercise,
-7-
<PAGE> 19
measured by the excess, if any, of the fair market value of the Shares, at the
time the option is exercised, over the purchase price for the Shares. Absent
such an election, alternative minimum taxable income will be measured and
recognized by Optionee at the time or times on which the Company's Repurchase
Option lapses. Optionee is strongly encouraged to seek the advice of his or her
own tax consultants in connection with the purchase of the Shares and the
advisability of filing the Election under Section 83(b) of the Code. A form of
Election under Section 83(b) is attached hereto as Exhibit C-5 for reference.
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE'S
BEHALF.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of Utah.
13. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
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<PAGE> 20
OPTIONEE: FIELD(Name) INSURQUOTE SYSTEMS, INC.
- ----------------------------------- ------------------------------------
Signature By
- ----------------------------------- ------------------------------------
Print Name Title
FIELD(Address)
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<PAGE> 21
EXHIBIT A
1994 STOCK PLAN
EXERCISE NOTICE
InsurQuote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of InsurQuote Systems, Inc.
(the "Company") under and pursuant to the 1994 Stock Plan (the "Plan") and the
[ ] Incentive [ ] Nonstatutory Stock Option Agreement dated ____________, 19__,
(the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 11 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver
to the Company a written notice (the "Notice") stating: (i) the Holder's bona
fide intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee
-1-
<PAGE> 22
("Proposed Transferee"); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Shares (the "Offered Price"), and
the Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the Shares
purchased by the Company or its assignee(s) under this Section shall be the
Offered Price. If the Offered Price includes consideration other than cash, the
cash equivalent value of the non-cash consideration shall be determined by the
Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), in cash (by check), by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or by any combination
thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
-2-
<PAGE> 23
(g) Termination of Right of First Refusal. The Right of First Refusal
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE
SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
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<PAGE> 24
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the internal
substantive laws, but not the choice of law rules, of Utah.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein
by reference. This Agreement, the Plan, the Restricted Stock Purchase Agreement,
the Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee.
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<PAGE> 25
Submitted by: Accepted by:
OPTIONEE: FIELD(Name) INSURQUOTE SYSTEMS, INC.
- ----------------------------------- ------------------------------------
Signature By
- ----------------------------------- ------------------------------------
Print Name Its
Address: Address:
517 East 1860 South
- ----------------------------------- Provo, Utah 84606
- -----------------------------------
------------------------------------
Date Received
-5-
<PAGE> 26
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE : FIELD(Name)
COMPANY : INSURQUOTE SYSTEMS, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Optionee's investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the
statutory basis for such exemption may be unavailable if Optionee's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future. Optionee further understands that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Optionee further acknowledges
and understands that the Company is under no obligation to register the
Securities. Optionee understands that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the opinion
of counsel satisfactory to the Company and any other legend required under
applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to
<PAGE> 27
the satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee: FIELD(Name)
-----------------------------------------
Date: , 19
---------------------------- ----
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<PAGE> 28
EXHIBIT C-1
INSURQUOTE SYSTEMS, INC.
1994 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between _____________________________ (the
"Purchaser") and InsurQuote Systems, Inc. (the "Company") as of
______________________, 199__.
RECITALS
(1) Pursuant to the exercise of the stock option (grant number ) granted
to Purchaser under the Company's 1994 Stock Plan (the "Plan") and pursuant to
the Stock Option Agreement (the "Option Agreement") dated ___________ by and
between the Company and Purchaser with respect to such grant, which Plan and
Option Agreement are hereby incorporated by reference, Purchaser has elected to
purchase __________ of those shares which have not become vested under the
vesting schedule set forth in the Option Agreement ("Unvested Shares"). The
Unvested Shares and the shares subject to the Option Agreement which have become
vested are sometimes collectively referred to herein as the "Shares".
(2) As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
(a) If Purchaser's status as a Service Provider is terminated for any
reason, including for cause, death, and disability, the Company shall have the
right and option to purchase from Purchaser, or Purchaser's personal
representative, as the case may be, all of the Purchaser's Unvested Shares as of
the date of such termination at the price paid by the Purchaser for such Shares
(the "Repurchase Option").
(b) Upon the occurrence of a termination, the Company may exercise its
Repurchase Option by delivering personally or by registered mail, to Purchaser
(or his transferee or legal representative, as the case may be), within ninety
(90) days of the termination, a notice in writing indicating the Company's
intention to exercise the Repurchase Option and setting forth a date for closing
not later than thirty (30) days from the mailing of such notice. The closing
shall take place at the Company's office. At the closing, the holder of the
certificates for the Unvested Shares being transferred shall deliver the stock
certificate or certificates evidencing the Unvested Shares, and the Company
shall deliver the purchase price therefor.
<PAGE> 29
(c) At its option, the Company may elect to make payment for the
Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.
(d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.
(e) The Repurchase Option shall terminate in accordance with the Vesting
Schedule in Optionee's Option Agreement.
2. Transferability of the Shares; Escrow.
(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.
(b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, Purchaser hereby appoints the secretary, or any other person
designated by the Company as escrow agent, as its attorney-in-fact to sell,
assign and transfer unto the Company, such Unvested Shares, if any, repurchased
by the Company pursuant to the Repurchase Option and shall, upon execution of
this Agreement, deliver and deposit with the secretary of the Company, or such
other person designated by the Company, the share certificates representing the
Unvested Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall
be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of
the Company and Purchaser attached as Exhibit C-3 hereto, until the Company
exercises its purchase right as provided in Section 1, until such Unvested
Shares are vested, or until such time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested
Shares, the escrow agent shall promptly deliver to the Purchaser the certificate
or certificates representing such Shares in the escrow agent's possession
belonging to the Purchaser, and the escrow agent shall be discharged of all
further obligations hereunder; provided, however, that the escrow agent shall
nevertheless retain such certificate or certificates as escrow agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.
(c) The Company, or its designee, shall not be liable for any act it may
do or omit to do with respect to holding the Shares in escrow and while acting
in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser with respect to any
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<PAGE> 30
Unvested Shares purchased by Purchaser and shall acknowledge the same by signing
a copy of this Agreement.
3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any
way the ownership, voting rights or other rights or duties of Purchaser, except
as specifically provided herein.
4. Legends. The share certificate evidencing the Shares issued hereunder
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
5. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
6. Notices. Notices required hereunder shall be given in person or by
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at their respective principal executive offices.
7. Survival of Terms. This Agreement shall apply to and bind Purchaser and
the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.
8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has
been informed that, with respect to the exercise of an Option for unvested
Shares, an election may be filed by the Purchaser with the Internal Revenue
Service, within 30 days of the purchase of the Shares, electing pursuant to
Section 83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of a Nonstatutory Stock Option, this will result in a
recognition of taxable income to the Purchaser on the date of exercise, measured
by the excess, if any, of the fair market value of the Shares, at the time the
Option is exercised over the purchase price for the Shares. Absent such an
election, taxable income will be measured and recognized by Purchaser at the
time or times on which the Company's Repurchase Option lapses. In the case of an
Incentive Stock Option, such an election will result in a recognition of income
to the Purchaser for alternative minimum tax purposes on the date of exercise,
measured by the excess, if any, of the fair market value of the Shares, at the
time the option is exercised, over the purchase price for the Shares. Absent
such an election, alternative minimum taxable income will be measured and
recognized by Purchaser at the time or times on which the Company's Repurchase
Option lapses. Purchaser is strongly encouraged to seek the advice of his or her
own tax consultants in connection with the purchase of the Shares and the
advisability of filing of
-3-
<PAGE> 31
the Election under Section 83(b) of the Code. A form of Election under Section
83(b) is attached hereto as Exhibit C-5 for reference.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S
BEHALF.
9. Representations. Purchaser has reviewed with his own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules, of Utah.
Purchaser represents that he has read this Agreement and is familiar with
its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.
-4-
<PAGE> 32
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set
forth above.
"COMPANY"
INSURQUOTE SYSTEMS, INC.
-----------------------------------------
By
-----------------------------------------
Title
"PURCHASER"
-----------------------------------------
Signature
FIELD(Name)
-----------------------------------------
Printed Name
-----------------------------------------
Soc. Sec. No.
Address:
-----------------------------------------
-----------------------------------------
-5-
<PAGE> 33
EXHIBIT C-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto InsurQuote Systems, Inc. (____________) shares of the Common Stock
of InsurQuote Systems, Inc. standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint _______________________ to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between InsurQuote Systems, Inc. and the undersigned
dated _____________________, 19__.
Dated: ______________, 19__
Signature:
-----------------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 34
EXHIBIT C-3
JOINT ESCROW INSTRUCTIONS
_______, 19__
Corporate Secretary
InsurQuote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
Attention: Secretary
Dear __________:
As Escrow Agent for both InsurQuote Systems, Inc. (the "Company"), and the
undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement ("Agreement") between
the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the
stock is held by you.
<PAGE> 35
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE> 36
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: InsurQuote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
Attention: Secretary
PURCHASER: FIELD(Name)
--------------------------------------
--------------------------------------
ESCROW AGENT: Corporate Secretary
InsurQuote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
-3-
<PAGE> 37
18. These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of Utah.
INSURQUOTE SYSTEMS, INC.
-----------------------------------------
By
-----------------------------------------
Title
PURCHASER
-----------------------------------------
Signature
FIELD(Name)
-----------------------------------------
Typed or Printed Name
ESCROW AGENT
-----------------------------------------
Corporate Secretary
-4-
<PAGE> 38
EXHIBIT C-4
CONSENT OF SPOUSE
I, _________________________ spouse of __________________________, have
read and approve the foregoing Agreement. In consideration of granting of the
right to my spouse to purchase shares of InsurQuote Systems, Inc., as set forth
in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect
to the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated: , 19
---------------------- --
- ------------------------------------------
<PAGE> 39
EXHIBIT C-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross
income or alternative minimum taxable income, as the case may be, for the
current taxable year the amount of any compensation taxable to taxpayer in
connection with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: ________________ shares (the "Shares") of the Common Stock of
InsurQuote Systems, Inc. (the "Company").
3. The date on which the property was transferred is: , 19 .
---------------- ---
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under the
terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained in
such agreement.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$______________.
6. The amount (if any) paid for such property is:
$______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: , 19
-------------------- --- ----------------------------------------------
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: , 19
-------------------- --- ----------------------------------------------
<PAGE> 1
EXHIBIT 10.7
[CCC INFORMATION SERVICES GROUP INC. LETTERHEAD]
January 31, 2000
InsurQuote Systems, Inc.
533 East 1860 South
Provo, Utah 84606
Attn: David L. Whetten, Chief Executive Officer
RE: AGREEMENT REGARDING CCC OPTION
AGREEMENT REGARDING TERMINATION OF CERTAIN AGREEMENTS
CONSENT AND WAIVER REGARDING PROPOSED MERGER
Dear Dave:
This letter agreement (this "Agreement") between CCC Information
Services, Inc. ("CCC") memorializes the agreements between CCC and InsurQuote
Systems, Inc. ("InsurQuote") and other understandings between the parties in
connection with the proposed merger of InsurQuote with ChannelPoint, Inc. (the
"Proposed Merger").
BACKGROUND
CCC and InsurQuote are parties to that certain Amended and Restated
Investment Agreement dated March 30, 1999 (the "Investment Agreement") and the
Securities Purchase Agreement dated February 10, 1998, as amended by Amendment
No. 1 thereto dated March 30, 1999 (the "Securities Purchase Agreement"). CCC
further holds a Common Stock Purchase Warrant dated February 10, 1998, as
amended by Amendment No. 1 thereto dated March 30, 1999 (the "Warrant"), and
shares of Series C and Series D Preferred Stock of InsurQuote having the rights,
preferences and privileges set forth in the Third Amended and Restated Articles
of Incorporation of InsurQuote, filed with the Department of Commerce of the
State of Utah on March 30, 1999 (the "Restated Articles").
Pursuant to Section 5.1 of the Investment Agreement, Section 6 of
Article III of the Restated Articles, and Section 5.17 of the Securities
Purchase Agreement, InsurQuote may not enter into the Proposed Merger without
the written consent of CCC. In addition, under Section 7 of Article III of the
Restated Articles, CCC may elect to require InsurQuote to redeem the shares of
Series C Preferred Stock of CCC at a price equal to the liquidation preference
plus accrued dividends prior to the Proposed Merger.
<PAGE> 2
In addition. Section 2.3 of the Investment Agreement sets forth the
terms of the CCC Option, which provides that at any time after July 1, 2000
until July 1, 2010, CCC may at its option purchase shares (in one transaction)
of Common Stock sufficient to cause CCC to have 51% of the Fully-Diluted
Voting Power of InsurQuote (the "CCC Option").
AGREEMENT
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge, CCC and InsurQuote hereby agree as
follows:
1. Treatment of CCC Option in Proposed Merger. CCC and InsurQuote
agree that they have been advised by their respective accounting advisors that
the CCC Option constitutes a residual equity interest in InsurQuote that is
"essentially the same as Common Stock" of InsurQuote, and that therefore the
CCC Option needs to be dealt with in the Proposed Merger. After consultation
with their respective financial and legal advisors, CCC and InsurQuote agree
that (i) the CCC Option has a fair value equivalent to Fifty Thousand (50,000)
shares of Common Stock of InsurQuote, and (ii) CCC shall receive in the Proposed
Merger, in exchange for the CCC Option, that number of shares of Common Stock
of ChannelPoint that would otherwise be exchangeable for 50,000 shares of Common
Stock of InsurQuote based on the exchange ratio set forth in the proposed merger
agreement. The Agreement set forth in this paragraph 1 is for purposes of the
Proposed Merger only and shall have no force or effect if the Proposed Merger is
not consummated.
For additional and separate consideration, the receipt and sufficiency
of which the parties acknowledge, CCC and InsurQuote hereby further agree as
follows:
2. Consent to Proposed Merger. CCC acknowledges that (i) it has had the
opportunity to discuss the terms of the Proposed Merger with InsurQuote
management and InsurQuote's financial advisors, (ii) it has reviewed the Letter
of Intent for the Proposed Merger, (iii) it has reviewed copies of the proposed
merger agreement and other agreements to be signed in connection with the
Proposed Merger, (iv) it has conducted due diligence that included a visit to
ChannelPoint offices in Colorado Springs, Colorado, and (v) it believes it has
sufficient information regarding the Proposed Merger to make an informed
decision to consent to the transaction. Accordingly, CCC hereby consents to
InsurQuote's signing the proposed merger agreement and to consummating the
transactions contemplated thereby for the Proposed Merger for all purposes,
including for purposes of the Securities Purchase Agreement, the Investment
Agreement and the Restated Articles.
<PAGE> 3
3. CCC Redemption Right. CCC hereby irrevocably elects not to require
InsurQuote to redeem outstanding shares of Series C Preferred Stock in
connection with the Proposed Merger pursuant to Section 7 of the Restated
Articles.
4. Exercise of Warrant; Cancellation of Subordinated Note. CCC agrees
to exercise the Warrant immediately prior to the consummation of the Proposed
Merger. CCC further agrees that it will pay the exercise price of the Warrant
by cancelling the Subordinated Promissory Note dated February 10, 1998. Upon
such cancellation, Insurquote shall promptly remit a cash payment to CCC in full
satisfaction of accrued but unpaid interest on the note.
4. Termination and Release Agreement. CCC and InsurQuote agree to
terminate that certain Marketing and Sales Agreement between the parties dated
as of February 11, 1998, as amended by Amendment No. 1 thereto dated as of March
30, 1999, and that certain Information Services Agreement dated December 31,
1989 between the Company (by virtue of its acquisition of the assets of
Automated Call Processing) and CCC, and to extinguish all obligations of the
parties thereunder, in consideration of a payment by InsurQuote to CCC of Five
Million Dollars ($5,000,000) as follows:
(i) Approximately $500,O00 will be paid in cash by InsurQuote a
reasonable period of time following the closing of the Proposed Merger; and
(ii) The balance (approximately $4,500,000) will be paid by way of
an unsecured, subordinated promissory note that accrues interest at the rate of
7.5% per annum. Principal and accrued interest on the note will become due and
payable two and one-half years from the date of this Agreement.
CCC and InsurQuote agree to negotiate diligently and in good faith to
execute a definitive termination agreement and promissory note within five (5)
business days from the date of this Agreement; provided, however, that the
agreements set forth in this paragraph 4 are binding upon CCC and InsurQuote.
5. Binding Effect. This Agreement shall be binding upon each party's
successors and assigns, including ChannelPoint, Inc. (as a successor to
InsurQuote) in the event and solely in the event that the Proposed Merger is
consummated.
[Remainder of Page Intentionally Left Blank]
<PAGE> 4
This Agreement may not be amended or modified except by a writing
signed by both parties. This Agreement shall be governed by and construed in
accordance with Utah law. This Agreement may be signed in one or more
counterparts, each of which shall be considered an original copy of this
Agreement and all of which, when taken together, shall be considered to
constitute one and the same agreement. By signing below, each of CCC and
InsurQuote shall have caused this Agreement to be duly executed on its behalf by
a duly authorized officer as of the date first written above with an intent to
be bound hereby.
Very truly yours,
CCC INFORMATION SERVICES, INC.
By: /s/ GITHESH RAMAMURTHY
------------------------------
Githesh Ramamurthy
Chief Executive Officer
Agreed and Accepted:
INSURQUOTE SYSTEMS, INC.
By: /s/ DAVID L. WHETTEN
----------------------------------
David L. Whetten
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.8
[INSURQUOTE LETTERHEAD]
February 10, 1998
PERSONAL & CONFIDENTIAL
Mr. William B. Woahn
2184 North 180 West
Pleasant Grove, Utah 84062
Dear Bill:
This letter will confirm our agreement ("Agreement") with respect to your
employment as President of InsurQuote Systems, Inc. ("ISI").
PART I - EMPLOYER - EMPLOYEE RELATIONSHIP
The following terms and conditions set forth the rights, duties and
responsibilities regarding the employer - employee relationship between you and
ISI, including but not limited to the termination of that relationship:
1. The term of employment will be from February 1, 1998 through January 31,
2003, unless sooner terminated as provided below. Either party may provide the
other party sixty (60) days written notice of its intention not to extend this
Agreement beyond the term stated above. If this Agreement is not terminated
effective as of January 31, 2003 in the manner stated above, it then shall be
automatically renewed on a year-to-year basis (each, a "Renewal Term") provided
that either party may provide the other party sixty (60) days written notice of
its intention not to extend the Agreement beyond any Renewal Term.
2. You will serve as President of ISI. Your duties and responsibilities
shall include the duties and responsibilities for your corporate office and
position set forth in the Company's bylaws from time to time in effect and such
other duties and responsibilities as may be reasonably prescribed by the Board
of Directors, in all cases to be consistent with your corporate office and
position.
3. During the term of this Agreement you agree to devote your full and
undivided business time and attention, to the business of ISI. You agree to
perform those duties and services consistent with your position and fulfill
those obligations as may be designated from time to time by ISI's Board of
Directors. The foregoing, however, shall not preclude you from serving in any
capacity with any civic, educational, charitable or religious organization or
any trade association, so long as such activities do not interfere with your
<PAGE> 2
Mr. William B. Woahn
February 10, 1998
Page 2
duties and obligations under this Agreement. Your services shall be performed at
ISI's principal executive offices in Provo, Utah. However, ISI and you
understand that you may be required to travel in connection with the performance
of your duties hereunder.
4. ISI agrees to the following compensation and incentive arrangement:
a. You will be paid a salary at an annual base rate of $140,000
($11,666.67 monthly) during the period of the Agreement, payable
in accordance with normal ISI payroll practices. Furthermore,
your base salary will be subject to review annually for increases
by the Board of Directors in its sole discretion in connection
with the annual review of salary and benefits for ISI's
management. All reasonable out-of-pocket expenses incurred in
connection with your services hereunder, will be separately
reimbursed subject to the terms of ISI's expense reimbursement
policy for its management. ISI shall have the right to withhold
from your salary any taxes, FICA, or other amounts required to be
withheld by any governmental entity or authority having
jurisdiction over the matter.
b. You will be entitled to participate in the ISI Corporate
Management Bonus program, as amended from time to time (the
"Bonus"). This will entitle you to a potential bonus for FY 1998
of 50% of your annual salary and thereafter at the rate
determined by ISI's Board of Directors.
c. In addition, you shall be entitled to participate in health
insurance, pension and other benefits provided to other senior
executives of ISI on terms no less favorable than those available
to such senior executives of ISI. You shall also be entitled to
the same number of vacation days, holidays, sick days and other
benefits as are generally allowed to other senior executives of
ISI in accordance with the ISI policy in effect from time to
time.
5. ISI shall have the right to terminate this contract with you at any time
without payment of any amounts described herein (other than payment of salary
and a pro rata portion of your bonus earned through the effective date of such
termination and reimbursement of reasonable out-of-pocket expenses incurred
prior to such date) in the event that:
<PAGE> 3
Mr. William B. Woahn
February 10, 1998
Page 3
a. you willfully fail to substantially perform your duties
hereunder, other than a failure as a result of your complete or
partial incapacity due to physical or mental illness or
impairment;
b. you willfully act, or willfully fail to act, in such a fashion so
as to constitute gross misconduct which is injurious to ISI;
c. you engage in any act of personal dishonesty in connection with
your responsibilities under this Agreement and that is intended
to result in substantial gain or personal enrichment at the
expense of ISI;
d. you are convicted of a felony; or
e. you materially breach the terms of Part I Section 3 or Part III
Section 2 of this Agreement provided that ISI first shall have
provided you with written notice specifying the acts or omissions
alleged to constitute your breach of such section and you have
failed to correct the breach within fifteen (15) days of receipt
of such notice.
A termination of your employment with ISI for any of the reasons set forth
in this section shall be referred to as "Termination for Cause".
6. In the event of a "Change in Control" of ISI and within twelve 12 months
thereafter there is a "Termination Without Cause" or a "Constructive
Termination", you shall be entitled to the following consideration:
a. (i) The greater of $200,000 or one (1) year benefits (for
purposes of this section benefits shall mean the ISI
medical, dental and life insurance benefit plans Employee
participated in at the date of termination), salary and
bonus (calculated based on your salary and bonus plan as of
the date of termination) payable on the last day of
employment, or on such other date as we mutually agree in
writing.
(ii) One (1) year executive out placement services to be provided
from the date of termination. The terms of such services
shall be
<PAGE> 4
Mr. William B. Woahn
February 10, 1998
Page 4
determined at the discretion of ISI, provided that the cost
of such services are reasonable and substantially equal to
similar services offered to similar executives in the
industry. ISI's obligation for out placement services shall
cease earlier than one (1) year in the event you accept a
position of employment prior to such time.
(iii) You will have the right, but not the obligation, to sell
your shares of ISI Common Stock to ISI (or in ISI's
discretion to CCC Information Services Inc.). The sale
price of such shares shall be their fair market value.
Where there exists a public market for ISI's Common Stock
at the time of such sale, the fair market value per share
shall be the average last reported sale price in the
over-the-counter market in which the Common Stock is quoted
or on any exchange on which the Common Stock is listed,
whichever is applicable, for the five (5) trading days
prior to the date of determination of fair market value.
Where there is no public market for ISI's Common Stock at
the time of such sale, the fair market value per share
shall be determined as follows: you will select an
investment banker and ISI will select an investment banker
to assess the fair market value of ISI at the date you
elect to sell the shares. If the parties are unable to
agree on a valuation, the two investment bankers shall
select a third investment banker to arbitrate the
valuation. The decision of the independent investment
banker shall be binding on both parties.
b. For purposes of this section, a "Change of Control" shall occur
if:
(i) any person (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including CCC Information Services Inc.
(including its affiliates), becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly, of securities of ISI representing
50% or more of the total voting power represented by ISI
then outstanding voting securities; or
(ii) the "Continuing Directors", cease for any reason to
constitute a majority of the Board of InsurQuote Systems.
Inc. For purposes of
<PAGE> 5
Mr. William B. Woahn
February 10, 1998
Page 5
this section, "Continuing Director" shall mean a member of
the Board who either is a member of the Board on the date
of the execution of this Agreement, or who subsequently
became a director of ISI and whose election was approved by
a vote of a majority of the Continuing Directors then on
the Board (which term, for purposes of this definition,
shall mean the whole Board and not any committee thereof);
or
(iii) a merger or consolidation of ISI with any other entity,
other than a merger or consolidation which would result in
the voting securities of ISI outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the
total voting power represented by the voting securities of
ISI or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of ISI
approve a plan of complete liquidation of ISI or an
agreement for the sale or disposition by ISI of all or
substantially all of ISI's assets.
c. "Termination Without Cause", for purposes of this section, shall
mean termination of your employment with ISI or any of its
affiliates for any reason other than those constituting
Termination For Cause as defined in Part I, Section 5 of this
Agreement:
7. a. In the event ISI terminates this Agreement for reasons not
described in Part I, Paragraphs 5 or 6 above, or if your termination is a
"Termination Without Cause" or a "Constructive Termination", you shall be
entitled to the following consideration:
(i) The greater of $200,000 or one (1) year benefits (for
purposes of this section benefits shall mean the ISI
medical, dental and life insurance benefit plans Employee
participated in at the date of termination), salary, bonus
(calculated based on your salary and bonus plan as of the
date of termination) payable to the last day of employment,
or on such other date as we mutually agree in writing.
<PAGE> 6
Mr. William B. Woahn
February 10, 1998
Page 6
(ii) One (1) year executive out placement services to be
provided from the date of termination. The terms of such
services shall be determined at the discretion of ISI,
provided that the cost of such services are reasonable and
substantially equal to similar services offered to similar
executives in the industry. ISI's obligation for out
placement services shall cease earlier than one (1) year in
the event you accept a position of employment prior to such
time.
b. For purposes of this Agreement a termination shall be a
"Constructive Termination" if:
(i) there is a material diminution in the authority, duties, or
responsibilities of your position from the authority,
duties or responsibilities of your position with ISI in
effect immediately prior to such diminution, or your
removal from such authority, duties or responsibilities;
(ii) there is any failure by ISI to comply with any of the
provisions of Part 1, Section 4 of this Agreement, other
than an isolated, insubstantial, or inadvertent failure not
occurring in bad faith and which is remedied by ISI
promptly after receipt of written notice from you;
(iii) a reduction, of more than ten (10%) percent, by ISI in your
annual salary or bonus opportunity as in effect immediately
prior to such reduction provided, however, if such
reduction also applies to similarly situated employees
this provision shall not be a Constructive Termination;
(iv) a reduction, of more than ten (10%) percent, by ISI in the
kind or level of employee benefits to which you are
entitled immediately prior to such reduction with the
result that your overall benefits package is materially
reduced provided, however, if such reduction also applies
to similarly situated employees this provision shall not be
a Constructive Termination;
<PAGE> 7
Mr. William B. Woahn
February 10, 1998
Page 7
(v) the relocation of ISI to a facility or a location more than
200 miles from ISI's present location, without the majority
approval of the Inside Stockholders as defined in the
Investment Agreement dated February 10, 1998;
(vi) any purported termination, other than your voluntary
resignation, of your employment by ISI which is not effected
as a result of your death or incapacity or as a Termination
For Cause, or any purported termination for which the
grounds relied upon are not valid;
(vii) the failure of ISI to obtain the assumption of this
Agreement by any successor;
(viii) any material breach by ISI of any material provision of
this Agreement; or
(ix) you die or become incapacitated. You will be deemed to be
incapacitated if, at the time notice is given, you have been
unable to substantially perform your duties under this
Agreement for a period of three (3) consecutive months as
the result of your incapacity due to physical or mental
illness. ISI may terminate your employment due to incapacity
by giving you 30 days advance notice in writing. In the
event that you resume the performance of substantially all
of your duties hereunder before the termination becomes
effective, ISI notice of intent to terminate shall
automatically be deemed to have been revoked.
You acknowledge and agree, for the purposes of Section 7.b.i. above, (A)
that ISI may, from time to time, reorganize its divisions and establish new
subsidiaries or affiliates, (B) that the transfer of you to such division,
subsidiary or affiliate shall not be deemed a material diminution in authority,
duties or job responsibilities so long as you maintain a similar, or greater,
level of authority, duties and responsibilities as you had just prior to the
transfer, and (C) that a change in reporting responsibilities shall not
necessarily be deemed a diminution in authority for purposes of this Agreement.
<PAGE> 8
Mr. William B. Woahn
February 10, 1998
Page 8
Notwithstanding the foregoing, Constructive Termination shall not occur
within the meaning of this Paragraph 7 until and unless thirty (30) days have
elapsed from the date the Board of Directors receives such written notice
without ISI curing or causing to be cured the circumstances set forth in this
Paragraph 7 on the basis of which the declaration of Constructive Termination is
given.
PART II - RIGHTS UNDER STOCK OPTION PLAN UPON TERMINATION OF EMPLOYMENT
The following terms and conditions are set forth solely for the purpose of
defining certain rights regarding the exercise of vested and unvested options
you hold pursuant to the ISI Stock Option Plan, or its successor, if any, and
your Stock Option Agreement(s):
1. You are subject to certain terms and conditions of the ISI Stock Option
Plan, or its successor, if any, as amended from time to time, (the "Plan") and
you are a party to certain Stock Option Agreement(s) (the "Option Agreement").
Notwithstanding anything contained in the Plan or the Option Agreement to the
contrary, you will have the right to exercise immediately but no later than one
hundred eighty (180) days, all vested and unvested options you hold pursuant to
your Option Agreement if either of the following events occur:
a. in the event a "Change in Control" occurs, as defined in Part I,
Section 6 of this Agreement, and within twelve 12 months
thereafter there is a Termination Without Cause as defined in
Part I, Section 6.c. of this Agreement; or
b. in the event there is a Constructive Termination as defined in
Part I Section 7.b.; or
c. in the event there is an "Adverse Change" in the Plan. For
purposes of this subsection an Adverse Change in the Plan shall
mean:
i. termination of the Plan; or
ii. amendment to the Plan which materially diminishes the value
of your long term incentive award, that may be granted under
the Plan.
<PAGE> 9
Mr. William B. Woahn
February 10, 1998
Page 9
unless there is substituted concurrently long term incentive
awards of comparable value.
PART III - GENERAL PROVISIONS
1. During your association with the ISI, or any affiliate, you will be
exposed to confidential and proprietary information of ISI and its affiliates
which may be disclosed to you both orally and/or in writing concerning ISI, its
affiliates, subsidiaries, customers, products, systems, marketing, financial,
legal and such other information relating to ISI and its affiliates, or
subsidiaries. You agree to keep such information confidential, and you will not,
without ISI's prior written consent, disclose to any person or entity the
confidential information. You also agree to take all reasonably necessary
precautions to prevent any unauthorized disclosure of such matters. It is agreed
that the obligations of confidentiality which you have agreed to will continue
in full force and effect while you are associated with the company and for three
(3) years following the termination of our Agreement. For purposes of the
foregoing, confidential and proprietary information shall not include
information in the public domain or information that becomes public through no
fault of your own.
2. You also agree that without the express prior written consent of ISI and
as consideration for the above-mentioned compensation, you will not (on behalf
of yourself or any other person or entity), during the term of your employment
with ISI and for a period equal to one (1) year) after the date of any
termination of such employment for any reason whatsoever (i) directly or
indirectly own, manage, join, invest in, finance, control or participate in,
accept employment with, provide consulting or advisory services to, or be
connected with, any business (other than ISI or any of its affiliates) anywhere,
that markets, sells or provides access to databases or services substantially
similar to those offered by ISI or that ISI is actively developing or has
developed and then intends to market presently as of the date of termination of
this Agreement, (ii) rely on proprietary technology or know-how used by, or
documents that contain confidential information (specifically including customer
lists and the contents of marketing documents and marketing materials) of ISI
or any of its affiliated companies to engage in any activity with the intent or
effect of competing with ISI or any of its affiliated companies, or (iii)
directly or indirectly, (on behalf of yourself or any other person who markets,
sells or provides access to databases or services substantially similar to those
offered by ISI or that ISI is actively developing or has developed and then
intends to market presently), employ, solicit for employment or
<PAGE> 10
Mr. William B. Woahn
February 10, 1998
Page 10
otherwise assist in the solicitation for employment, any other employee or
consultant of ISI or any of its affiliated companies (collectively the
"non-competition obligations"). You will not, however, be prevented from owning,
directly or indirectly, solely for investment purposes, no more than one
percent (1%) of the shares of stock of any publicly traded corporation that
does compete with ISI.
In addition, during the applicable term stated above you shall not directly
or indirectly (1) induce or attempt to induce any employee of ISI, its
affiliates or subsidiaries to leave the employ of ISI or in any way interfere
with the relationship between ISI and any employee thereof, (2) hire directly or
through another entity any person who was an employee of ISI as of the date of
your termination, or (3) induce or attempt to induce any customer, supplier,
licensee, licensor, or other business relation of ISI to cease doing business
with ISI or its affiliates, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor or business relation and
ISI, (4) disparage ISI, its management, or its business in any public or private
manner, or (5) induce, directly or indirectly, any person to compete with ISI.
3. You agree that if you fail fully to honor your obligations of
confidentiality and non-competition hereunder, ISI shall have, in addition to
any other rights, the right to cease all further payments hereunder and the
right to obtain specific performance of the confidentiality and non-compete
obligations agreed to herein, without any showing of actual damage or inadequacy
of legal remedy.
4. All controversies and disputes between you and ISI arising out of your
employment, the termination thereof, or the provisions of this Agreement,
including but not limited to all claims involving federal, state and local laws
relating to employment discrimination based on race, color, national origin,
religion, sex, age, disability or any other protected status, shall be subject
to mandatory arbitration as provided for in this Section.
All such disputes shall be submitted to arbitration in Provo, Utah, or such
other location as the parties may mutually agree, under the Employment Dispute
Resolution Rules of the American Arbitration Association.
The arbitrator(s) selected under this Section may award damages,
reinstatement and all other relief available under all applicable federal, state
or local laws, except that each
<PAGE> 11
Mr. William B. Woahn
February 10, 1998
Page 11
party shall be responsible for its own attorney's fees and costs. Any
arbitration award issued hereunder shall be in writing, shall state its
underlying reasons and shall be final and binding on the parties to this
Agreement and anyone claiming through them. Any judgment upon an award issued
under this Section may be entered in any court having jurisdiction thereof.
YOU AND ISI HEREBY EXPRESSLY AGREE THAT THE FOREGOING ARBITRATION
PROVISIONS ARE THE EXCLUSIVE MEANS FOR RESOLVING ALL CONTROVERSIES AND DISPUTES
ARISING OUT OF YOUR EMPLOYMENT, THE TERMINATION THEREOF, OR THE PROVISIONS OF
THIS AGREEMENT.
5. The terms of this Agreement may not be modified orally, but only by
mutual written consent. This letter, and any agreement you signed as part of
your original employment with ISI contains our entire agreement regarding your
employment by ISI and all prior agreements other than confidentiality agreements
are terminated. In the event that there are any conflicts between this Agreement
and any confidentiality or non-compete agreements, the terms of this Agreement
shall prevail.
6. This Agreement shall inure to the benefit of and be binding upon you
(and your successors, heirs, assigns and legal representatives) and ISI and its
successors and assigns. ISI will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of ISI to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
ISI would be required to perform it if no such succession had taken place. If
you should die while any amounts are still payable to you hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
7. You agree that, except to the extent that disclosure is required by you
to your attorney or accountant, or required by operation of law, you will keep
the terms of this Agreement confidential.
8. All notices pursuant to this Agreement shall be in writing and shall be
considered properly delivered when addressed to as set forth below, given or
served
<PAGE> 12
Mr. William B. Woahn
February 10, 1998
Page 12
personally, or sent by any generally recognized overnight delivery service or by
certified mail, return receipt requested, postage fully prepaid.
If to ISI: Insurquote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
If to Employee: William B. Woahn
2184 North 180 West
Pleasant Grove, Utah 84062
9. Neither party shall assign nor subcontract to any other party all or any
part of this Agreement, its obligations hereunder, or any other interest herein
or rights hereunder without the other parties' prior written consent.
10. If any provision of this Agreement is for any reason held invalid,
illegal, void or unenforceable, all other provisions of this Agreement will
remain in full force and effect and the invalid, illegal, void or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision that is closest to the original intent of the parties.
11. This Agreement will have been made, executed and delivered in the State
of Utah and will be governed and construed for all purposed in accordance with
the laws of the State of Utah without giving effect to conflict of laws
provisions.
12. No action taken by either party shall be deemed to constitute a waiver
of compliance with any representation, warranty or covenant contained in this
Agreement. The waiver by a parry of a breach of any provision of this Agreement
will not operate or be construed as a waiver of any subsequent breach.
<PAGE> 13
Mr. William B. Woahn
February 10, 1998
Page 13
If the above meets with your understanding, I would appreciate your signing
a copy of this letter and returning it to me. If there are items which require
further clarification or discussion, please let me know. I look forward to the
continuation of a mutually beneficial relationship.
Very truly yours,
/s/ DAVID L. WHETTEN
------------------------------------
Chief Executive Officer
------------------------------------
I hereby acknowledge that I have read, understand and agree to the terms and
conditions stated above:
/s/ WILLIAM B. WOAHN
- ---------------------------------
Date: February 10, 1998
---------------------------
<PAGE> 14
[GOLD LETTERHEAD]
February 1, 2000
Mr. William B. Woahn
2184 North 180 West
Pleasant Grove, Utah 84062
Re: Employment
Dear Mr. Woahn:
By letter dated February 10, 1998 from InsurQuote Systems, Inc. (the
"COMPANY") to you (the "EMPLOYMENT LETTER"), the Company and you have agreed to
certain employment arrangements and conditions. The Company is entering into
that certain Agreement and Plan of Merger, dated as of the date hereof, by and
among the Company, ChannelPoint, Inc. ("BUYER") and Gold Acquisition Corp. (the
"MERGER AGREEMENT") pursuant to which the Company will be acquired by, and
become a direct, wholly-owned subsidiary of, Buyer (the "ACQUISITION"). This
letter (this "AMENDMENT") shall amend the Employment Letter effective as of the
Closing Date (as defined in the Merger Agreement). This Amendment shall be null
and void if the Acquisition is not consummated.
1. Continued Employment. For up to one (1) year following the Closing Date,
you will be employed as the President of the Company pursuant to the terms and
conditions of the Employment Letter, as amended by this Amendment. After such
time you will be employed as a Senior Vice President of Buyer also pursuant to
the terms and conditions of the Employment Letter, as amended by this Amendment.
2. Responsibilities and Reporting. For at least one (1) year following the
Closing Date, all decisions with respect to employees of the Company, including
the retention and termination of such employees (other than terminations for
cause), shall be made by you or made with your prior consent (which consent
shall not be unreasonably withheld). For the term of your employment following
the Closing Date, you shall report directly to Kenneth Hollen or the President
or Chief Operating Officer of Buyer.
3. No Constructive Termination. You hereby agree that the Acquisition and
your continued employment pursuant to the Employment Letter, as amended by this
Amendment, does not constitute a Constructive Termination (as defined in the
Employment Letter).
4. Compensation. You shall be paid during your employment with Buyer or the
Company after the Acquisition an annual base salary of $200,000 and you shall
continue to receive employee benefits as are currently in effect for executive
employees
<PAGE> 15
Mr. Woahn
February 1, 2000
Page 2
of the Company for a period of at least one (1) year following the Closing Date
and benefits as are in effect from time to time for employees of Buyer
thereafter. You shall also be eligible for an annual bonus equal to up to 40% of
your base salary.
5. Stock Options. Subject to the terms of the applicable stock option plan
and an option grant letter, and other terms approved by the Board of Directors
of Buyer, as an inducement for you to enter into this Amendment and in
consideration of your continued employment and in recognition of the fact that
(i) your services and expertise are essential to the success of the business
combination and (ii) your continued employment hereunder may preclude your
pursuit of certain other employment opportunities (including opportunities which
might otherwise have allowed you to earn incentive bonuses and equity awards),
Buyer will grant to you an option to purchase 40,000 shares of common stock,
$.001 par value per share, of Buyer, with one-twenty-fourth (1/24th) of the
shares subject to such option becoming exercisable on the first day of each full
month beginning one (1) year after the Closing Date, until all such shares are
exercisable, subject to your continued employment with Buyer on such dates. The
parties hereto agree that the options granted pursuant to this paragraph 5 shall
count towards the option pool of the Company as it exists prior to the
Acquisition.
6. Transition Team. A transition team, consisting of you, Kenneth Hollen,
Fred Rook, Fred Eppinger and David Whetten, shall be formed to implement and
monitor the integration of the Company with Buyer's business operations. Kenneth
Hollen shall have the final determination on all unresolvable issues of the
transition team.
7. Employee Policies. You shall be entitled to and shall abide by all
applicable employment and personnel policies in effect from time to time.
8. Amendment to Employment Letter. The Employment Letter is hereby amended
as follows:
(a) paragraph (e) of Section 5 of Part I shall be amended to delete the
reference to Section 3 of Part I;
(b) clause (iii) of paragraph (a) of Section 6 of Part I shall be deleted
in its entirety;
(c) the reference to the number 200 in clause (v) of paragraph (b) of
Section 7 of Part I shall be deleted and replaced with the number "50"; and
2
<PAGE> 16
Mr. Woahn
February 1, 2000
Page 3
(d) the following sentence shall be inserted at the end of clause (i) of
paragraph (a) of Section 7 of Part I: "The benefits payable under this clause
(i) shall be in consideration of the your agreements under Section 2 of Part III
of this Agreement."
9. Entire agreement; Miscellaneous. The parties acknowledge and agree that
they are not relying on any representations, oral or written, other than those
expressly contained herein. Except for the provisions of the Employment Letter
not amended by this Amendment, (i) this Amendment supersedes all proposals, oral
or written, all negotiations, conversations or discussions between the parties
and all course of dealing and (ii) all prior understandings and agreements
between the parties regarding employment matters are hereby merged in this
Amendment, which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this Amendment
shall be valid unless the same shall be in writing and signed by the party
sought to be charged therewith. Time is of the essence in this Amendment and
each and every provision hereof. The parties acknowledge that they each
participated in drafting this Amendment, and there shall be not presumption
against any party on the ground that such party was responsible for preparing
this Amendment or any part hereof. Paragraph headings are for convenience of
reference only and are not intended to create substantive rights or obligations.
This Amendment shall be binding upon and inure to the benefit of Buyer,
the Company and their respective successors and assigns. This Amendment shall
also be enforceable by you and your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. Buyer, the company or any successor thereto may assign its rights
under this Amendment to any corporation which owns all of the outstanding equity
of Buyer, the Company or any successor thereto.
If the foregoing accurately reflects our mutual understanding, please sign
and return the enclosed copy of this letter, as evidence of our agreement.
Very truly yours,
InsurQuote Systems, Inc.
By: /s/ DAVID L. WHETTEN
-----------------------------------
3
<PAGE> 17
Mr. Woahn
February 1, 2000
Page 4
ChannelPoint, Inc.
By: /s/ KENNETH E. HOLLEN
------------------------------------
Agreed to this 1st day
of February, 2000.
/s/ WILLIAM B. WOAHN
- ----------------------------------
William B. Woahn
4
<PAGE> 1
EXHIBIT 10.9
[INSURQUOTE LETTERHEAD]
February 10, 1998
PERSONAL & CONFIDENTIAL
Mr. David L. Whetten
1735 North 1300 West
Pleasant Grove, Utah 84062
Dear Dave:
This letter will confirm our agreement ("Agreement") with respect to your
employment as Chief Executive Officer and Chief Technology Officer of InsurQuote
Systems, Inc. ("ISI").
PART I - EMPLOYER-EMPLOYEE RELATIONSHIP
The following terms and conditions set forth the rights, duties and
responsibilities regarding the employer - employee relationship between you and
ISI, including but not limited to the termination of that relationship:
1. The term of employment will be from February 1, 1998 through January 31,
2003, unless sooner terminated as provided below. Either party may provide the
other party sixty (60) days written notice of its intention not to extend this
Agreement beyond the term stated above. If this Agreement is not terminated
effective as of January 31, 2003 in the manner stated above, it then shall be
automatically renewed on a year-to-year basis (each, a "Renewal Term") provided
that either party may provide the other party sixty (60) days written notice of
its intention not to extend the Agreement beyond any Renewal Term.
2. You will serve as Chief Executive Officer and Chief Technology Officer
of ISI. Your duties and responsibilities shall include the duties and
responsibilities for your corporate office and position set forth in the
Company's bylaws from time to time in effect and such other duties and
responsibilities as may be reasonably prescribed by the Board of Directors, in
all cases to be consistent with your corporate office and position.
3. During the term of this Agreement you agree to devote your full and
undivided business time and attention, to the business of ISI. You agree to
perform those duties and services consistent with your position and fulfill
those obligations as may be designated from time to time by ISI's Board of
Directors. The foregoing, however, shall not preclude you from serving in any
capacity with any civic, educational, charitable or religious
<PAGE> 2
Mr. David L. Whetten
February 10, 1998
Page 2
organization or any trade association, so long as such activities do not
interfere with your duties and obligations under this Agreement. Your services
shall be performed at ISI's principal executive offices in Provo, Utah. However,
ISI and you understand that you may be required to travel in connection with the
performance of your duties hereunder.
4. ISI agrees to the following compensation and incentive arrangement:
a. You will be paid a salary at an annual base rate of $150,000
($12,500 monthly) during the period of the Agreement, payable
in accordance with normal ISI payroll practices. Furthermore,
your base salary will be subject to review annually for
increases by the Board of Directors in its sole discretion in
connection with the annual review of salary and benefits for
ISI's management. All reasonable out-of-pocket expenses
incurred in connection with your services hereunder, will be
separately reimbursed subject to the terms of ISI's expense
reimbursement policy for its management. ISI shall have the
right to withhold from your salary any taxes, FICA, or other
amounts required to be withheld by any governmental entity or
authority having jurisdiction over the matter.
b. You will be entitled to participate in the ISI Corporate
Management Bonus program, as amended from time to time (the
"Bonus"). This will entitle you to a potential bonus for FY
1998 of 50% of your annual salary and thereafter at the rate
determined by ISI's Board of Directors.
c. In addition, you shall be entitled to participate in health
insurance, pension and other benefits provided to other senior
executives of ISI on terms no less favorable than those
available to such senior executives of ISI. You shall also be
entitled to the same number of vacation days, holidays, sick
days and other benefits as are generally allowed to other
senior executives of ISI in accordance with the ISI policy in
effect from time to time.
5. ISI shall have the right to terminate this contract with you at any
time without payment of any amounts described herein (other than payment of
salary and a pro rata portion of your bonus earned through the effective date of
such termination and
<PAGE> 3
Mr. David L. Whetten
February 10, 1998
Page 3
reimbursement of reasonable out-of-pocket expenses incurred prior to such date)
in the event that:
a. you willfully fail to substantially perform your duties
hereunder, other than a failure as a result of your complete or
partial incapacity due to physical or mental illness or
impairment;
b. you willfully act, or willfully fail to act, in such a fashion
so as to constitute gross misconduct which is injurious to ISI;
c. you engage in any act of personal dishonesty in connection with
your responsibilities under this Agreement and that is intended
to result in substantial gain or personal enrichment at the
expense of ISI;
d. you are convicted of a felony; or
e. you materially breach the terms of Part I Section 3 or Part III
Section 2 of this Agreement provided that ISI first shall have
provided you with written notice specifying the acts or
omissions alleged to constitute your breach of such section and
you have failed to correct the breach within fifteen (15) days
of receipt of such notice.
A termination of your employment with ISI for any of the reasons set
forth in this section shall be referred to as "Termination for Cause".
6. In the event of a "Change in Control" of ISI and within twelve 12
months thereafter there is a "Termination Without Cause" or a "Constructive
Termination", you shall be entitled to the following consideration:
a. (i) The greater of $300,000 or one (1) year benefits (for
purposes of this section benefits shall mean the ISI
medical, dental and life insurance benefit plans Employee
participated in at the date of termination), salary and
bonus (calculated based on your salary and bonus plan as
of the date of termination) payable on the last day of
employment, or on such other date as we mutually agree in
writing.
<PAGE> 4
Mr. David L. Whetten
February 10, 1998
Page 4
(ii) One (1) year executive out placement services to be
provided from the date of termination. The terms of such
services shall be determined at the discretion of ISI,
provided that the cost of such services are reasonable
and substantially equal to similar services offered to
similar executives in the industry. ISI's obligation for
out placement services shall cease earlier than one (1)
year in the event you accept a position of employment
prior to such time.
(iii) You will have the right, but not the obligation, to sell
your shares of ISI Common Stock to ISI (or in ISI's
discretion to CCC Information Services Inc.). The sale
price of such shares shall be their fair market value.
Where there exists a public market for ISI's Common Stock
at the time of such sale, the fair market value per share
shall be the average last reported sale price in the
over-the-counter market in which the Common Stock is
quoted or on any exchange on which the Common Stock is
listed, whichever is applicable, for the five (5) trading
days prior to the date of determination of fair market
value. Where there is no public market for ISI's Common
Stock at the time of such sale, the fair market value per
share shall be determined as follows: you will select an
investment banker and ISI will select an investment
banker to assess the fair market value of ISI at the
date you elect to sell the shares. If the parties are
unable to agree on a valuation, the two investment
bankers shall select a third investment banker to
arbitrate the valuation. The decision of the independent
investment banker shall be binding on both parties.
b. For purposes of this section, a "Change of Control" shall occur
if:
(i) any person (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including CCC Information Services
Inc. (including its affiliates), becomes the beneficial
owner (within the meaning of Rule 13d-3 under the
Exchange Act) directly or indirectly, of securities of
ISI representing 50% or more of the total voting power
represented by ISI's then outstanding voting securities;
or
<PAGE> 5
Mr. David L. Whetten
February 10, 1998
Page 5
(ii) the "Continuing Directors", cease for any reason to
constitute a majority of the Board of InsurQuote Systems,
Inc. For purposes of this section, "Continuing Director"
shall mean a member of the Board who either is a member
of the Board on the date of the execution of this
Agreement, or who subsequently became a director of ISI
and whose election was approved by a vote of a majority
of the Continuing Directors then on the Board (which
term, for purposes of this definition, shall mean the
whole Board and not any committee thereof); or
(iii) a merger or consolidation of ISI with any other entity,
other than a merger or consolidation which would result
in the voting securities of ISI outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by
the voting securities of ISI or such surviving entity
outstanding immediately after such merger or
consolidation, or the stockholders of ISI approve a plan
of complete liquidation of ISI or an agreement for the
sale or disposition by ISI of all or substantially all of
ISI's assets.
c. "Termination Without Cause", for purposes of this section,
shall mean termination of your employment with ISI or any of
its affiliates for any reason other than those constituting
Termination For Cause as defined in Part I, Section 5 of this
Agreement;
7. a. In the event ISI terminates this Agreement for reasons not
described in Part I, Paragraphs 5 or 6 above, or if your termination is a
"Termination Without Cause" or a "Constructive Termination", you shall be
entitled to the following consideration:
(i) The greater of $300,000 or one (1) year benefits (for
purposes of this section benefits shall mean the ISI
medical, dental and life insurance benefit plans Employee
participated in at the date of termination), salary,
bonus (calculated based on your salary and bonus plan as
of the date of termination) payable on the last day of
employment, or on such other date as we mutually agree in
writing.
<PAGE> 6
Mr. David L. Whetten
February 10, 1998
Page 6
(ii) One (1) year executive out placement services to be
provided from the date of termination. The terms of such
services shall be determined at the discretion of ISI,
provided that the cost of such services are reasonable
and substantially equal to similar services offered to
similar executives in the industry. ISI's obligation for
out placement services shall cease earlier than one (1)
year in the event you accept a position of employment
prior to such time.
b. For purposes of this Agreement a termination shall be a
"Constructive Termination" if:
(i) there is a material diminution in the authority, duties,
or responsibilities of your position from the authority,
duties or responsibilities of your position with ISI in
effect immediately prior to such diminution, or your
removal from such authority, duties or responsibilities;
(ii) there is any failure by ISI to comply with any of the
provisions of Part I, Section 4 of this Agreement, other
than an isolated, insubstantial, or inadvertent failure
not occurring in bad faith and which is remedied by ISI
promptly after receipt of written notice from you;
(iii) a reduction, of more than ten (10%) percent, by ISI in
your annual salary or bonus opportunity as in effect
immediately prior to such reduction provided, however, if
such reduction also applies to similarly situated
employees this provision shall not be a Constructive
Termination;
(iv) a reduction, of more than ten (10%) percent, by ISI in
the kind or level of employee benefits to which you are
entitled immediately prior to such reduction with the
result that your overall benefits package is materially
reduced provided, however, if such reduction also applies
to similarly situated employees this provision shall not
be a Constructive Termination;
<PAGE> 7
Mr. David L. Whetten
February 10, 1998
Page 7
(v) the relocation of ISI to a facility or a location more
than 200 miles from ISI's present location, without the
majority approval of the Inside Stockholders as defined
in the Investment Agreement dated February 10, 1998;
(vi) any purported termination, other than your voluntary
resignation, of your employment by ISI which is not
effected as a result of your death or incapacity or as a
Termination For Cause, or any purported termination for
which the grounds relied upon are not valid;
(vii) the failure of ISI to obtain the assumption of this
Agreement by any successor;
(viii) any material breach by ISI of any material provision of
this Agreement; or
(ix) you die or become incapacitated. You will be deemed to
be incapacitated if, at the time notice is given, you
have been unable to substantially perform your duties
under this Agreement for a period of three (3)
consecutive months as the result of your incapacity due
to physical or mental illness. ISI may terminate your
employment due to incapacity by giving you 30 days
advance notice in writing. In the event that you resume
the performance of substantially all of your duties
hereunder before the termination becomes effective,
ISI's notice of intent to terminate shall automatically
be deemed to have been revoked.
You acknowledge and agree, for the purposes of Section 7.b.i. above,
(A) that ISI may, from time to time, reorganize its divisions and establish new
subsidiaries or affiliates, (B) that the transfer of you to such division,
subsidiary or affiliate shall not be deemed a material diminution in authority,
duties or job responsibilities so long as you maintain a similar, or greater,
level of authority, duties and responsibilities as you had just prior to the
transfer, and (C) that a change in reporting responsibilities shall not
necessarily be deemed a diminution in authority for purposes of this Agreement.
<PAGE> 8
Mr. David L. Whetten
February 10, 1998
Page 8
Notwithstanding the foregoing, Constructive Termination shall not occur
within the meaning of this Paragraph 7 until and unless thirty (30) days have
elapsed from the date the Board of Directors receives such written notice
without ISI curing or causing to be cured the circumstances set forth in this
Paragraph 7 on the basis of which the declaration of Constructive Termination is
given.
PART II - RIGHTS UNDER STOCK OPTION PLAN UPON TERMINATION OF EMPLOYMENT
The following terms and conditions are set forth solely for the purpose
of defining certain rights regarding the exercise of vested and unvested options
you hold pursuant to the ISI Stock Option Plan, or its successor, if any, and
your Stock Option Agreement(s):
1. You are subject to certain terms and conditions of the ISI Stock
Option Plan, or its successor, if any, as amended from time to time, (the
"Plan") and you are a party to certain Stock Option Agreement(s) (the "Option
Agreement"). Notwithstanding anything contained in the Plan or the Option
Agreement to the contrary, you will have the right to exercise immediately but
no later than one hundred eighty (180) days, all vested and unvested options you
hold pursuant to your Option Agreement if either of the following events occur:
a. in the event a "Change in Control" occurs, as defined in Part
I, Section 6 of this Agreement, and within twelve 12 months
thereafter there is a Termination Without Cause as defined in
Part I, Section 6.c. of this Agreement; or
b. in the event there is a Constructive Termination as defined in
Part I Section 7.b.; or
c. in the event there is an "Adverse Change" in the Plan. For
purposes of this subsection an Adverse Change in the Plan shall
mean:
i. termination of the Plan; or
ii. amendment to the Plan which materially diminishes the
value of your long term incentive award, that may be
granted under the Plan,
<PAGE> 9
Mr. David L. Whetten
February 10, 1998
Page 9
unless there is substituted concurrently long term
incentive awards of comparable value.
PART III - GENERAL PROVISIONS
1. During your association with the ISI, or any affiliate, you will be
exposed to confidential and proprietary information of ISI and its affiliates
which may be disclosed to you both orally and/or in writing concerning ISI, its
affiliates, subsidiaries, customers, products, systems, marketing, financial,
legal and such other information relating to ISI and its affiliates, or
subsidiaries. You agree to keep such information confidential, and you will not,
without ISI's prior written consent, disclose to any person or entity the
confidential information. You also agree to take all reasonably necessary
precautions to prevent any unauthorized disclosure of such matters. It is agreed
that the obligations of confidentiality which you have agreed to will continue
in full force and effect while you are associated with the company and for three
(3) years following the termination of our Agreement. For purposes of the
foregoing, confidential and proprietary information shall not include
information in the public domain or information that becomes public through no
fault of your own.
2. You also agree that without the express prior written consent of ISI
and as consideration for the above-mentioned compensation, you will not (on
behalf of yourself or any other person or entity), during the term of your
employment with ISI and for a period equal to one (1) year) after the date of
any termination of such employment for any reason whatsoever (i) directly or
indirectly own, manage, join, invest in, finance, control or participate in,
accept employment with, provide consulting or advisory services to, or be
connected with, any business (other than ISI or any of its affiliates) anywhere,
that markets, sells or provides access to databases or services substantially
similar to those offered by ISI or that ISI is actively developing or has
developed and then intends to market presently as of the date of termination of
this Agreement, (ii) rely on proprietary technology or know-how used by, or
documents that contain confidential information (specifically including customer
lists and the contents of marketing documents and marketing materials) of ISI or
any of its affiliated companies to engage in any activity with the intent or
effect of competing with ISI or any of its affiliated companies, or (iii)
directly or indirectly, (on behalf of yourself or any other person who markets,
sells or provides access to databases or services substantially similar to those
offered by ISI or that ISI is actively developing or has developed and then
intends to market presently), employ, solicit for employment or
<PAGE> 10
Mr. David L. Whetten
February 10, 1998
Page 10
otherwise assist in the solicitation for employment, any other employee or
consultant of ISI or any of its affiliated companies (collectively the
"non-competition obligations"). You will not, however, be prevented from owning,
directly or indirectly, solely for investment purposes, no more than one percent
(1%) of the shares of stock of any publicly traded corporation that does compete
with ISI.
In addition, during the applicable term stated above you shall not
directly or indirectly (1) induce or attempt to induce any employee of ISI, its
affiliates or subsidiaries to leave the employ of ISI or in any way interfere
with the relationship between ISI and any employee thereof, (2) hire directly or
through another entity any person who was an employee of ISI as of the date of
your termination, or (3) induce or attempt to induce any customer, supplier,
licensee, licensor, or other business relation of ISI to cease doing business
with ISI or its affiliates, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor or business relation and
ISI, (4) disparage ISI, its management, or its business in any public or private
manner, or (5) induce, directly or indirectly, any person to compete with ISI.
3. You agree that if you fail fully to honor your obligations of
confidentiality and non-competition hereunder, ISI shall have, in addition to
any other rights, the right to cease all further payments hereunder and the
right to obtain specific performance of the confidentiality and non-compete
obligations agreed to herein, without any showing of actual damage or inadequacy
of legal remedy.
4. All controversies and disputes between you and ISI arising out of
your employment, the termination thereof, or the provisions of this Agreement,
including but not limited to all claims involving federal, state and local laws
relating to employment discrimination based on race, color, national origin,
religion, sex, age, disability or any other protected status, shall be subject
to mandatory arbitration as provided for in this Section.
All such disputes shall be submitted to arbitration in Provo, Utah, or
such other location as the parties may mutually agree, under the Employment
Dispute Resolution Rules of the American Arbitration Association.
The arbitrator(s) selected under this Section may award damages,
reinstatement and all other relief available under all applicable federal, state
or local laws, except that each
<PAGE> 11
Mr. David L. Whetten
February 10, 1998
Page 11
party shall be responsible for its own attorney's fees and costs. Any
arbitration award issued hereunder shall be in writing, shall state its
underlying reasons and shall be final and binding on the parties to this
Agreement and anyone claiming through them. Any judgment upon an award issued
under this Section may be entered in any court having jurisdiction thereof.
YOU AND ISI HEREBY EXPRESSLY AGREE THAT THE FOREGOING ARBITRATION
PROVISIONS ARE THE EXCLUSIVE MEANS FOR RESOLVING ALL CONTROVERSIES AND
DISPUTES ARISING OUT OF YOUR EMPLOYMENT, THE TERMINATION THEREOF, OR THE
PROVISIONS OF THIS AGREEMENT.
5. The terms of this Agreement may not be modified orally, but only by
mutual written consent. This letter, and any agreement you signed as part of
your original employment with ISI contains our entire agreement regarding your
employment by ISI and all prior agreements other than confidentiality agreements
are terminated. In the event that there are any conflicts between this Agreement
and any confidentiality or non-compete agreements, the terms of this Agreement
shall prevail.
6. This Agreement shall inure to the benefit of and be binding upon you
(and your successors, heirs, assigns and legal representatives) and ISI and its
successors and assigns. ISI will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of ISI to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
ISI would be required to perform it if no such succession had taken place. If
you should die while any amounts are still payable to you hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
7. You agree that, except to the extent that disclosure is required by
you to your attorney or accountant, or required by operation of law, you will
keep the terms of this Agreement confidential.
8. All notices pursuant to this Agreement shall be in writing and shall
be considered properly delivered when addressed to as set forth below, given or
served
<PAGE> 12
Mr. David L. Whetten
February 10, 1998
Page 12
personally, or sent by any generally recognized overnight delivery service or by
certified mail, return receipt requested, postage fully prepaid.
If to ISI: InsurQuote Systems, Inc.
517 East 1860 South
Provo, Utah 84606
If to Employee: David L. Whetten
1735 North 1300 West
Pleasant Grove, Utah 84062
9. Neither party shall assign nor subcontract to any other party all or
any part of this Agreement, its obligations hereunder, or any other interest
herein or rights hereunder without the other parties' prior written consent.
10. If any provision of this Agreement is for any reason held invalid,
illegal, void or unenforceable, all other provisions of this Agreement will
remain in full force and effect and the invalid, illegal, void or enforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision that is closest to the original intent of the parties.
11. This Agreement will have been made, executed and delivered in the
State of Utah and will be governed and construed for all purposed in accordance
with the laws of the State of Utah without giving effect to conflict of laws
provisions.
12. No action taken by either party shall be deemed to constitute a
waiver of compliance with any representation, warranty or covenant contained in
this Agreement. The waiver by a party of a breach of any provision of this
Agreement will not operate or be construed as a waiver of any subsequent breach.
<PAGE> 13
Mr. David L. Whetten
February 10, 1998
Page 13
If the above meets with your understanding, I would appreciate your signing
a copy of this letter and returning it to me. If there are items which require
further clarification or discussion, please let me know. I look forward to the
continuation of a mutually beneficial relationship.
Very truly yours,
/s/ WILLIAM B. WOAHN
--------------------------
President
--------------------------
I hereby acknowledge that I have read, understand and agree to the terms and
conditions stated above:
/s/ DAVID L. WHETTEN
- --------------------------
Date: 2/10/98
---------------------
<PAGE> 14
[GOLD LETTERHEAD]
February 1, 2000
Mr. David L. Whetten
1735 North 1300 West
Pleasant Grove, Utah 84062
Re: Employment
Dear Mr. Whetten:
By letter dated February 10, 1998 from InsurQuote Systems, Inc. (the
"COMPANY") to you (the "EMPLOYMENT LETTER"), the Company and you have agreed to
certain employment arrangements and conditions. The Company is entering into
that certain Agreement and Plan of Merger, dated as of the date hereof, by and
among the Company, ChannelPoint, Inc. ("BUYER") and Gold Acquisition Corp. (the
"MERGER AGREEMENT") pursuant to which the Company will be acquired by, and
become a direct, wholly-owned subsidiary of, Buyer (the "ACQUISITION"). This
letter (this "AMENDMENT") shall amend the Employment Letter effective as of the
Closing Date (as defined in the Merger Agreement). This Amendment shall be null
and void if the Acquisition is not consummated.
1. Continued Employment. From and after the Closing Date, you will be
employed as a Senior Vice President of Buyer pursuant to the terms and
conditions of the Employment Letter, as amended by this Amendment. For at least
ninety (90) days following the Closing Date you shall report directly to Kenneth
Hollen or the President or Chief Operating Officer of Buyer.
2. No Constructive Termination. You hereby agree that the Acquisition
and your continued employment pursuant to the Employment Letter, as amended by
this Amendment, does not constitute a Constructive Termination (as defined in
the Employment Letter).
3. Compensation. You shall be paid during your employment with Buyer
after the Acquisition an annual base salary of $200,000 and you shall continue
to receive employee benefits as are currently in effect for executive employees
of the Company for a period of at least one (1) year following the Closing Date
and benefits as are in effect from time to time for employees of Buyer
thereafter. You shall also be eligible for an annual bonus equal to up to 40% of
your base salary.
4. Stock Options. Subject to the terms of the applicable stock option
plan and an option grant letter, and other terms approved by the Board of
Directors of Buyer, as an inducement for you to enter into this Amendment and in
consideration of your
<PAGE> 15
Mr. Whetten
February 1, 2000
Page 2
continued employment and in recognition of the fact that (i) your services and
expertise are essential to the success of the business combination and (ii) your
continued employment hereunder may preclude your pursuit of certain other
employment opportunities (including opportunities which might otherwise have
allowed you to earn incentive bonuses and equity awards), Buyer will grant to
you an option to purchase 40,000 shares of common stock, $.001 par value per
share, of Buyer, with one-twenty-fourth (1/24(th)) of the shares subject to such
option becoming exercisable on the first day of each full month beginning one
(1) year after the Closing Date, until all such shares are exercisable, subject
to your continued employment with Buyer on such dates. The parties hereto agree
that the options granted pursuant to this paragraph 4 shall count towards the
option pool of the Company as it exists prior to the Acquisition.
5. Transition Team. A transition team, consisting of you, Kenneth
Hollen, Fred Rook, Fred Eppinger and William Woahn, shall be formed to
implement and monitor the integration of the Company with Buyer's business
operations. Kenneth Hollen shall have the final determination on all
unresolvable issues of the transition team.
6. Employee Policies. You shall be entitled to and shall abide by all
applicable employment and personnel policies in effect from time to time.
7. Amendment to Employment Letter. The Employment Letter is hereby
amended as follows:
(a) paragraph (e) of Section 5 of Part I shall be amended to delete the
reference to Section 3 of Part I;
(b) clause (iii) of paragraph (a) of Section 6 of Part I shall be
deleted in its entirety;
(c) the reference to the number 200 in clause (v) of paragraph (b) of
Section 7 of Part I shall be deleted and replaced with the number "50"; and
(d) the following sentence shall be inserted at the end of clause (i)
of paragraph (a) of Section 7 of Part I: "The benefits payable under this clause
(i) shall be in consideration of the your agreements under Section 2 of Part III
of this Agreement."
8. Entire Agreement; Miscellaneous. The parties acknowledge and agree
that they are not relying on any representations, oral or written, other than
those expressly contained herein. Except for the provisions of the Employment
Letter not amended by this Amendment, (i) this Amendment supersedes all
proposals, oral or written, all negotiations, conversations or discussions
between the parties and all course of dealing
2
<PAGE> 16
Mr. Whetten
February 1, 2000
Page 3
and (ii) all prior understandings and agreements between the parties regarding
employment matters are hereby merged in this Amendment, which alone is the
complete and exclusive statement of their understanding as to employment. No
waiver or modification of this Amendment shall be valid unless the same shall be
in writing and signed by the party sought to be charged therewith. Time is of
the essence in this Amendment and each and every provision hereof. The parties
acknowledge that they each participated in drafting this Amendment, and there
shall be not presumption against any party on the ground that such party was
responsible for preparing this Amendment or any part hereof. Paragraph headings
are for convenience of reference only and are not intended to create substantive
rights or obligations.
This Amendment shall be binding upon and inure to the benefit of Buyer,
the Company and their respective successors and assigns. This Amendment shall
also be enforceable by you and your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. Buyer, the Company or any successor thereto may assign its rights
under this Amendment to any corporation which owns all of the outstanding equity
of Buyer, the Company or any successor thereto.
If the foregoing accurately reflects our mutual understanding, please
sign and return the enclosed copy of this letter, as evidence of our agreement.
Very truly yours,
InsurQuote Systems, Inc.
By: /s/ WILLIAM B. WOAHN
----------------------------------
ChannelPoint, Inc.
By: /s/ KENNETH E. HOLLEN
----------------------------------
3
<PAGE> 17
Mr. Whetten
February 1, 2000
Page 4
Agreed to this 1st day
of February, 2000.
/s/ DAVID L. WHETTEN
- -------------------------------
David L. Whetten
4
<PAGE> 1
EXHIBIT 10.10
CHANNELPOINT, INC.
FIFTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
March 27, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. GENERAL................................................................................................1
1.1 Amendment and Restatement of Prior Agreement....................................................1
1.2 Definitions.....................................................................................2
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.................................................................4
2.1 Restrictions On Transfer........................................................................4
2.2 Demand Registration.............................................................................5
2.3 Piggyback Registrations.........................................................................6
2.4 Form S-3 Registration...........................................................................7
2.5 Expenses Of Registration........................................................................7
2.6 Obligations Of The Company......................................................................8
2.7 Termination Of Registration Rights..............................................................9
2.8 Delay Of Registration; Furnishing Information...................................................9
2.9 Indemnification.................................................................................9
2.10 Assignment Of Registration Rights..............................................................11
2.11 Amendment Of Registration Rights...............................................................11
2.12 Limitation On Subsequent Registration Rights...................................................12
2.13 "Market Stand-Off" Agreement...................................................................12
2.14 Rule 144 Reporting.............................................................................12
SECTION 3. COVENANTS OF THE COMPANY..............................................................................13
3.1 Basic Financial Information And Reporting......................................................13
3.2 Inspection Rights..............................................................................14
3.3 Confidentiality................................................................................14
3.4 Reservation Of Common Stock....................................................................15
3.5 Stock Vesting..................................................................................15
3.6 Proprietary Information And Inventions Agreement...............................................15
3.7 Termination Of Covenants.......................................................................15
SECTION 4. RIGHT TO MAINTAIN INTEREST............................................................................16
4.1 Subsequent Offerings...........................................................................16
4.2 Exercise Of Rights.............................................................................16
4.3 Issuance Of Equity Securities To Other Persons.................................................16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.4 Termination Of Rights To Maintain Interest.....................................................17
4.5 Transfer Of Rights To Maintain Interest........................................................17
4.6 Excluded Securities............................................................................17
4.7 Waiver Of Right................................................................................18
SECTION 5. RIGHT OF FIRST OFFER; PREEMPTIVE RIGHT................................................................18
5.1 Right Of First Offer...........................................................................18
5.2 Preemptive Right...............................................................................19
SECTION 6. MISCELLANEOUS.........................................................................................19
6.1 Governing Law..................................................................................19
6.2 Survival.......................................................................................19
6.3 Successors And Assigns.........................................................................19
6.4 Severability...................................................................................20
6.5 Amendment, Waiver And Termination..............................................................20
6.6 Delays Or Omissions............................................................................20
6.8 Notices........................................................................................21
6.9 Titles And Subtitles...........................................................................21
6.10 Counterparts...................................................................................21
</TABLE>
ii.
<PAGE> 4
CHANNELPOINT, INC.
FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS FIFTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"Agreement") is entered into as of the 27th day of March, 2000, by and among
CHANNELPOINT, INC., a Delaware corporation (the "Company") and the investors set
forth on Exhibit A hereto (each, an "Investor" and collectively, the
"Investors").
RECITALS
WHEREAS, certain Investors were parties to that certain Fourth Amended
and Restated Investor Rights Agreement dated as of February 1, 2000 and that
certain Third Amended and Restated Investor Rights Agreement dated as of
September 14, 1999 (collectively, the "Prior Agreements"), by and among the
Company and such Investors (the "Prior Investors"), pursuant to which the
Company granted such Prior Investors certain registration rights, information
rights and rights of first refusal;
WHEREAS, in connection with the Company's issuance of Series E
Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement, by
and among the Company and the Purchasers listed on Exhibit A thereto (the
"Series E Investors"), dated of even date herewith (the "Series E Purchase
Agreement"), the Company and the Prior Investors wish to amend and restate the
Prior Agreements and to include each Series E Investor as a party;
WHEREAS, each Series E Investor desires to become a party to this
Agreement;
WHEREAS, in contemplation of the consummation of the transactions
contemplated by the Agreement and Plan of Merger, by and among the Company, Gold
Acquisition Corp. and InsurQuote Systems, Inc. ("InsurQuote"), dated as of
February 1, 2000 (the "InsurQuote Merger Agreement"), the Company and the Prior
Investors wish, effective upon the effective time of the Merger contemplated by
the InsurQuote Merger Agreement (the "Effective Time"), to include as a party to
this Agreement each party who holds shares of InsurQuote's common stock or
preferred stock ("InsurQuote Stock"), which shares will be converted into the
right to receive the Company's common stock, par value $.001 per share ("Common
Stock"), pursuant to the InsurQuote Merger Agreement (each such party, an
"InsurQuote Investor");
WHEREAS, each InsurQuote Investor is identified as such on Exhibit A
hereto; and
WHEREAS, each InsurQuote Investor desires to become a party to this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL.
1.1 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENTS. All of the
undersigned parties who were parties to the Prior Agreements and who constitute
the requisite parties to amend the Prior Agreements hereby (i) waive any right
of first refusal, preemptive right, or other right to purchase any shares of
Series E Preferred Stock being sold pursuant to that certain Series E Preferred
Stock Purchase Agreement, as of even date herewith, as well as notice of such
sale of Series E Preferred Stock, on behalf of themselves and all others, and
(ii) agree that each of the Prior Agreements is null and void and
1.
<PAGE> 5
superseded in all respects by this Agreement. Notwithstanding the foregoing,
section (iii) of the definition of "Registrable Securities" shall not become
effective, and certain Investors listed on Schedule A hereto pursuant to the
InsurQuote Merger Agreement shall not become parties hereto, until the Effective
Time, at which time section (iii) of the definition of "Registrable Securities"
shall automatically become effective, and certain Investors listed on Schedule A
hereto pursuant to the InsurQuote Merger Agreement shall automatically become
parties hereto. Notwithstanding the first sentence of this Section 1.1, section
(v) of the definition of "Registrable Securities" shall not become effective,
and certain Investors listed on Exhibit A hereto pursuant to the LifeLink Merger
Agreement (as defined below) (together the "LifeLink Amendment") shall not
become parties hereto, unless the transactions contemplated by the LifeLink
Merger Agreement are consummated, at which time section (v) of the definition of
"Registrable Securities" shall automatically become effective, and certain
Investors listed on Schedule A hereto pursuant to the LifeLink Merger Agreement
shall automatically become parties hereto.
1.2 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FORM S-3" shall mean such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"HOLDER" shall mean any person owning of record Shares or
Registrable Securities that have not been sold to the public or any assignee of
record of such Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" shall mean the Company's first firm commitment
underwritten public offering of its Common Stock pursuant to an effective
registration under the Securities Act in which (i) the per share purchase price
is at least twenty dollars and ninety seven cents ($20.97) (adjusted for any
stock dividends, splits or other recapitalizations, and (ii) the gross proceeds
to the Company (before underwriting discounts, commissions and fees) are at
least forty million dollars ($40,000,000).
"INITIATING HOLDERS" shall mean Holders that hold thirty percent
(30%) or more of the Registrable Securities then outstanding.
"NEW SECURITIES" shall mean any capital stock of the Company sold
or proposed to be sold after the date hereof by the Company at a per share price
(adjusted for any stock dividends, stock splits, combinations or other
recapitalizations) of less than two dollars and seventy five cents ($2.75) per
share, whether or not now authorized, and rights, options or warrants to
purchase such capital stock at a price of less than two dollars and seventy five
cents ($2.75) per share, and securities of any type whatsoever that are or may
become convertible into capital stock at a price of less than two dollars and
seventy five cents ($2.75) per share; provided, however, that the term "New
Securities" shall not include (i) up to 15,562,037 securities or rights, options
or warrants to acquire securities (provided that such number shall be increased
or decreased to reflect the number of shares excluded from the definition of
"Additional Shares of Common Stock" in Section 4(j)(4) of the Company's
Certificate of Incorporation, so long as such increase or decrease is approved
by a majority of the Board of Directors), issued to officers, directors,
employees or consultants of the Company pursuant to any stock option, stock
purchase or stock bonus plan, agreement or arrangement approved by a majority of
the Board of Directors of the Company or (ii) all securities or rights, options
or warrants to acquire securities issued pursuant to the
2.
<PAGE> 6
InsurQuote Systems, Inc. 1994 Stock Option Plan that are to be assumed by the
Company in connection with the consummation of the transactions contemplated.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" shall mean (i) Common Stock of the
Company issued or issuable upon conversion of the Shares; (ii) shares of Common
Stock issued or issuable pursuant to the agreements between the Company and any
of the Series D Investors described on the Schedule of Exceptions to the Series
D Purchase Agreement and shares of Common Stock issuable upon conversion of
Preferred Stock which may be issued pursuant to such agreements; (iii) shares of
Common Stock issued or issuable pursuant to the InsurQuote Merger Agreement to
holders of shares of InsurQuote Stock; (iv) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities;
and (v) Common Stock of the Company issued to Craig Wm. Earnshaw and General
Electric Capital Assurance Company pursuant to the Agreement and Plan of Merger
and Reorganization, dated as of March 3, 2000, among the Company, LifeLink
Acquisition Corporation, LifeLink Corporation, Craig Wm. Earnshaw Craig Wm.
Earnshaw as Trustee of the Craig Wm. Earnshaw Charitable Remainder Unitrust and
General Electric Capital Assurance Company (the "LifeLink Merger Agreement").
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 under the Securities Act ("Rule 144") or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RULE 144" means Rule 144 promulgated under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SERIES D INVESTORS" shall mean the purchasers listed on Exhibit
A to the Series D Purchase Agreement.
"SERIES D PURCHASE AGREEMENT" shall mean the Series D Preferred
Stock Purchase Agreement dated as of September 14, 1999, among the Company and
the purchasers listed on Exhibit A thereto, as amended.
3.
<PAGE> 7
"SHARES" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock of the Company purchased by or issued to the Investors.
"SEC" or "COMMISSION" shall mean the Securities and Exchange
Commission.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any sale, transfer or any
other form of disposition of all or any portion of the Shares or Registrable
Securities (excluding transfers of shares to such Holder's parent company
("Parent"), to an affiliate of Holder or to an affiliate of Parent) unless and
until:
(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) Except for transfers made pursuant to Rule 144, (A) the
transferee has agreed in writing to be bound by the terms of this Agreement, (B)
such Holder shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (C) if reasonably requested by the
Company, such Holder 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.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former 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 Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with a legend substantially similar
to the following (in addition to any legend required under applicable state
securities laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.
<PAGE> 8
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Initiating Holders that the Company
file a registration statement under the Securities Act covering the registration
of Registrable Securities, then the Company shall, within ten (10) business days
of the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 2.2, use its best efforts to effect,
as soon as practicable, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered. Holders may
request registration of all or part of the Registrable Securities held by such
Holders.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include all or part of its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which underwriter or underwriters shall be reasonably acceptable to the
Company). Notwithstanding any other provision of this Section 2.2, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders);
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from the
registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the date one hundred eighty (180) days following
the effective date of the registration statement pertaining to the Initial
Offering; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and each such registration has been declared or
ordered effective; or
5.
<PAGE> 9
(iii) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the number of
Registrable Securities that such Holder wishes to include in such registration
statement. If a Holder decides not to include all of its Registrable Securities
in any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any stockholder of the Company (other than a Holder) on a pro rata
basis. In no event shall the amount of securities of the selling Holders
included in the registration be reduced below twenty-five percent (25%) of the
total amount of securities included in such registration, unless such offering
is the Initial Offering and such registration does not include shares of any
other selling stockholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling stockholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than
fifty percent (50%) of the Registrable Securities proposed to be sold in the
offering.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
6.
<PAGE> 10
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000, or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors 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 and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(iv) if the Company has already effected four (4)
registrations on Form S-3 for the Holders pursuant to this Section 2.4 with an
aggregate offering price per registration of at least $1,000,000 and in which no
Holders requesting registration were prohibited from participating as a result
of actions by the Company or any underwriter, or
(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as requests for registration effected pursuant
to Section 2.2.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, Section 2.3 or Section 2.4
herein shall be borne by the Company. All Selling Expenses incurred in
7.
<PAGE> 11
connection with any registrations of Registrable Securities hereunder, shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of shares so registered. The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Section 2.2
or 2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days
or, if earlier, until the Holder or Holders have completed the distribution
related thereto.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
8.
<PAGE> 12
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.
(h) Cause such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which shares of the
Company's Common Stock are then listed.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (i) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act and (ii)
all Registrable Securities held by and issuable to such Holder may be sold under
Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 with respect to
the Registrable Securities of any selling Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors, employees,
agents and legal counsel of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation") by the Company: (i) any untrue statement or alleged untrue
9.
<PAGE> 13
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay each such
Holder, partner, officer or director, underwriter or controlling person monthly
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished by such
Holder, partner, officer, director, underwriter or controlling person under an
instrument duly executed by such Holder, partner, officer, director, underwriter
or controlling person and stated to be specifically for use in connection with
such registration.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will pay monthly any legal or other expenses reasonably incurred by the Company
or any such director, officer, controlling person, underwriter or other Holder,
or partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided, further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in
10.
<PAGE> 14
such proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.9 only to the extent so prejudiced, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a full release from all liability in respect to such claim
or litigation.
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with any of the foregoing provisions, the provisions in the
underwriting agreement shall control.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (i) is a
direct or indirect subsidiary, affiliate, parent, general partner, limited
partner or retired partner of a Holder, (ii) is a Holder's family member or
trust for the benefit of an individual Holder, or (iii) acquires at least fifty
thousand (50,000) shares of Registrable Securities (as adjusted for stock splits
and combinations); provided, however, (A) the transferor shall, within ten (10)
days after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Holders holding at least sixty-six and
two-thirds percent (66-2/3%) of all of the Registrable Securities then
outstanding and which are held by a Holder, provided, however, that in the event
that such amendment or waiver adversely affects the obligations and/or rights of
the holders of one class or one series of stock in a different manner than the
holders of other classes or series of stock, such amendment or waiver shall also
require the written consent of the holders of a majority in interest of the
adversely affected class or series or stock, as
11.
<PAGE> 15
the case may be. Any amendment or waiver effected in accordance with this
Section 2.11 shall be binding upon each Holder and the Company. By acceptance of
any benefits under this Section 2, Holders of Registrable Securities hereby
agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of
Holders holding at least sixty-six and two-thirds percent (66-2/3%) of all of
the Registrable Securities then outstanding and which are held by Holders, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those
granted to the Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
will not, without the prior written consent of the managing underwriter of the
Company's Initial Offering, during the period commencing on the date of the
final prospectus relating to the Company's Initial Offering and ending on the
date specified by the Company and the managing underwriter (such period not to
exceed one hundred eighty (l80) days) (i) lend, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by the Holder or are
thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing provisions of this Section 2.13
shall apply only to the Company's Initial Offering, shall not apply to the sale
of any shares to an underwriter pursuant to an underwriting agreement, and shall
only be applicable to the Holders if all officers, directors and greater than
two percent (2%) stockholders of the Company enter into similar agreements. The
underwriters in connection with the Company's Initial Offering are intended
third-party beneficiaries of this Section 2.13 and shall have the right, power
and authority to enforce the provisions hereof as though they were a party
hereto. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities held by
each Holder until the end of such period.
The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration or
pursuant to a registration statement on Form S-3, the Company agrees to use its
best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public;
(b) Take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
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(c) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Securities Act or Exchange Act;
(d) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company (i) as
to its compliance with the reporting requirements of said Rule 144 of the
Securities Act and of the Exchange Act (at any time after it has become subject
to such reporting requirements) or (ii) that it qualifies as a registrant whose
securities may be registered pursuant to Form S-3 (at any time after it so
qualifies); a copy of the most recent annual or quarterly report of the Company;
and such other reports and documents as a Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration or pursuant to such form.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) So long as an Investor continues to hold Registrable
Securities, the Company will furnish each Investor as soon as practicable after
the end of each fiscal year of the Company and in any event within ninety (90)
days thereafter, an audited consolidated balance sheet of the Company, as at the
end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all prepared
in accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
(c) So long as an Investor (with its affiliates) shall own not
less than one hundred thousand (100,000) shares of Registrable Securities (as
adjusted for stock splits, stock dividends, combinations and other
recapitalizations) (a "Major Investor"), the Company will furnish each such
Major Investor (i) upon request a capitalization summary of the Company and
stockholder list; (ii) at least thirty (30) days prior to the beginning of each
fiscal year an annual budget and operating plans for such fiscal year (and as
soon as available, any subsequent revisions thereto); (iii) as soon as
practicable after the end of each month, and in any event within twenty (20)
days thereafter, a consolidated balance sheet of the Company as of the end of
each such month, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such month and for the current fiscal
year to date, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes) and setting forth in comparative
form the figures for the corresponding periods of the previous fiscal year and
the Company's operating plan then in effect and approved by its Board of
Directors, subject to changes resulting from year-end audit adjustments; and
(iv) as soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within forty-five (45) days thereafter, a consolidated balance sheet of
the Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year and to the Company's operating plan then
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in effect and approved by the Company's Board of Directors, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made. With respect to the financial statements called for in
subsections (iii) and (iv) of this Section 3.1(c), the Company will furnish each
such Major Investor with an instrument executed by the Chief Financial Officer
or President of the Company certifying that such financial statements were
prepared in accordance with generally accepted accounting principles
consistently applied with prior practice for earlier periods (with the exception
of footnotes that may be required by generally accepted accounting principles)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY.
(a) DISCLOSURE OF TERMS. The terms and conditions of this
Agreement, the Series E Preferred Stock Purchase Agreement and the Fifth Amended
and Restated Stockholders Agreement (collectively, the "Financing Terms"),
including their existence, shall be considered confidential information and
shall not be disclosed by any party hereto to any third party except in
accordance with the provisions set forth herein.
(b) PRESS RELEASES, ETC. Within sixty (60) days of the Closing,
the Company may issue a press release in the form provided by each Investor
disclosing that such Investor has invested in the Company. No announcement
regarding any Investor, including the announcement described in the foregoing
sentence, in a press release, conference, advertisement, announcement,
professional or trade publication, mass marketing materials or otherwise to the
general public may be made without such Investor's prior written consent.
(c) PERMITTED DISCLOSURES. Notwithstanding the foregoing, (i) any
party may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate non-disclosure obligations; (ii) any party may disclose (other than
in a press release or other public announcement described in Section 3.3 (b))
solely the fact that the Investors are investors in the Company to any third
parties without the requirement for the consent of any other party or
nondisclosure obligations; and (iii) each Investor may disclose its investment
in the Company and the Financing Terms to third parties or to the public at its
sole discretion and, if it does so, the other parties hereto shall have the
right to disclose to third parties any such information disclosed in a press
release or other public announcement by such other Investor.
(d) LEGALLY COMPELLED DISCLOSURE. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of this Agreement,
the Series E Preferred Stock Purchase Agreement, the Fifth Amended and Restated
Stockholders Agreement or any of the Financing Terms in contravention of the
provisions of this Section 3.3, such party (the "Disclosing Party") shall
provide the other parties (the "Non-Disclosing Parties") with prompt written
notice of that fact so that the appropriate party may seek (with the cooperation
and reasonable efforts of the other parties) a protective order, confidential
treatment
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or other appropriate remedy. In such event, the Disclosing Party shall furnish
only that portion of the information which is legally required and shall
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information to the extent reasonably requested
by any Non-Disclosing Party.
(e) OTHER INFORMATION. The provisions of this Section 3.3 shall
be in addition to, and not in substitution for, the provisions of any separate
non-disclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel (including without
limitation, any exchanges of information with any Intel board observer) shall be
governed by the terms of the Corporate Non-Disclosure Agreement No. 0538346,
dated September 30, 1998, executed by the Company and Intel (the "CNDA"), and
any Confidential Information Transmittal Records (CITR) provided in connection
therewith.
(f) NOTICES. All notices required under this Section 3.3 shall be
made pursuant to Section 6.8 of this Agreement.
(g) CONFIDENTIALITY OF RECORDS. Each Investor (other than Intel
Corporation, which shall be governed by the terms of the CNDA) agrees to use,
and to use its best efforts to insure that its authorized representatives use,
the same degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may disclose
such proprietary or confidential information to any partner, subsidiary or
parent of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3 and may make such other
disclosures as are required by law.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Shares, all Common Stock issuable from time to time upon such conversion.
3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (i) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the date on which such person
began providing services to the Company, and (ii) seventy-five percent (75%) of
such stock shall vest monthly over the remaining three (3) years. With respect
to any shares of stock purchased by any such person, the Company's repurchase
option shall provide that upon such person's termination of employment or
service with the Company, with or without cause, the Company or its assignee (to
the extent permissible under applicable securities laws and other laws) shall
have the option to purchase at cost any unvested shares of stock held by such
person.
3.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all officers, employees and consultants to execute and deliver a
Proprietary Information and Inventions Agreement in the form delivered to
counsel for the Investors.
3.7 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
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SECTION 4. RIGHT TO MAINTAIN INTEREST.
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right to purchase
its Pro Rata Amount (as defined herein) of any Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. The Company may, at its election, sell such Investor its Pro Rata
Amount of Equity Securities at the initial closing of the sale of Equity
Securities or at a subsequent closing of which shall take place within ninety
(90) days of the initial closing. An Investor's Pro Rata Amount shall be equal
to the ratio of (A) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares or any other securities convertible into Common Stock or upon the
exercise of any outstanding warrants or options, to the extent such warrants or
options are vested and exercisable) which such Investor is deemed to be a holder
immediately prior to the issuance of such Equity Securities to (B) the total
number of shares of the Company's outstanding Common Stock (including all shares
of Common Stock issued or issuable upon conversion of the Shares or any other
securities convertible into Common Stock or upon the exercise of any outstanding
warrants or options, to the extent such warrants or options are vested and
exercisable) immediately prior to the issuance of the Equity Securities. The
term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option or warrant to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right; provided, however, that notwithstanding the provisions of this Section 4,
in the event that an Equity Security is a New Security, then the provisions of
Section 5.1 shall control.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice before such issuance or
within ten (10) days thereafter, describing the type of Equity Securities, the
price and number of shares and the general terms upon which the Company issued
the same and the closing date of the same to investors. Each Investor shall have
fifteen (15) business days from the date of receipt of any such notice to agree
to purchase at the initial closing of the sale of Equity Securities or, at the
Company's election, at a subsequent closing within ninety (90) days of the
initial closing up to the amount of Equity Securities equal to the Investor's
Pro Rata Amount of such Equity Securities for the price and upon the general
terms specified in the notice by giving written notice to the Company. Each
Investor shall have a right of overallotment such that if any Investor fails to
exercise its right hereunder to purchase all of such Investor's Pro Rata Amount
of Equity Securities, the Company shall notify all other Investor(s) exercising
their rights to purchase their full Pro Rata Amount and such other Investor(s)
shall have the right to purchase the nonparticipating Investor's entire portion
on a pro rata basis (based upon such Investor's respective Pro Rata Amount) by
agreeing to purchase such amount of Equity Securities within fifteen (15)
business days from the date of receipt of such notice.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. In the event an
Investor fails to give notice of its intent to exercise in full its right to
maintain its interest within said thirty (30) day period as set forth in Section
4.2 above, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Investor's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Investors
pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Investors in the manner provided
above.
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<PAGE> 20
4.4 TERMINATION OF RIGHTS TO MAINTAIN INTEREST. The rights to maintain
interest established by this Section 4 shall not apply to, and shall terminate
upon the effective date of the registration statement pertaining to the
Company's Initial Offering.
4.5 TRANSFER OF RIGHTS TO MAINTAIN INTEREST. The rights to maintain
interest of each Investor under this Section 4 may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights to maintain interest established by
this Section 4 shall have no application to any of the following Equity
Securities:
(a) up to 15,562,037 shares of Common Stock (and/or options,
warrants or other Common Stock purchase rights issued pursuant to such options,
warrants or other rights) issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock option plans or other arrangements that are
approved by a majority of the Board of Directors (provided that such number
shall be increased or decreased to reflect the number of shares excluded from
the definition of "Additional Shares of Common Stock" in Section 4(j)(4) of the
Company's Certificate of Incorporation, so long as such increase or decrease is
approved by a majority of the Board of Directors);
(b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, provided that the rights to
maintain interest established by this Section 4 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;
(g) any Equity Securities that are issued by the Company pursuant
to a registration statement pertaining to the Company's Initial Offering or in
any private placement of Common Stock that closes concurrently with such Initial
Offering;
(h) shares of Series E Preferred Stock issued by the Company
pursuant to the Series E Stock Purchase Agreement dated as of the date hereof,
including any shares issued in subsequent closings pursuant to Section 2.3 of
the Series E Stock Purchase Agreement;
(i) shares of Common Stock or Preferred Stock (and shares of
Common Stock issued upon conversion thereof) which may be issued to any of the
Series D Investors pursuant to the agreements between the Company and such
Series D Investors described on the Schedule of Exceptions to the Series D
Purchase Agreement;
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(j) all options issued pursuant to the InsurQuote Systems, Inc.
1994 Stock Option Plan that are to be assumed by the Company in connection with
the consummation of the transaction contemplated in the InsurQuote Merger
Agreement; and
(k) shares of Common Stock issuable upon exercise of that certain
Warrant to purchase 10,000 shares of InsurQuote Common Stock held by Real Time
Internet Services to be assumed by the Company pursuant to the InsurQuote Merger
Agreement.
4.7 WAIVER OF RIGHT. The right to maintain interest set forth in this
Section 4, including the notice provisions relating thereto, may be waived by
Holders holding more than sixty-six and two-thirds percent (66-2/3%) of all of
the outstanding Registrable Securities then outstanding and which are held by
Holders.
SECTION 5. RIGHT OF FIRST OFFER; PREEMPTIVE RIGHT.
5.1 RIGHT OF FIRST OFFER.
(a) Subject to the terms and conditions specified in this Section
5.1, the Company hereby grants to each Investor a right of first offer to
purchase its Pro Rata Share of any New Securities that are sold or proposed to
be sold by the Company. For purposes of this Section 5.1, an Investor's Pro Rata
Share shall be equal to the ratio of the number of shares of Common Stock held
by such Investor (assuming full conversion and exercise of all securities
convertible into or exercisable for Common Stock), immediately prior to the
issuance of New Securities, to the total number of shares of Common Stock held
by all Investors (assuming full conversion and exercise of all securities
convertible into or exercisable for Common Stock) immediately prior to the
issuance of New Securities. Each Investor shall have a right of over-allotment
such that if any Investor fails to exercise its right hereunder to purchase its
entire Pro Rata Share of New Securities (a "Non-Purchasing Investor"), the other
Investors may purchase the Non-Purchasing Investor's portion on a pro rata basis
(calculated as set forth above, excluding shares held by a Non-Purchasing
Investor) to the extent that such Investors have elected to purchase New
Securities in excess of their Pro Rata Shares. The right of first offer shall be
subject to the provisions set forth below:
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Investor written notice of its intention,
describing the number and type of New Securities, their price and the general
terms upon which the Company proposes to issue such New Securities (the
"Investors' Notice"). Each Investor shall have twenty (20) days after receipt of
any such notice (with receipt to be determined by reference to Section 6.7
below) to agree to purchase such Investor's pro rata share of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. Each Investor shall have a right of overallotment such that if
any Investor fails to exercise its right hereunder to purchase all of such
Investor's pro rata share of such New Securities, the Company shall notify all
other Investor(s) exercising their rights to purchase their full pro rata share,
and such other Investor(s) shall have the right to purchase the nonparticipating
Investor's entire portion on a pro rata basis (based upon such Investor's
respective pro rata share) by agreeing to purchase such amount of New Securities
within ten (10) days from the date of receipt of such notice.
(c) In the event the Investors fail to exercise fully the right
of first offer within such twenty (20) day period, the Company shall have sixty
(60) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within sixty
(60) days from the date of such agreement) to sell the remaining unsubscribed
portion of New
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Securities at a price and upon terms no more favorable to the purchasers thereof
than are specified in such notice. After the expiration of such sixty (60) day
period, the Company shall not thereafter issue or sell any New Securities
without first again offering such securities to the Investors in the manner
provided in Section 5.1(b) above.
(d) The right of first offer granted under this Section 5.1 shall
terminate upon the effective date of the registration statement pertaining to
the Company's Initial Offering.
5.2 PREEMPTIVE RIGHT.
(a) If, prior to the completion of the Company's Initial
Offering, the Company proposes to sell or issue to Cigna Insurance Company,
WellPoint, Aetna/US HealthCare, PacifiCare/FHP, Prudential Insurance Company,
Humana or any other healthplan with over three million risk-bearing health
insured lives (a "Competitor"), or any successor to or affiliate of any of the
foregoing companies, shares of Common Stock (or securities convertible into
Common Stock), representing more than sixty-six and two-thirds percent (66-2/3%)
of the then-current holdings of the Company's capital stock of Validus and its
affiliates, then Validus shall have the right to purchase any or all of such
shares of Common Stock or convertible securities that are in excess of the
number of shares equal to sixty-six and two-thirds percent (66-2/3%) of Validus'
then-current holdings (the "Excess Shares") on the same terms as proposed to any
such Competitor.
(b) In the event the Company proposes to sell any such Excess
Shares, it shall give written notice to Validus of its intention, describing the
number and type of Excess Shares, their price and the general terms upon which
the Company proposes to sell or issue such Excess Shares (the "Validus Notice").
Validus shall have twenty (20) days after any such notice is given to agree to
purchase the Excess Shares on the same terms as proposed to any such Competitor.
(c) In the event Validus fails to exercise fully the right to
purchase the Excess Shares within such twenty (20) day period, the Company shall
have sixty (60) days thereafter to sell or enter into an agreement (pursuant to
which the sale of the Excess Shares covered thereby shall be closed, if at all,
within sixty (60) days from the date of such agreement) to sell the Excess
Shares as set forth in the Validus Notice at a price and upon terms no more
favorable to any such Competitor than are specified in the Validus Notice. After
the expiration of such sixty (60) day period, the Company shall not thereafter
issue or sell any Excess Shares without first again offering such securities to
Validus in the manner provided in Section 5.2(b) above.
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado as applied to agreements among Colorado
residents entered into and to be performed entirely within Colorado.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and
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administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of Registrable Securities from
time to time; provided, however, that prior to the receipt by the Company of
adequate written notice of the transfer of any Registrable Securities specifying
the full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
6.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.5 AMENDMENT, WAIVER AND TERMINATION.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and Holders
holding at least sixty-six and two-thirds percent (66-2/3%) of all of the
Registrable Securities then outstanding and which are held by Holders; provided,
however, that in the event that such amendment or modification adversely affects
the obligations or rights of the holders of one class or one series of stock in
a different manner than the holders of other classes or series of stock, such
amendment shall also require the written consent of the holders of a majority in
interest of the adversely affected class or series of stock, as the case may be.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of Holders holding at least sixty-six and
two-thirds percent (66-2/3%) of all of the Registrable Securities then
outstanding and which are held by an Investor; provided, however, that in the
event that such waiver adversely affects the obligations or rights of the
holders of one class or one series of stock in a different manner than the
holders of other classes or series of stock, such waiver shall also require the
written consent of the holders of a majority in interest of the adversely
affected class or series of stock, as the case may be.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include (i) additional
purchasers of Shares and (ii) additional purchasers of the stock of InsurQuote
as "Investors," "Holders" and parties hereto.
(d) Except as otherwise expressly provided, this Agreement may be
terminated only with the written consent of the Investors holding at least
sixty-six and two-thirds percent (66-2/3%) of each series of the Company's
preferred stock party to this Agreement.
6.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.7 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and complete understanding and agreement between the parties with
regard to the subjects hereof and
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<PAGE> 24
supercedes the Prior Agreement. The holders of more than sixty-six and
two-thirds percent (66 2/3%) of the Registrable Securities subject to the Prior
Agreement hereby consent to the amendment of the Prior Agreement by virtue of
such holders' execution of this Agreement. No party shall be liable or bound to
any other in any manner with respect to the subjects hereof by any
representations, warranties, covenants and agreements except as specifically set
forth herein.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A to the Purchase Agreement or at such other address as such party
may designate by ten (10) days advance written notice to the other parties
hereto.
6.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.10 COUNTERPARTS. 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.
21.
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY: INVESTORS:
CHANNELPOINT, INC. MOHR, DAVIDOW VENTURES IV, L.P.
By: Fourth MDV Partners, L.L.C.,
By: /s/ Kenneth E. Hollen General Partner
--------------------------------------
Kenneth E. Hollen
President and Chief Executive Officer /s/ Nancy J. Schoendorf
--------------------------------
10155 Westmoor Drive, Suite 210 Nancy J. Schoendorf
Westminster, CO 80020 Member
MDV IV ENTREPRENEURS' NETWORK
FUND, L.P.
By: Fourth MDV Partners, L.L.C.,
General Partner
/s/ Nancy J. Schoendorf
--------------------------------
Nancy J. Schoendorf
Member
PACIFIC VENTURE GROUP, L.P.
By: PVG Equity Partners, L.L.C.,
its General Partner
By: /s/ Eve Kurtin
-----------------------------
Eve Kurtin
Member
PVG ASSOCIATES, L.P.,
By: PVG Equity Partners, L.L.C.,
its General Partner
By: /s/ Eve Kurtin
-----------------------------
Eve Kurtin
Member
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 26
GC&H INVESTMENTS
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
--------------------------------
GENE E. HOLLEN
DEVIN C. MILLER TRUST
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
COLE T. MILLER TRUST
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
--------------------------------
SCOTT NYQUIST
--------------------------------
KENNETH PLUMLEE
HLM/CB ASSOCIATES, LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 27
HLM INVESTMENT PARTNERS LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
AC VENTURES B.V. (FORMERLY AC
TECHNOLOGY (ACT A) B.V.).
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
CAPITAL Z FINANCIAL SERVICES
FUND II, LP
By: /s/ Adam Mizel
-----------------------------
Name: Adam Mizel
---------------------------
Title: General Partner
--------------------------
CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, LP
By: /s/ Adam Mizel
-----------------------------
Name: Adam Mizel
---------------------------
Title: General Partner
--------------------------
VALIDUS L.P.
By: /s/ Bernard J. McDonagh
-----------------------------
Name: Bernard J. McDonagh
---------------------------
Title: General Partner
--------------------------
INTEL CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 28
GE CAPITAL EQUITY INVESTMENTS,
INC.
By: /s/ Michael S. Fisher
-----------------------------
Name: Michael S. Fisher
---------------------------
Title: Managing Director
--------------------------
VIRGINIA SURETY COMPANY, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
UNITED HEALTHCARE SERVICES, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
WELLPOINT HEALTH NETWORKS INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BG INVESTMENTS LTD.
By: /s/ Michael R. Deevy
-----------------------------
Name: Michael R. Deevy
---------------------------
Title: Director
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 29
MARSH & MCLENNAN CAPITAL
TECHNOLOGY VENTURE FUND, L.P.
BY: MARSH & MCLENNAN CAPITAL
TECHNOLOGY VENTURE GP,
L.P., ITS GENERAL PARTNER
BY: MARSH & MCLENNAN GP II,
INC., ITS GENERAL PARTNER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
MARSH & MCLENNAN CAPITAL
TECHNOLOGY PROFESSIONALS VENTURE
FUND, L.P.
BY: MARSH & MCLENNAN GP II,
INC., ITS GENERAL PARTNER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
TRIDENT II, L.P.
BY: TRIDENT CAPITAL II, L.P.,
ITS GENERAL PARTNER
BY: MARSH & MCLENNAN GP I,
INC., ITS GENERAL PARTNER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 30
MARSH & MCLENNAN EMPLOYEES'
SECURITIES COMPANY, L.P.
BY: MARSH & MCLENNAN GP I,
INC., ITS GENERAL PARTNER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
MARSH & MCLENNAN CAPITAL
PROFESSIONALS FUND, L.P.
BY: MARSH & MCLENNAN GP I,
INC., ITS GENERAL PARTNER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BLUE CROSS AND BLUE SHIELD
ASSOCIATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
INTERNET HEALTHCARE GROUP LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
--------------------------------
CRAIG WM. EARNSHAW
GENERAL ELECTRIC CAPITAL
ASSURANCE COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
PAINE WEBBER CAPITAL INC.
By: /s/ DHANANJAY PAI
-----------------------------
Name: Dhananjay Pai
---------------------------
Title: President
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 31
INSURQUOTE INVESTORS:
--------------------------------
[Insert Name]
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 32
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E COMMON
NAME SHARES SHARES SHARES SHARES SHARES STOCK
<S> <C> <C> <C> <C> <C> <C>
Mohr, Davidow Ventures IV, L.P. 2,352,000 -- 146,154 90,605
MDV IV Entrepreneurs' Network Fund, L.P. 98,000 -- 7,692 4,769
Pacific Venture Group, L.P. 2,340,289 -- 146,923 --
PVG Associates, L.P. 109,711 -- 6,923 --
GC&H Investments 25,000 -- 6,520 --
Gene E. Hollen 40,000 -- 10,432 --
Devin C. Miller Trust 5,000 -- -- --
Cole T. Miller Trust 5,000 -- -- --
Scott Nyquist 15,000 -- 3,912 --
Kenneth Plumlee 10,000 -- -- --
Validus L.P. -- 1,200,000 461,538 47,687
AC Ventures B.V. -- 500,000 -- --
HLM/CB Associates, LLC -- 18,181 -- --
Capital Z Financial Services Fund II, L.P. -- -- 2,678,081 200,661
Capital Z Financial Services Private Fund II, L.P. -- -- 14,226 1,066
Intel Corporation -- -- 307,692 --
HLM Investment Partners LLC -- -- 7,692 --
GE Capital Equity Investments, Inc. -- -- -- 1,773,752
Virginia Surety Company, Inc. -- -- -- 318,073
United HealthCare Services, Inc. -- -- -- 238,435
WellPoint Health Networks Inc. -- -- -- 119,217
BG Investments Ltd. -- -- -- 119,217
Marsh & McLennan Capital Technology
Venture Fund, L.P. -- -- -- 191,117
Marsh & McLennan Capital Technology -- -- -- 76,298
Professionals Venture Fund, L.P.
Trident II, L.P. -- -- -- 112,597
Marsh & McLennan Employees' Securities Company, L.P. -- -- -- 2,999
Marsh & McLennan Capital Professionals Fund, L.P. -- -- -- 3,255
Blue Cross and Blue Shield Association -- -- -- 23,843
Internet Healthcare Group L.L.C. -- -- -- 119,217
Craig Wm Earnshaw 223,333
General Electric Capital Assurance Company 110,000
*
- --------------- --------
*
- --------------- --------
Total 5,000,000 1,718,181 3,797,785 3,442,808
</TABLE>
A-1
ChannelPoint, Inc.
Fifth Amended and Restated Investor Rights Agreement
<PAGE> 1
EXHIBIT 10.11
CHANNELPOINT, INC.
FIFTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS FIFTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the
"Agreement") is made and entered into as of this 27th day of March, 2000, by and
among CHANNELPOINT, INC., a Delaware corporation (the "Company"), those certain
holders of the Company's Common Stock listed on Exhibit A hereto (the "Key
Stockholders") and the persons and entities listed on Exhibit B hereto (the
"Investors").
W I T N E S S E T H:
WHEREAS, the Company, the Key Stockholders and certain Investors (the
"Prior Investors) are parties to that certain Fourth Amended and Restated
Stockholders Agreement dated as of February 1, 2000 and that certain Third
Amended and Restated Stockholders Agreement dated as of September 14, 1999
(collectively, the "Prior Agreements"), pursuant to which the Key Stockholders
granted such Prior Investors certain rights of co-sale and rights of first
refusal, and the Key Stockholders and Prior Investors agreed to provide for the
future voting of their shares of the Company's capital stock;
WHEREAS, the Company proposes to sell shares of its Series E Preferred
Stock ("Series E") pursuant to the Series E Preferred Stock Purchase Agreement
by and among the Company and the Purchasers listed on Exhibit A thereto (the
"Series E Investors") of even date herewith (the "Financing");
WHEREAS, in connection with the consummation of the Financing, the
Company, the Key Stockholders and the Prior Investors wish to amend and restate
the Prior Agreements and to include each Series E Investor as a party;
WHEREAS, each Series E Investor desires to become a party to this
Agreement;
WHEREAS, in contemplation of the consummation of the transactions
contemplated by the Agreement and Plan of Merger by and among the Company, Gold
Acquisition Corp. and InsurQuote Systems, Inc. ("InsurQuote"), dated as of
February 1, 2000 (the "InsurQuote Merger Agreement"), the Company, the Key
Stockholders and the Prior Investors wish, effective upon the effective time of
the merger contemplated by the InsurQuote Merger Agreement (the "Effective
Time"), to include as a party to this Agreement each party who holds shares of
InsurQuote's common stock or preferred stock ("InsurQuote Stock"), which shares
will be converted into the right to receive the Company's Common Stock pursuant
to the InsurQuote Merger Agreement (each, an "InsurQuote Investor");
WHEREAS, each InsurQuote Investor is identified as such on Exhibit B
hereto;
WHEREAS, each InsurQuote Investor desires to become a party to this
Agreement;
1.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
GENERAL
1.1 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENTS. All of the
undersigned parties who were parties to the Prior Agreements and who constitute
the requisite parties to amend the Prior Agreements hereby (i) waive any right
of first refusal, preemptive right, or other right to purchase any shares of
Series E Preferred Stock being sold pursuant to that certain Series E Preferred
Stock Purchase Agreement, as of even date herewith, as well as notice of such
sale of Series E Preferred Stock, on behalf of themselves and all others, and
(ii) agree that each of the Prior Agreements is null and void and superseded in
all respects by this Agreement. Notwithstanding the foregoing, Sections 2.2(d),
(e), (f) and (g) and 5.1(b)(ii) of this Agreement shall not become effective,
and certain Investors listed on Schedule A hereto pursuant to the InsurQuote
Merger Agreement shall not become parties hereto, until the Effective Time, at
which time Sections 2.2(d), (e), (f) and (g) and 5.1(b)(ii) of this Agreement
shall automatically become effective, and certain Investors listed on Schedule A
hereto pursuant to the InsurQuote Merger Agreement shall automatically become
parties hereto.
1.2 DEFINITIONS
"AFFILIATE" shall mean any subsidiary, parent, company under common
control with an Investor, general partner, limited partner, retired partner,
member or retired member of an Investor. A company is under common control with
an Investor if the same natural person or company controls both the Investor and
the company by beneficially owning greater than fifty percent (50%) of the
outstanding voting securities of an Investor or company which is a corporation,
or by beneficially owning a partnership or limited liability company interest in
greater than fifty percent (50%) of the distributable profits or losses of an
Investor or company which is a partnership or limited liability company.
"CO-SALE STOCK" shall mean Key Stockholder Stock and Investor Stock.
"COMMON STOCK" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's outstanding
Preferred Stock.
"INVESTOR STOCK" shall mean shares of the Company's Common Stock or
Preferred Stock now owned or subsequently acquired by the Investors. The number
of shares and type of stock owned by each Investor is set forth on Exhibit B,
which Exhibit may be amended from time to time by the Company to reflect changes
in the number of shares or type of stock owned by the Investors.
"KEY STOCKHOLDER STOCK" shall mean shares of the Company's Common Stock
or Preferred Stock now owned or subsequently acquired by the Key Stockholders.
The number of
2.
<PAGE> 3
shares of stock owned by each Key Stockholder is set forth on Exhibit A, which
Exhibit may be amended from time to time by the Company to reflect changes in
the number of shares owned by the Key Stockholders.
"SHAREHOLDER REPRESENTATIVE" shall mean William B. Woahn.
ARTICLE 2
VOTING
2.1 AGREEMENT TO VOTE.
(a) Each Key Stockholder agrees to hold all shares of Key Stockholder
Stock subject to, and to vote the Common Shares in accordance with, the
provisions of this Agreement.
(b) Each Investor agrees to hold all shares of Investor Stock subject
to, and to vote the Investor Stock in accordance with, the provisions of this
Agreement. Notwithstanding the above, this Section 2.1(b) shall not restrict the
transfer of shares of voting capital stock of the Company by Investors to an
Affiliate of the Investor, the Investor's parent company ("Parent") or to an
Affiliate of Parent; provided, however, that any and all shares of Investor
Stock that are transferred by an Investor to an Affiliate, Parent or an
Affiliate of Parent, shall remain subject to the provisions of this Agreement.
2.2 ELECTION OF DIRECTORS.
(a) At each election of directors in which the holders of Common Stock
and the holders of Series B Preferred Stock ("Series B"), voting together as a
single class, are entitled to elect a director of the Company, the Key
Stockholders and the Investors holding shares of Series B ("Series B Investors")
shall vote the Key Stockholder Stock and the shares of Series B held by them, as
applicable, so that one nominee mutually agreed upon by the Key Stockholders and
the Series B Investors shall be elected to serve on the Company's Board of
Directors. The Key Stockholders and the Series B Investors hereby agree that
they will vote the shares held by them in favor of Bernard McDonagh. Beginning
at such time as Bernard McDonagh is no longer a member of the Company's Board of
Directors, if the Key Stockholders and the Series B Investors are unable to
mutually agree upon a nominee, the Key Stockholders and the Series B Investors
shall vote the Key Stockholder Stock and the shares of Series B held by them, as
applicable, so as to maintain one vacancy on the Company's Board of Directors.
(b) The Company's Certificate of Incorporation provides that the Series
C Investors are entitled to elect a director to the Company's Board of
Directors. The Series C Investors hereby agree that they will initially vote the
shares of Series C held by them for Adam Mizel as their representative to the
Board. If at any time following the Closing of the transactions contemplated by
the Series C Preferred Stock Purchase Agreement, the Series C Investors decide
to replace Mr. Mizel with another representative, they shall consult with the
Key Stockholders to choose a new representative that is mutually acceptable to
the Series C Investors and the Key Stockholders. If the Key Stockholders and the
Series C Investors are unable to mutually agree upon a nominee, the Series C
Investors shall be entitled, in their sole discretion, to vote the shares of
Series C held by them in favor of the nominee of their choice to
3.
<PAGE> 4
serve on the Company's Board of Directors. The Series C Investors shall have the
right at any time and for any reason (or for no reason) to remove Mr. Mizel as
their representative to the Company's Board of Directors and nothing herein
shall be construed to the contrary.
(c) For so long as GE Capital, along with its Affiliates, continues to
hold not less than 1,596,377 shares of Series D Preferred Stock ("Series D"), at
each election of directors in which the holders of Series D, voting together as
a single class, are entitled to elect a director of the Company, the Investors
holding shares of Series D ("Series D Investors") shall vote the shares of
Series D held by them, as applicable, for the person designated by GE Capital
who shall be either the chief executive officer of GE Financial Assurance
Holdings, Inc. or another individual mutually acceptable to GE Capital and the
Key Stockholders (hereinafter, the "GE Board Member") as their representative to
the Board (the shares required to be held by GE Capital or its Affiliates
pursuant to this sentence shall be the "Minimum GE Holdings"). For so long as GE
Capital, along with its Affiliates, continues to hold not less than the Minimum
GE Holdings, GE Capital may at any time and for any reason (or for no reason)
elect to remove the GE Board Member and the Series D Investors hereby agree to
vote in favor of such removal. For so long as GE Capital, along with its
Affiliates, continues to hold not less than the Minimum GE Holdings, if at any
time following the Closing of the transactions contemplated by the Series D
Preferred Stock Purchase Agreement, GE Capital decides to replace the GE Board
Member with another representative, it shall consult with the Key Stockholders
to choose a new representative that is mutually acceptable to GE Capital and the
Key Stockholders. The Company shall reimburse the GE Board Member or the
Designee (as defined below), as the case may be, for reasonable expenses
incurred in attending meetings of the Board of Directors.
For so long as GE Capital, along with its Affiliates, continues to hold
not less than the Minimum GE Holdings, GE Capital shall have the right to send a
designee (the "Designee"), to attend any meeting of the Company's Board of
Directors which the GE Board Member does not attend or if there is a vacancy in
the Board of Directors position elected by the Series D Investors, which
Designee shall have the right to receive copies of all notices and other
materials furnished to directors of the Company at the same time such documents
are furnished to the directors. Notwithstanding anything herein to the contrary,
the Company reserves the right to exclude the Designee from access to any
material or meeting or portion thereof, or to refrain from sending any copies of
notices or other materials to the Designee, if the Company believes upon advice
of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect confidential information or for other
similar reasons. The Minimum GE Holdings will be adjusted to reflect any stock
split, stock dividend, reverse stock split or similar change to the Series D.
(d) For so long as the InsurQuote Investors hold in the aggregate not
less than 10% of the outstanding Common Stock on a fully-diluted basis, at any
time at which the stockholders of the Company will have the right to vote for,
or will vote for, or consent in writing to, the election of directors of the
Company, each Investor and Key Stockholder shall vote the shares of Common Stock
held by them, respectively, for the two persons designated by the Shareholder
Representative; provided that neither of such designees is a current or past
employee of the Company or InsurQuote (an "Outsider Director"); and provided,
further, that such designees are reasonably acceptable to a majority of the
other directors of the Company (such designees are referred to herein as the
"InsurQuote Investor Designees"). Notwithstanding
4.
<PAGE> 5
the Shareholder Representative's obligation to designate Outside Directors, the
Shareholder Representative may designate David L. Whetton to serve as a director
until the earlier of (i) the consummation of a Qualified IPO, or (ii) such time
as the Shareholder Representative designates, as a replacement, an Outsider
Director who is mutually acceptable to the Shareholder Representative and the
Company.
(e) Prior to the consummation of a Qualified IPO (as defined herein),
Githesh Ramamurthy shall be permitted to attend any meeting of the Company's
Board of Directors, for so long as he remains the Chief Executive Officer of CCC
Information Services Inc. During such period, Githesh Ramamurthy shall have the
right to receive copies of all notices and other materials furnished to the
directors of the Company. Notwithstanding anything herein to the contrary, the
Company reserves the right to exclude Githesh Ramamurthy from access to any
material or meeting or portion thereof, or to refrain from sending any copies of
notices or other materials to Githesh Ramamurthy, if the Company believes upon
advice of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect confidential information or for other
similar reasons. Githesh Ramamurthy's rights pursuant to the Section 2.3(e)
shall terminate upon the consummation of a Qualified IPO.
(f) If a Qualified IPO (as defined herein) shall be consummated prior
to the Company's Annual Stockholders Meeting in 2001 (the "2001 Stockholders
Meeting"), then at any time up to and including the 2001 Stockholders Meeting,
the Company shall use its commercially reasonable efforts to cause to be
nominated for election to the Board of Directors of the Company either (x) one
of the persons who was an InsurQuote Investor Designee immediately prior to the
Qualified IPO or (y) a person who is not a current or past employee of the
Company or InsurQuote and who is mutually acceptable to the Shareholder
Representative and the Company.
(g) Upon the consummation of a Qualified IPO and for so long as the
InsurQuote Investors hold in the aggregate not less than 10% of the outstanding
Common Stock on a fully-diluted basis, the Shareholder Representative shall have
the right to appoint a designee reasonably acceptable to a majority of the
directors of the Company (the "InsurQuote Investor Designee") to attend any
meeting of the Company's Board of Directors and such InsurQuote Investor
Designee shall have the right to receive copies of all notices and other
materials furnished to directors of the Company at the same time such documents
are furnished to the directors of the Company. Notwithstanding anything herein
to the contrary, the Company reserves the right to exclude the InsurQuote
Investor Designee from access to any material or meeting or portion thereof, or
to refrain from sending any copies of notices or other materials to the
InsurQuote Investor Designee, if the Company believes upon advice of counsel
that such exclusion is reasonably necessary to preserve the attorney-client
privilege, to protect confidential information or for other similar reasons.
2.3 SALE OF COMPANY. In the event that a Sale of the Company (as
defined below) is approved by the Company's Board of Directors and the required
vote of the holders of Preferred Stock pursuant to the Restated Certificate of
Incorporation of the Company, each Key Stockholder and each Investor does hereby
agree to:
5.
<PAGE> 6
(a) vote all shares of Key Stockholder Stock and Investor Stock, as
applicable, as to which he or it has beneficial ownership as of the time of the
record date for such Sale of the Company;
(b) take all actions reasonably deemed necessary by the Company's Board
of Directors to preserve "pooling of interests" accounting treatment for such
Sale of the Company, including but not limited to, not exercising any
dissenters' rights under applicable law and refraining from transferring any
securities of the Company, the acquiror or any other applicable company during
any period prohibited by then-applicable pooling of interests rules, whether
before or after the Sale of the Company; and
(c) after receiving proper notice of a stockholders meeting to approve
such Sale of the Company ("Meeting Notice"), be present, in person or by proxy,
along with any of its respective affiliated entities, as holders of shares of
voting securities, at all meetings of stockholders of the Company, to vote on
the approval of a Sale of the Company so that all shares of voting securities
beneficially owned by such stockholders and/or its affiliated entities may be
counted for the purposes of determining the presence of a quorum at such
meetings.
For purposes of this Section 2.3, "Sale of the Company" means: (i) any
consolidation or merger of the Company with or into any other corporation or
other entity or person; (ii) any merger of any other corporation into the
Company; (iii) any other corporate reorganization, in which the stockholders of
the Company immediately prior to such consolidation, merger or reorganization,
own less than 50% of the Company's voting power immediately after such
consolidation, merger or reorganization; (iv) any transaction or series of
related transactions in which in excess of fifty percent (50%) of the Company's
voting power is transferred; or (v) a sale, lease or other disposition of all or
substantially all of the assets of the Company.
ARTICLE 3
CO-SALE RIGHTS
3.1 SALES BY A KEY STOCKHOLDER.
(a) If a Key Stockholder proposes to sell or transfer any shares of Key
Stockholder Stock, then the Key Stockholder shall promptly give written notice
(the "Key Stockholder Notice") simultaneously to the Company and to each of the
Investors at least fifteen (15) business days prior to the closing of such sale
or transfer. The Key Stockholder Notice shall describe in reasonable detail the
proposed sale or transfer including, without limitation, the number of shares of
Key Stockholder Stock to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer is
being made pursuant to the provisions of Section 3.3(a) below, the Key
Stockholder Notice shall state under which section the sale or transfer is being
made.
(b) Each Investor shall have the right, exercisable upon written notice
to such Key Stockholder within fifteen (15) business days after the Key
Stockholder Notice, to participate in such sale of Key Stockholder Stock on the
same terms and conditions. Such notice shall indicate the number of shares of
Common Stock such Investor wishes to sell under its right
6.
<PAGE> 7
to participate. To the extent one or more of the Investors exercise such right
of participation in accordance with the terms and conditions set forth below,
the number of shares of Key Stockholder Stock that such Key Stockholder may sell
in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Key Stockholder Stock covered by the Key Stockholder Notice by (ii) a
fraction, the numerator of which is the number of shares of Common Stock owned
(on an as converted basis) by the Investor at the time of the sale or transfer
and the denominator of which is the total number of shares of Common Stock owned
by the Key Stockholder providing the Key Stockholder Notice and the Investors at
the time of the sale or transfer.
(d) Each Investor who elects to participate in the sale pursuant to
this Section 3.1 (a "Key Stockholder Participant") shall effect its
participation in the sale by promptly delivering to such Key Stockholder for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which such
Key Stockholder Participant elects to sell; or
(ii) that number of shares of Series A Preferred Stock
("Series A"), Series B, Series C Preferred Stock ("Series C"), Series D or
Series E or other securities convertible into Common Stock which is at such time
convertible into the number of shares of Common Stock which such Key Stockholder
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series A, Series B, Series C, Series D or Series E or
such other securities in lieu of Common Stock, such Key Stockholder Participant
shall convert such Series A, Series B, Series C, Series D or Series E or such
other securities into Common Stock and deliver Common Stock as provided in
Section 3.1(d)(i) above. The Company agrees to make any such conversion
concurrent with the actual transfer of such shares to the purchaser.
(e) The stock certificate or certificates that the Key Stockholder
Participant delivers to such Key Stockholder pursuant to Section 3.1(d) shall be
transferred to the prospective purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Key
Stockholder Notice, and the Key Stockholder shall concurrently therewith remit
to such Key Stockholder Participant that portion of the sale proceeds to which
such Key Stockholder Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Key Stockholder Participant exercising its rights of co-sale hereunder, such
Key Stockholder shall not sell to such prospective purchaser or purchasers any
Key Stockholder Stock unless and until, simultaneously with such sale, such Key
Stockholder shall purchase such shares or other securities from such Key
Stockholder Participant on the same terms and conditions specified in the Key
Stockholder Notice.
7.
<PAGE> 8
(f) The exercise or non-exercise of the rights of an Investor hereunder
to participate in one or more sales of Key Stockholder Stock made by such Key
Stockholder shall not adversely affect such Investor's rights to participate in
subsequent sales of Key Stockholder Stock subject to Section 3.1(a).
(g) If none of the Investors elects to participate in the sale of the
Key Stockholder Stock subject to the Key Stockholder Notice or do not
participate with respect to all of the Key Stockholder Stock proposed to be
sold, such Key Stockholder may, not later than sixty (60) days following
delivery to the Company of the Key Stockholder Notice, enter into an agreement
with the transferee identified in the Key Stockholder Notice providing for the
closing of the transfer of the Key Stockholder Stock covered by the Key
Stockholder Notice within thirty (30) days of such agreement on terms and
conditions no more favorable to the transferor than those described in the Key
Stockholder Notice. Any proposed transfer on terms and conditions more favorable
than those described in the Key Stockholder Notice or to a transferee not
identified in such notice, as well as any subsequent proposed transfer of any of
the Key Stockholder Stock by a Key Stockholder, shall again be subject to the
co-sale rights of the Investors and shall require compliance by a Key
Stockholder with the procedures described in this Section 3.1.
3.2 SALES BY INVESTORS.
(a) If one or more Investors (the "Selling Investors") propose to sell
or transfer shares of Investor Stock that represent, on a cumulative basis
taking account of all prior sales by the Selling Investors, twenty percent (20%)
or more of the outstanding capital stock of the Company on a fully diluted
basis, then such Selling Investor or Investors shall promptly give written
notice (the "Investor Notice") simultaneously to the Company and to each of the
other Investors at least fifteen (15) business days prior to the closing of such
sale or transfer. The Investor Notice shall describe in reasonable detail the
proposed sale or transfer including, without limitation, the number of shares of
Investor Stock to be sold or transferred, the nature of such sale or transfer,
the consideration to be paid, and the name and address of each prospective
purchaser or transferee. In the event that the sale or transfer is being made
pursuant to the provisions of Sections 3.3(a) below, the Investor Notice shall
state under which section the sale or transfer is being made.
(b) Each Investor that is not a Selling Investor shall have the right,
exercisable upon written notice to the Selling Investor or Investors within
fifteen (15) business days after the Investor Notice, to participate in such
sale of Investor Stock on the same terms and conditions. Such notice shall
indicate the number of shares of Common Stock such Investor wishes to sell under
its right to participate. To the extent one or more of the Investors exercise
such right of participation in accordance with the terms and conditions set
forth below, the number of shares of Investor Stock that the Selling Investor or
Investors may sell in the transaction shall be correspondingly reduced.
(c) Each Investor that is not a Selling Investor may sell all or any
part of that number of shares equal to the product obtained by multiplying (i)
the aggregate number of shares of Investor Stock covered by the Investor Notice
by (ii) a fraction the numerator of which is the number of shares of Common
Stock owned by the Investor at the time of the sale or transfer and
8.
<PAGE> 9
the denominator of which is the total number of shares of Common Stock owned by
the Selling Investor or Investors providing the Investor Notice and the other
Investors at the time of the sale or transfer.
(d) Each Investor who elects to participate in the sale pursuant to
this Section 3.2 (an "Investor Participant") shall effect its participation in
the sale by promptly delivering to the Selling Investor or Investors for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which such
Investor Participant elects to sell; or
(ii) that number of shares of Series A, Series B, Series C,
Series D or Series E or other securities convertible into Common Stock which is
at such time convertible into the number of shares of Common Stock which such
Investor Participant elects to sell; provided, however, that if the prospective
purchaser objects to the delivery of Series A, Series B, Series C, Series D or
Series E or such other securities in lieu of Common Stock, such Investor
Participant shall convert such Series A, Series B, Series C, Series D or Series
E or such other securities into Common Stock and deliver Common Stock as
provided in Section 3.2(d)(i) above. The Company agrees to make any such
conversion concurrent with the actual transfer of such shares to the purchaser.
(e) The stock certificate or certificates that the Investor Participant
delivers to the Selling Investor or Investors pursuant to Section 3.2(d) shall
be transferred to the prospective purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Investor
Notice, and the Selling Investor or Investors shall concurrently therewith remit
to such Investor Participant that portion of the sale proceeds to which such
Investor Participant is entitled by reason of its participation in such sale. To
the extent that any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase shares or other securities from an
Investor Participant exercising its rights of co-sale hereunder, the Selling
Investor or Investors shall not sell to such prospective purchaser or purchasers
any Investor Stock unless and until, simultaneously with such sale, the Selling
Investor or Investors shall purchase such shares or other securities from such
Investor Participant on the same terms and conditions specified in the Investor
Notice.
(f) The exercise or non-exercise of the rights of an Investor hereunder
to participate in one or more sales of Investor Stock made by a Selling Investor
shall not adversely affect such Investor's rights to participate in subsequent
sales of Investor Stock subject to Section 3.2(a).
(g) If none of the other Investors elect to participate in the sale of
the Investor Stock subject to the Investor Notice or do not participate with
respect to all of the Investor Stock proposed to be sold, the Selling Investor
or Investors may, not later than sixty (60) days following delivery to the
Company of the Investor Notice, enter into an agreement with the transferee
identified in the Investor Notice providing for the closing of the transfer of
the Investor Stock covered by the Investor Notice within thirty (30) days of
such agreement on terms and conditions no more favorable to the transferor than
those described in the Investor Notice.
9.
<PAGE> 10
Any proposed transfer on terms and conditions more favorable than those
described in the Investor Notice or to a transferee not identified in such
notice, as well as any subsequent proposed transfer of any of the Investor Stock
by a Selling Investor, shall again be subject to the co-sale rights of the
Investors and shall require compliance by a Selling Investor with the procedures
described in this Section 3.2.
3.3 EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the Investors
pursuant to Sections 3.1 and 3.2 above shall not apply to (i) any transfer or
transfers by a Key Stockholder which, in the aggregate, over the term of this
Agreement, amount to no more than ten percent (10%) of the shares of Key
Stockholder Stock held by a Key Stockholder as of the date hereof, (ii) any
pledge of Co-Sale Stock made pursuant to a bona fide loan transaction with a
financial institution that creates a mere security interest, (iii) any transfer
to the ancestors, descendants or spouse of the Key Stockholders or Investors or
to trusts for the benefit of such persons, the Key Stockholder or an Investor,
(iv) any transfer or transfers by a Key Stockholder to another Key Stockholder
(the "Transferee-Key Stockholder"), so long as the Transferee-Key Stockholder
is, at the time of the transfer, employed by or acting as a consultant or
director of the Company or any transfer by an Investor to another Investor, (v)
any transfer or transfers to any Affiliate of an Investor, or (vi) any bona fide
gift; provided that in the event of any transfer made pursuant to one of the
exemptions provided by clauses (ii), (iii), (iv), (v) and (vi), (A) the Key
Stockholder or Investor, as applicable, shall inform the Company and the
Investors of such pledge, transfer or gift prior to effecting it and (B) the
pledgee, transferee or donee, prior to the completion of the pledge, transfer,
gift or assignment, shall have executed documents assuming the obligations of
the Key Stockholder or Investor under this Agreement with respect to the Key
Stockholder Stock or Investor Stock pledged, transferred, given or assigned to
such person. Except with respect to Key Stockholder Stock transferred under
clause (i) above (which Stock shall no longer be subject to the co-sale rights
of the Investors), such transferred Stock shall remain "Co-Sale Stock"
hereunder, and such pledgee, transferee or donee shall be treated as the "Key
Stockholder" or "Investor," as applicable, for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Sections 3.1 and
3.2 shall not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit the
right that the Company may have to repurchase securities from the Key
Stockholders or any Investor pursuant to (i) a stock restriction agreement or
other agreement between the Company and the Key Stockholder or such Investor and
(ii) any right of first refusal set forth in the Bylaws of the Company.
3.4 PROHIBITED TRANSFERS.
(a) In the event that a Key Stockholder or any Investor should sell any
Co-Sale Stock in contravention of the co-sale rights of each Investor under this
Agreement (a "Prohibited Transfer"), each Investor, in addition to such other
remedies as may be available at
10.
<PAGE> 11
law, in equity or hereunder, shall have the put option provided below, and such
Key Stockholder or Selling Investor shall be bound by the applicable provisions
of such option.
(b) In the event of a Prohibited Transfer, each Investor shall have the
right to sell to such Key Stockholder or Selling Investor the type and number of
shares of Common Stock equal to the number of shares each Investor would have
been entitled to transfer to the purchaser under Section 3.1 or 3.2 hereof had
the Prohibited Transfer been effected pursuant to and in compliance with the
terms thereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Key Stockholder or Selling Investor shall be equal to the price per share
paid by the purchaser to such Key Stockholder or Selling Investor in such
Prohibited Transfer. The Key Stockholder or Selling Investor shall also
reimburse each Investor for any and all fees and expenses, including reasonable
legal fees and expenses, incurred pursuant to the exercise or the attempted
exercise of the Stockholder's rights under Section 3.1 or 3.2.
(ii) Within ninety (90) days after the date on which an
Investor received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Key Stockholder or Selling Investor the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) Such Key Stockholder or Selling Investor shall, upon
receipt of the certificate or certificates for the shares to be sold by an
Investor, pursuant to this Section 3.4, pay the aggregate purchase price
therefor and the amount of reimbursable fees and expenses, as specified in
Section 3.4(b)(i), in cash or by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Key
Stockholder or Selling Investor to transfer Co-Sale Stock in violation of
Section 3.1 or 3.2 hereof shall be voidable at the option of a majority in
interest of the Investors if the Investors do not elect to exercise the put
option set forth in this Section 3.4, and the Company agrees it will not effect
such a transfer nor will it treat any alleged transferee as the holder of such
shares without the written consent of a majority in interest of the Investors.
ARTICLE 4
LEGEND
4.1 LEGEND. Each certificate representing shares of Key Stockholder
Stock and Investor Stock now or hereafter owned by the Key Stockholders and the
Investors, or issued to any person in connection with a transfer pursuant to
Section 3.3(a) hereof, shall be endorsed with the following legend (the
"Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A FIFTH AMENDED AND RESTATED STOCKHOLDERS AGREEMENT,
DATED MARCH 27, 2000 WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING
AND SALE OF THE
11.
<PAGE> 12
SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH
SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON
WRITTEN REQUEST TO CHANNELPOINT, INC. AT ITS PRINCIPAL PLACE OF
BUSINESS."
4.2 TRANSFER RESTRICTIONS. The Key Stockholders and the Investors agree
that the Company may instruct its transfer agent to impose transfer restrictions
on the shares represented by certificates bearing the Legend to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
Company agrees that, during the term of this Agreement, it will not remove, and
will not permit to be removed (upon registration of transfer, reissuance or
otherwise), the Legend from any such certificate and will place or cause to be
placed the Legend on any new certificate issued to represent Key Stockholder
Stock or Investor Stock theretofore represented by a certificate carrying the
Legend. The Legend shall be removed upon termination of this Agreement.
ARTICLE 5
TERMINATION
5.1 TERMINATION EVENTS.
(a) This Agreement shall continue in full force and effect from the
date hereof through the date as of which the parties hereto terminate this
Agreement in its entirety by written consent of Investors holding a majority of
the Investor Stock, voting on an as converted basis, Investors holding more than
sixty-six and two-thirds percent (66-2/3%) in interest of the Series D and Key
Stockholders holding a majority of the Key Stockholder Stock.
(b) Notwithstanding the foregoing, (i) this Agreement will terminate
in its entirety as to all Key Stockholders and all Investors other than the
InsurQuote Investors (and such persons thereafter will not be deemed to be Key
Stockholders or Investors hereunder) on the date of the closing of a firmly
underwritten public offering of the Company's Common Stock pursuant to a
registration statement filed with, and declared effective under the Securities
Act, covering the offer and sale of Common Stock in which (i) the per share
price is at least ten dollars and forty eight and one half cents ($10.485)
(adjusted for any stock dividends, splits, combinations or other
recapitalizations), and (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least forty million dollars
($40,000,000) (a "Qualified IPO"), and (ii) as to the InsurQuote Investors and
the Company, all provisions of this Agreement, other than Sections 2.2(f),
2.2(g), 5.1(b), Article 6 and any applicable definitions, will terminate in
their entirety upon the closing of a Qualified IPO.
12.
<PAGE> 13
ARTICLE 6
MISCELLANEOUS
6.1 OWNERSHIP; AUTHORITY. Each Key Stockholder and Investor represents
and warrants that (a) he or it owns the capital stock of the Company held by him
or it, free and clear of liens or encumbrances, and has not, prior to or on the
date of this Agreement, executed or delivered any proxy or entered into any
other voting agreement or similar arrangement other than one which has expired
or terminated prior to the date hereof, (b) each is the sole legal and
beneficial owner of those shares of Co-Sale Stock he or it currently holds
subject to the Agreement and that no other person has any interest (other than a
community property interest) in such shares and (c) such Key Stockholder or
Investor has full power and capacity to execute, deliver and perform this
Agreement, which has been duly executed and delivered by, and evidences the
valid and binding obligation of, such Key Stockholder or Investor, as
applicable, enforceable in accordance with its terms.
6.2 OBLIGATION TO EFFECT TRANSFER. If and whenever shares of the Key
Stockholder Stock or Investor Stock are sold or otherwise transferred in
compliance with this Agreement, such selling Key Stockholder or Investor or the
personal representative of such Key Stockholder or Investor shall do all things
and execute and deliver all documents and make all transfers, and cause any
transferee of the Key Stockholder Stock or the Investor Stock to do all things
and execute and deliver all documents, as may be necessary to consummate such
sale consistent with this Agreement.
6.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages that will accrue to a party hereto or
to their heirs, personal representatives or assigns by reason of a failure to
perform the obligations set forth in Sections 2 and 3 of this Agreement and
agree that the terms of Sections 2 and 3 of this Agreement shall be specifically
enforceable. If any party hereto or his heirs, personal representatives or
assigns institutes any action or proceeding to specifically enforce the
provisions thereof, any person against whom such action or proceeding is brought
hereby waives the claim or defense therein that such party or such personal
representative has an adequate remedy at law, and such person shall not offer in
any such action or proceeding the claim or defense that such remedy at law
exists.
6.4 CONDITIONS TO EXERCISE OF RIGHTS. Exercise of each party's rights
under this Agreement shall be subject to and conditioned upon, and the Key
Stockholders, each Investor and the Company shall use their best efforts to
assist each party in, compliance with applicable laws.
6.5 RIGHTS OF STOCKHOLDER. Except as provided by this Agreement, each
Key Stockholder and Investor shall exercise the full rights of a stockholder
with respect to the Key Stockholder Stock and the Investor Stock, respectively.
6.6 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado as applied to agreements among Colorado
residents entered into and to be performed entirely within Colorado.
6.7 AMENDMENT. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the
13.
<PAGE> 14
Company, (ii) as to the Investors, by persons holding more than sixty-six and
two-thirds percent (66-2/3%) in interest of the Common Stock held by the
Investors and their assignees, pursuant to Section 6.8 hereof, and (iii) as to
the Key Stockholders, only by the Key Stockholders; provided, however, that in
the event that such amendment or waiver adversely affects the obligations and/or
rights of the holders of one class or one series of stock in a different manner
than the holders of other classes or series of stock, such amendment or waiver
shall also require the written consent of the holders of a majority in interest
of the adversely affected class or series or stock, as the case may be. Any
amendment or waiver effected in accordance with clauses (i), (ii), and (iii) of
this Section 6.7 shall be binding upon each Investor, its successors and
assigns, the Company and the Key Stockholders. Notwithstanding the foregoing,
this Agreement may be amended with only the written consent of the Company to
include (x) additional Series E Investors and (y) additional purchasers of the
stock of InsurQuote as "Investors" and parties hereto.
6.8 ASSIGNMENT OF RIGHTS. This Agreement constitutes the entire
agreement between the parties relative to the specific subject matter hereof.
Any previous agreement among the parties relative to the specific subject matter
hereof is superseded by this Agreement. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
For transfers other than those pursuant to Rule 144 or a registration statement
under the Securities Act, the Company shall not permit the transfer of any of
the Key Stockholder Stock or Investor Stock on its books or issue a new
certificate representing any of the Key Stockholder Stock or Investor Stock
unless and until the person to whom such security is to be transferred shall
have executed a written Agreement, substantially in the form of this Agreement,
pursuant to which such person becomes a party to this Agreement and agrees to be
bound by all the provisions hereof as if such person were a Key Stockholder or
Investor, as applicable.
6.9 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and complete understanding and agreement between the parties with
regard to the subjects hereof and supercedes the Prior Agreements. The holders
of more than sixty-six and two-thirds percent (66 2/3%) of the Common Stock held
by the Investors subject to the Prior Agreements and each of the Key
Stockholders hereby consent to the amendment of the Prior Agreements by virtue
of such holders' execution of this Agreement. No party shall be liable or bound
to any other in any manner with respect to the subjects hereof by any
representations, warranties, covenants and agreements except as specifically set
forth herein.
6.10 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
Exhibit A to the Series E Purchase Agreement or at such other address as such
party may designate by ten (10) days advance written notice to the other parties
hereto.
14.
<PAGE> 15
6.11 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.12 EFFECT OF CHANGES IN STOCK. In the event that subsequent to the
date of this Agreement any shares or other securities (other than any shares or
securities of another corporation issued to the Company's stockholders pursuant
to a plan of merger) are issued on, or in exchange for, any of the Key
Stockholder Stock or Investor Stock by reason of any stock dividend, stock
split, consolidation of shares, reclassification or consolidation involving the
Company, such shares or securities shall be deemed to be Key Stockholder Stock
or Investor Stocks, as the case may be, for purposes of this Agreement.
6.13 LIMITATION ON WAIVER. No waivers of any breach of this Agreement
extended by any party hereto to any other party shall be construed as a waiver
of any rights or remedies of any other party hereto or with respect to any
subsequent breach.
6.14 ATTORNEY'S FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party
shall be entitled to all costs and expenses of maintaining such suit or action,
including reasonable attorneys' fees.
6.15 FURTHER ACTION. In the event that, at any time after the date of
this Agreement, any further action is necessary or desirable in order to carry
out the purposes of this Agreement, the parties hereto agree to take all such
lawful and necessary action.
6.16 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amended
and Restated Stockholders' Agreement as of the date first above written.
THE COMPANY:
CHANNELPOINT, INC.
/s/ KENNETH E. HOLLEN
- ---------------------------------------------
Kenneth E. Hollen
President and Chief Executive Officer
10155 Westmoor Drive, Suite 210
Westminster, CO 80020
KEY STOCKHOLDERS:
/s/ JAMES B. HOLLEN
- ---------------------------------------------
James B. Hollen
/s/ KENNETH E. HOLLEN
- ---------------------------------------------
Kenneth E. Hollen
REID ANDREW HOLLEN IRREVOCABLE TRUST
NO. 1
By: /s/ JAMES B. HOLLEN
-----------------------------------------
Name: James B. Hollen
---------------------------------------
Title: Grantor
--------------------------------------
PAIGE ELISABETH HOLLEN IRREVOCABLE
TRUST NO. 1
By: /s/ JAMES B. HOLLEN
-----------------------------------------
Name: James B. Hollen
---------------------------------------
Title: Grantor
--------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 17
DANE BRADLEY HOLLEN IRREVOCABLE
TRUST NO. 1
By: /s/ JAMES B. HOLLEN
----------------------------------------------
Name: James B. Hollen
---------------------------------------------
Title: Grantor
--------------------------------------------
JHH INVESTMENTS, LLLP
By: /s/ JAMES B. HOLLEN
-----------------------------------------------
Name: James B. Hollen
---------------------------------------------
Title: General Partner
--------------------------------------------
PETER JAMES HOLLEN IRREVOCABLE TRUST
NO. 1
By: /s/ KENNETH E. HOLLEN FOR PETER JAMES HOLLEN
-----------------------------------------------
Name: Kenneth E. Hollen
---------------------------------------------
Title:
--------------------------------------------
HENRY PORTER HOLLEN IRREVOCABLE
TRUST NO. 1
By: /s/ KENNETH E. HOLLEN FOR HENRY PORTER HOLLEN
------------------------------------------------
Name: Kenneth E. Hollen
----------------------------------------------
Title:
--------------------------------------------
HAYDEN MILLER HOLLEN IRREVOCABLE
TRUST NO. 1
By: /s/ KENNETH E. HOLLEN FOR HAYDEN MILLER HOLLEN
------------------------------------------------
Name: Kenneth E. Hollen
---------------------------------------------
Title:
--------------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 18
KMH INVESTMENTS, LLLP
By: /s/ KENNETH E. HOLLEN
------------------------------------------------
Name: Kenneth E. Hollen
----------------------------------------------
Title: General Partner
---------------------------------------------
/s/ MEREDITH R. HOLLEN
- ---------------------------------------------------
MEREDITH R. HOLLEN
/s/ TERIE MOORE
- ---------------------------------------------------
TERIE MOORE
/s/ BRIAN GOATES
- ---------------------------------------------------
BRIAN GOATES
/s/ DEBORAH A. WALLHERMFECHTEL
- ---------------------------------------------------
DEBORAH A. WALLHERMFECHTEL
/s/ SCOTT WALLHERMFECHTEL
- ---------------------------------------------------
SCOTT WALLHERMFECHTEL
/s/ JOHN SALDANA
- ---------------------------------------------------
JOHN SALDANA
/s/ PIXIE SALDANA
- ---------------------------------------------------
PIXIE SALDANA
/s/ ANNE MOORE
- ---------------------------------------------------
ANNE MOORE
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 19
INVESTORS:
MOHR, DAVIDOW VENTURES IV, L.P.
By: Fourth MDV Partners, L.L.C.,
General Partner
By: /s/ NANCY SCHOENDORF
-----------------------------------------
Its: Member
-----------------------------------------
MDV IV ENTREPRENEURS' NETWORK FUND, L.P.
By: Fourth MDV Partners, L.L.C.,
General Partner
By: /s/ NANCY SCHOENDORF
-----------------------------------------
Its: Member
-----------------------------------------
PACIFIC VENTURE GROUP, L.P.
By: PVG Equity Partners, L.L.C.,
its General Partner
By: /s/ EVE M. KURTIN
-----------------------------------------
Eve Kurtin
Member
PVG ASSOCIATES, L.P.
By: PVG Equity Partners, L.L.C.,
its General Partner
By: /s/ EVE M. KURTIN
-----------------------------------------
Eve Kurtin
Member
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 20
GC&H INVESTMENTS
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
- ---------------------------------------------
GENE E. HOLLEN
- ---------------------------------------------
KENNETH PLUMLEE
DEVIN C. MILLER TRUST
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
COLE T. MILLER TRUST
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
- ---------------------------------------------
SCOTT NYQUIST
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 21
HLM/CB ASSOCIATES, LLC
By:
-----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
AC VENTURES B.V. (FORMERLY AC TECHNOLOGY
(ACT A) B.V.)
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
---------------------------------------
CAPITAL Z FINANCIAL SERVICES FUND II, LP
By: /s/ Adam Mizel
-----------------------------------------
Name: Adam Mizel
----------------------------------------
Title: General Partner
---------------------------------------
CAPITAL Z FINANCIAL SERVICES PRIVATE
FUND II, LP
By: /s/ Adam Mizel
-----------------------------------------
Name: Adam Mizel
-----------------------------------------
Title: General Partner
----------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 22
VALIDUS L.P.
By: /s/ Bernard J. McDonagh
-----------------------------------------
Name: Bernard J. McDonagh
----------------------------------------
Title: General Partner
---------------------------------------
INTEL CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
HLM INVESTMENT PARTNERS LLC
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Michael S. Fisher
-----------------------------------------
Name: Michael S. Fisher
-----------------------------------------
Title: Managing Director
-----------------------------------------
VIRGINIA SURETY COMPANY, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 23
UNITED HEALTHCARE SERVICES, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
WELLPOINT HEALTH NETWORKS INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
BG INVESTMENTS LTD.
By: /s/ Michael R. Deevy
-----------------------------------------
Name: Michael R. Deevy
-----------------------------------------
Title: Director
-----------------------------------------
MARSH & MCLENNAN CAPITAL TECHNOLOGY
VENTURE FUND, L.P.
BY: MARSH & MCLENNAN CAPITAL TECHNOLOGY
VENTURE GP, L.P., ITS GENERAL PARTNER
BY: MARSH & MCLENNAN GP II, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 24
MARSH & MCLENNAN CAPITAL TECHNOLOGY
PROFESSIONALS VENTURE FUND, L.P.
BY: MARSH & MCLENNAN GP II, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
TRIDENT II, L.P.
BY: TRIDENT CAPITAL II, L.P., ITS GENERAL PARTNER
BY: MARSH & MCLENNAN GP I, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
MARSH & MCLENNAN EMPLOYEES' SECURITIES
COMPANY, L.P.
BY: MARSH & MCLENNAN GP I, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 25
MARSH & MCLENNAN CAPITAL PROFESSIONALS
FUND, L.P.
BY: MARSH & MCLENNAN GP I, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
INTERNET HEALTHCARE GROUP LLC
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
- ---------------------------------------------
PETER ROWE
PAINE WEBBER CAPITAL INC.
By: /s/ DHANANJAY PAI
----------------------------------------
Name: Dhananjay Pai
---------------------------------------
Title: President
--------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 26
INSURQUOTE INVESTORS:
- ---------------------------------------------
[Insert Name]
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
ChannelPoint, Inc.
Fifth Amended and Restated Stockholders Agreement
<PAGE> 27
EXHIBIT A
KEY STOCKHOLDERS
<TABLE>
<S> <C>
KEY STOCKHOLDER CO-SALE STOCK
James B. Hollen 4,115,020 shares Common Stock
Kenneth E. Hollen 5,195,000 shares Common Stock
Reid Andrew Hollen Irrevocable Trust No. 1 19,998 shares of Common Stock
Paige Elisabeth Hollen Irrevocable Trust No. 1 19,998 shares of Common Stock
Dane Bradley Hollen Irrevocable Trust No. 1 19,998 shares of Common Stock
Terie Moore 19,998 shares of Common Stock
Brian Goates 19,998 shares of Common Stock
Scott Wallhermfechtel 29,998 shares of Common Stock
Deborah A. Wallhermfechtel 29,998 shares of Common Stock
John Saldana 19,998 shares of Common Stock
Pixie Saldana 19,998 shares of Common Stock
Anne Moore 19,998 shares of Common Stock
JHH Investments, LLLP 260,000 shares of Common Stock
Meredith R. Hollen 50,000 shares of Common Stock
Peter James Hollen Irrevocable Trust No. 1 10,000 shares of Common Stock
Henry Porter Hollen Irrevocable Trust No. 1 10,000 shares of Common Stock
Hayden Miller Hollen Irrevocable Trust No. 1 10,000 shares of Common Stock
KMH Investments, LLLP 260,000 shares of Common Stock
Peter Rowe 20,000 shares of Common Stock
</TABLE>
<PAGE> 28
EXHIBIT B
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NAME SERIES A SERIES B SERIES C SERIES D SERIES E COMMON
SHARES SHARES SHARES SHARES SHARES STOCK
<S> <C> <C> <C> <C> <C> <C>
Mohr, Davidow Ventures IV, L.P. 2,352,000 -- 146,154 90,605
MDV IV Entrepreneurs' Network Fund, L.P. 98,000 -- 7,692 4,769
Pacific Venture Group, L.P. 2,340,289 -- 146,923 --
PVG Associates, L.P. 109,711 -- 6,923 --
GC&H Investments 25,000 -- 6,520 --
Gene E. Hollen 40,000 -- 10,432 --
Devin C. Miller Trust 5,000 -- -- --
Cole T. Miller Trust 5,000 -- -- --
Scott Nyquist 15,000 -- 3,912 --
Kenneth Plumlee 10,000 -- -- --
Validus L.P. -- 1,200,000 461,538 47,687
AC Technology II (ACT) B.V. -- 500,000 -- --
HLM/CB Associates, LLC -- 18,181 -- --
Capital Z Financial Services Fund II, L.P. -- -- 2,678,081 200,661
Capital Z Financial Services Private Fund II, -- -- 14,226
L.P.
Intel Corporation -- -- 307,692
HLM Investment Partners LLC -- -- 7,692
GE Capital Equity Investments, Inc. -- -- -- 1,773,752
Virginia Surety Company, Inc. -- -- -- 318,073
United HealthCare Services, Inc. -- -- -- 238,435
WellPoint Health Networks Inc. -- -- -- 119,217
BG Investments Ltd. -- -- -- 119,217
Marsh & McLennan Capital Technology -- -- -- 191,117
Venture Fund, L.P.
Marsh & McLennan Capital Technology -- -- -- 76,298
Professionals Venture Fund, L.P.
Trident II, L.P. -- -- -- 112,597
Marsh & McLennan Employees' Securities -- -- -- 2,999
Company, L.P.
Marsh & McLennan Capital Professionals -- -- -- 3,255
Fund, L.P.
Blue Cross and Blue Shield Association -- -- -- 23,843
Internet Insurance Group Investments, L.L.C. -- -- -- 119,217
- -------------------------* ---------
- -------------------------* ---------
Total 5,000,000 1,718,181 3,797,785 3,098,020
</TABLE>
- --------
* InsurQuote Investor (to be added upon consummation of the InsurQuote
Merger)
<PAGE> 1
EXHIBIT 10.12
SUBLEASE
THIS SUBLEASE is made this 30th day of June, 1998, by and between MCI
SYSTEMHOUSE CORP., a Delaware corporation, with offices at 1133 19th Street,
N.W., Washington, D.C. 20036 (the "SUBLESSOR") and CHANNELPOINT, INC., a
corporation, with offices at 5755 Mark Dabling Boulevard, Suite 100, Colorado
Springs, CO 80919 (the "SUBLESSEE").
WITNESSETH:
WHEREAS, by lease dated June 30, 1997 (hereinafter called the "PRIME
LEASE"), CMD Realty Investment Fund, III, L.P. successor-in-interest to North
Creek I-III L.P. (the "PRIME LESSOR"), demised unto Sublessor the entire 2nd
floor, also known as Suite 200, consisting of 36,246 rentable square feet (the
"LEASED PREMISES") in the building known as North Creek II located at 5755 Mark
Dabling Boulevard, Colorado Springs, CO 80919 (the "BUILDING") for an initial
term of three (3) years; and
WHEREAS, Sublessor desires to sublet to Sublessee the entire Leased
Premises and Sublessee desires to accept such sublease; and
WHEREAS, Sublessee has in its possession and has examined a true and
correct copy of the Prime Lease a copy of which is attached hereto as EXHIBIT A
and, except as otherwise stated herein, has agreed to all the terms and
conditions therein; and
NOW, THEREFORE, Sublessor hereby subleases to Sublessee and Sublessee
hereby hires from Sublessor a portion of said Leased Premises containing
approximately 36,246 rentable square feet on the 2nd floor of the Building (the
"SUBLEASED PREMISES") as more fully described and shown on EXHIBIT B attached
hereto, together with the rights and privileges hereinafter set forth, the
Subleased Premises to be used by Sublessee for the purposes set forth in this
Sublease and for no other purpose, all in consideration of the rentals herein
set forth and on the following terms and conditions:
ARTICLE I
TERM
SECTION 1.01(a) SUBLEASE TERM. The term of this Sublease shall
commence on July 1, 1998 or upon the date which the Sublessee takes possession
of the Subleased Premises (the "COMMENCEMENT DATE") and shall continue until
midnight on the 29th day of June, 2000, or at such earlier time as may be
pursuant to this Sublease, the Prime Lease or law (the "SUBLEASE TERM"). In the
event that the Commencement Date is other the date stated herein, then Sublessor
and Sublessee agree to executed a Commencement Date Agreement following the date
that Subtenant takes possession of the Subleased Premises.
SECTION 1.02. HOLDING OVER. If Sublessee fails to surrender the
Subleased Premises at the expiration or earlier termination of the Sublease Term
and "holds over," absent any written notification from Sublessor, then Sublessee
shall pay monthly installments of Base Rent in an amount equal to one hundred
fifty percent (150%) of the monthly Base Rent installment specified in this
Sublease and any and all penalties which may be incurred by Sublessor (as
tenant) under the Prime Lease. Sublessor's acceptance of such rent shall not
prohibit or restrict Sublessor's other rights and remedies, including
Sublessor's right to evict Sublessee and to recover damages. Except as otherwise
specifically provided in this paragraph, such holdover tenancy shall be subject
to all of the terms and conditions of this Sublease.
ARTICLE II
SUBLEASED PREMISES
SECTION 2.01. CONDITION OF SUBLEASED PREMISES. Sublessee acknowledges
that it has inspected the Subleased Premises and accepts possession strictly in
"AS IS" condition. Sublessor makes no warranties, express or implied, regarding
the condition of the Subleased Premises except to the extent that such
warranties may be explicitly stated in
<PAGE> 2
this Sublease. In making and executing this Sublease, Sublessee has neither
relied upon nor been induced by any statement or representation, if any, other
than those set forth in this Sublease. Sublessor and Prime Lessor shall not be
obligated to make, arrange, or effect any alterations, repairs or improvements
to the Subleased Premises except that Sublessor shall deliver the Subleased
Premises in broom-clean condition.
SECTION 2.02. NO ALTERATIONS WITHOUT CONSENT. Sublessee shall make no
alterations to the Subleased Premises without the prior written consent of
Sublessor and the Prime Lessor. All plans and specifications for alterations to
the Subleased Premises shall be provided to Sublessor and Prime Lessor for
approval prior to the start of work. Any alterations performed to the Subleased
Premises shall be performed lien free and shall comply with all legal
requirements and all of the provisions of the Prime Lease relating to the
performance of alterations and be performed by a contractor approved by
Sublessor at the sole cost and expense of Sublessee.
SECTION 2.03. INSTALLATION OF EQUIPMENT. Sublessee shall not install
any equipment in the Subleased Premises that: (i) could generate excessive heat
or consume excessive electricity; (ii) could interfere with Sublessor's
equipment or operations; (iii) could threaten the safety of Sublessor's
employees, agents, contractors or visitors; or (iv) could harm or impair the
structural conditions of the Building.
SECTION 2.04. SURRENDER AND RESTORATION. Upon the expiration or earlier
termination of this Sublease, Sublessee shall quietly surrender the Subleased
Premises without notice, and Sublessee shall deliver all pass keys and/or
security access cards to Sublessor. Sublessee shall return the Subleased
Premises in the same order and condition as delivered at the time of Sublessee's
occupancy, ordinary wear and tear, damage by fire excepted. Any leasehold
improvements installed in the Subleased Premises shall be removed by Sublessee
prior to the termination date of this Sublease. Sublessee shall also remove all
furniture, fixtures, signs and equipment and other property owned by Sublessee
and Sublessee shall repair any damage caused by such removal. In the event that
Sublessee vacates the Subleased Premises without repairing such damage as
described above, Sublessor shall have the right to make such repairs and charge
Sublessee for such cost which cost shall be reimbursed to Sublessor on demand.
Should any of Sublessee's property remain on the Subleased Premises upon the
expiration date of this Sublease, such property shall be deemed abandoned and
Sublessor may retain title to such property or dispose of it at Sublessee's
expense. Sublessee's obligations described in this Section 2.04 shall survive
the expiration date or earlier termination of this Sublease.
ARTICLE III
ACCESS, SERVICES, MAINTENANCE, AND REPAIRS
SECTION 3.01. SUBLESSOR'S ACCESS TO SUBLEASED PREMISES. Sublessee
agrees to permit Sublessor access to the Subleased Premises upon reasonable
advance notice during the Sublease Term for the purpose of inspecting the
Subleased Premises, marketing the Subleased Premises to potential future
Sublessees or in the case of an
SECTION 3.02. UTILITIES AND SERVICES. Sublessee recognizes that
Sublessor is not in a position to furnish the services described in the Prime
Lease or to perform certain other obligations which are not within the control
of Sublessor. Therefore, Sublessee is entitled to receive only those utilities
and services to which Sublessor is entitled to receive from Prime Lessor under
the Prime Lease. Therefore, Sublessor shall not be obligated to provide any
services to Sublessee and Sublessee's sole source of services shall be Prime
Lessor, pursuant to the Prime Lease. Sublessee shall receive all customary
building maintenance services including janitorial and customary interior and
exterior maintenance as a part of the Rent paid. Sublessee waives and release
any claims against Sublessor and Prime Lessor for damages for interruption of
utilities to the Subleased Premises.
SECTION 3.03. MAINTENANCE AND REPAIRS. Sublessee is entitled only to
those repairs which Sublessor is entitled to receive under terms of the Prime
Lease and Sublessee shall look solely to the Prime Lessor under the Prime Lease
for all such maintenance and repairs. Sublessee, at its cost and expense, shall
keep and maintain the Subleased Premises and all fixtures and equipment therein
in clean, safe and sanitary condition and in compliance with all applicable laws
and regulations.
2
<PAGE> 3
Sublessee shall perform all repairs and maintenance to the Subleased Premises
as required by Sublessor (as tenant) under the Prime Lease. If Sublessee does
not perform such obligations within ten (10) days after receipt of Sublessor's
notice, Sublessor may, but need not, perform such obligations and Sublessee
shall reimburse Sublessor for such cost on demand. Sublessor shall have no
obligation to maintain or repair the Subleased Premises or any fixture or
furnishing therein. Sublessee shall promptly notify Sublessor of any maintenance
or repairs needed in the Subleased Premises, regardless of which party has the
obligation for such maintenance or repair.
ARTICLE IV
USE: COMPLIANCE WITH LAWS AND RULES AND REGULATIONS
SECTION 4.01. USE. Sublessee may use the Subleased Premises for general
office purposes only and in no event for any use prohibited or restricted by the
Prime Lease or by law. Sublessee shall not commit or permit to be committed on
the Subleased Premises any act or omission which shall violate any term or
condition of the Prime Lease.
SECTION 4.02. COMPLIANCE WITH LAWS, AND RULES AND REGULATIONS.
Sublessee shall, at its sole cost and expense, from and after the Commencement
Date comply with, and cause the Subleased Premises to comply with, all laws,
regulations and ordinances applicable to the Subleased Premises and to
Sublessee's use and occupancy thereof. Sublessee agrees that it shall comply
with all laws and with the rules and regulations stated in the Prime Lease
including all rules or regulations later promulgated by Prime Lessor.
ARTICLE V
RENT AND ADDITIONAL RENT
SECTION 5.01. BASE RENT. Sublessee shall pay to Sublessor, an annual
base rent at the rate of $13.90 per rentable square foot per annum in the
aggregate amount of $503,819.40 ("BASE RENT") payable in equal monthly
installments of $41,984.95 in advance on the first day of each month, commencing
on the Commencement Date, prorated for any portion of a month.
SECTION 5.02 ADDITIONAL RENT. In addition to paying the Base Rent due
hereunder, Sublessee shall pay to Sublessor, as Additional Rent, its
proportionate share of any escalations for increases in Operating Expenses (as
such term is defined in Section 2.02 of the Prime Lease), when and as such
Operating Expenses are billed to Sublessor (as tenant) from Prime Lessor under
the Prime Lease, said amount is currently $6.21 per rentable square foot. In
addition, any and all other charges imposed on Sublessor (as tenant) under the
Prime Lease shall be borne by Sublessee on the same terms and conditions as
provided for in the Prime Lease and likewise shall be paid to Sublessor when and
as such charges are billed to Sublessor (as tenant) under the Prime Lease.
Sublessee shall make any and all such payments directly to Sublessor at the
address stated in Section 5.05 hereof or such other persons as the Sublessor may
from time to time direct. For purposes hereof, Sublessee's proportionate share
of Operating Expenses shall be determined by multiplying Operating Expenses by a
fraction, the numerator of which is the number of rentable square feet of
Subleased Premises and the denominator of which is the number of rentable square
feet of the Premises as follows: Sublessee's proportionate share is
approximately 34.26% (36,246rsf/105,790rsf=34.26%). In the event that the Prime
Lessor invoices the Sublessor on a monthly basis for the estimated Operating
Expenses, Sublessor shall then invoice Sublessee on a monthly basis for the
estimated Operating Expenses, in accordance with Section 2.02 of the Prime
Lease. Sublessee shall have fifteen (15) days to pay Sublessor after receipt of
the written invoice. Within six (6) months following the close of each calendar
year and following receipt of the documentation from the Prime Lessor, Sublessor
shall provide an accounting showing in reasonable detail all computation of the
operating expenses for that year.
SECTION 5.03. COST OF ADDITIONAL SERVICES. Sublessee shall also be
responsible for paying directly to Sublessor (or to such other persons as
Sublessor shall from time to time direct) the cost of any additional services
provided to the
3
<PAGE> 4
Subleased Premises or based on Sublessee's use and occupancy of the Subleased
Premises. Sublessee shall make payment of any and all such services within
thirty (30) days following Sublessee's receipt of Sublessor's request for
payment.
SECTION 5.04. LATE CHARGE. If any installment of Base Rent is not paid
by the tenth (10th) day of the month during which such Base Rent is due, or if
any other amount (including Additional Rent) is not paid by the tenth (10th) day
following the date such amount is due, then in addition to such sum, Sublessee
shall pay (i) a late fee equal to ten percent (10%) of such sum until paid.
SECTION 5.05. PAYMENT. Base Rent, Additional Rent, and all other sums
payable by Sublessee under this Sublease shall be paid to Sublessor without
notice or demand and without any deduction, abatement or set-off in legal United
States tender at the following address:
MCI SYSTEMHOUSE CORP.
c/o MCI Telecommunications Corporation
701 S. 12th Street
Arlington, Virginia 22202
ATTN: Real Estate Services Dept. 0950/081
or to such other party or address as Sublessor may designate by written notice
to Sublessee. Invoices for rent due shall be rendered only for the first month
of the Sublease Term and not for recurring months. Sublessor's acceptance of
late rent payments shall not excuse such delay nor any future delays in payment
nor constitute a waiver of rights, notwithstanding any endorsement or
restriction that Sublessee may include with such payment.
SECTION 5.06. TAX ON SUBLESSEE'S PERSONAL PROPERTY. Sublessee shall
also be responsible for paying any tax due on Sublessee's equipment or personal
property, if such tax is billed by the taxing authority.
ARTICLE VI
SECURITY DEPOSIT
Subtenant has deposited the sum of One Hundred Twenty Thousand and
No/l00 Dollars ($120,000.00) in a form of a Letter of Credit for the full term
of the Sublease, with Sublandlord as security for Subtenant's payment of rent
and performance of its other obligations under this Sublease. If Subtenant
defaults in its payment of rent or performance of its other obligations,
Sublandlord may draw down all or a part of the security deposit for the payment
of rent or any other sums in default, or for the payment of any other sums which
Sublandlord may spend by reason of Subtenant's default, or for the payment to
Sublandlord of any other loss or damage which Sublandlord may suffer by reason
of Subtenant's default.
If Sublandlord uses any portion of the Letter of Credit, Subtenant will
restore the Letter of Credit to its original amount within five (5) days after
written demand from Sublandlord. The Security Deposit shall not be a limitation
on Sublandlord's damages or other rights under this Sublease, or a payment of
liquidated damages, or an advance payment of the rent. If Subtenant pays the
rent and performs all of its other obligations under this Sublease, Sublandlord
shall return the Letter of Credit to Subtenant within fifteen (15) days after
the end of the Sublease Term.
ARTICLE VII
NOTICE
SECTION 7.01. DISTRIBUTION OF NOTICE RECEIVED. Sublessor shall, no
later than two (2) business days after receipt thereof, give to Sublessee a copy
of each notice and demand received from Prime Lessor concerning the
4
<PAGE> 5
Subleased Premises or this Sublease and shall within such time give to Prime
Lessor a copy, or the substance of, each notice and demand received from
Sublessee.
SECTION 7.02. FORM OF NOTICE. Notices and other communications between
the parties shall be in writing and shall be given or made by United States
registered or certified mail, return receipt requested, or by recognized
overnight mail delivery service, pre-paid, addressed to Sublessor at:
MCI Systemhouse Corp.
c/o MCI Telecommunications Corporation
701 S. 12th Street
Arlington, Virginia 22202
ATTN: REAL ESTATE SERVICES DEPT. 0950/081
with a copy to:
MCI Telecommunications Corporation
1133 19th Street, N.W.
Washington, D.C. 20036
ATTN: LAW AND PUBLIC POLICY
REAL ESTATE ADMINISTRATOR
DEPARTMENT 0598/003
and to Sublessee at:
ChannelPoint, Inc.
Northcreek II
5755 Mark Dabling Blvd., Suite 100
Colorado Springs, CO 80919
ATTN: CEO OF CHANNELPOINT
Such notices shall be deemed effective on the date of addressee's receipt or
refusal, as the case may be. Either party may change its notice address by
giving notice of such change to the other party as stated in this Article VII.
ARTICLE VIII
INCORPORATION OF PRIME LEASE
SECTION 8.01. INCORPORATION OF SUBLEASE WITH PRIME LEASE. So long as
the provisions of the Prime Lease pertaining to the Subleased Premises do not
conflict with or are applicable to the specific provisions of this Sublease (or
are not excluded below), such provisions are incorporated into and made a part
of this Sublease. Subject to the preceding sentence, Sublessee shall be bound by
all the provisions of the Prime Lease which pertain to the Subleased Premises
and shall perform all of the obligations and responsibilities that Sublessor is
obligated to perform (as tenant) pursuant to the Prime Lease related to the
Subleased Premises.
Therefore, for purposes of this Sublease: (i) references in the Prime
Lease to "Landlord" shall mean the Sublessor; (ii) references in the Prime Lease
to "Tenant" shall mean the Sublessee; (iii) references in the Prime Lease to
"Leased Premises" or similar words shall mean the Subleased Premises; (iv)
references in the Prime Lease to "Term" shall mean the Sublease Term; and (v)
references in the Prime Lease to "use and occupancy" shall refer to Sublessee's
use and occupancy of the Subleased Premises. All terms not specifically defined
herein shall have the same meanings designated in the Prime Lease provided that
such words are not in conflict with the provisions of this Sublease.
The Prime Lease contains certain provisions that are not applicable to
this Sublease. The parties agree that the following sections of the Prime Lease
are not incorporated into this Sublease: (i) any provisions that are in direct
5
<PAGE> 6
conflict with the Sublease; (ii) any provisions relating to Prime Lessor's or
Sublessor's obligations regarding the initial construction of the Premises, the
intent of this provision being to acknowledge that construction of the Premises
covered by the Prime Lease are complete. Notwithstanding and in addition to the
preceding sentence, and not by way of limitation, the following provisions of
the Prime Lease shall not apply to Sublessee under this Sublease: Sections 15.4
and 16.14, Exhibits E and G, and Rider to Lease, Paragraphs 14, 18 and 19.
SECTION 8.02. PRIVITY. Except as specifically provided herein, nothing
contained in this Sublease shall be construed to create privity of estate or
privity of contract between Sublessee and Prime Lessor.
SECTION 8.03. BREACH OF PRIME LEASE: INDEMNIFICATION. Sublessee shall
not do or permit to be done any act or thing which will constitute a breach or
violation of any of the provisions of the Prime Lease or of any law, ordinance,
rule or regulation of any governmental body applicable to the Subleased Premises
and/or Sublessee's use and occupancy thereof. Sublessee will indemnify and hold
Sublessor harmless from and against all losses, costs, damages, expenses
(including reasonable attorneys' fees), penalties and liabilities which
Sublessor may incur or pay out by reason of any such violation or breach or any
injuries to persons or property occurring in, on or about the Subleased
Premises, or by reason of any breach, default or act of negligence hereunder by
Sublessee, its officers, employees or agents, or by reason of any work done on,
in or to the Subleased Premises by, for or on behalf of Sublessee. Likewise,
Sublessor shall not do or permit to be done any act or thing which will
constitute a breach or violation of any of the provisions of the Prime Lease.
SECTION 8.04. RIGHTS/OBLIGATIONS. Notwithstanding any provision to the
contrary in this Sublease, Sublessee shall in no case have any rights with
respect to the Subleased Premises, unless and except as specifically provided in
this Sublease, and Sublessee hereby agrees to assume all of Sublessor's
obligations under the Prime Lease, except as may be specifically provided herein
to the contrary. For example, whenever a provision of the Prime Lease which is
incorporated herein by reference requires Sublessor (as tenant) under the Prime
Lease, to perform an act or conduct a repair, such provision shall obligate
Sublessee to perform such act.
SECTION 8.05. TERMINATION OR MODIFICATION OF PRIME LEASE. If the term
of the Prime Lease is terminated prior to the expiration date of this Sublease,
this Sublease shall thereupon be terminated and Sublessor shall not be liable to
Sublessee by reason thereof unless such termination shall be due to the breach
or default of Sublessor under the terms of the Prime Lease. Sublessor hereby
agrees that it will not enter into any agreement with the Prime Lessor with
respect to the termination, surrender and acceptance of the Prime Lease, as
related to the Subleased Premises, without the prior written consent of the
Sublessee, which consent shall not be unreasonably withheld or delayed.
SECTION 8.06. SUBORDINATION OF SUBLEASE TO THE PRIME LEASE. This
Sublease is subject and subordinate to the Prime Lease and to all mortgages,
ground leases, security agreements or other encumbrances to which the Prime
Lease is subject and subordinate. Sublessee shall not by any act or failure to
act cause any default under the Prime Lease nor do anything which is prohibited
under the Prime Lease.
SECTION 8.07. DEFAULT BY PRIME LESSOR. If Prime Lessor shall default
under any of the provisions of the Prime Lease, such default shall not
constitute a default by Sublessor under this Sublease and Sublessor shall not be
obligated to cure Prime Lessor's default. Sublessor shall have no obligation to
enforce any right or remedy under the Prime Lease for Sublessee's benefit and
Sublessor shall have no liability to Sublessee for any default under the Prime
Lease by Prime Lessor.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
SECTION 9.01. NO ASSIGNMENT AND SUBLETTING WITHOUT CONSENT. Sublessee
shall not assign or sublet this Sublease or any part of the Subleased Premises
or any right or privilege
6
<PAGE> 7
appurtenant thereto, and shall not suffer or permit any other person (excepting
agents, servants or associates of Sublessee) to occupy or use the Subleased
Premises or any portion thereof, without the prior written consent of Sublessor.
Further, any assignment or subletting by Sublessee without such prior written
consent of Sublessor shall be void and shall, at the option of Sublessor,
terminate this Sublease.
ARTICLE X
INSURANCE
SECTION 10.01. SUBLESSEE'S INSURANCE. Sublessee shall maintain with
respect to the Subleased Premises comprehensive public liability and property
damage insurance in minimum limits as stated in Article 13 of the Prime Lease,
insuring Sublessor, Prime Lessor and Sublessee against bodily injury or death to
persons, and against damage to property as herein provided. Sublessee shall
deliver a certificate of such insurance to Sublessor and to Prime Lessor within
fifteen (15) days after the date hereof and Sublessor and Prime Lessor shall be
named as an additional insured on such policy. Such insurance policy shall be in
form reasonably satisfactory to Sublessor and to Prime Lessor, and shall be
placed with a company qualified to do business in the State where the Subleased
Premises are located. Such policy shall provide that it cannot be cancelled
without at least thirty (30) days prior written notice to Sublessor.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. BROKERS. Sublessor and Sublessee acknowledge that Olive
Real Estate Group, Inc. has acted as broker with regard to the Subleased
Premises and that Sublessor shall be solely responsible for, and shall pay to
said broker, a real estate commission in accordance with the terms of a separate
agreement. Sublessor agrees to indemnify, defend and hold Sublessee harmless
from any claim for such commission, and furthermore, Sublessor agrees that
should any other broker make a claim for a commission based upon the actions of
Sublessor, Sublessor shall indemnify, defend and hold Sublessee harmless from
any such claim. Sublessee represents that it has dealt with no broker other than
the aforesaid broker and agrees that, should any other broker make a claim for a
commission based upon the actions of Sublessee, Sublessee shall indemnify,
defend and hold Sublessor harmless from any such claim.
SECTION 11.02. QUIET ENJOYMENT. Sublessor covenants that upon
Sublessee's paying the rent and any other sums and observing and performing all
of the terms, covenants and conditions on Sublessee's part to be observed and
performed, Sublessee may peaceably and quietly enjoy the Subleased Premises
hereby demised, and such other rights as Sublessee is granted under this
Sublease.
SECTION 11.03. PARKING. Provided Sublessee is not in default and
subject to casualty, condemnation and applicable laws, Sublessee at all times
during the terms of the Sublease, at no additional cost to Sublessee, shall have
the right to the use up to 3 parking spaces for each 1,000 square feet of the
Subleased Premises.
SECTION 11.04. SURVIVAL. The parties agree to execute and deliver, from
time to time, as circumstances may require, any other instruments necessary to
effect the provisions of this Sublease. All of Sublessee's obligations which
accrue during the Sublease Term shall survive the expiration or earlier
termination of this Sublease.
SECTION 11.05. ENTIRE AGREEMENT. This Sublease contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior understandings and agreements. This Sublease cannot be
changed in any manner except by a written agreement signed by the parties
hereto.
SECTION 11.06. GOVERNING LAW. If any provision of this Sublease shall
be determined to be invalid or unenforceable, the remainder of this Sublease and
the application of all such provisions shall be valid and enforceable as
permitted by law. This Sublease shall be governed in all respects by the laws of
the state in which the Subleased Premises are located.
7
<PAGE> 8
SECTION 11.07. EXECUTION BY COUNTERPART; FORMAT. This Sublease may be
executed in counterparts which shall be construed together as one instrument.
Each exhibit attached hereto is made a part of this Sublease. Headings are for
convenience only and shall not affect the interpretation of this Sublease.
Unless otherwise stated, all defined terms shall have the meanings used in the
Prime Lease.
SECTION 11.08. SUCCESSORS AND ASSIGNS. This Sublease shall apply to and
bind the Sublessor and Sublessee to their respective heirs, successors, and
assigns, however the agreements and obligations of Sublessor stated in this
Sublease shall be binding upon Sublessor and its successors and assigns only
concerning breaches occurring during its and their respective ownership of
Sublessor's interest hereunder. Sublessee shall attorn to each of Sublessor's
successors and assigns.
SECTION 11.09. CONSENT OF PRIME LESSOR. This Sublease is subject to the
consent of Prime Lessor in accordance with the terms of the Prime Lease and
shall have no effect until Prime Lessor shall have given its consent and this
Sublease is executed by and delivered to all parties. If Prime Lessor refuses to
consent to this Sublease for any reason whatsoever within thirty (30) days after
the date hereof, Sublessor shall not be obligated to take any action to obtain
such consent, and this Sublease shall be deemed void and of no effect, and,
except as otherwise provided in this Sublease, all rent and other charges paid
in advance, if any, shall be refunded to Sublessee.
SECTION 11.10. AUTHORITY. The parties affirm and covenant that each has
the authority to enter into this Sublease, to abide by the terms hereof, and
that the signatories hereto are authorized representatives of their respective
entities to execute and bind such entity to this Sublease.
IN WITNESS WHEREOF, this Sublease has been duly executed by the parties
hereto as of the day and year first above written.
SUBLESSOR:
ATTEST: MCI SYSTEMHOUSE CORP.
By: /s/ DANIEL J. PERKA By: /s/ MARTHA BENSON
---------------------------- -----------------------------
Daniel J. Perka Martha Benson
Assistant Secretary Authorized Signatory
SUBLESSOR:
ATTEST: CHANNELPOINT, INC.
By: /s/ JAMES B. HOLLEN By: /s/ KENNETH E. HOLLEN
---------------------------- -----------------------------
Name: Kenneth E. Hollen
---------------------------
Its: President & CEO
----------------------------
8
<PAGE> 9
LIST OF EXHIBITS
EXHIBIT A: PRIME LEASE
EXHIBIT B: PLAN OF SUBLEASED PREMISES
9
<PAGE> 10
COMMENCEMENT DATE AGREEMENT
This agreement made this 1st day of August, 1998, MCI SYSTEMHOUSE
CORP. between (hereinafter referred to as "Sublessor") and CHANNELPOINT, INC.
(hereinafter referred to as "Sublessee").
WHEREAS, Sublessor and Sublessee entered into a Sublease dated June 30,
1998 for 36,246 rentable square feet on the second floor located in the building
known as North Creek II have an address of 5755 Mark Dabling Boulevard, Colorado
Springs, CO (the "Subleased Premises").
NOW, THEREFORE, pursuant to the provisions of Section 1.01(a) of the
Sublease, Sublessor and Sublessee mutually agree to as follows:
1. The Commencement Date of the Sublease Term is August 1, 1998. The
Expiration Date of the Sublease Term is June 29, 2000.
2. Tenant is in possession of, and has accepted, the Subleased Premises
in its "AS IS" condition.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement as of the day and date first written above.
SUBLESSOR:
MCI SYSTEMHOUSE CORP.
By:
----------------------------
Martha Benson
Authorized Signatory
SUBLESSEE:
CHANNELPOINT, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
<PAGE> 11
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023464 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[X] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [X] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As Specified
On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks). Interest
will not be compounded. Interest will be credited according to your
instructions at the time your account is opened. The interest payment may
be credited to your certificate at maturity, credited to another account at
the Bank, or paid by cashier's check on either a monthly, quarterly,
semi-annual or annual basis or at maturity of the certificate. However, if
the certificate is less than 31 days, interest will only be credited at
maturity. We use the daily balance method to calculate the interest on your
account. This method applies a daily periodic rate to the principal rate in
the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace period
of two (2) business days on a maturity of a 7-31 day term account. You have
a grace period of ten (10) business days on a maturity of a 32 or more day
term account. The Bank reserves the right to terminate this term deposit
during any renewal period upon 10 days written notice to depositor. If you
withdraw your funds during the grace period, the term deposit will cease
earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 12
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023475 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[x] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [x] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As
Specified On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks).
Interest will not be compounded. Interest will be credited according to
your instructions at the time your account is opened. The interest payment
may be credited to your certificate at maturity, credited to another
account at the Bank, or paid by cashier's check on either a monthly,
quarterly, semi-annual or annual basis or at maturity of the certificate.
However, if the certificate is less than 31 days, interest will only be
credited at maturity. We use the daily balance method to calculate the
interest on your account. This method applies a daily periodic rate to the
principal in the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace
period of two (2) business days on a maturity of a 7-31 day term account.
You have a grace period of ten (10) business days on a maturity of a 32 or
more day term account. The Bank reserves the right to terminate this term
deposit during any renewal period upon 10 days written notice to depositor.
If you withdraw your funds during the grace period, the term deposit will
cease earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 13
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023392 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[x] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [x] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As
Specified On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks).
Interest will not be compounded. Interest will be credited according to
your instructions at the time your account is opened. The interest payment
may be credited to your certificate at maturity, credited to another
account at the Bank, or paid by cashier's check on either a monthly,
quarterly, semi-annual or annual basis or at maturity of the certificate.
However, if the certificate is less than 31 days, interest will only be
credited at maturity. We use the daily balance method to calculate the
interest on your account. This method applies a daily periodic rate to the
principal in the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace
period of two (2) business days on a maturity of a 7-31 day term account.
You have a grace period of ten (10) business days on a maturity of a 32 or
more day term account. The Bank reserves the right to terminate this term
deposit during any renewal period upon 10 days written notice to depositor.
If you withdraw your funds during the grace period, the term deposit will
cease earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 14
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023512 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[x] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [x] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As
Specified On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks).
Interest will not be compounded. Interest will be credited according to
your instructions at the time your account is opened. The interest payment
may be credited to your certificate at maturity, credited to another
account at the Bank, or paid by cashier's check on either a monthly,
quarterly, semi-annual or annual basis or at maturity of the certificate.
However, if the certificate is less than 31 days, interest will only be
credited at maturity. We use the daily balance method to calculate the
interest on your account. This method applies a daily periodic rate to the
principal in the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace
period of two (2) business days on a maturity of a 7-31 day term account.
You have a grace period of ten (10) business days on a maturity of a 32 or
more day term account. The Bank reserves the right to terminate this term
deposit during any renewal period upon 10 days written notice to depositor.
If you withdraw your funds during the grace period, the term deposit will
cease earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 15
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023431 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[x] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [x] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As
Specified On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks).
Interest will not be compounded. Interest will be credited according to
your instructions at the time your account is opened. The interest payment
may be credited to your certificate at maturity, credited to another
account at the Bank, or paid by cashier's check on either a monthly,
quarterly, semi-annual or annual basis or at maturity of the certificate.
However, if the certificate is less than 31 days, interest will only be
credited at maturity. We use the daily balance method to calculate the
interest on your account. This method applies a daily periodic rate to the
principal in the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace period
of two (2) business days on a maturity of a 7-31 day term account. You have
a grace period of ten (10) business days on a maturity of a 32 or more day
term account. The Bank reserves the right to terminate this term deposit
during any renewal period upon (10) days written notice to depositor. If
you withdraw your funds during the grace period, the term deposit will
cease earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 16
[SILICON VALLEY BANK LOGO]
RECEIPT FOR TERM DEPOSIT INTERNAL BANK USE
<TABLE>
<CAPTION>
SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, CA 95054-1191 408-654-7400
<S> <C> <C> <C>
Class Code 754 Account Number 8800023350 Interest Rate 4.90% Annual Percentage Yield 4.90%
-------- -------------- ----- -----
Issue Date 7/24/98 Maturity Date 7/24/99 Term 365 days
------------ ---------- ------------
</TABLE>
Amount Deposited *****$20,000.00***** Dollars
-----------------------------------------------------
IN THE NAME(S) OF
*****Channelpoint Inc*****
<TABLE>
<S> <C> <C> <C> <C>
FJA 841367639
INTEREST PAYMENT FREQUENCY
[x] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually [ ] At Maturity Of The Certificate
METHOD OF INTEREST DISTRIBUTION
[ ] Mail Check [ ] Credit To Certificate At Maturity Only [x] Credit To Acct. No. 3300032362
---------------
</TABLE>
CD Held for Collateral
Trade Note
Finance Dept.
/s/ [ILLEGIBLE]
--------------------------------------
BANK AUTHORIZED SIGNATURE
This Term Deposit Is Subject To The Terms And Conditions Hereon And As
Specified On The Signature Card And Agreement On File With Silicon Valley Bank.
TERMS AND CONDITIONS
1. INTEREST RATE AND PAYMENT - The interest rate for your account will be paid
until the maturity date of your certificate. Interest begins to accrue on
the business day you deposit noncash items (for example, checks).
Interest will not be compounded. Interest will be credited according to
your instructions at the time your account is opened. The interest payment
may be credited to your certificate at maturity, credited to another
account at the Bank, or paid by cashier's check on either a monthly,
quarterly, semi-annual or annual basis or at maturity of the certificate.
However, if the certificate is less than 31 days, interest will only be
credited at maturity. We use the daily balance method to calculate the
interest on your account. This method applies a daily periodic rate to the
principal in the account each day.
2. ADDITIONAL DEPOSITS - After the account is opened, deposits will only be
accepted on the maturity date or any date within the grace period.
3. RENEWAL - This account will automatically renew at maturity for a like
period at Silicon Valley Bank's prevailing interest rate for that
particular term. You have a grace period after the maturity date to
withdraw the funds without being charged a penalty. You have a grace
period of two (2) business days on a maturity of a 7-31 day term account.
you have a grace period of ten (10) business days on a maturity of a 32 or
more day term account. The Bank reserves the right to terminate this term
deposit during any renewal period upon 10 days written notice to depositor.
If you withdraw your funds during the grace period, the term deposit will
cease earning interest as of the maturity date.
4. PENALTY FOR EARLY WITHDRAWAL - Partial withdrawals will not be permitted.
If we permit a withdrawal before the maturity date, a penalty as shown
below will be imposed.
a. Deposits with an original maturity of 31 days or less will forfeit all
interest earned from the date of deposit. There is a minimum penalty
of seven (7) days simple interest.
b. Deposits with an original maturity of 32 days to one year will forfeit
an amount equal to 31 days simple interest at the interest rate paid
on the time deposit at the time of withdrawal on the full amount of
the deposit.
c. Deposits with an original maturity of more than one year will forfeit
an amount equal to 90 days simple interest at the interest rate being
paid on the time deposit at the time of withdrawal on the full amount
of the deposit.
d. There is no penalty if early withdrawal is made due to the death of a
depositor or if the depositor has been declared legally incompetent.
In complying with the terms of this account, it may be necessary to deduct
a portion of the principal deposit to satisfy an early withdrawal penalty.
PRESENTATION OF THIS RECEIPT IS NOT NECESSARY FOR WITHDRAWAL OF FUNDS FROM THIS
ACCOUNT.
(Member FDIC)
NOT NEGOTIABLE * NOT TRANSFERABLE
<PAGE> 17
AMENDMENT OF LEASE AGREEMENT
This Amendment of Lease is made this 9th day of December, 1996 by and between
One Mall, LLC, a Maryland Limited Liability Company (the "Landlord"), and SHL
ACT Systemhouse Corp., successor in interest to SHL Kee Systems Inc. (the
"Tenant").
RECITALS
1. Landlord is the owner of the One Mall North Building (the "Building"),
an office building located at 10025 Governor Warfield Parkway,
Columbia, Maryland 21044.
2. The Landlord and the successor to the Tenant have entered into an
agreement of Lease, dated July 31, 1995, whereby, among other things,
the Landlord has leased unto the Tenant (the "Lease") that certain
portion of the fourth floor of the Building containing approximately
13,029 rentable square feet of space (the "Fourth Floor Space"), and
that portion of the first floor at the Building (the "First Floor
Space") containing approximately 3,750 rentable square feet.
3. The Lease has been assigned to the Tenant with Landlord's consent.
4. The Lease, pursuant to its terms, creates the obligation on the
part of the Tenant to expand into the Must Take Space on the fourth
floor of the Building as shown on Exhibit A of the Lease (the "Must
Take Space") on or before September 1, 1996. Tenant actually expanded
into the Must Take Space as of April 15, 1996 and has been paying rent
pursuant to the terms set forth herein since that date.
5. Tenant desires to future expand on the first floor of the Building,
in accordance with the terms and conditions and plan set forth below
(the "First Floor Expansion Space").
NOW, THEREFORE, in consideration of the mutual promises of the parties hereto,
the promises, and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. Lease: Except as provided herein, all the terms and conditions under
the Lease shall remain in full force and effect.
2. Must Take Space: As of April 15, 1996 the Fourth Floor Space shall be
increased by the Must Take Space, as shown on Exhibit A hereto, which
Must Take Space contains, the agreed upon equivalent of 775 rentable
square feet (the Must Take Space and the Fourth Floor Space shall
hereinafter collectively be the "Expanded Fourth Floor Space").
<PAGE> 18
3. Rental:
a) From April 15, 1996 and throughout the Lease Term, the basic annual
rent for the Must Take Space shall be paid at the same rental rates
per rentable square foot and in the same manner as set forth in
Section 5 of the Lease.
b) The rental to be paid by Tenant for the First Floor Expansion Space
shall be at the rental rates set forth in the Lease plus ($2.00) per
square foot and shall commence November 1, 1996.
c) The percentage of the Building that is occupied by the Tenant shall be
increased by 3% for purposes of computing Tenant's allocable
percentage of any Operating Expense and Real Estate Tax increases.
4. Tenant Improvements: Tenant acknowledges and agrees that Landlord has
delivered the Must Take Space as required under the Lease. The build out
specifications for the First Floor Expansion Space is set forth on Exhibit
B hereto and dated "Revision 20-08-96" which Landlord agrees to construct
on a turn key basis. If Tenant makes any changes to the Exhibit, Tenant
agrees to promptly reimburse Landlord for any costs Landlord incurs beyond
the cost to construct the space.
5. First Floor Expansion Space: The First Floor Expansion Space is shown on
Exhibit B attached hereto and incorporated by reference herein and consists
of 2,088 rentable square feet.
6. Term: The initial Term for the Must Take Space and the First Floor
Expansion Space shall be coterminous with the Term as set forth in the
Lease, it being the express intention of the parties that the Term for the
Must Take Space shall commence on April 15, 1996 and that the term for the
First Floor Expansion Space shall commence on November 1, 1996, and shall
expire on August 31, 2000. With respect to the First Floor Expansion Space
only, Landlord agrees that Tenant provided Tenant is not in default
hereunder, shall have the right to terminate the Lease as of December 31,
1997, (the "Termination Date"), by doing all of the following:
(i) send written notice to Landlord exercising Tenant's right to so
terminate the Lease with respect to the First Floor Expansion Space
only on or before September 30, 1997;
(ii) the Tenant shall be responsible for the payment of a termination Fee
in the form of one month gross rental plus all of the Landlord's
unamortized tenant improvement costs related to the First Floor
expansion space at the Termination Date. Tenant shall nevertheless be
responsible to pay the rental for the First Floor Expansion Space
until and through the Termination Date and shall also be responsible
for the allocable share of the Operating Expenses and Real Estate Tax
for the Building through that date as well.
<PAGE> 19
7. Brokerage Commissions: Tenant agrees that Landlord shall not be
responsible to pay any brokerage commissions on the leasing of the
First Floor Expansion Space.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Amendment of Lease as of the day and year first above
written.
WITNESS: ONE MALL, LLC
Governor Warfield, LLC, Member
/s/ KIMBERLY A. HARTMAN /s/ BRUCE F. TAUH (SEAL)
----------------------- ---------------------
Bruce F. Tauh, Member
SHL SYSTEMHOUSE CORP.
[ILLEGIBLE] [ILLEGIBLE] (SEAL)
----------------------- ---------------------
Authorized Signatory
<PAGE> 20
ADDENDUM TO LEASE AGREEMENT DATED DECEMBER 5TH, 1996
BETWEEN ONE MALL, LLC., (AS LANDLORD) AND MCI SYSTEMHOUSE CORP. (AS TENANT)
1. Notices
Delete the address for Tenant stated in the Lease and insert in lieu
thereof the following:
If to Tenant:
SHL Systemhouse Corp.
701 South 12th Street
Arlington, VA 22202
Attn: Real Estate Services
with a copy to:
MCI Telecommunications Corporation
Law & Public Policy Department
1133 19th Street N.W.
Washington, D.C. 20036
Attention: Real Estate Administrator.
Notices shall be deemed given when received or refused, as the case may be,
by the addressee.
2. Landlord and Tenant affirm and covenant that each has the authority to
enter into this Amendment, to abide by the terms hereof, and that the
signatories hereto are authorized representatives of their respective entities
empowered by their respective corporations to execute this Amendment.
3. Except as expressly amended or modified herein, all other terms,
covenants and conditions of the Lease shall remain in full force and effect.
4. Landlord hereby convenants and warrants to Tenant that this Amendment
does not require the approval of any lender holding a lien on the Building, nor
of any other third party.
<PAGE> 21
LEASE AMENDMENT TWO
THIS LEASE AMENDMENT TWO ("Amendment") is made and entered into as of the 30th
day of June, 1998, by and between CMD Realty Investment Fund III, L. P., an
Illinois limited partnership ("Landlord") and ChannelPoint, Inc., a Delaware
corporation ("Tenant").
A. Landlord and Tenant are the current parties to that certain lease
("Original Lease") dated March 25, 1997, for premises (the "Premises") in the
building (the "Building") known as North Creek II, located at 5755 Mark Dabling
Boulevard, Colorado Springs, Colorado 80919 (the "Property," as may be further
described below), which lease has heretofore been amended or assigned by a
document described and dated as follows First Amendment to Lease dated May 23,
1997 (collectively, and as amended herein, the "Lease").
B. The parties mutually desire to amend the Lease on and subject to the
terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereby agree as follows:
1. AMENDMENT. The parties agree that the Lease shall be amended in
accordance with the following terms and conditions:
Section 3 of the Rider to the Lease ("Right to Terminate") is
hereby deleted from the Lease.
2. EFFECTIVE DATE. This Amendment shall become effective as an
amendment to the Lease as of, on and after July 1, 1998 (herein referred to as
the "Effective Date"), and shall continue in effect until amended by the parties
in writing or until expiration or sooner termination of the Lease.
3. BROKERS. Tenant hereby represents and warrants that Tenant has not
dealt with any broker, salesman, agent or finder in connection with this
Amendment, and agrees to defend, indemnify and hold Landlord, and its employees,
agents and affiliates harmless from all damages, losses, judgments, liabilities
and expenses (including reasonable attorneys' fees) arising from any claims or
demands of any broker, salesman, agent or finder with whom Tenant has dealt for
any commission or fee alleged to be due in connection with this Amendment.
4. CONFIDENTIALITY. Tenant shall keep the content and all copies of
this document and the Lease, all related documents or amendments now or
hereafter entered, and all proposals, materials, information and matters
relating thereto strictly confidential, and shall not disclose, disseminate or
distribute any of the same, or permit the same to occur, with respect to any
party other than Tenant's financial or legal advisors to the extent that they
need such information to advise Tenant (and Tenant shall obligate any such other
parties to whom disclosure is permitted to honor the confidentiality provisions
hereof), except as may be required by Law or court proceedings.
<PAGE> 22
5. WHOLE AMENDMENT; FULL FORCE AND EFFECT; CONFLICTS. This Amendment
sets forth the entire agreement between the parties with respect to the matters
set forth herein. There have been no additional oral or written representations
or agreements. As amended herein, the Lease between the parties shall remain in
full force and effect. As an inducement for Landlord to enter into this
Amendment, Tenant hereby represents that Landlord is not in violation of the
Lease, and that Landlord has fully performed all of its obligations under the
Lease as of the date on which Tenant signs this Amendment. In case of any
inconsistency between the provisions of the Lease and this Amendment, the latter
provisions shall govern and control.
6. NOT AN OFFER. The submission and negotiation of this Amendment shall
not be deemed an offer to enter into the same by Landlord. Tenant's execution of
this Amendment constitutes a firm offer to enter into the same which may not be
withdrawn for a period of thirty (30) days after delivery to Landlord. During
such period, Landlord may proceed in reliance thereon, but such acts shall not
be deemed an acceptance. Such acceptance shall be evidenced only by Landlord
signing and delivering this Amendment to Tenant.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
WITNESSES; ATTESTATION
(Two for each signatory
required if Building is
in Florida or Ohio):
LANDLORD:
CMD REALTY INVESTMENT FUND III, L.P.,
an Illinois limited partnership
By: CMD/Fund III GP Investments, L.P.,
an Illinois limited partnership,
its general partner
By: CMD REIM III, Inc.,
an Illinois corporation,
its general partner
By: /s/ [ILLEGIBLE]
- --------------------------- -----------------------------------
Name:
--------------------------------
Its:
- --------------------------- ----------------------------------
TENANT:
CHANNELPOINT, INC.
a Delaware corporation
/s/ JAMES B. HOLLEN By: /s/ KENNETH E. HOLLEN
- --------------------------- ----------------------------------------
Name: Kenneth E. Hollen
--------------------------------------
Its: President & CEO
- --------------------------- ---------------------------------------
<PAGE> 23
EXHIBIT A
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 PARTIES. This lease agreement ("Lease") is entered into by and between
the following Lessor and Lessee:
North Creek I-III L.P., a Delaware limited partnership ("Lessor")
MCI Systemhouse Corp., a Delaware corporation ("Lessee")
1.02 LEASED PREMISES. In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises ("Leased Premises"):
36,246 (Approximate sq. ft.) Entire second floor (Suite no. 200)
North Creek II (Name of building or project)
5755 Mark Dabling Boulevard (Street address/suite number)
Colorado Springs, Colorado 80919 (City, State, and Zip Code)
The Leased Premises are shown on Exhibit A-1 attached hereto and
legally described on Exhibit B attached hereto.
1.03 TERM. Subject to and upon the conditions set forth herein, the term of
this Lease shall commence on July 1, 1997 (the "Commencement Date") or as
otherwise more specifically set forth in Exhibit C hereto, and shall terminate
thirty-six (36) months thereafter. If the Commencement Date shall occur on
other than the first day of a month, then the Lease shall terminate on the last
day of the thirty-sixth (36th) full calendar month thereafter.
1.04 BASE RENT AND SECURITY DEPOSIT. Base Rent is pursuant to the Schedule
set forth in Section 2.01. The Security deposit is $____N/A_____, and shall be
held and applied in accordance with Section 2.06.
1.05 ADDRESSES.
Lessor's Address: Lessee's Address:
LaSalle Advisors Limited MCI Telecommunications Corporation
200 East Randolph Drive c/o MCI Systemhouse Corp.
Chicago, Illinois 60601 Attn: Real Estate Administrator
701 S. 12th Street
Arlington, VA 22202
with a copy to: with a copy to:
LPAML Colorado Limited Partnership MCI Telecommunications Corporation
8055 East Tufts Avenue, Suite 101 Law and Public Policy
Denver, Colorado 80237 1133 19th Street, N.W.
Attention: General Partner Washington, D.C. 20036
Attention: Real Estate Administrator
1.06 PERMITTED USE. General office use for those uses set forth on
Exhibit D hereto.
ARTICLE 2.00 RENT
2.01 BASE RENT. Lessee agrees to pay monthly as Base Rent during the term
of this Lease the sum of money set forth below, which amount shall be payable at
the address set forth in Section 16.07.
<PAGE> 24
Base Rental Rate/ Monthly
Months SF/YR/NNN Base Rent
36 $13.90 $41,984.95
Monthly installment shall be due and payable on or before the first day of each
calendar month succeeding the Commencement Date during the term of this Lease
provided, if the Commencement Date should be a date other than the first day of
a calendar month, the monthly Base Rent set forth above shall be prorated based
on a thirty day month to the end of that calendar month, and all succeeding
installments of rent shall be payable on or before the first day of each
succeeding calendar month during the term of this Lease. Lessee shall pay as
additional rent, all other sums due under this Lease.
2.02 OPERATING EXPENSES. Lessee agrees to pay as additional rent Lessee's
pro rata share of Operating Expenses as defined in Section 2.03 below. For
purposes of this Lease, Lessee's pro rata share shall be determined by dividing
36,246 (the approximate square footage for the Leased Premises) by 105,790 (the
approximate square footage of the building), multiplying the resulting quotient
by 100, and rounding to the second decimal place (approximately 34.26%).
Tenant's pro rata share shall be adjusted accordingly if the square footage of
the Leased Premises is increased pursuant to the terms of this Lease. Lessor may
invoice Lessee monthly for Lessee's pro rata share of the estimated Operating
Expenses for each calendar year, which amount shall be adjusted each year based
upon the anticipated Operating Expenses. Within six months following the close
of each calendar year, Lessor shall provide Lessee an accounting showing in
reasonable detail all computations of additional rent due under this section. In
the event the accounting shows that the total of the monthly payments made by
Lessee exceeds the amount of additional rent due by Lessee under this section,
the accounting shall be accompanied by a refund. In the event the accounting
shows that the total of the monthly payments made by Lessee is less than the
amount of additional rent due by Lessee under this section, the accounting shall
be accompanied by an invoice for the additional rent. Notwithstanding any other
provisions in this Lease, during the year in which the Lease terminates, Lessor,
prior to the termination date, shall have the option to invoice Lessee for
Lessee's pro rata share of the Operating Expenses based upon the previous year's
Operating Expenses. If this Lease shall terminate on a day other than the last
day of a calendar year, the amount of any additional rent payable by Lessee
applicable to the year in which such termination shall occur shall be prorated
on the ratio that the number of days from the commencement of the calendar year
to and including the termination date bears to 365. Lessee shall have the right,
at its own expense, within ninety (90) days of receipt of any invoice, to audit
Lessor's books relevant to the additional rent payable under such invoice. After
such ninety (90) day period, Lessee's right to audit with respect to such
invoice is waived. Lessee agrees to pay any additional rent due under this
section within thirty (30) days following receipt of the invoice or accounting
showing additional rent due. [See Rider, Paragraph 1.]
2.03 DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses"
includes all expenses incurred by Lessor with respect to the maintenance and
operation of the parking areas and the Building of which the Leased Premises are
a part, including, but not limited to, the following: maintenance, repair and
replacement costs; electricity, fuel, water, sewer, gas and other utility
charges; security, window washing and janitorial services; trash and snow
removal; landscaping and pest control; management fees, wages and benefits
payable to employees of Lessor whose duties are directly connected with the
operation and maintenance of the building; all services, supplies, repairs,
landscaping replacements or other expenses for maintaining and operating the
building or project including parking and common areas; the cost, including
interest, amortized over its useful life, of any capital improvement made to the
building which is required under any governmental law or regulation that was not
applicable to the building at the time it was constructed; the cost, including
interest, amortized over its useful life, of installation of any device or other
equipment which improves any system within the Leased Premises or the building;
all other expenses which would generally be regarded as operating, ownership and
maintenance expenses which would reasonably be amortized over a period in
accordance with
2
<PAGE> 25
generally accepted Internal Revenue Service amortization schedules; all real
property taxes and installments of special assessments, including assessments by
means of deed restrictions and/or owners' associations which accrue against the
building of which the Leased Premises are a part during the term of this Lease;
and all insurance premiums Lessor is required to pay or deems necessary to pay,
including public liability insurance, with respect to the building. The term
Operating Expenses does not include the following: repairs, restoration or other
work occasioned by fire, wind, the elements or other casualty to the extent of
insurance proceeds; income and franchise taxes of Lessor; expenses incurred in
leasing to or procuring of lessees, leasing commissions, advertising expenses
and expenses for the renovating of space for new lessees; interest or principal
payments on any mortgage or other indebtedness of Lessor; compensation paid to
any employee of Lessor above the grade of property manager; any depreciation
allowance or expense; Operating Expenses which are the direct responsibility of
Lessee; costs of excess or additional services provided to any lessee that are
directly billed to such lessee; any income, estate, inheritance, transfer tax,
excess profit or franchise tax on Lessor's business; all costs, including legal
fees, relating to activities for the solicitation and execution of leases of
space in the building; any delinquent interest or penalties due or charged for
late payment of taxes; or any legal fees incurred by Lessor in enforcing its
rights under other leases for premises in the building. [See Rider, Paragraph
2.]
2.04 LATE PAYMENT CHARGE. Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor on or
before the tenth day; of the month for which the rent is due, or if any other
payment due Lessor by Lessee is not received by Lessor on or before the tenth
day of the month next following the month in which Lessee was invoiced, a late
payment charge of five percent (5%) applied to such past due amount shall become
due and payable in addition to such amounts owed under this Lease.
2.05 INCREASE IN INSURANCE PREMIUM. If an increase in any insurance
premiums paid by Lessor for the building is caused by Lessee's use of the
Leased Premises in a manner other than as set forth in Section 1.06, or if
Lessee vacates the Leased Premises and causes an increase in such premiums, then
Lessee shall pay as additional rent the amount of such increase to Lessor,
within thirty (30) days after receipt of invoice with supporting documentation
attached.
2.06 SECURITY DEPOSIT. Intentionally Deleted.
2.07 HOLDING OVER. In the event the Lessee does not vacate the Leased
Premises upon the expiration or termination of this Lease, Lessee shall be a
tenant at will for the holdover period and all of the terms and provisions of
this Lease shall be applicable during that period, except that Lessee shall pay
Lessor as Base Rental for the period of such holdover an amount equal to one and
one-half (1.5) times the Base Rent which would have been payable by Lessee had
the holdover period been a part of the original term of this Lease. Lessee
agrees to vacate and deliver the Leased Premises to Lessor upon Lessee's receipt
of written notice from Lessor to vacate. The rental payable during the holdover
period shall be payable to Lessor on demand. No holding over by Lessee, whether
with or without the consent of Lessor, shall operate to extend the term of this
Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 USE. Lessee warrants and represents to Lessor that the Leased Premises
shall be used and occupied only for the purpose as set forth in Section 1.06.
Lessee shall occupy the Leased Premises, conduct its business and control its
agents, employees, invitees and visitors in such a manner as is lawful,
reputable and will not create a nuisance. Lessee shall not permit any operation
which emits any odor or matter which intrudes into other portions of the
building, use any apparatus or machine which makes undue noise or causes
vibration in any portion of the building or otherwise interfere with, annoy or
disturb any other lessee in its normal business operations or Lessor in its
management of the building. Lessee shall neither permit any waste on the Leased
Premises nor allow the Leased Premises to be used in any
3
<PAGE> 26
way which would, in the opinion of Lessor, be extra hazardous on account of fire
or which would in any way increase or render void the fire insurance on the
building.
3.02 SIGNS. No sign of any type or description shall be erected, placed or
painted in or about the Leased Premises or project except those signs submitted
to Lessor in writing and approved by Lessor in writing, and which signs are in
conformance with Lessor's sign criteria established for the project.
3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Lessee, at Lessee's sole
cost and expense, shall comply with all laws, ordinances, orders, rules and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction over the use, condition or occupancy of the Leased Premises. Lessee
will comply with the rules and regulations of the building adopted by Lessor
which are set forth on Exhibit G attached to this Lease. Lessor shall have the
right at all times to change and amend the rules and regulations in any
reasonable manner as may be deemed advisable for the safety, care, cleanliness,
preservation of good order and operation or use of the building or the Leased
Premises. All changes and amendments to the rules and regulations of the
building will be sent by Lessor to Lessee in writing and shall thereafter be
carried out and observed by Lessee. [See Rider, Paragraph 3.]
3.04 WARRANTY OF POSSESSION. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the Leased Premises during the full term of this
Lease as well as any extension or renewal thereof. Lessor shall not be
responsible for the acts or omissions of any other lessee or third party that
may interfere with Lessee's use and enjoyment of the Leased Premises.
3.05 INSPECTION. Lessor or its authorized agents shall at any and all
reasonable times have the right to enter the Leased Premises to inspect the
same, to supply janitorial service or any other service to be provided by
Lessor, to show the Leased Premises to prospective purchasers and lenders of the
Building at any time upon reasonable prior verbal notice or to prospective
lessees during the last twelve (12) months of the Lease Term or if the Lessee is
in default then Lessor may show the Premises at any time, and to alter, improve
or repair the Leased Premises or any other portion of the building. Lessee
hereby waives any claim for damages for injury or inconvenience to or
interference with Lessee's business, any loss of occupancy or use of the Leased
Premises, and any other loss occasioned thereby (however, Lessee shall have the
right to have an employee or other agent present during any entry to show the
Premises or perform scheduled maintenance and shall in fact supply such escort
upon reasonable prior verbal request of Lessor). Lessor shall at all times have
and retain a key with which to unlock all of the doors in, upon and about the
Leased Premises except for portions of the Leased Premises that are on a
separate security system, which shall be accessible at any time upon prior
verbal request of Lessor, subject to Lessee's right to have an escort present.
Lessee shall not change Lessor's lock system or in any other manner prohibit
Lessor from entering the Leased Premises; however, Lessee may install, at its
expense, a "card key" or other similar security system provided Lessor is also
provided a "key" to the system. Lessor shall have the right to use any and all
means which Lessor may deem proper to open any door in an emergency without
liability therefor.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 BUILDING SERVICES. Lessor shall provide water and electricity for
Lessee during the term of this Lease. Lessee shall pay all telephone charges.
Lessor shall furnish Lessee hot and cold water at those points or supply
provided for general use of other lessees in the building, central heating and
air conditioning in season (at times Lessor normally provides these services to
other lessees in the building, and at temperatures and in amounts as are
considered by Lessor to be standard or in compliance with any governmental
regulations, such service on Saturday afternoons, Sundays, evenings and holidays
to be furnished only upon the request of Lessee, who shall bear the entire
cost). Lessor shall also provide routine maintenance, painting and electric
lighting service for all public areas and special service areas of the building
in
4
<PAGE> 27
the manner and to the extent deemed by Lessor to be standard. Lessor may, in
its sole discretion, provide additional services not enumerated herein. Failure
by Lessor to any extent to provide these defined services or any other services
not enumerated, or any cessation thereof, shall not render Lessor liable in any
respect for damages to either person or property, be construed as an eviction of
Lessee, work an abatement of rent or relieve Lessee from fulfillment of any
covenant in this Lease. Should any of the equipment or machinery break down, or
for any cause cease to function properly, Lessor shall use reasonable diligence
to repair the same promptly, but Lessee shall have no claim for rebate of rent
on account of any interruption in service occasioned from the repairs. Lessor
reserves the right from time to time to make changes in the utilities and
services provided by Lessor to the building. [See Rider, Paragraph 4.]
4.02 THEFT OR BURGLARY. Lessor shall not be liable to Lessee for losses to
lessee's property or personal injury caused by criminal acts or entry by
unauthorized persons into the Leased Premises or the building.
4.03 JANITORIAL SERVICE. Lessor shall furnish janitorial services to the
Leased Premises and public areas of the building five times per week during the
term of this Lease, excluding holidays. Lessor shall not provide janitorial
service to kitchens.
4.04 EXCESSIVE UTILITY CONSUMPTION. Lessee shall pay all utility costs
occasioned by electrodata processing machines, telephone equipment, computers
and other equipment of high electrical consumption, including without
limitation, the cost of installing, servicing and maintaining any special or
additional inside or outside wiring or lines, meters or submeters, transformers,
poles, air conditioning costs, or the cost of any other equipment necessary to
increase the amount or type of electricity or power available to the Leased
Premises. Lessor may at Lessee's expense submeter the Leased Premises and Lessee
shall pay for such utility costs used therein.
4.05 WINDOW COVERINGS. Lessor shall furnish and install window coverings on
all exterior windows to maintain a uniform exterior appearance. Lessee shall not
remove or replace these window coverings or install any other window covering
which would affect the exterior appearance of the building. Lessee may install
lined or unlined over draperies on the interior sides of the Lessor furnished
window coverings for interior appearance or to reduce light transmission,
provided such over draperies do not affect the exterior appearance of the
building or affect the operation of the building's heating, ventilating and air
conditioning systems.
4.06 CHARGE FOR SERVICE. Unless otherwise excluded in Section 2.02 hereof,
all costs of Lessor for providing the services set forth in Article 4.00 (except
those charges paid by Lessee pursuant to Section 4.04) shall be subject to the
additional rent provisions in Section 2.02.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 LESSOR REPAIRS. Unless otherwise excluded in Section 2.02 hereof,
Lessor shall not be required to make any improvements, replacements or repairs
of any kind or character to the Leased Premises or the project during the term
of this Lease except as are set forth in this section. Lessor shall maintain
only the roof, foundation, parking and common areas, the structural soundness of
the exterior walls, doors, corridors, windows and other standard structures or
standard equipment serving the Leased Premises, expressly excluding equipment
installed by or for the Lessee. Lessor's cost of maintaining and repairing the
items set forth in this section are subject to the additional rent provisions in
Section 2.02. Lessor shall not be liable to Lessee, except as expressly provided
in this Lease, for any damage or inconvenience, and Lessee shall not be entitled
to any abatement or reduction of rent, except as stated in the Lease, by reason
of any repairs, alterations or additions made by Lessor under this Lease.
5.02 LESSEE REPAIRS. Lessee shall, at its own cost and expense, repair or
replace any damage or injury to all or any part of the Leased Premises caused by
any act or omission of Lessee or Lessee's agents, employees, invitees, licensees
or
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visitors; provided, however, if Lessee fails to make the repairs or replacements
promptly, Lessor may, at its option, make the repairs or replacements, and the
costs of such repairs or replacements shall be charged to Lessee as additional
rent and shall become payable by Lessee with the payment of the rent next due
hereunder.
5.03 REQUEST FOR REPAIRS. All requests for repairs or maintenance that are
the responsibility of Lessor pursuant to any provision of this Lease must be
made in writing to Lessor at the address in Section 1.05.
ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS
6.01 LESSOR IMPROVEMENTS. If construction to the Leased Premises is to be
performed by Lessor prior to or during Lessee's occupancy, Lessor will complete
the construction of the improvements to the Leased Premises in accordance with
Exhibit C.
6.02 LESSEE IMPROVEMENTS. Lessee shall not make or allow to be made any
alterations or physical additions in or to the Leased Premises without first
obtaining the written consent of Lessor, the consent for which may in the
reasonable discretion of Lessor be denied. Any alterations, physical additions
or improvements to the Leased Premises made by Lessee shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease; provided, however, Lessor, at its option, may require Lessee to
remove any physical additions and/or repair any alterations in order to restore
the Leased Premises to the condition existing at the time Lessee took
possession, all costs of removal and/or alterations to be borne by Lessee. This
clause shall not apply to moveable equipment or furniture owned by Lessee, which
may be removed by Lessee at the end of the term of this Lease if Lessee is not
then in default and if such equipment and furniture are not then subject to any
other rights, liens and interests of Lessor. [See Rider, Paragraph 5.]
6.03 MECHANICS LIEN. Lessee will not permit any mechanic's or materialman's
lien(s) or other lien to be placed upon the Leased Premises or the building and
nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Lessor, express or implied, by inference or otherwise,
to any person for the performance of any labor or the furnishing of any
materials to the Leased Premises, or any part thereof, nor as giving Lessee any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to any
mechanic's, materialman's or other lien against the Leased Premises. In the
event any such lien is attached to the Leased Premises, then, in addition to any
other right or remedy of Lessor, Lessor may, but shall not be obligated to,
obtain the release of or otherwise discharge the same. Any amount paid by Lessor
for any of the aforesaid purposes shall be paid by Lessee to Lessor on demand as
additional rent. [See Rider, Paragraph 6.]
ARTICLE 7.00 CASUALTY
7.01 SUBSTANTIAL DESTRUCTION. If the Leased Premises should be totally
destroyed by fire or other casualty, or if the Leased Premises should be damaged
so that rebuilding cannot reasonably be completed within ninety (90) working
days after the date of written notification by Lessee to Lessor of the
destruction, this Lease shall at Lessor's option terminate and the rent shall be
abated for the unexpired portion of the Lease, effective as of the date of the
written notification. Notwithstanding the foregoing, if the casualty occurs
during the last year of the Lease Term, Lessee, at its option, may terminate
this Lease upon thirty (30) days written notice to Lessor.
7.02 PARTIAL DESTRUCTION. If the Leased Premises should be partially
damaged by fire or other casualty, and rebuilding or repairs can reasonably be
completed within ninety working days from the date of written notification by
Lessee to Lessor of the destruction, or Lessor does not elect to terminate this
Lease then Lessor shall, to the extent of insurance proceeds received by Lessor,
proceed with reasonable diligence to rebuild or repair the building or other
improvements to substantially the same condition in which they existed prior to
the damage. If the Leased Premises are to be rebuilt or repaired and are
untenantable in whole or in part following the damage, and
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the damage or destruction was not caused or contributed to by act or negligence
of Lessee, its agents, employees, invitees or those for whom Lessee is
responsible, the rent payable under this Lease during the period for which the
Leased Premises are untenantable shall be equitably abated to such an extent as
may be fair and reasonable under the circumstances based upon the area of the
Leased Premises which are untenantable.
7.03 HOLD HARMLESS. Lessor shall not be liable to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for an injury
to person or damage to property on or about the Leased Premises caused by an act
or omission of Lessee, its agents, servants or employees, or of any other person
entering upon the Leased Premises under express or implied invitation by
Lessee, or caused by the improvements located on the Leased Premises becoming
out of repair, to the extent the improvements are not attributed to Lessor's
maintenance obligations as set forth in Section 5, the failure or cessation of
any service provided by Lessor (including security service and devices), or
caused by leakage of gas, oil, water or steam or by electricity emanating from
the Leased Premises. Lessee agrees to indemnify and hold harmless Lessor of and
from any loss, attorney's fees, expenses or claims arising out of any such
damage or injury.
ARTICLE 8.00 CONDEMNATION
8.01 SUBSTANTIAL TAKING. If all or a substantial part of the Leased
Premises are taken for any public or quasi-public use under any governmental
law, ordinance or regulation, or by right of eminent domain or by purchase in
lieu thereof, and the taking would prevent or materially interfere with the use
of the Leased Premises for the purpose for which it is then being used (as
reasonably determined by Tenant to the extent that the actual square footage of
the Leased Premises is rendered untenantable), this Lease shall terminate and
the rent shall be abated during the unexpired portion of this Lease effective on
the date physical possession is taken by the condemning authority. With respect
to a partial taking of any portion of the Building or Building Complex other
than Suite 200, the election to terminate this Lease shall be in Lessor's
discretion. Lessee shall have no claim to the condemnation award or proceeds in
lieu thereof. Lessee may, in a separate legal action, make any separate claims
against the condemning authority permitted by Colorado law for trade fixtures
and moving expenses, but in no event shall any award to Lessee reduce the award
to Lessor.
8.02 PARTIAL TAKING. If a portion of the Leased Premises shall be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in Section 8.01 above, Lessor shall at
Lessor's sole risk and expense, restore and reconstruct the building and other
improvements on the Leased Premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be equitably abated to such an extent as may be fair
and reasonable under the circumstances based upon the area of the Leased
Premises which are untenantable. Lessee shall have no claim to the condemnation
award or proceeds in lieu thereof. Lessee may, in a separate legal action, make
any claims against the condemning authority permitted by Colorado law, but in no
event shall any award to Lessee reduce the award to Lessor.
ARTICLE 9.00 ASSIGNMENT OR SUBLEASE
9.01 LESSOR ASSIGNMENT. Lessor shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the building. Any such sale, transfer or assignment shall operate to release
Lessor from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer.
9.02 LESSEE ASSIGNMENT. Lessee shall not assign, in whole or in part, this
Lease, or allow it to be assigned, in whole or in part, by operation of law or
otherwise or mortgage or pledge the same, or sublet the Leased Premises, in
whole or in part, without the prior written consent of Lessor, and Lessor may
consider the intended
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use, parking requirements, and financial condition of the prospective assignee
or subtenant in deciding whether to consent, and in no event shall any such
assignment or sublease ever release Lessee or any guarantor from any obligation
or liability hereunder. No assignee or sublessee of the Leased Premises or any
portion thereof may assign or sublet the Leased Premises or any portion thereof.
Any assignment or subletting in violation hereof is void at Lessor's option.
[See Rider, Paragraph 7.]
9.03 CONDITIONS OF ASSIGNMENT. If Lessee desires to assign or sublet all or
any part of the Leased Premises, it shall so notify Lessor at least thirty (30)
days in advance of the date on which Lessee desires to make such assignment or
sublease. Lessee shall provide Lessor with a copy of the proposed assignment or
sublease and such information as Lessor might request concerning the proposed
sublessee or assignee to allow Lessor to make informed judgments as to the
financial condition, reputation, operations and general desirability of the
proposed sublessee or assignee. Within fifteen days after Lessor's receipt of
Lessee's proposed assignment or sublease and all required information concerning
the proposed sublessee or assignee, Lessor shall have the following options: (1)
cancel this Lease as to the Leased Premises or portion thereof proposed to be
assigned or sublet; (2) consent to the proposed assignment or sublease, and, if
the rent due and payable by any assignee or sublessee under any such permitted
assignment or sublease (or a combination of the rent payable under such
assignment or sublease plus any bonus or any other consideration or any payment
incident thereto) exceeds the rent payable under this Lease for such space,
Lessee shall pay to Lessor all such excess rent and other excess consideration,
less any reasonable expenses incurred in obtaining the assignment or sublease,
within ten days following receipt thereof by Lessee; or (3) refuse, in its sole
discretion and judgment, to consent to the proposed assignment or sublease. Upon
the occurrence of an event of default, if all or any part of the Leased Premises
are then assigned or sublet, Lessor, in addition to any other remedies provided
by this Lease or provided by law, may, at its option, collect directly from the
assignee or sublessee all rents becoming due to Lessee by reason of the
assignment or sublease, and Lessor shall have a security interest in all
properties on the Leased Premises to secure payment of such sums. Any collection
directly by Lessor from the assignee or sublessee shall not be construed to
constitute a novation or a release of Lessee or any guarantor from the further
performance of its obligations under this Lease.
9.04 SUBORDINATION. Lessee accepts this Lease subject and subordinate to
any recorded mortgage or deed of trust lien presently existing or hereafter
created upon the building or project and to all existing recorded restrictions,
covenants, easements and agreements with respect to the building or project.
Lessor is hereby irrevocably vested with full power and authority to subordinate
Lessee's interest under this Lease to any first mortgage or deed of trust lien
hereafter place on the Leased Premises, and Lessee agrees upon demand to execute
additional instruments subordinating this Lease as Lessor may require. If the
interests of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust lien on the Leased Premises, Lessee shall be bound to the transferee
(sometimes called the "Purchaser") under the terms, covenants and conditions of
this Lease for the balance of the term remaining, including any extensions or
renewals, with the same force and effect as if the Purchaser were Lessor under
this Lease, and, if requested by the Purchaser, Lessee agrees to attorn to the
Purchaser, including the first mortgagee under any such mortgage if it be the
Purchaser, as its Lessor. [See Rider, Paragraph 8].
9.05 ESTOPPEL CERTIFICATES. Lessee agrees to furnish, from time to time,
within fifteen (15) days after receipt of a request from Lessor or Lessor's
mortgagee, a statement certifying, if applicable, the following: Lessee is in
possession of the Leased Premises; the Leased Premises are acceptable except for
defects which Lessor is obligated to repair, if any, specifying same; the Lease
is in full force and effect; the Lease is unmodified; Lessee claims no present
charge, lien, or claim of offset against rent; the rent is paid for the current
month, but is not prepaid for more than one month and will not be prepaid for
more than one month in advance; there is no existing default by reason of some
act or omission by Lessor; and such other matters as may be reasonably required
by Lessor or Lessor's mortgagee. Lessee's failure to deliver such statement, in
addition to being a default under this Lease, shall be
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deemed to establish conclusively that this Lease is in full force and effect
except as declared by Lessor, that Lessor is not in default of any of its
obligations under this Lease, that Lessor has not received more than one month's
rent in advance, and such other matters as set forth in the estoppel.
ARTICLE 10.00 LIENS
Intentionally Deleted.
ARTICLE 11.00 DEFAULT AND REMEDIES
11.01 DEFAULT BY LESSEE. The following shall be deemed to be events of
default by Lessee under this Lease: (1) Lessee shall fail to pay when due any
installment of rent or other payment required pursuant to this Lease and the
failure is not cured within ten (10) days after receipt of written notice;
provided, however, Lessee shall not be entitled to more than two (2) notices of
a delinquency in payment during any calendar year; (2) Lessee shall abandon any
substantial portion of the Leased Premises; (3) Lessee shall fail to comply with
any term, provision or covenant of this Lease, other than the payment of rent,
and the failure is not cured within twenty (20) days after receipt of written
notice by Lessee or if such default cannot reasonably be cured within twenty
(20) days, then Lessee has failed to commence to cure within such twenty (20)
day period and/or fails to diligently prosecute same to completion, or to the
extent that such default does not interfere with or disturb any other lessee or
violate law, then such cure period shall be thirty (30) days; (4) Lessee shall
file a petition or be adjudged bankrupt or insolvent under any applicable
federal or state bankruptcy or insolvency law or admit that it cannot meet its
financial obligations as they become due; or a receiver or trustee shall be
appointed for all or substantially all of the assets of Lessee; or Lessee shall
make a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors; (5) Lessee shall vacate or abandon the Leased Premises
except as permitted by the Rider, Paragraph 9; or (6) Lessee shall do or permit
to be done any act which results in a lien being filed against the Leased
Premises or the building and/or project of which the Leased Premises are a part
and Lessee has not removed such lien within thirty (30) days after receipt of
notice of such filing.
11.02 Remedies for Lessee's Default. Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any one
or more of the remedies set forth herein without any notice or demand. (1)
Lessor may enter upon and take possession of the Leased Premises, by picking or
changing locks if necessary, and lock out, expel or remove Lessee and any other
person who may be occupying all or any part of the Leased Premises without being
liable for any claim for damages, and relet the Leased Premises on behalf of
Lessee and receive the rent directly by reason of the reletting. Lessee agrees
to pay Lessor on demand any deficiency that may arise by reason of any reletting
of the Leased Premises; further, Lessee agrees to reimburse Lessor for any
expenditures made by it in order to relet the Leased Premises, including, but
not limited to, commissions, remodeling and repair costs. (2) Lessor may enter
upon the Leased Premises, by picking or changing locks if necessary, without
being liable for any claim for damages, and do whatever Lessee is obligated to
do under the terms of this Lease. Lessee agrees to reimburse Lessor on demand
for any expenses which Lessor may incur in effecting compliance with Lessee's
obligations under this Lease; further, Lessee agrees that Lessor shall not be
liable for any damages resulting to Lessee from effecting compliance with
Lessee's obligations under this Lease caused by the negligence of Lessor or
otherwise. (3) Lessor may terminate this Lease, in which event Lessee shall
immediately surrender the Leased Premises to Lessor, and if Lessee fails to
surrender the Leased Premises, Lessor may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take
possession of the Leased Premises, by picking or changing locks if necessary,
and lock out, expel or remove Lessee and any other person who may be occupying
all or any part of the Leased Premises without being liable for any claim for
damages. (4) Lessor may, in addition to any other damages and sums due Lessor
including past due rents and attorneys' fees, elect to terminate the Lease, and
recover in addition to the above a sum equal to all Base Rent and additional
sums due for the remaining term of the Lease, as reasonably determined
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by Lessor using existing estimates of Operating Expenses, less the reasonable
rental value of the Leased Premises over the remaining term. Lessee agrees to
pay on demand the amount of all loss and damage which Lessor may suffer by
reason of the default by Lessee including arising from the termination of this
Lease under this section, whether through inability to relet the Leased Premises
on satisfactory terms or otherwise. Notwithstanding any other remedy set forth
in this Lease, in the event Lessor has made rent concessions of any type or
character, or waived any Base Rent, and Lessee defaults at any time during the
terms of this Lease, the rent concessions, including any waived Base Rent, shall
be cancelled and the amount of the Base Rent or other rent concessions shall be
due and payable immediately as if no rent concessions or waiver of any Base Rent
had ever been granted. A rent concession or waiver of the Base Rent shall not
relieve Lessee of any obligation to pay any other charge due and payable under
this Lease including without limitation any sum due under Section 2.02.
Notwithstanding anything contained in this Lease to the contrary, this Lease may
be terminated by Lessor only by mailing or delivering written notice of such
termination to Lessee, and no other act or omission of Lessor shall be construed
as a termination of this Lease. All sums not paid when due shall accrue interest
at the Default Rate.
ARTICLE 12.00 RELOCATION
Intentionally Deleted.
ARTICLE 13.00 INSURANCE
13.01 GENERAL REQUIREMENTS. Lessee shall, during its occupancy of the
Leased Premises and during the entire term hereof and any extended term, at its
sole cost and expense, obtain, maintain and keep in full force and effect the
following types and kinds of insurance:
(a) Property Insurance upon property of every description and kind owned by
the Lessee and located in the building or on the project or for which the
Lessee is legally liable or installed by or on behalf of the Lessee,
including, without limitation furniture, fixtures, fittings, installations,
alterations, additions, partitions, fixtures and anything in the nature of
a leasehold improvement in an amount of not less than the full replacement
cost thereof on an all risk basis. In the event that there is a dispute as
to the amount which comprises full replacement cost, the decision of the
Lessor or the mortgagees of the Lessor shall be conclusive. Evidence of
this insurance shall be provided on ACORD Form 27.
(b) Commercial General Liability Insurance which shall include but not be
limited to bodily injury, property damage, personal injury and broad form
contractual liability and non-owned automobile liability in an amount of
not less than $1,000,000 per occurrence and $2,000,000 in the aggregate
combined single limit. The Lessor, the Lessor's agent, the Lessor's
mortgagee and any other parties which the Lessor shall deem necessary shall
be named as an additional insured therein as their respective interests may
appear. This insurance shall be considered to be primary and
noncontributory to any other insurance carried by the Lessor.
(c) Automobile Liability Insurance (if applicable) in an amount of not less
than $1,000,000 combined single limit for bodily injury and property damage
providing coverage for all owned, non-owned and hired automobiles.
(d) Workers' Compensation Insurance in the statutory form and amounts
required by the State of Colorado and Employer's Liability Insurance in an
amount of not less than:
$500,000 bodily injury by accident, each accident
$500,000 bodily injury by disease, policy limit
$500,000 bodily injury by disease, each employee
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(e) Any other form or forms of insurance as the Lessor or the Lessor's
mortgagees may reasonably require from time to time in form, in amounts and
for insurance risks against which a prudent tenant would protect itself.
(f) If Lessee or any contractor of Lessee performs any work on the Leased
Premises, prior to the commencement of any such work, Lessee shall deliver
to Lessor certificates issued by insurance companies licensed to do
business in the State of Colorado, evidencing commercial general liability,
workers' compensation, employer's liability, automobile liability and other
insurance as required by Lessor and its mortgagees, in amounts and with
companies reasonably satisfactory to Lessor, are in force and effect and
maintained by all contractors and subcontractors engaged by Lessee to
perform such work, and name where requested Lessor, Lessor's agent and
Lessor's mortgagee as additional insureds.
All policies shall be written with insurers licensed to do
business in the State of Colorado and shall carry an A. M. Best rating of
not less than AX (A Ten). The Lessee agrees that certificates of insurance
evidencing the required insurance will be delivered to the Lessor no less
than ten (10) days prior to each policy's annual renewal date. Such
certificates will evidence that thirty (30) days written shall be sent to
the Lessor prior to cancellation or nonrenewal of any policy, and shall
evidence the Lessor, Lessor's agent and Lessor's mortgagee as additional
insureds as required under subparagraph 13.01(b).
The Lessee covenants and agrees that in the event of damage or
destruction to the leasehold improvements in the Leased Premises covered by
insurance as required to be taken out by the Lessee herein, and if the
Lessor or Lessee do not terminate this Lease as specifically set forth in
this Lease, the Lessee will use the proceeds of such insurance for the
purpose of repairing or restoring such leasehold improvements at least up
to and including the amounts of the unamortized Allowance. In the event
that Lessor or Lessee are entitled to terminate the Lease, then if the
premises have been damaged, Lessee shall pay to Lessor all of its insurance
proceeds relative to Lessee's cabling costs, but in no event greater than
the amount of Seventy-Two Thousand Dollars ($72,000).
13.02 LESSOR'S INSURANCE. Lessor agrees to carry or cause to be carried
during the term hereof commercial general liability insurance covering bodily
injury, property damage and personal injury in an amount carried by prudent
owners of comparable properties and deemed prudent by the Lessor. Lessor may,
but shall not be obligated to, take out and carry any other form or forms of
insurance as it or the mortgagees of Lessor may reasonably determine to be
advisable. Notwithstanding any contribution by Lessee to the cost of insurance
premiums, Lessee acknowledges that it has no right to receive any proceeds from
any such insurance policies carried by Lessor, and that such insurance will be
for the sole benefit of Lessor, with no coverage for Lessee for any risk insured
against.
13.03 SUBROGATION. The parties hereto agree that any and all fire, extended
coverage and/or property damage insurance which is required to be carried by
either shall be endorsed with a subrogation clause, substantially as follows:
"This insurance shall not be invalidated should the insured waive, in writing
prior to a loss, any and all right of recovery against any party for loss
occurring to the property described therein"; and each party hereto waives all
claims for recovery from the other party, its officers, agents or employees for
any loss or damage (whether or not such loss or damage is caused by negligence
of the other party), and notwithstanding any provisions contained in this Lease
to the contrary, as a result of damage to any of its real or personal property
insured under valid and collectible insurance policies to the extent of the
collectible recovery under such insurance or which would have been collectible
had the party carried the insurance required to be maintained hereunder.
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ARTICLE 14.00 OBSERVANCE OF LAW
14.01 LAW AND COVENANTS. Lessee shall comply with all provisions of any
applicable covenants, rules or restrictions and all provisions of law, including
without limitation, federal, state, county and city laws, ordinances and
regulations and any other governmental, quasi-governmental or municipal
regulations, which shall impose any duty upon Lessor or Lessee, including,
without limitation, the partitioning, equipment operation, alteration, occupancy
and use of the Leased Premises, and to the making of any repairs, replacements,
alterations, additions, changes, substitutions or improvements of or to the
Leased Premises. Moreover, Lessee shall comply with all police, fire and
sanitary regulations imposed by any federal, state, county or municipal
authorities, or made by insurance underwriters, and to observe and obey all
governmental and municipal regulations and other requirements governing the
conduct of any business conducted in the Leased Premises or the use or occupancy
thereof.
14.02 TAXES. Lessee shall fully and timely pay all business and other
taxes, charges, rates, duties, assessments and license fees levied, rates
imposed, charged or assessed against or in respect of the Lessee's occupancy of
the Leased Premises or in respect of the personal property, trade fixtures,
furniture and facilities of the Lessee or the business or income of the Lessee
on and from the Leased Premises, if any, as and when the same shall become due,
and to indemnify and hold Lessor harmless from and against all payment of such
taxes, charges, rates, duties, assessments and license fees and against all
loss, costs, charges and expenses occasioned by or arising from any and all such
taxes, rates, duties, assessments and license fees, and to promptly deliver to
Lessor for inspection, upon written request of the Lessor, evidence satisfactory
to Lessor of any such payments.
ARTICLE 15.00 DEFINITIONS
15.01 ABANDON. Intentionally Deleted.
15.02 ACT OF GOD OR FORCE MAJEURE. An "act of God" or "force majeure" is
defined for purposes of this Lease as strikes, lockouts, sitdowns, material or
labor restrictions by any governmental authority, unusual transportation delays,
riots, floods, washouts, explosions, earthquakes, fire, storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of Lessor and which by the exercise of due diligence Lessor
is unable, wholly or in part, to prevent or overcome.
15.03 BUILDING OR PROJECT. "Building" or "project" as used in this Lease
means the building and/or project described in Section 1.02, including the
Leased Premises and the land upon which the building or project is situated.
15.04 COMPLETION DATE. "Completion date" shall be the date on which the
improvements erected and to be erected upon the Leased Premises shall have been
completed in accordance with the Exhibit C. Subject to punch list items as set
forth in Exhibit C, the Lessee shall as of the Completion Date accept the Leased
Premises in their "as is" condition and shall be deemed an acknowledgement by
Lessee that the Leased Premises were completed in accordance with Exhibit C, are
suitable for the purposes for which the Leased Premises are let, and that the
Leased Premises are in good and satisfactory condition as of the date of
completion.
15.05 DEFAULT RATE. "Default Rate" shall mean two percent in excess of the
prime rate as announced by Norwest Bank, or its successor; if Norwest Bank
ceases to announce its prime rate then a similar rate or prime rate as
reasonably selected by Lessor or announced by another commercial bank in
Colorado Springs selected by Lessor.
15.06 SQUARE FEET. "Square feet" or "square foot" as used in this Lease
includes the area contained within the Leased Premises together with a common
area percentage factor of the Leased Premises proportionate to the total
building area, as reasonably determined by Lessor. Lessor may remeasure the
total building area or
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complex, in which event Lessee's rent and/or pro rata share may adjust and
Lessor shall upon request deliver copies of such calculations to Lessee.
15.07 SUPPLEMENTAL AGREEMENT. "Supplemental Agreement" shall refer to the
attached Exhibit E. The parties hereto agree that upon the request of Lessor,
Lessee shall execute the Agreement from time to time confirming Lessor's
compliance with the covenants, terms and conditions of this Lease.
ARTICLE 16.00 MISCELLANEOUS
16.01 WAIVER. Failure of Lessor to declare an event of default immediately
upon its occurrence, or delay in taking any action in connection with an event
of default, shall not constitute a waiver of the default, but Lessor shall have
the right to declare the default at any time and take such action as is lawful
or authorized under this Lease. Pursuit of any one or more of the remedies set
forth in Article 11.00 above shall not preclude pursuit of any one or more of
the other remedies provided elsewhere in this Lease or provided by law, nor
shall pursuit of any remedy constitute forfeiture or waiver of any rent or
damages accruing to Lessor by reason of the violation of any of the terms,
provisions or covenants of this Lease. Failure by Lessor to enforce one or more
of the remedies provided upon an event of default shall not be deemed or
construed to constitute a waiver of the default or of any other violation or
breach of any of the terms, provisions and covenants contained in this Lease.
16.02 ACT OF GOD. Neither Lessor nor Lessee shall be required to perform
any covenant or obligation in this Lease, or be liable in damages to the other
party, so long as the performance or non-performance of the covenant or
obligation is delayed, caused or prevented by an act of God, force majeure.
16.03 ATTORNEY'S FEES. In the event Lessee defaults in the performance of
any of the terms, covenants, agreements or conditions contained in this Lease
and Lessor places in the hands of an attorney the enforcement of all or any
part of this Lease, the collection of any rent due or to become due or recovery
of the possession of the Leased Premises, Lessee agrees to pay Lessor's costs of
collection, including reasonable attorney's fees for the services of the
attorney, whether suit is actually filed or not.
16.04 SUCCESSORS. This Lease shall be binding upon and inure to the benefit
of Lessor and Lessee and their respective heirs, personal representatives,
successors and assigns. It is hereby covenanted and agreed that should Lessor's
interest in the Leased Premises cease to exist for any reason during the term of
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect, and Lessee
hereunder agrees to attorn to the then owner of the Leased Premises.
16.05 RENT TAX. If applicable in the jurisdiction where the Leased Premises
are situated, Lessee shall pay and be liable for all rental, sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the rent,
additional rent, Operating Expenses or other charge upon which the tax is based
as set forth above.
16.06 CAPTIONS. The captions appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent of any section.
16.07 NOTICE. All rent and other payments required to be made by Lessee
shall be payable to Lessor c/o LPAML Colorado Limited Partnership, P.O. Box
74750, Chicago, Illinois 60694-4750. All payments required to be made by Lessor
to Lessee shall be payable to Lessee at the address set forth in Section 1.05,
or at any other address within the United States as Lessee may specify from time
to time by written notice. Any notice or document required or permitted to be
delivered by the terms of this Lease shall be deemed to be delivered (whether or
not actually received) when
13
<PAGE> 36
deposited in the United States Mail, postage prepaid, certified mail, return
receipt requested, or overnight, receipted, express mail service, addressed to
the parties at the respective addresses set forth in Section 1.05. [See Rider,
Paragraph 10.]
16.08 SUBMISSION OF LEASE. Submission of this Lease to lessee for signature
does not constitute a reservation of space or an option to lease. This Lease is
not effective until execution by and delivery to both Lessor and Lessee.
16.09 CORPORATE AUTHORITY. If Lessee executes this Lease as a corporation,
each of the persons executing this Lease on behalf of Lessee does hereby
personally represent and warrant that Lessee is a duly authorized and existing
corporation, that Lessee is qualified to do business in the state in which the
Leased Premises are located, that the corporation has full right and authority
to enter into this Lease, and that each person signing on behalf of the
corporation is authorized to do so. In the event any representation or warranty
is false, all persons who execute this Lease shall be liable, individually, as
Lessee.
16.10 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
16.11 LESSOR'S LIABILITY. If Lessor shall be in default under this Lease
and, it as a consequence of such default, Lessee shall recover a money judgment
against Lessor, such judgment shall be satisfied only out of the right, title
and interest of Lessor in the buildings as the same may then be encumbered and
neither Lessor nor any person or entity comprising Lessor shall be liable for
any deficiency. In no event shall Lessee have the right to levy execution
against any property of Lessor nor any person or entity comprising Lessor other
than its interest in the building as herein expressly provided. In no event,
however, shall Lessor be deemed in default unless it fails to cure such default
within twenty (20) days of written notice or if such default cannot reasonably
be cured within twenty (20) days, then Lessor shall not be deemed in default if
it has commenced to cure and diligently prosecutes same to completion.
16.12 INDEMNITY. Lessor agrees to indemnify and hold harmless Lessee from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker whose claim arises by, through or on behalf of Lessor.
Lessee agrees to indemnify and hold harmless Lessor from and against any
liability or claim, whether meritorious or not, arising with respect to any
broker whose claim arises by, through or on behalf of Lessee.
16.13 SURVIVAL. All indemnities to or for the benefit of either party as
set forth herein shall survive termination of this Lease.
16.14 BROKERS. Lessor and Lessee acknowledge that the Staubach Company has
acted as broker with regard to this transaction and Lessor shall be responsible
for paying said broker a real estate commission in accordance with an agreement
between Lessor and broker.
ARTICLE 17.00 AMENDMENT AND LIMITATION OF WARRANTIES
17.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY LESSEE, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN THIS LEASE.
14
<PAGE> 37
17.02 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
17.03 LIMITATIONS OF WARRANTIES. LESSOR AND LESSEE EXPRESSLY AGREE THAT
THERE ARE NO AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS LEASE, AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY
SET FORTH IN THIS LEASE.
ARTICLE 18.00 SIGNATURES
SIGNED AT Denver, Colorado this 30th day of June, 1997
LESSOR: LESSEE:
North Creek I-III L.P., MCI Systemhouse Corp.,
a Delaware limited partnership a Delaware corporation
By: LPAML Colorado Limited By: /s/ MARTHA BENSON
Partnership, a Colorado limited ---------------------------------
partnership, as Agent for Lessor Its: Director, Real Estate Services
-------------------------------
By: /s/ LUCY A. BARNETT
----------------------------------
Its: General Partner
----------------------------------
15
<PAGE> 38
LIST OF ATTACHMENTS
EXHIBIT A-1 LEASED PREMISES
EXHIBIT B LEGAL DESCRIPTION
EXHIBIT C WORK LETTER
EXHIBIT D PERMITTED USES
EXHIBIT E SUPPLEMENTAL AGREEMENT
EXHIBIT F RULES AND REGULATIONS
EXHIBIT G SATELLITE DISH LICENSE
1
<PAGE> 39
EXHIBIT A-1
LEASED PREMISES
[SECOND FLOOR PLAN]
A-1
<PAGE> 40
EXHIBIT B
LEGAL DESCRIPTION
PARCEL B:
Lot 2, Block 1, NORTH CREEK SUBDIVISION, in the City of Colorado Springs,
El Paso County, Colorado, according to the plat thereof recorded in Plat
Book V-3 at Page 166
B
<PAGE> 41
EXHIBIT C
LESSEE IMPROVEMENT WORK AGREEMENT
1. Lessee Finish Allowance
Lessor hereby grants to Lessee a Lessee Finish Allowance equal to $326,214
($9.00 per rentable square foot of the Leased Premises). The Lessee Finish
Allowance is to be used only for payment of the cost of preparing the space
plans and the final plans, including mechanical, electrical, plumbing,
engineering and structural drawings and of all other aspects necessary to
complete the final plans, and payment for carpet, paint and other improvements
set forth in the final plans; and any construction, management fee equal to 3%
of the total construction costs. Said Lessee Finish Allowance shall be credited
against the aggregate cost of Lessee Work, as hereinafter defined. Any unused
portion of the allowance, up to $1.00 per rentable square foot, may be used by
Lessee as (i) a rent credit against the first rent dollars owing under this
Lease, or (ii) up to $2.00 per rentable square foot may be applied towards
Lessee's cabling costs. If Lessee requires Lessee Work in excess of the Lessee
Finish Allowance, then Lessee agrees that it shall pay for said work in excess
of the Lessee Finish Allowance in accordance with the terms for payment of
Additional Work as more specifically set forth in Paragraph 2 hereof, including
provision for profit and overhead.
2. Lessee Work
Lessor agrees to complete the work depicted in the space plan attached
hereto as Exhibit C-1 (the "Lessee Work") in a good and workmanlike manner,
subject, however, to extensions equal to the delays suffered by Lessor and
caused by strikes, lockouts, fire or other casualty loss, acts of God,
unavailability of materials, hostile or war-like action, riot or other causes
beyond Lessor's reasonable control. If Lessee shall require any changes to the
attached plans and specifications or the Lessee Work depicted in such attached
plans and specifications ("Additional Work"), then, providing Lessor agrees to
such changes, Lessee shall pay, within thirty (30) days of the billing after
work has been completed. Lessor agrees to perform such Additional Work up to
$3.00 per rentable square foot. All costs and expenses associated with Lessor's
Additional Work shall bear interest at the rate of 2.9% per month.
3. Commencement of Rent
Lessee's obligation to pay Rent under the Lease shall not commence until
the date the Leased Premises are Ready for Occupancy; provided, however, that if
Lessor shall be delayed in rendering the Leased Premises Ready for Occupancy
beyond the Commencement Date set out in Section 1.03 of this Lease as a result
of one or more of the following:
(a) Lessee's failure to devote the time or furnish the information required
in connection with the space plan for the Lessee Work; or
(b) Lessee's failure to timely deposit the estimated costs for the
Additional Work within the time period specified in Paragraph 2 above; or
(c) Lessee's changes in the Lessee Work, in the space plan relating
thereto, or in the plans for the Additional Work (notwithstanding Lessor's
approval of any such changes); or
(d) Any other act or omission by Lessee or its agents;
then and in any such event, Lessee's obligation to commence the payment of Rent
under the Lease on the Commencement Date provided for in Section 1.03 shall not
be affected or deferred on account of such delay.
C-1
<PAGE> 42
4. Alternate Commencement Date
If Lessor is unable to cause the Leased Premises to be Ready for Occupancy
by the Commencement Date for reasons other than those set out in subsection (a)
through (d) of Paragraph 3 above then the Commencement Date of the Lease shall
be on the first date the Leased Premises are Ready for Occupancy; provided,
however if the date the Leased Premises are Ready for Occupancy is not the first
day of a month, then the Commencement Date shall be the first day of the month
immediately following the date the Leased Premises are Ready for Occupancy. The
period between the date the Leased Premises are Ready for Occupancy and the
Commencement Date shall be deemed to be the Interim Lease Term and Lessee shall
be obligated to pay Rent for such Interim Lease Term on a pro rata basis based
on the Base Rent for the first full month of the Term and Lessee shall hold the
Leased Premises during the Interim Lease Term under all of the other terms and
conditions of this Lease. In the event the Commencement Date set out in Section
1.03 of the Lease is changed as provided for in this Paragraph 4 then (i) if the
Leased Premises are Ready for Occupancy after the Commencement Date set out in
Section 1.03 of the Lease then the Expiration Date of the Lease as provided for
in Section 1.03 of the Lease shall be extended such that beginning with the
adjusted Commencement Date the Term shall extend for the number of months set
out in Section 1.03 of the Lease, or (ii) if the Leased Premises are Ready for
Occupancy prior to the Commencement Date set out in Section 1.03 of the Lease
then the Commencement Date shall be adjusted as provided for in this Paragraph
4, however the Expiration Date shall remain as set out in Section 1.03 of the
Lease. In either such event, Lessee shall, at Lessor's request, execute a
Memorandum of Commencement Date in which the parties specify the Commencement
Date and Expiration Date of the Lease.
"Ready for Occupancy" as used herein shall mean the date on which Lessor
shall have substantially completed all its work outlined in this Work Letter.
The issuance of a Certificate of Occupancy (or its equivalent) for the Leased
Premises or a certificate from Lessor's architect or space planner certifying
substantial completion of the work shall conclusively control the date the
Leased Premises are substantially complete, the date on which the Leased
Premises are Ready for Occupancy and the date Lessee's obligation to pay Rent
commences. Lessor agrees to use its best efforts to provide Lessee with at least
fifteen (15) days prior notice of the date the Leased Premises are expected to
be Ready for Occupancy. Lessor's undertaking to provide fifteen (15) days prior
notice to Lessee shall not change, alter, or otherwise affect Lessee's
obligations under this Lease to take occupancy of the Leased Premises when the
same are Ready for Occupancy.
5. Miscellaneous
(a) Except to the extent otherwise indicated herein, the initially
capitalized terms used in this Lessee Improvement Work Agreement shall have the
meanings assigned to them in the Lease.
(b) The terms and provisions of this Lessee Improvement Work Agreement are
intended to supplement and are specifically subject to all the terms and
provisions of the Lease. In the event of conflict between the terms of this
Lessee Improvement Work Agreement and the Lease, then the provisions of the
Lease shall govern.
(c) Prior to the date the Leased Premises are Ready for Occupancy, Lessor's
contractor and Lessee shall inspect the Leased Premises and jointly complete a
"punch list" of incomplete or defective work and thereafter Lessor shall
exercise due diligence to cause such punch list items to be completed.
(d) This Lessee Improvement Work Agreement may not be amended or modified
other than by supplemental written agreement executed by authorized
representatives of the parties hereto.
(e) Lessee shall not be entitled to any credits, whether in the form of
materials or money, for unused work or materials.
C-2
<PAGE> 43
(f) All standard Lessee Work shall be performed in accordance with Exhibit
C-1.
(g) Lessor's approval of Lessee's plans or the Lessee Work shall create no
responsibility or liability on the part of Lessor for their completeness, design
sufficiency, or compliance with all laws, rules and regulations of governmental
agencies or authorities, including but not limited to the Americans with
Disabilities Act.
LESSOR: LESSEE:
North Creek I-III L.P., MCI Systemhouse Corp.,
a Delaware limited partnership a Delaware corporation
By: LPAML Colorado Limited By: /s/ MARTHA BENSON
Partnership, a Colorado limited -----------------------------
partnership, as Agent for Lessor Its: Director Real Estate Services
-----------------------------
Date:
-----------------------------
By: /s/ LUCY A. BARNETT
----------------------------
Its: General Partner
-----------------------------
Date: 6/30/97
-----------------------------
C-3
<PAGE> 44
EXHIBIT D
PERMITTED USES
Lessee shall use and occupy the Leased Premises for the operation of a
telecommunications facility, engineering, education and training of Lessee's
customers and employees and in general administration functions and all
incidental and related uses thereto and all other purposes permitted under the
Building rules and regulations.
D
<PAGE> 45
EXHIBIT E
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT is attached to and made a part of the Lease
dated as of the __ day of _________, ____, by and between ____________________
_____________________, a ____________ and ______________, a ______________, as
Lessee. By this Supplemental Agreement dated as of the ____ day of
_______________, ____, the parties to the lease dated _______________ (the
"Lease") agree as follows:
1. All defined terms in the Lease are incorporated herein by reference.
2. Any Lessee Work required to be constructed and finished by Lessor in
accordance with the terms of the Lease for the Leased Premises were completed by
Lessor on ___________, 19__, subject to the completion of Punch List Items
identified on the attachment hereto, if any.
3. Any work to be performed by Lessor has been completed. The temporary or
permanent certificate of occupancy for the Leased Premises was issued on
___________________.
4. The Expiration Date pursuant to the terms of the Lease is ___________.
5. In accordance with the provisions of the Lease, Lessee's obligation to
pay Base Rent and Additional Rent shall commence on the date set forth in
Paragraph 1.03 of the Lease (which payment shall be prorated as set forth in
the Lease if the date set forth in Paragraph 1.03 is any day other than the
first day of a month).
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Agreement to be executed the day and year first above written.
- ---------------------------, ----------------------------------,
a a
-------------------------- ---------------------------------
By: By:
------------------------- --------------------------------
Title:
---------------------- ----------------------------------,
("Lessee") a
---------------------------------
E
<PAGE> 46
EXHIBIT F
RULES AND REGULATIONS
1. Lessor agrees to furnish Lessee their required number of keys without
charge upon occupancy. Additional keys will be furnished at a nominal
charge. Lessee shall not change locks or install additional locks on doors
without prior written consent of Lessor. Lessee shall not make or cause to
be made duplicates of keys procured from Lessor. All keys to Leased
Premises shall be surrendered to Lessor upon termination of this Lease.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the Leased Premises
for Lessee to Lessor for Lessor's approval (which shall not be unreasonably
withheld) before performance of any contractual service. Lessee's
contractors and installation technicians shall comply with Lessor's rules
and regulations pertaining to construction and installation. This provision
shall apply to all work performed on or about the Leased Premises or
project, including installation of telephones, telegraph equipment,
electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings and equipment or
any other physical portion of the Leased Premises or project.
3. Lessee shall not at any time occupy any part of the Leased Premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the Leased Premises or in any
part of the building any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein, or place or use in or about the
Leased Premises or project any explosives, gasoline, kerosene, oil, acids,
caustics, or any flammable, explosive or hazardous material without written
consent of Lessor. Nothing herein shall prohibit the use of a microwave
oven.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the Leased Premises or the project
regardless of whether such loss occurs when the area is locked against
entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the Leased Premises or project, unless necessary to accompany a
handicapped or disabled individual into and throughout the premises or
project.
7. Employees of Lessor shall not receive or carry messages for or to any
Lessee or other person or contract with or render free or paid services to
any Lessee or to any of Lessee's agents, employees or invitees.
8. None of the parking, plaza, recreation or lawn areas, entries, passages,
doors, elevators, hallways or stairways, shall be blocked or obstructed or
any rubbish, litter, trash, or material of any nature placed, emptied or
thrown into these areas or such area used by Lessee's agents, employees, or
invitees at any time for purposes inconsistent with their designation by
Lessor.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or by the defacing or injury of any part of
the building shall be borne by the person who shall occasion it. No person
shall waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the building by the use of any radios,
record players, tape recorders, musical instruments, the making of unseemly
noises or any unreasonable use.
11. Nothing shall be thrown out of the windows of the building or down the
stairways or other passages.
F-1
<PAGE> 47
12. Lessee and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Lessor. Lessee, if requested by
Lessor, shall furnish Lessor with state automobile license numbers of
Lessee's vehicles and its employees' vehicles within five days after such
request. Lessee shall not leave any vehicle in a state of disrepair
(including without limitation, flat tires) on the Leased Premises or
project. If Lessee or its employees, agents or invitees park their vehicles
in area other than the designated parking areas or leave any vehicle in a
state of disrepair, Lessor, after giving written notice to Lessee of such
violation, shall have the right to remove such vehicles at Lessee's
expense.
13. Parking in a parking garage or area shall be in compliance with all parking
rules and regulations including any sticker or other identification system
established by Lessor. Failure to observe the rules and regulations shall
terminate Lessee's right to use the parking garage or area and subject the
vehicle in violation of the parking rules and regulations to removal and
impoundment. No termination of parking privileges or removal of impoundment
of a vehicle shall create any liability on Lessor or be deemed to interfere
with Lessee's right to possession of its Leased Premises. Vehicles must be
parked entirely within the stall lines and all directional signs, arrows
and posted speed limits must be observed. Parking is prohibited in areas
not striped for parking, in aisles, where "No Parking" signs are posted, on
ramps, in cross hatched areas, and in other areas as may be designated by
Lessor. Parking stickers or other forms of identification supplied by
Lessor shall remain the property of Lessor and not the property of Lessee
and are not transferable. Every person is required to park and lock his
vehicle. All responsibility for damage to vehicles or persons is assumed by
the owner of the vehicle or its driver.
14. Lessee shall be responsible for obtaining, installing and maintaining fire
extinguishers in the Leased Premises in order to comply with Colorado
Building Code (one each for every 3,000 square feet of leased space).
15. Movement in or out of the building of furniture or office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or materials
which requires use of elevators or stairways, or movement through the
building entrances or lobby, shall be restricted to hours designated by
Lessor. All such movement shall be under supervision of Lessor and carried
out in the manner agreed between Lessee and Lessor by prearrangement before
performance. Such prearrangement will include determination by Lessor of
time, method, and routing of movement and limitations imposed by safety or
other concerns which may prohibit any article, equipment or any other item
from being brought into the building. Lessee assumes, and shall indemnify
Lessor against, all risks and claims of damage to persons and properties
arising in connection with any said movement.
16. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort or
duration in connection with the elevator service.
17. Lessee shall not lay floor covering within the Leased Premises without
written approval of the Lessor, which shall not be unreasonably withheld.
The use of cement or other similar adhesive materials not easily removed
with water is expressly prohibited.
18. Lessee agrees to cooperate and assist Lessor in the prevention of
canvassing, soliciting and peddling within the building or project.
19. Lessor reserves the right to exclude from the building or project, between
the hours of 6:00 p.m. and 7:00 a.m. on weekdays and at all hours on
Saturday, Sunday and legal holidays, all persons who are not known to the
building or project security personnel and who do not present a pass to the
building signed by the Lessee. Each Lessee shall be responsible for all
persons for whom he supplies a pass.
F-2
<PAGE> 48
20. It is Lessor's desire to maintain in the building or project the highest
standard of dignity and good taste consistent with comfort and convenience
for Lessees. Any action or condition not meeting this high standard should
be reported directly to Lessor. Your cooperation will be mutually
beneficial and sincerely appreciated. Lessor reserves the right to make
such other and further reasonable rules and regulations as in its judgment
may from time to time be necessary, for the safety, care and cleanliness of
the Leased Premises and for the preservation of good order therein.
F-3
<PAGE> 49
EXHIBIT G
SATELLITE DISH LICENSE
(FOR RECEIVING ONLY)
THIS SATELLITE DISH LICENSE is made and entered into this _______, day of
_______, 1997 by and between North Creek I-III L.P., a Delaware limited
partnership ("Lessor") and MCI Systemhouse Corp., a Delaware corporation
("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have entered into a Lease dated _______________
(the "Lease") for premises located in that certain building known as North Creek
II located in Colorado Springs, State of Colorado (the "Building"); and
WHEREAS, Lessee is desirous of locating a satellite dish on the roof of the
Building; and
WHEREAS, Lessor is willing to permit same only upon the following terms and
conditions.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
1. Grant of License. Provided Lessee provides Lessor with detailed
information regarding the satellite dish for Lessor's prior review and approval
(which may be given or withheld by Lessor in its sole discretion), Lessor grants
to Lessee a non-exclusive license for the term of the Lease, said term being
more specifically described in Section 3 below, for the purpose of installing,
maintaining and operating a satellite dish not to exceed two (2) meters (the
"Satellite") on a portion of the roof located on the Building as shown on
Appendix __ attached hereto (the "Roof Space"). The actual location of the Roof
Space shall be in Lessor's reasonable discretion. The grant of this license is
for the sole benefit of and use by Lessee and the Satellite's use shall be
personal to and may not be assigned, sublet or transferred in whole or in part
except pursuant to an assignment or sublease according to the Lease to be used
solely by such sublessee or assignee for its own purposes. No third party may
use the Satellite nor may Lessee receive any fees or other payment for the use
of such Satellite. Lessor makes no representation or warranty as to the fitness
for any purpose of the Roof Space and shall have no liability of any kind or
nature directly or indirectly arising from or related to the Satellite and
Related Equipment as hereinafter defined.
2. Installation. Lessee shall be permitted to install the one (1)
Satellite. All installation expenses shall be at Lessee's sole cost and expense.
Installation expenses shall include, but not be limited to, all of the
incremental costs related to repairing or replacing the roof of the Building in
conjunction with such installation and the cost of installation of a walkway
providing access to the Satellite (the "Walkway"). Prior to commencing the
installation of the Satellite and any related equipment, conduits, cables and
materials located on the Roof Space or in other parts of the Building
(collectively, the "Related Equipment"), Lessee shall submit plans and
specifications regarding installation of the Satellite and any Related Equipment
to Lessor for review and reasonable approval, which approval shall not be
unreasonably withheld. Lessee shall have a reasonable right of access to the
chases, telephone and electrical closets located in the Building for purposes of
installing, repairing and maintaining the Related Equipment, provided, however,
such access shall be subject to the reasonable approval of Lessor, which
approval shall not be unreasonably withheld. The Related Equipment to be
installed in the telephone and electrical closets shall consist of
_________________________ and shall not occupy more than ___________ cubic
inches, provided that such space is available within the Building prior to the
execution of this License. The plans and specifications shall include load
factors, electrical platforms leading to the Satellite and any other
specifications as Lessor may require. Lessee agrees that Lessor may require
certain aesthetic specifications concerning the
G-1
<PAGE> 50
appearance of the Satellite and any Related Equipment, which specifications
shall be in the reasonable discretion of Lessor.
3. Term. Lessee's right to use the Roof Space shall commence on the date on
which Lessee commences installation of the Satellite or any of the Related
Equipment, and shall terminate upon the termination of the Lease (the "Term") as
such Lease may be extended. Upon the termination hereof, the Satellite, the
Walkway and the Related Equipment shall be removed by Lessee at Lessee's
expense, and Lessee shall repair any damage to the building and roof caused by
the removal and restore the roof.
4. License Fee.
Intentionally Deleted
5. Reroofing and Repair. Lessee acknowledges that Lessor may be repairing
or installing a new roof on the Building during the term of this License.
Lessor, the roofing contractor or consultant and Lessee shall coordinate the
repair and/or reroofing of the Roof and Lessee shall pay in advance on demand
all increases in costs of repair or reroofing arising from or related to the
Satellite, the Walkways and the Related Equipment. Furthermore, to the extent
that the Satellite, Walkways or any Related Equipment need to be dismantled,
relocated, repaired or replaced in conjunction with such reroofing or repair,
all costs and expenses shall be borne by Lessee, and Lessor shall have no
liability in connection therewith, including, without limitation, any
interruption in service.
6. Permits. Prior to commencing the installation of the Satellite, Walkways
and/or Related Equipment, Lessee shall, at its own cost and expense, obtain each
and every permit including building permits and approvals of any applicable
architectural control committee for same and deliver same to Lessor. Lessor
makes no representations or warranties with respect to zoning or any other
approvals. If Lessee cannot obtain such necessary permits or such permits affect
the Building or the Roof Space in any way by means of additional requirements,
then this License shall be deemed null and void and of no further force and
effect, unless Lessor in writing waives the conditions set forth herein.
7. Repair and Maintenance of Satellite and Related Equipment. Lessee agrees
that it shall keep and maintain the Satellite, Walkways and the Related
Equipment in good condition and repair, at Lessee's sole cost and expense, in
such a manner so as not to conflict or interfere with the use of other
facilities installed in the Building and consistent with first-class office
buildings in Colorado Springs, Colorado. Furthermore, Lessee agrees that it
shall not damage nor shall it permit any damage to the roof or the Roof Space or
the Building in conjunction with the Satellite and the Related Equipment. Lessee
agrees that the Satellite and the Related Equipment shall be of such types and
frequencies that will not cause interference with other antennas or dishes in
the North Creek Complex in operation at the time of Lessee's installation. In
the event the Satellite or the Related Equipment cause such interference, Lessee
shall immediately take all steps necessary to correct and eliminate the
interference. If Lessee cannot eliminate the interference within a reasonable
time of notification thereof, it shall remove the Satellite and Related
Equipment causing the interference. Lessee shall use its best efforts to notify
any telephone and/or electrical service persons of the location of the Related
Equipment in the Building in order to minimize any interference with such
equipment.
8. Repair and Maintenance of the Roof. Lessee hereby acknowledges and
agrees that Lessor, its agents, employees, contractors or anyone else permitted
by Lessor to be on the roof of the Building may from time to time inspect,
repair, replace or maintain the roof or any part or parts thereof, or install
additional improvements or fixtures on the said roof. Lessee shall maintain the
Walkway at it sole expense, except Lessor shall be liable for the cost of
repairs or maintenance to the Satellite, Walkway and Related Equipment caused by
Lessor's misconduct or gross negligence.
G-2
<PAGE> 51
9. Compliance with Law and Warranties. Lessee, at Lessee's sole cost and
expense, agrees to install, keep, maintain, operate and remove the Satellite,
Walkways and the Related Equipment in accordance with all applicable laws,
rules, regulations, statutes, ordinances or other requirements of any kind or
nature of any governmental or quasi-governmental authority or the requirements
of Lessor's insurance underwriters and in compliance with any roofing
warranties.
10. Alterations and Mechanic's Liens. Lessee shall not without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
make any alterations, improvements or additions to the Satellite, the Related
Equipment or any other materials related thereto. Lessee agrees that it shall
not alter, add to or move the Satellite, the Walkway or Related Equipment
without Lessor's consent, which consent shall not be unreasonably withheld by
Lessor. In the event that Lessee desires to perform any alterations,
improvements, additions, repairs or other work on the Satellite, Walkways or the
Related Equipment, Lessee shall first submit to Lessor a written request
therefor outlining the repairs, alterations, or other matters which Lessee is
requesting Lessor's consent. The work necessary to perform any of the repairs or
alterations under this section shall be done by employees or contractors
approved in advance by Lessee subject to written contracts containing all
conditions Lessor may reasonably impose, including insurance provisions. Lessee
agrees that it shall defend and hold Lessor and the Building harmless from all
costs, damages, liens, for labor, services or materials related to any work done
on the additions by Lessee.
11. Damage by Lessee. Subject to the waiver of subrogation as set forth in
Section 13.03 of the Lease, which is incorporated herein by reference, if the
Building, Building Complex, elevators, boilers, engines, pipes, electrical
apparatus, or any other elements of the Building or the Building roof or any
portion thereof, become damaged or destroyed through any act of Lessee, its
servants, agents, employees, contractors or anyone permitted by Lessee to be
working in the Building or on the Satellite, Walkways or the Related Equipment,
whether or not such act was a result of the negligence or willful misconduct of
Lessee or any such party, then the cost of any repairs, replacements,
alterations and all damages incurred by Lessor shall be borne by Lessee who
shall, within thirty (30) days of demand, pay the same to Lessor.
12. Lessee's Insurance. Lessee shall with respect solely to the Satellite,
during the entire term of this License, at its sole cost and expense, obtain,
maintain, and keep in full force and effect insurance with coverages, amounts,
with companies and in form reasonably acceptable to Lessor naming Lessor and
Mortgagees of Lessor as insureds thereunder. If the cost of Lessor's insurance
increases as a result directly or indirectly of this License, the Satellite or
the Related Equipment then Lessee shall pay the costs of such increases directly
to Lessor upon demand.
13. Attorneys' Fees. In the event of any litigation or arbitration between
Lessor and Lessee to enforce any provision of this License or any right of
either party hereto, the unsuccessful party to such litigation or arbitration
shall pay to the successful party all costs and expenses, including reasonable
attorneys' fees, incurred therein.
14. Indemnification; Release. From and after the Effective Date, Lessee
hereby agrees to indemnify, defend, and save Lessor harmless from and against
all claims, demands, liability, loss, cost, damage, or expense, including
attorneys' fees, incurred by or asserted against Lessor as a result of or
arising out of this License including the installation, use or existence of the
Satellite, Walkways and Related Equipment by Lessee. This indemnity shall
survive expiration or termination of this License and/or the Lease for a period
of time not to exceed one (1) year. Lessee hereby irrevocably releases Lessor,
its agents, employees, invitees or contractors, from any claims, damages,
expenses or costs of any kind or nature, whether known or unknown, arising from
or related to this License or any act or the negligence of Lessor, its
employees, agents, invitees or contractors, excepting, however, any costs,
claims or damages relating to the gross negligence or willful acts of Lessor, it
being understood and agreed that the Satellite and Related Equipment are at the
sole risk, cost and expense of Lessee.
G-3
<PAGE> 52
15. Default by Lessee. Each one of the following events is herein referred
to as an "event of default":
(1) Lessee shall fail to make due and punctual payment of any amounts
payable hereunder, and such failure shall continue for thirty (30) days after
receipt of written notice from Lessor;
(2) Lessee shall default on any term or condition to be performed by it
under the Lease and such default is not cured within the applicable cure period,
if any;
(3) This License or the estate of Lessee hereunder shall be transferred
to or shall pass to or devolve upon any other person or party except in the
manner set forth in Section 12;
(4) Lessee shall fail to perform any of the other agreements, terms,
covenants or conditions hereof on Lessee's part to be performed, and such
non-performance shall continue for a period of thirty (30) days after written
notice thereof by Lessor to Lessee, or if such performance cannot be reasonably
had within such thirty (30) day period, Lessee shall not in good faith have
commenced such performance within such thirty (30) day period and shall not
thereafter diligently proceed to completion;
16. Remedies of Lessor. If any one or more events of default shall happen,
then Lessor shall have the right, at Lessor's election, to terminate this
License by written notice to Lessee, and to pursue any other remedy provided in
law or in equity for damages incurred by Lessor.
17. Notice. Any notice from Lessor to Lessee or from Lessee to Lessor shall
be in writing and shall be delivered in accordance with the terms of the Lease.
18. Satellite. Lessee hereby agrees that its Satellite may not interfere
with any antenna or dish now or hereafter placed upon the roof by Landlord or
another tenant, nor may such antenna or dish cause any interference with any
tenant's use of their Premises and equipment therein nor may the antenna or dish
cause or pose any possible health risk of any kind or nature.
IN WITNESS WHEREOF, ____________________ and ________________ have executed
this License the day and year first above written.
LESSOR: LESSEE:
North Creek I-III L.P., MCI Systemhouse Corp.,
a Delaware limited partnership a Delaware corporation
By: LPAML Colorado Limited By:
Partnership, a Colorado limited -------------------------------
partnership, as Agent for Lessor Its:
------------------------------
Date:
By: -----------------------------
-------------------------------
Its:
------------------------------
Date:
-----------------------------
G-4
<PAGE> 53
RIDER TO LEASE DATED AS OF , 1997
BETWEEN NORTH CREEK I-III L.P., AS LESSOR
AND MCI SYSTEMHOUSE CORP., AS LESSEE
IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PRINTED PORTIONS OF THE LEASE
AND THIS RIDER, THE LANGUAGE IN THIS RIDER SHALL PREVAIL.
Notwithstanding anything contained in this Lease to the contrary, whenever
Lessor's consent or approval is required hereunder, it shall not be unreasonably
withheld, conditioned or delayed.
1. RIDER TO SECTION 2.02 - OPERATING EXPENSE STATEMENT
Notwithstanding any provision contained in this Lease to the contrary,
after the end of each calendar year, including the year in which the Term
expires, Lessor shall give Lessee a detailed statement, prepared in accordance
with generally accepted accounting principles (the "STATEMENT"), setting forth
the actual taxes and actual Operating Expenses for that calendar year, the
estimated Operating Expenses actually paid by Lessee for that calendar year, and
the amount, if any, due to Lessor from Lessee for that calendar year. If the
Lessee's actual pro rata share of the Operating Expenses exceeds the Lessee's
pro rata share of the estimated Operating Expenses for that year, Lessee shall
pay to Lessor the excess amount due within thirty (30) days after receiving such
Statement. If the Lessee's pro rata share of the actual Operating Expenses is
less than the Lessee's estimated Operating Expenses paid for that year, Lessor
shall pay to Lessee the difference within thirty (30) days after furnishing
Lessee with such Statement. Lessor shall use its reasonable efforts to deliver
to Lessee notice of any actual Operating Expense adjustment within one hundred
eighty (180) days after the closing of any calendar year.
2. RIDER TO SECTION 2.03 - EXCLUSIONS FROM OPERATING EXPENSES
Notwithstanding any provision contained in this Lease to the contrary,
Operating Expenses shall not include the following items: (i) any cost
associated with asbestos containing materials in the Building, including, but
not limited to, the cost of monitoring, encapsulating, or abating of any
asbestos containing materials from the Building; (ii) the cost of correcting
structural defects in the Building or Leased Premises; (iii) the cost of the
initial balancing of the HVAC system in the Leased Premises; (iv) the cost of
any items for which Lessor is actually reimbursed by insurance, or any lessee;
(v) corporate taxes, capital gains taxes, taxes on rents or gross receipts, and
income or estate taxes personally owed by Lessor; and (vi) any charge for
depreciation of the building or equipment.
In no event shall Lessor recover from Lessee more than an amount equal to
Lessee's proportionate share of 100% of Operating Expenses.
3. RIDER TO SECTION 3.03 - RULES & REGULATIONS
Lessor shall use reasonable efforts to enforce the rules and regulations
against Lessee in a manner which is not materially adverse and inconsistent (as
compared to other lessees which violate rules and regulations).
4. RIDER TO SECTION 4.01 - BUILDING SERVICES
To the extent Lessee installs supplemental HVAC (which installation shall
be at Lessee's sole cost and expense and subject to the provisions of this
Lease, including all exhibits hereto), Lessee shall keep and maintain such
supplemental HVAC at Lessee's sole cost and expense and shall pay all costs
associated therewith. Lessor may at Lessee's cost submeter the supplemental HVAC
and Lessee shall pay the actual costs of the utilities within thirty (30) days
of receipt of a demand therefor. Upon termination or earlier expiration of the
Lease term, Lessee shall at Lessor's option either surrender the supplemental
HVAC, in good condition and repair, or at Lessee's cost remove the supplemental
HVAC and repair any damage caused by the removal.
<PAGE> 54
or assignment which violates this provision or purports directly or indirectly
to change the terms of this Lease shall be void.
8. RIDER TO 9.04 - NON-DISTURBANCE
At Lessee's request and expense, Lessor agrees to use its reasonable
efforts to obtain a non-disturbance agreement from any future mortgagee of the
Real Property and/or the Building, however, such efforts shall not require
Lessor to expend any costs or expenses, including attorneys' fees, in doing so
unless such costs and expenses are paid by Lessee.
9. RIDER TO 11.01 - DEFAULT BY LESSEE
Lessee shall be deemed in default of this Lease if it (i) vacates or
abandons the Leased Premises in whole or in material part thereof, (ii) fails to
give thirty (30) days prior notice to Lessor of its intention to vacate or
abandon all or any material part thereof, or (iii) fails to keep and/or perform
all other covenants under the Lease including payment of rent or maintenance of
insurance.
10. RIDER TO SECTION 16.07 - NOTICES
Notwithstanding any provision contained in this Lease to the contrary,
until further notice is sent in accordance with the terms of this Lease, all
statements, notices or communications to be given under the terms of this Lease
shall be in writing and delivered by hand against receipt or sent by certified
mail, registered mail or Express Mail Service, with postage prepaid and return
receipt requested, or other nationally utilized overnight delivery service, and
addressed as follows:
IF TO LESSOR:
North Creek I-III, L.P.
LaSalle Advisors Limited
200 East Randolph Drive
Chicago, IL 60601
Facsimile: (312) 782-4339
WITH A COPY TO:
LPAML Colorado Limited Partnership
8055 East Tufts Avenue, Suite 101
Denver, CO 80237
Attention: General Partner
Facsimile: (303) 779-5831
IF TO LESSEE:
MCI Telecommunications Corporation
c/o MCI Systemhouse Corp.
701 S. 12th Street
Arlington, Virginia 22202
Attention: Real Estate Manager, Dept. 0950/081
Facsimile: 703-414-6829
WITH A COPY TO:
MCI Telecommunications Corporation
Law and Public Policy
1133 19th Street, N.W.
Washington, D.C. 20036
Attention: Real Estate Administrator
Facsimile: (202) 736-6666
3
<PAGE> 55
ADDITIONAL PROVISIONS TO THE LEASE:
14. EXTENSION OPTIONS
Notwithstanding any provisions contained in this Lease to the contrary, in
addition to the initial term hereof, Lessee shall have the right to extend the
term of this Lease for an additional term of five (5) years (the "EXTENSION
PERIOD") commencing on the date immediately following the expiration date and
ending on the date immediately preceding the sixth (6) anniversary of the
commencement date of the Extension Period. If Lessee elects to exercise such
option, it shall do so by giving notice of such election to Lessor no sooner
than one (1) year and no later than six (6) months before the beginning of
the Extension Period. Such Extension Period shall be on the same terms and
conditions as are set forth herein except for rent which shall be 100% of the
then current Fair Market Rent ("FMR") as hereinafter defined. The word "TERM" as
used in this Lease and this Rider shall include the above mentioned Extension
Period.
If Lessee gives notice in accordance with the provisions of this Paragraph,
and the parties are unable to agree to the Fair Market Rent within thirty (30)
days after receipt of the notice from Lessor setting forth the Base Rent then
Lessee at its sole option and as its sole right or remedy may either (i)
initiate the appraisal process provided for herein by giving notice to that
effect to the Lessor, or (ii) revoke its exercise of its option to extend. If
Lessee initiates an appraisal then the Lessee shall specify in such notice the
name and address of the Appraiser designated on its behalf. Lessor shall have
ten (10) business days from receipt of such notice of appraisal to appoint its
own Appraiser and notify Lessee thereof. All Appraisers designated shall be real
estate brokers licensed in the State of Colorado with at least ten (10) years
experience in office building leasing in Colorado Springs, Colorado. The third
appraiser must be impartial and must not have been directly engaged by Lessor or
Lessee for two and one half years preceding the appraisal process. If the Lessor
fails to notify the Lessee of the appointment of its Appraiser within the time
above specified, then the appointment of the second Appraiser shall be made in
the same manner as hereinafter provided for the appointment of a third Appraiser
in a case where the two Appraisers appointed hereunder and the parties are
unable to agree upon such appointment. The two Appraisers so chosen shall meet
within ten (10) days after the second Appraiser is appointed, and if the two
Appraisers shall not agree, they shall together appoint a third Appraiser. If
the two Appraisers are unable to agree upon such appointment within thirty (30)
days after the appointment of the second Appraiser, then either party, on behalf
of both and no notice to the other, may apply for the appointment of a third
Appraiser to the District Court Judge for El Paso County.
The majority of the Appraisers shall determine the Fair Market Rent for the
Leased Premises and render a written report of their determination to both
Lessor and Lessee within thirty (30) days of the appointment of the second
Appraiser or thirty (30) days of the appointment of the third Appraiser, if such
third Appraiser is appointed pursuant to the provisions hereof, and
determination of the Fair Market Rent by the majority of the Appraisers shall be
binding and conclusive on both Lessor and Lessee.
Each party shall pay the fees and expenses of the one of the two original
Appraisers appointed by or for such party, and the fees and expenses of the
third Appraiser and all other expenses (not including the attorneys' fees,
witness fees and similar expenses of the parties, which shall be borne
separately by each of the parties) of the appraisal process shall be borne by
the parties equally.
In the event Lessor or Lessee initiates the appraisal process and as of the
commencement date of the Extension Period the amount of the Fair Market Rent has
not been determined, Lessee shall pay the base rent payable by Lessee hereunder
as of the Expiration Date of the Initial Term and when such determination has
been made, it shall be retroactive as of the commencement date of the Extension
Period and any deficiency or overpayment shall be paid by Lessee to Lessor, or
if applicable Lessor to Lessee, within thirty (30) days after the date of such
determination.
4
<PAGE> 56
Lessee's occupancy of the Leased Premises during the Extension Period shall
be on the same terms and conditions as are in effect immediately prior to the
expiration date of the initial term of this Lease, provided, however, (i) base
rent shall be as determined herein; (ii) Lessee shall have no further right to
any allowances, tenant finish, renewals or monetary concessions, if any,
included in Base Rent.
If Lessee does not send notice pursuant to the provisions hereof, the
option to extend shall be of no further force or effect and shall be deemed
deleted from this Lease. Time shall be of the essence as to Lessee's delivery of
notice.
If this Lease is extended, then Lessor or Lessee can request the other
party hereto to execute a supplemental agreement setting forth the exercise of
Lessee's right to extend the term of this Lease, the last day of the Extension
Period, and the base rent for the respective Extension Period.
For purposes hereof, Fair Market Rent shall mean the base rent for a
reasonably comparable renewal term of a comparable size lease in El Paso County,
Colorado, for a building of similar size, age, condition and amenities.
15. QUIET ENJOYMENT
Notwithstanding any provision contained in this Lease to the contrary,
Lessor covenants and agrees with Lessee that upon Lessee's paying the rent and
any additional rent and observing and performing all of the terms, covenants and
conditions on Lessee's part to be observed and performed, Lessee may peaceably
and quietly enjoy from claims of parties claiming by or through Lessor (1) the
Leased Premises hereby demised, and (2) such other rights as Lessee is granted
under this Lease subject to the terms of the Lease.
16. AUTHORITY TO EXECUTE
Notwithstanding any provision contained in this Lease to the contrary, the
parties hereto represent and warrant that each has the authority to enter into
this Lease and that the signatories hereto are authorized representatives of
Lessor and Lessee respectively.
17. PARKING
Provided Lessee is not in default and subject to casualty, condemnation and
applicable laws, Lessee shall at all times during the term of this Lease, at no
additional cost to Lessee, including any extensions or renewals thereof, have up
to 3 parking spaces for each 1000 square feet of the Leased Premises.
18. CONNECTIVITY
Lessor hereby grants to Lessee the right, at its sole cost and expense, to
install two (2) six (6) inch conduits between the North Creek II Building and
the North Creek III Building for the placement of fiber optic risers and cables
between the respective Leased Premises of Lessee, along with accompanying access
to existing chases and other building facilities in order to install cables
measuring 2-2 1/2 inches in diameter. Lessee shall submit all plans and
specifications for installation of its conduits to Lessor for Lessor approval
prior to beginning any construction, which approval shall not be unreasonably
withheld or delayed. Lessee shall at its sole cost and expense keep, maintain
and repair the conduits in good condition and repair. The conduit is subject to
existing easements, and any applicable laws.
In addition, upon the execution of the attached Satellite Dish License
Agreement (Exhibit G), Lessor hereby grants to Lessee the right to install one
(1) receiving only satellite dish on the roof of the Building, along with
accompanying access to existing chases and other building facilities in order to
install cables measuring approximately 2-2 1/2 inches in diameter to the
satellite dish. Lessee shall submit all plans and specifications for
installation of the satellite dish and accompanying cables to Lessor for Lessor
approval prior to beginning any construction, which approval shall not be
5
<PAGE> 57
unreasonably withheld or delayed. Upon termination of Lessee's right to use such
conduit, Lessee shall remove any of its cabling and fiber optics, clean the
conduit and surrender the conduit to Lessor, which shall remain the property of
Lessor.
19. COLLOCATION OF EQUIPMENT
Lessor hereby grants to Lessee the right to locate equipment owned by
Lessee's customers upon the Leased Premises; provided, however, that:
(i) the placement of such equipment upon the Leased Premises will not
create in the third party customer a possessory interest in the Leased
Premises;
(ii) all equipment placed upon the Leased Premises by a third party customer
shall remain the personal property of the third party customer;
provided prior written notice thereof is given to Lessor, the third
party customer releases Lessor from any and all claims arising from the
presence of the equipment in on or about the Leased Premises, and the
third party customer agrees to remove the equipment within one (1) day
of receipt of notice, and repair any damage if the Lessee's rights to
possession have been terminated.
(iii) Lessee shall indemnify and hold Lessor harmless from any and all
damages, liabilities and other claims arising from the existence of the
third party customer's equipment upon the Leased Premises in accordance
with Section 7.03 of this Lease during the term of this Lease and any
extensions thereof.
(iv) in the event Lessor deems the Lessee's placement of such equipment upon
the Leased Premises does create in the third party customer a
possessory right in the Leased Premises, Lessee agrees to execute a
sublease agreement with Lessor covering the space utilized by Lessee's
customer's equipment within the Leased Premises.
(v) all costs and expenses by Lessor arising from or relating to such
equipment shall be borne by Lessee and payable upon demand including
reasonable attorneys fees and costs.
(vi) the existence or placement of the equipment in on or about the Leased
Premises shall not violate this Lease including the rules and
regulations, and any insurance requirements.
LESSOR: LESSEE:
North Creek I-III L.P., MCI Systemhouse Corp.,
a Delaware limited partnership a Delaware corporation
By: LPAML Colorado Limited By: /s/ MARTHA BENSON
Partnership, a Colorado limited ----------------------------------
partnership, as Agent for Lessor Its: Director, Real Estate Services
-----------------------------------
Date:
----------------------------------
By: /s/ LUCY A. BARNETT
----------------------------------
Its: General Partner
-----------------------------------
Date: 6/30/97
----------------------------------
6
<PAGE> 58
EXHIBIT B
[SECOND FLOOR PLAN]
A-1
<PAGE> 59
5. RIDER TO SECTION 6.02 - LESSEE IMPROVEMENTS
Notwithstanding the provisions of Section 6.02, Lessor agrees to not
unreasonably withhold consent to alterations within the Leased Premises which do
not affect either the structure of the building (including the roof) or the
building systems, which systems include without limitation electrical, plumbing
and HVAC. Lessee may install vending machines in the Leased Premises for
exclusive use of Lessee's employees and Lessee shall be responsible for the cost
of any additional maintenance or utilities required for such machines. Upon the
prior written approval of Lessor, Lessee may retain its own licensed contractor
for all work within the Leased Premises, provided that such contractor meets all
reasonable insurance requirements of Lessor and such contractor would not
violate or invalidate any outstanding warranties for work.
6. RIDER TO SECTION 6.03 - MECHANICS LIEN
Notwithstanding any provision contained in this Lease to the contrary,
Lessee shall have a period of thirty (30) days from and after Lessee's receipt
of notice of the filing of any such mechanic's or materialmen's lien within
which to post a bond or to cause such lien to be released of record before
Lessor may exercise its rights under this section.
7. RIDER TO SECTION 9.02 - ASSIGNMENT
Notwithstanding anything to the contrary contained hereinabove, Lessee
shall have the right, without obtaining Lessor's prior written consent, to
assign or sublease all or any portion of the Leased Premises to the following
parties on the following conditions:
a. Any subsidiary or affiliate of Lessee, provided Lessee owns a
substantial interest in such affiliate or subsidiary;
b. Any parent corporation of Lessee;
c. Any subsidiary or affiliate of Lessee's parent corporation if such
parent owns a substantial interest in such subsidiary or affiliate; or
d. Any corporation into which Lessee may be merged or consolidated or
which purchases all or substantially all of the assets or stock of Lessee;
provided that the resulting corporation has as net worth at least equal to
Lessee's net worth as of the date hereof;
and provided that:
(1) Lessee continues to remain primarily liable on its obligations set
forth herein;
(2) Any such subtenant and/or assignee shall assume and be bound by
all obligations of Lessee for payment of all amounts of rental and other
sums and the performance of all covenants required by Lessee pursuant to
this Lease; and
(3) Any such subtenant and/or assignee intends to operate the Leased
Premises in accordance with the usage restrictions of this Lease and under
the same name as Lessee.
Not less than thirty (30) days subsequent to the effective date of such
transaction, Lessee shall provide Lessor with copies of the documents evidencing
such transaction and such evidence as Lessor may reasonably require to establish
that such transaction falls within the terms and provisions of this
subparagraph. All subletting and assignments shall be on forms approved by
Lessor in advance. If Lessor's then standard subletting or assignment form is
not utilized then Lessee shall pay Lessor's reasonable costs to have such
sublease or assignment forms reviewed. Any subletting
2
<PAGE> 60
CMD REALTY INVESTMENT FUND III, L.P.
c/o CMD REALTY INVESTORS, INC.
227 WEST MONROE STREET, SUITE 3900
CHICAGO, ILLINOIS 60606
07/16/98
VIA AIRBORNE EXPRESS
MCI Telecommunications Corporation
Law and Public Policy
1133 19th Street, N.W.
Washington, D.C. 20036
Re: Sublease Agreement dated June 30, 1998
("Sublease") between MCI SYSTEMHOUSE CORP.,
a Delaware corporation ("SUBLESSOR") and
CHANNELPOINT, INC., a Delaware corporation
("SUBLESSEE") concerning certain premises
("PREMISES") commonly known as Suite 200 in
North Creek II, 5755 Mark Dabling Boulevard,
Colorado Springs, Colorado
Ladies and Gentlemen:
Reference is hereby made to your request for consent to the subletting
contemplated by the Sublease.
We hereby consent to such subletting, subject to the following
understandings, agreements and conditions, notwithstanding anything contained in
the Sublease to the contrary:
1. Neither this consent nor the terms of the Sublease modifies,
amends, waives or affects any of the terms, covenants,
conditions, provisions or agreements of the lease from the
undersigned to Sublessor dated on or about June 30, 1997, as
may have been amended ("LEASE"), nor affects Sublessor's
obligations thereunder, which Lease shall continue to apply to
all the space covered by the Lease and the use and occupancy
thereof. The Sublease is subject and subordinate at all times
to this consent and to the Lease and all of its terms,
covenants, conditions, provisions and agreements.
2. This consent shall not be construed to create a
landlord-tenant relationship or privity of contract or estate
between the undersigned and Sublessee.
<PAGE> 61
MCI SYSTEMHOUSE CORP.
07/16/98
Page 2
3. Nothing contained herein shall be construed as a consent to,
approval of, or ratification by the undersigned of any of the
particular provisions of the Sublease or as a representation
or warranty by the undersigned in respect thereof. The
undersigned is not passing on the terms, covenants and
conditions of the Sublease and is not assuming any obligations
under the Sublease.
4. Neither the Sublease, nor this consent thereof shall be
construed as a consent by the undersigned to any further
subletting either by Sublessor or by Sublessee.
5. This consent is not assignable, nor shall this consent be a
consent to any amendment, modification, extension or renewal
of the Sublease, without the undersigned's prior written
consent.
6. Intentionally omitted.
7. Sublessor and Sublessee covenant and agree that under no
circumstances shall the undersigned be liable for any
brokerage commission or other charge or expense in connection
with the Sublease and both Sublessor and Sublessee agree to
indemnify the undersigned, its directors, officers, agents,
shareholders and employees against same and against any cost
or expense (including, without limitation, attorney's fees and
disbursements) incurred by the undersigned, its directors,
officers, agents, shareholders and employees in resisting any
claim for any such brokerage commission.
8. If for any reason the term of the Lease shall terminate, the
Sublease shall automatically be terminated, and on or prior to
the date of such termination of the Sublease, Sublessee shall
quit and surrender the Premises to the undersigned in
accordance with all applicable provisions of the Lease.
9. The execution of this consent by Sublessor and by Sublessee
shall indicate their joint and several confirmation of the
foregoing conditions and their agreement to be bound thereby.
The failure of Sublessor and Sublessee to execute this consent
and deliver it to the undersigned within 30 days of the date
hereof shall render this consent void ab initio and of no
force or effect, without any further action of the
undersigned.
10. The parties hereby acknowledge that any special rights under
the Lease that, by their terms are personal or non-assignable,
including, but not limited to, extension, expansion,
relocation, early termination, signage, or rights that by
their terms are personal or non-assignable, are not being
assigned by the Sublease (notwithstanding anything to the
contrary contained therein), and, to the extent that such
rights by their terms no longer apply after a sublease, then
such rights shall be of no further force or effect.
<PAGE> 62
MCI SYSTEMHOUSE CORP.
07/16/98
Page 3
11. This Consent to Sublease is expressly conditioned upon and
subject to the following:
(a) execution and delivery of a lease amendment between
the undersigned and Sublessee in the form attached
hereto as Exhibit A wherein Sublessee agrees to
delete Section 3 of the Rider to that certain lease
dated March 25, 1997 between Sublessee, as Tenant and
the undersigned, as Landlord, for certain other
premises at North Creek II;
(b) execution of a Tenant Estoppel Certificate by
Sublessor with respect to the Lease in the form
attached hereto as Exhibit B;
(c) execution of a Tenant Estoppel Certificate by
Sublessee with respect to its lease with the
undersigned for certain other premises at the
Building in the form attached hereto as Exhibit C;
and
(d) execution of a Tenant Estoppel Certificate by MCI
Telecommunications Corporation with respect to
certain premises leased by MCI Telecommunications
Corporation at North Creek III in the form attached
hereto as Exhibit D.
In the event that Sublessor fails or refuses to execute and deliver to
the undersigned any or all of the foregoing documents (executed by the
appropriate party) together with the fully executed copy of this Consent to
Sublease, then this Consent to Sublease shall, at the sole option of the
undersigned, be null and void.
Very truly yours,
CMD REALTY INVESTMENT FUND III, L.P.,
an Illinois limited partnership
By: CMD/Fund III GP Investments, L.P.,
an Illinois limited partnership,
its general partner
By: CMD REIM III, Inc., an Illinois corporation,
its general partner
By: /s/ [ILLEGIBLE]
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
<PAGE> 63
MCI SYSTEMHOUSE CORP.
07/16/98
Page 4
CONFIRMED AND AGREED:
MCI Systemhouse Corp.
By: /s/ MARTHA BENSON
-------------------------
Martha Benson
Authorized Signatory
ChannelPoint Inc.
By: /s/ KENNETH E. HOLLEN
-------------------------
Name: Kenneth E. Hollen
-----------------------
Its: President & CEO
------------------------
cc: MCI Telecommunications Corporation
701 S. 12th Street
Arlington, VA 22202
<PAGE> 64
EXHIBIT A
LEASE AMENDMENT TWO
THIS LEASE AMENDMENT TWO ("Amendment") is made and entered into as of the 30th
day of June, 1998, by and between CMD Realty Investment Fund III, L.P., an
Illinois limited partnership ("Landlord") and ChannelPoint, Inc., a Delaware
corporation ("Tenant").
A. Landlord and Tenant are the current parties to that certain lease
("Original Lease") dated March 25, 1997, for premises (the "Premises") in the
building (the "Building") known as North Creek II, located at 5755 Mark Dabling
Boulevard, Colorado Springs, Colorado 80919 (the "Property," as may be further
described below), which lease has heretofore been amended or assigned by a
document described and dated as follows First Amendment to Lease dated May 23,
1997 (collectively, and as amended herein, the "Lease").
B. The parties mutually desire to amend the Lease on and subject to the
terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereby agree as follows:
1. AMENDMENT. The parties agree that the Lease shall be amended in
accordance with the following terms and conditions:
Section 3 of the Rider to the Lease ("Right to Terminate") is
hereby deleted from the Lease.
2. EFFECTIVE DATE. This Amendment shall become effective as an
amendment to the Lease as of, on and after July 1, 1998 (herein referred to as
the "Effective Date"), and shall continue in effect until amended by the parties
in writing or until expiration or sooner termination of the Lease.
3. BROKERS. Tenant hereby represents and warrants that Tenant has not
dealt with any broker, salesman, agent or finder in connection with this
Amendment, and agrees to defend, indemnify and hold Landlord, and its employees,
agents and affiliates harmless from all damages, losses, judgments, liabilities
and expenses (including reasonable attorneys' fees) arising from any claims or
demands of any broker, salesman, agent or finder with whom Tenant has dealt for
any commission or fee alleged to be due in connection with this Amendment.
<PAGE> 65
4. CONFIDENTIALITY. Tenant shall keep the content and all copies of
this document and the Lease, all related documents or amendments now or
hereafter entered, and all proposals, materials, information and matters
relating thereto strictly confidential, and shall not disclose, disseminate or
distribute any of the same, or permit the same to occur, with respect to any
party other than Tenant's financial or legal advisors to the extent that they
need such information to advise Tenant (and Tenant shall obligate any such other
parties to whom disclosure is permitted to honor the confidentiality provisions
hereof), except as may be required by Law or court proceedings.
5. WHOLE AMENDMENT; FULL FORCE AND EFFECT; CONFLICTS. This Amendment
sets forth the entire agreement between the parties with respect to the matters
set forth herein. There have been no additional oral or written representations
or agreements. As amended herein, the Lease between the parties shall remain in
full force and effect. As an inducement for Landlord to enter into this
Amendment, Tenant hereby represents that Landlord is not in violation of the
Lease, and that Landlord has fully performed all of its obligations under the
Lease as of the date on which Tenant signs this Amendment. In case of any
inconsistency between the provisions of the Lease and this Amendment, the latter
provisions shall govern and control.
6. NOT AN OFFER. The submission and negotiation of this Amendment shall
not be deemed an offer to enter into the same by Landlord. Tenant's execution of
this Amendment constitutes a firm offer to enter into the same which may not be
withdrawn for a period of thirty (30) days after delivery to Landlord. During
such period, Landlord may proceed in reliance thereon, but such acts shall not
be deemed an acceptance. Such acceptance shall be evidenced only by Landlord
signing and delivering this Amendment to Tenant.
<PAGE> 66
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
WITNESSES; ATTESTATION
(Two for each signatory
required if Building
is in Florida or Ohio):
LANDLORD:
CMD REALTY INVESTMENT FUND III, L.P.,
an Illinois limited partnership
By: CMD/Fund III GP Investments, L.P.,
an Illinois limited partnership,
its general partner
By: CMD REIM III, Inc.,
an Illinois corporation,
its general partner
By:
- -------------------- --------------------------
Name:
------------------------
Its:
- -------------------- -------------------------
TENANT:
CHANNELPOINT, INC.
a Delaware corporation
By:
- --------------------- -------------------------------
Name:
-----------------------------
Its:
- --------------------- ------------------------------
<PAGE> 67
EXHIBIT B
TENANT ESTOPPEL CERTIFICATE
MCI Systemhouse Corp., a Delaware corporation ("TENANT"), is a tenant
in the building commonly known as North Creek II and located at 5755 Mark
Dabling Boulevard, Colorado Springs, Colorado 80919 ("BUILDING"). CMD Realty
Investment Fund III, L.P., an Illinois limited partnership ("LANDLORD"), has
requested Tenant to execute and deliver this Tenant Estoppel Certificate to
Landlord. Tenant understands that Landlord intends to rely upon information
contained in this Tenant Estoppel Certificate in connection with its consent to
the sublease of Tenant's interest in the Lease (as defined below) to
ChannelPoint, Inc., a Delaware corporation, and in connection with the sale and
purchase of the Building. Accordingly, Tenant hereby certifies as follows:
(a) LEASE DOCUMENTS. Attached hereto as EXHIBIT A is a description of
the lease, all amendments thereto and all other related agreements ("LEASE
DOCUMENTS") between Tenant and Landlord regarding its lease and occupancy in the
Building (collectively, the "LEASE"). The Lease Documents are valid and in full
force and effect.
(b) TERM. The term of the Lease expires on June 30, 2000 (without
regard to any rights of Tenant to terminate or extend the term).
(c) BASE RENT. The monthly base or fixed rent payable by Tenant under
the Lease Documents is $41,984.95 per month.
(d) PREPAID RENT. No rent under the Lease has been paid more than one
month in advance of its due date under the Lease.
(e) SECURITY DEPOSIT. The balance of the security deposit made by
Tenant under the Lease Documents is $ -0-.
(f) CONCESSIONS. Tenant is not entitled to any tenant improvements or
allowances, free rent for any period after the date hereof or any other
concessions with respect to the Lease, except as set forth in the Lease
Documents.
(g) OPTIONS. Tenant has no rights to extend, expand or terminate the
Lease, or purchase the Building, except as set forth in the Lease Documents.
(h) DEFAULTS. To Tenant's actual knowledge, without any independent
investigation, (i) there are no uncured defaults by Tenant or landlord under the
Lease Documents, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time, or both, would constitute a default
by Tenant or landlord under the Lease Documents, and (ii) Tenant neither has nor
claims any charge, lien, claim, counterclaim, defense or offset against Landlord
under the Lease Documents or otherwise against rents or other charges due or to
become due under the Lease Documents.
<PAGE> 68
(i) ADDITIONAL CERTIFICATE. Tenant agrees that it shall, within fifteen
(15) days after its receipt of Landlord's request therefor, furnish Landlord
with an additional Tenant Estoppel Certificate which shall be substantially the
same in form and substance as this Tenant Estoppel Certificate, and which
additional Tenant Estoppel Certificate shall state that it can be relied on and
will run to both Landlord and a purchaser of the Building.
Dated: ________________,1998.
MCI SYSTEMHOUSE CORP.
-----------------------------------
(Tenant)
By:
--------------------------------
Title:
-----------------------------
<PAGE> 69
EXHIBIT A
Lease Documents
1. Standard Commercial Lease dated on or about June 30, 1997 by and between
North Creek I-III L.P., a Delaware limited partnership and MCI Systemhouse
Corp.
2. Notice of assignment of lease dated November 19, 1997 from North Creek,
L.P. and CMD Realty Investment Fund III, L.P., an Illinois limited
partnership
<PAGE> 70
EXHIBIT C
TENANT ESTOPPEL CERTIFICATE
ChannelPoint, Inc., a Delaware corporation ("TENANT"), is a tenant in
the building commonly known as North Creek II and located at 5755 Mark Dabling
Boulevard, Colorado Springs, Colorado 80919 ("BUILDING"). CMD Realty Investment
Fund III, L.P., an Illinois limited partnership ("LANDLORD"), has requested
Tenant to execute and deliver this Tenant Estoppel Certificate to Landlord.
Tenant understands that Landlord intends to rely upon information contained in
this Tenant Estoppel Certificate in connection with its consent to the sublease
to Tenant of certain premises in the Building currently leased to MCI
Systemhouse Corp., and in connection with the sale and purchase of the Building.
Accordingly, Tenant hereby certifies as follows:
(a) LEASE DOCUMENTS. Attached hereto as EXHIBIT A is a description of
the lease, all amendments thereto and all other related agreements ("LEASE
DOCUMENTS") between Tenant and Landlord regarding its lease and occupancy in the
Building (collectively, the "LEASE"). The Lease Documents are valid and in full
force and effect.
(b) TERM. The term of the Lease expires on July 31, 2002 (without
regard to any rights of Tenant to terminate or extend the term).
(c) BASE RENT. The monthly base or fixed rent payable by Tenant under
the Lease Documents is $23,650.15 per month for the period beginning on August
1, 1998 and ending on July 31, 2001 and $24,096.38 per month for the period
beginning on August 1, 2001 and ending on July 31, 2002.
(d) PREPAID RENT. No rent under the Lease has been paid more than one
month in advance of its due date under the Lease.
(e) SECURITY DEPOSIT. The balance of the security deposit made by
Tenant under the Lease Documents is $300,000 in the form of a transferable
letter of credit.
(f) CONCESSIONS. Tenant is not entitled to any tenant improvements or
allowances, free rent for any period after the date hereof or any other
concessions with respect to the Lease, except as set forth in the Lease
Documents.
(g) OPTIONS. Tenant has no rights to extend, expand or terminate the
Lease, or purchase the Building, except as set forth in the Lease Documents.
(h) DEFAULTS. To Tenant's actual knowledge, without any independent
investigation, (i) there are no uncured defaults by Tenant or landlord under the
Lease Documents, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time, or both, would constitute a default
by Tenant or landlord under the Lease Documents, and (ii) Tenant neither has nor
claims any charge, lien, claim, counterclaim, defense or offset against Landlord
under the Lease Documents or otherwise against rents or other charges due or to
become due under the Lease Documents.
<PAGE> 71
(i) ADDITIONAL CERTIFICATE. Tenant agrees that it shall, within fifteen
(15) days after its receipt of Landlord's request therefor, furnish Landlord
with an additional Tenant Estoppel Certificate which shall be substantially the
same in form and substance as this Tenant Estoppel Certificate, and which
additional Tenant Estoppel Certificate shall state that it can be relied on and
will run to both Landlord and a purchaser of the Building.
Dated: _________________, 1998.
CHANNELPOINT, INC.
-------------------------------------
(Tenant)
By:
----------------------------------
Title:
-------------------------------
<PAGE> 72
EXHIBIT A
Lease Documents
1. Standard Commercial Lease dated on or about March 25, 1997 by and
between North Creek I-III L.P., a Delaware limited partnership and
Channelworks, Inc.
2. First Amendment to lease dated May 23, 1997
3. Notice of assignment of lease dated November 19, 1997 from North Creek,
L.P. and CMD Realty Investment Fund III, L.P., an Illinois limited
partnership
<PAGE> 73
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
MCI Telecommunications Corporation, a Delaware corporation ("TENANT"),
is a tenant in the building known as North Creek III and located at 5775 Mark
Dabling Boulevard, Colorado Springs, Colorado 80919 ("BUILDING"). CMD Realty
Investment Fund III, L.P., an Illinois limited partnership ("LANDLORD"), has
requested Tenant to execute and deliver this Tenant Estoppel Certificate to
Landlord. Tenant understands that Landlord intends to rely upon information
contained in this Tenant Estoppel Certificate in connection with the sale and
purchase of the Building. Accordingly, Tenant hereby certifies as follows:
(a) LEASE DOCUMENTS. Attached hereto as EXHIBIT A is a description of
the lease, all amendments thereto and all other related agreements ("LEASE
DOCUMENTS") between Tenant and landlord regarding its lease and occupancy in the
Building (collectively, the "LEASE"). The Lease Documents are valid and in full
force and effect.
(b) TERM. The term of the Lease expires on February 29, 2004 (without
regard to any rights of Tenant to terminate or extend the term).
c) BASE RENT. The monthly base or fixed rent payable by Tenant under
the Lease Documents is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Period Monthly Base Rent
- -----------------------------------------------------------------------
<S> <C>
JULY 1, 1998 THROUGH FEBRUARY 28, 1999 $109,333.24
- -----------------------------------------------------------------------
MARCH 1, 1999 THROUGH FEBRUARY 29, 2000 $116,220.38
- -----------------------------------------------------------------------
MARCH 1, 2000 THROUGH FEBRUARY 28, 2001 $118,803.05
- -----------------------------------------------------------------------
MARCH 1, 2001 THROUGH FEBRUARY 28, 2002 $122,246.62
- -----------------------------------------------------------------------
MARCH 1, 2002 THROUGH FEBRUARY 28, 2003 $125,690.18
- -----------------------------------------------------------------------
MARCH 1, 2003 THROUGH FEBRUARY 29, 2004 $129,133.75
- -----------------------------------------------------------------------
</TABLE>
(d) PREPAID RENT. No rent under the Lease has been paid more than one
month in advance of its due date under the Lease.
(e) SECURITY DEPOSIT. The balance of the security deposit made by
Tenant under the Lease Documents is $-0-.
(f) CONCESSIONS. Tenant is not entitled to any tenant improvements or
allowances, free rent for any period after the date hereof or any other
concessions with respect to the Lease, except as set forth in the Lease
Documents.
<PAGE> 74
(g) OPTIONS. Tenant has no rights to extend, expand or terminate the
Lease, or purchase the Building, except as set forth in the Lease Documents.
(h) DEFAULTS. To Tenant's actual knowledge, without any independent
investigation, (i) there are no uncured defaults by Tenant or landlord under the
Lease Documents, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time, or both, would constitute a default
by Tenant or landlord under the Lease Documents, and (ii) Tenant neither has nor
claims any charge, lien, claim, counterclaim, defense or offset against Landlord
under the Lease Documents or otherwise against rents or other charges due or to
become due under the Lease Documents.
(i) ADDITIONAL CERTIFICATE. Tenant agrees that it shall, within fifteen
(15) days after its receipt of Landlord's request therefor, furnish Landlord
with an additional Tenant Estoppel Certificate which shall be substantially the
same in form and substance as this Tenant Estoppel Certificate, and which
additional Tenant Estoppel Certificate shall state that it can be relied on and
will run to both Landlord and a purchaser of the Building.
Dated: __________________,1998.
MCI Telecommunications Corporation
-----------------------------------
(Tenant)
By:
--------------------------------
Title:
-----------------------------
<PAGE> 75
EXHIBIT A
LEASE DOCUMENTS
1. Lease dated December 6, 1993 by and between The Equitable Life Assurance
Society of the United States and MCI Telecommunications Corporation
2. First Amendment to Lease dated February 15, 1994
3. Second Amendment to Lease dated May 29, 1998
4. Notice of assignment of lease dated November 19, 1997 from North Creek, L.P.
and CMD Realty Investment Fund III, L.P., an Illinois limited partnership
<PAGE> 1
EXHIBIT 10.13
LEASE
BY AND BETWEEN
WESTMOOR BUSINESS PARK LTD, LLLP,
A COLORADO LIMITED LIABILITY LIMITED PARTNERSHIP
(LANDLORD)
AND
CHANNELPOINT, INC., A COLORADO CORPORATION
(TENANT)
FOR
WESTMOOR TECHNOLOGY PARK
WESTMINSTER, COLORADO
<PAGE> 2
BUILDING LEASE
LEASE SUMMARY
<TABLE>
<S> <C>
1. Landlord: WESTMOOR BUSINESS PARK LTD., LLLP, a Colorado limited
liability limited partnership
2. Tenant: ChannelPoint, Inc., a Colorado corporation
3. Guarantor: N/A
4. Premises: 10155 Westmoor Drive, Suite 210
5. Rentable Square Feet: 9,040
6. Commencement Date: September 1, 1999
7. Expiration Date: August 31, 2004
8. Term: Five (5) Years
9. Rent Commencement Date: September 1, 1999
10. Initial Base Rent (Annually): $13.80 per rentable square foot
11. Initial Base Rent (Monthly): $1.15 per rentable square foot
12. Increase in Base Rent: See paragraph 3
13. Security Deposit: $10,769.00
14. Parking Spaces: 5 per 1,000 USF
15. Tenant's Pro Rata Share of the Building: 9.23%
16. Option on Additional Space: See Addendum
17. Option to Renew: None
18. Landlord Broker: Frederick Ross Company
19. Tenant Broker: Prime West Real Estate Services
20. Landlord Notices: Westmoor Business Park, Ltd., LLLP
717 17th Street, Suite 2000
Denver, Colorado 80202
Attn: Richard G. McClintock
21. Tenant Notices: ChannelPoint, Inc.
5755 Mark Dabling Boulevard, Suite 100
Colorado Springs, Colorado 80919
Attn: Tim Hoogheem
</TABLE>
<PAGE> 3
ADDENDUM
EXHIBITS:
A Premises
A-1 Method of Calculation
B Legal Description
C Estoppel and Commencement Date Certificate
D Work Letter Agreement
D-l Landlord's Core and Shell Work
E Rules and Regulations
F Intentionally Deleted
Note: This Lease Summary does not in any way modify the terms of the Lease, but
rather is for information purposes only. The Lease should be consulted for
the specific terms of the Lease Agreement.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Premises .......................................... 1
2. Term .............................................. 1
3. Rent .............................................. 1
4. Security Deposit .................................. 2
5. Rent Adjustment ................................... 2
6. Character of Occupancy ............................ 6
7. Services and Utilities ............................ 7
8. Quiet Enjoyment ................................... 8
9. Maintenance and Repairs ........................... 8
10. Alterations and Additions ......................... 9
11. Entry by Landlord ................................. 10
12. Mechanic's Liens .................................. 10
13. Damage to Property, Injury to Persons ............. 10
14. Insurance ......................................... 11
15. Damage or Destruction to Building ................. 12
16. Condemnation ...................................... 13
17. Assignment and Subletting ......................... 13
18. Estoppel Certificate .............................. 15
19. Default ........................................... 15
20. Completion of Premises ............................ 18
21. Removal of Tenant's Property ...................... 19
22. Holding Over ...................................... 19
23. Parking and Common Areas .......................... 19
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C>
24. Surrender and Notice .............................. 20
25. Acceptance of Premises by Tenant .................. 20
26. Subordination and Attornment ...................... 20
27. Payments After Termination ........................ 21
28. Authorities for Action and Notice ................. 21
29. Liability of Landlord ............................. 22
30. Brokerage ......................................... 22
31. Taxes ............................................. 22
32. Substitution of Premises .......................... 23
33. Rights Reserved to Landlord ....................... 23
34. Force Majeure Clause .............................. 23
35. Signage ........................................... 24
36. Attorneys' Fees ................................... 24
37. Hazardous Materials ............................... 24
38. Americans with Disabilities Act ................... 25
39. Bankruptcy or Insolvency .......................... 25
40. Miscellaneous ..................................... 26
</TABLE>
ii
<PAGE> 6
BUILDING LEASE
THIS LEASE is made this 12th day of July 1999, between WESTMOOR BUSINESS
PARK LTD., LLLP, a Colorado limited liability limited partnership, ("Landlord")
and CHANNELPOINT, INC., a Colorado corporation ("Tenant").
1. Premises: Landlord hereby leases to Tenant those certain premises
designated on the floorplan(s) attached hereto as Exhibit A and incorporated
herein by this reference (the "Premises"), consisting of a total of
approximately 9,040 square feet of space (Rentable Area) on the second floor(s),
suite(s) 210 of the building known as Building Three ("Building"), located in
Westmoor Technology Park ("Westmoor Technology Park") at 10155 Westmoor Drive,
Westminster, Colorado 80021 located on the real property more particularly
described on Exhibit B attached hereto and incorporated herein by this
reference, together with a non-exclusive right, subject to the provisions
hereof, to use all appurtenances thereunto, including, but not limited to,
parking areas and any other areas designated by Landlord for use by tenants of
the Building (the Building, real property on which the same is situated, parking
areas, other areas and appurtenances are hereinafter collectively sometimes
called the "Building Complex"). For purposes of this Lease, "Rentable Area" of
the Premises shall mean and refer to the area of the Premises, as determined by
Landlord's architect, utilizing the methodology of calculation outlined on
Exhibit A-l consistently applied in the Building. The exact square footage of
the Premises shall be calculated by Landlord's architect at the time the
construction documents for the Premises have been completed. This Lease is
subject to the terms, covenants and conditions set forth herein and Tenant and
Landlord each covenant as a material part of the consideration for this Lease to
keep and perform each and all of said terms, covenants and conditions to be kept
and performed by them.
2. Term:
(a) The term of this Lease shall be for sixty (60) months (the "Primary
Lease Term") commencing at 12:01 a.m. on September 1, 1999 (the "Commencement
Date") and terminating at 12:00 midnight on August 31, 2004 (the "Termination
Date"), unless sooner terminated pursuant to the terms hereof. In the event the
Premises are not "Ready for Occupancy" as such term is defined in Paragraph 20
hereof, the Commencement Date shall mean and refer to the date the Premises are
Ready for Occupancy.
(b) If, as a result of the postponement or acceleration of the
Commencement Date, the Primary Lease Term would begin other than on the first
day of the month, Tenant shall pay proportionate rent at the same monthly rate
set forth herein (also in advance) for such partial month and all other terms
and conditions of this Lease shall be in force and effect during such partial
month, and the end of the Primary Lease Term hereof shall be adjusted to a date
which is the last day of the month sixty (60) months after the Commencement
Date. Tenant agrees to execute and deliver to Landlord, in form attached hereto
as Exhibit C, an Estoppel and Commencement Date Certificate, within ten (10)
days of the date the Primary Lease Term commences, certifying as to the actual
commencement and termination dates of the Primary Lease Term, the rent
commencement date, if different, and such other matters as may be required by
Landlord.
3. Rent: Tenant shall pay to Landlord, rent for the Premises ("Base Rent")
as follows:
<TABLE>
<CAPTION>
Period (by month) Annual Base Rent Monthly Base Rent Rate/RSF
----------------- ---------------- ----------------- --------
<S> <C> <C> <C>
1 - 36 $124,752.00 $10,396.00 $13.80
37 - 60 $135,961.60 $11,330.13 $15.04
</TABLE>
<PAGE> 7
All installments of Base Rent shall be payable in advance, on the first (1st)
day of each calendar month during the term hereof. Rent for the first and last
months of the term hereof shall be prorated based upon the number of days during
each of said months that the Lease term was in effect. One monthly installment
of Base Rent shall be due and payable on the date of execution of this Lease by
Tenant. All Base Rent shall be paid without notice, demand, deduction or offset,
at the office of Landlord or to such other person or at such other place as
Landlord may designate in writing. Tenant shall pay to Landlord as "Additional
Rent" all other sums due under this Lease. All payments of Base Rent and
Additional Rent shall be paid in United States currency.
4. Security Deposit: It is agreed that Tenant, concurrently with the
execution of this Lease, has deposited with Landlord, and will keep on deposit
at all times during the term hereof, the sum of Ten Thousand Seven Hundred
Sixty-nine Dollars and No/100 ($10,769.00), the receipt of which is hereby
acknowledged, as security for the payment by Tenant of the rent and all other
sums herein agreed to be paid and for the faithful performance of all the terms,
conditions and covenants of this Lease. If, at any time during the term hereof,
Tenant shall be in default in the performance of any provisions of this Lease,
Landlord shall have the right, but shall not be obligated, to use said deposit,
or so much thereof as necessary, in payment of any rent in default,
reimbursement of any expense incurred by Landlord, and in payment of any damages
incurred by the Landlord by reason of Tenant's default. In such event, Tenant
shall, on written demand of Landlord, forthwith remit to Landlord a sufficient
amount in cash to restore said deposit to its original amount. In the event said
deposit has not been utilized as aforesaid, said deposit, or as much thereof as
has not been utilized for such purposes, shall be refunded to Tenant without
interest, within sixty (60) days after the termination of this Lease upon full
performance of this Lease by Tenant and vacation of the Premises by Tenant.
Landlord shall have the right to commingle said deposit with other funds of
Landlord. Landlord may deliver the funds deposited herein by Tenant to any
purchaser of Landlord's interest in the Premises in the event such interest is
sold, and thereupon Landlord shall be discharged from further liability with
respect to such deposit. If the claims of Landlord exceed the amount of said
deposit, Tenant shall remain liable for the balance of such claims.
5. Rent Adjustment:
(a) The following terms shall have the following meanings with respect
to the provisions of this Paragraph 5:
(1) "Building Rentable Area" shall mean all rentable space available
for lease in the Building, as determined by Landlord's architect, utilizing the
methodology of calculation as outlined on Exhibit A-1 and consistently applied
to the Building. If there is a significant change in the aggregate Building
Rentable Area, of a permanent nature, as a result of an addition to the
Building, partial destruction thereof or similar circumstance, Landlord's
accountants shall determine and make an appropriate adjustment to the provisions
herein.
(2) "Tenant's Pro Rata Share" shall mean a fraction, the numerator
of which is the Rentable Area of the Premises (i.e., 9,040 square feet) and the
denominator of which is the Building Rentable Area (i.e., 97,916 feet), and is
equal to 9.23%. At such time, if ever, any space is added to or subtracted from
the Premises pursuant to the terms of this Lease, Tenant's Pro Rata Share shall
be increased or decreased accordingly.
(3) "Operating Expenses" shall mean:
A. All operating expenses of any kind or nature which are
necessary, ordinary or customarily incurred with respect to the operation and
maintenance of the Building Complex as determined in accordance with generally
accepted accounting principles and shall include, but not be limited to:
(i) Costs of supplies, including but not limited to the cost
of "relamping" all tenant lighting as the same may be required from time to
time;
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(ii) Costs incurred in connection with obtaining and
providing energy for the Building Complex, including but not limited to costs of
propane, butane, natural gas, steam, electricity, solar energy and fuel oils,
coal or any other energy sources as well as costs for heating, ventilation, and
air conditioning services ("HVAC");
(iii) Costs of water and sanitary and storm drainage
services;
(iv) Costs of janitorial services;
(v) Costs of Security services or systems;
(vi) Costs of general maintenance and repairs, including
costs under HVAC and other mechanical maintenance contracts; and repairs and
replacements of equipment used in connection with such maintenance and repair
work;
(vii) Costs of maintenance and replacement of landscaping;
and costs of maintenance, repair, striping and repaving of parking areas, common
areas, plazas and other areas used by tenants of the Building Complex,
exclusively or in common with others, including trash and snow removal;
(viii) Any fees, costs or assessments imposed by any property
owners association;
(ix) Insurance premiums, including fire and all-risk
coverage, together with loss of rent endorsement; public liability insurance;
and any other insurance carried by Landlord on the Building Complex or any
component parts thereof;
(x) Labor costs, including wages and other payments, costs to
Landlord of worker's compensation and disability insurance, payroll taxes,
welfare fringe benefits and all legal fees and other costs or expenses incurred
in resolving any labor disputes;
(xi) Professional building management fees;
(xii) Salaries of on site employees hired by Landlord or its
property manager;
(xiii) Legal, accounting, inspection and other consultation
fees (including, without limitation, fees charged by consultants retained by
Landlord for services that are designed to produce a reduction in Operating
Expenses or reasonably to improve the operation, maintenance or state of repair
of the Building Complex) incurred for the normal prudent operation of the
Building Complex;
(xiv) The costs of capital improvements and structural
repairs and replacements made in or to the Building Complex or the cost of any
machinery or equipment installed in the Building Complex in order to conform to
any applicable laws, ordinances, rules, regulations or orders of any
governmental or quasi-governmental authority having jurisdiction over the
Building Complex (herein, "Required Capital Improvement"); the costs of any
capital improvements and structural repairs and replacements designed primarily
to reduce Operating Expenses (herein, "Cost Savings Improvements"); and a
reasonable annual reserve for all other capital improvements and structural
repairs and replacements reasonably necessary to permit Landlord to maintain the
Building as an office building. The expenditures for Required Capital
Improvements and Cost Savings Improvements shall be amortized over the useful
life of such capital improvement or structural repair or replacement (as
determined by Landlord's accountants), provided that the amortized amount of any
Cost Savings Improvement shall be limited in any year to the reduction in
Operating Expenses as a result thereof; and
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(xv) "Real Estate Taxes" including all real property taxes
and assessments levied against the Building Complex by any governmental or
quasi-governmental authority, including any taxes, assessments, surcharges, or
service or other fees of a nature not presently in effect which shall hereafter
be levied on the Building Complex as a result of the use, ownership or operation
of the Building Complex or for any other reason, whether in lieu of or in
addition to any current real estate taxes and assessments; provided, however,
that any taxes which shall be levied on the rentals of the Building Complex
shall be determined as if the Building Complex were Landlord's only property
and provided further, that in no event shall the term "Taxes and Assessments",
as used herein, include any federal, state or local income taxes levied or
assessed on Landlord, unless such taxes are a specific substitute for real
property taxes; such term shall, however, include gross taxes on rentals and
expenses incurred by Landlord for tax consultants and in contesting the amount
or validity of any such Taxes or Assessments (all of the foregoing are
collectively referred to herein as "Taxes"). "Assessments" shall include any and
all so-called special assessments, license tax, business license fee, business
license tax, commercial rental tax, levy, charge or tax imposed by any authority
having the direct power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, water, drainage or other
improvement or special district thereof, against the Premises, the Building or
the Building Complex, or against any legal or equitable interest of Landlord
therein. For the purposes of this Lease, any special assessment shall be deemed
payable in such number of installments as is permitted by law, whether or not
actually so paid. If the Building Complex has not been fully assessed as a
completed project, for the purposes of computing the Real Estate Taxes for any
adjustment required herein, the same shall be increased by Landlord's
accountants, in accordance with their estimate of what the assessment will be,
upon full completion of the Building Complex, including installation of all
tenant finish items. Any difference in actual Real Estate Taxes in any year and
the estimated Real Estate Taxes used by Landlord in the calculation of Operating
Expenses paid by Tenant shall be reflected in the reconciliation of Operating
Expenses described in Paragraph 5(e) below.
(xvi) Any other expense which under generally accepted
accounting principles would be considered a normal maintenance or operating
expense.
If Landlord selects an accrual accounting basis for calculating Operating
Expenses, Operating Expenses shall be deemed to have been paid when such
expenses have accrued in accordance with generally accepted accounting
principles.
B. Operating Expenses shall expressly exclude Landlord's income
taxes; leasing commissions, advertising and promotional expenses; interest on
debt or amortization payments on any mortgages or deeds of trust except as
provided in Paragraph 5(a)(3)(A)(xii); costs of repairs or other work occasioned
by fire, windstorm or other casualty to the extent of insurance proceeds
received; costs of repairs or other work to the Building or Building systems
covered by warranty; and any other expense which under generally accepted
accounting principles would not be considered a normal maintenance or operating
expense, except as otherwise specifically provided herein.
(b) If, during any year or portion thereof, the Building is less than
ninety-five percent (95%) occupied, those Operating Expenses which vary with the
occupancy levels in the Building shall be adjusted by Landlord to reflect the
level of Operating Expenses which reasonably would be incurred by Landlord in
the event the Building were ninety-five percent (95%) occupied; similarly, Real
Estate Taxes shall be adjusted by Landlord to reflect a fully occupied, fully
assessed Building, and the Building revenue shall be treated as if there were no
"free rent" periods or periods of rental abatement in making such adjustment
(such adjustments as described in this sentence being referred to herein as a
"Gross-Up"). Further, Operating Expenses shall be retroactively adjusted by
Landlord to include the cost of all maintenance contracts incurred by Landlord
during the second year of operation of the Building and any costs of operation
or maintenance in the Building which would have been incurred during the Base
Year but for the fact that such costs and/or expenses were covered by warranties
covering the Building during the initial twelve (12) months of the Building's
operation (or such longer warranty period as Landlord may have procured), it
being the intent of the parties that Operating Expenses (i) shall not be
artificially low by virtue of the fact that any Building components were subject
to contract warranties, and (ii) shall reflect the entire costs of ownership and
operation of the Building during a normal twelve (12) month period, such
adjustment being agreed to
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by the parties. Landlord shall not recover through Operating Expenses any item
of cost more than once. Landlord shall, at all times during the entire term of
this Lease, operate, manage, maintain and repair the Building in a lawful,
efficient and businesslike manner in accordance with sound property management
practices.
(c) From and after the Commencement Date, Tenant shall pay to Landlord
as Additional Rent during the balance of the term hereof an estimate of Tenant's
Pro Rata Share of Operating Expenses as reasonably estimated by Landlord,
payable monthly, at the rate of one twelfth (1/12) thereof, on the same date and
at the same place Base Rent is payable, with an adjustment to be made between
the parties at a later date as hereinafter provided. Landlord shall deliver to
Tenant, as soon as practicable following the end of any calendar year, an
estimate of the Operating Expenses for the new calendar year (the "Budget
Sheet"). Until receipt of the Budget Sheet, Tenant shall continue to pay its
monthly Tenant's Pro Rata Share of Operating Expenses based upon the estimate
for the preceding calendar year. To the extent that the Budget Sheet reflects an
estimate of Tenant's Pro Rata Share of Operating Expenses for the new calendar
year greater than the amount actually paid to the date of receipt of the Budget
Sheet for the new calendar year, Tenant shall pay such amount to Landlord within
thirty (30) days of receipt of the Budget Sheet. Upon receipt of the Budget
Sheet, Tenant shall thereafter pay the amount of its monthly Tenant's Pro Rata
Share of Operating Expenses as set forth in the Budget Sheet. As soon as
practicable following the end of any calendar year, but not later than May 1st,
Landlord shall submit to Tenant a statement in reasonable detail describing the
computations of the Operating Expenses setting forth the exact amount of
Tenant's Pro Rata Share of Operating Expenses for the calendar year just
completed (the "Statement"), and the difference, if any, between the actual
Tenant's Pro Rata Share of Operating Expenses for the calendar year just
completed and the estimated amount of Tenant's Pro Rata Share of Operating
Expenses paid by Tenant to Landlord. Notwithstanding the foregoing, Landlord's
failure to deliver the Statement to Tenant on or before May 1st, shall in no way
serve as a waiver of Landlord's rights under this Paragraph. To the extent that
the actual Tenant's Pro Rata Share of Operating Expenses for the period covered
by the Statement is higher than the estimated Tenant's Pro Rata Share of
Operating Expenses which Tenant previously paid during the calendar year just
completed, Tenant shall also pay to Landlord such balance within thirty (30)
days following receipt of the Statement from Landlord. To the extent that the
actual Tenant's Pro Rata Share of Operating Expenses for the period covered by
the Statement is less than the estimated Tenant's Pro Rata Share of Operating
Expenses which Tenant previously paid during the calendar year just completed,
Landlord shall credit the excess against any sums then owing or next becoming
due from Tenant under the Lease. In addition to the above Operating Expenses,
Tenant shall pay monthly upon receipt of Landlord's invoice, the Tenant's
electric usage for the Premises, as determined by the check meter installed as
provided for in paragraph 7(b).
(d) If the Lease term hereunder covers a period of less than a full
calendar year during the first or last calendar years of the term hereof,
Tenant's Pro Rata Share of Operating Expenses for such partial year shall be
calculated by proportionately reducing the Operating Expenses to reflect the
number of months in such year during which Tenant leased the Premises (the
"Adjusted Operating Expenses"). The Adjusted Operating Expenses shall then be
compared with the actual Operating Expenses for said partial year to determine
the amount, if any, of any increases in the actual Operating Expenses for such
partial year over the Adjusted Operating Expenses. Tenant shall pay Tenant's Pro
Rata Share of any such increases within ten (10) days following receipt of
notice thereof.
(e) Tenant shall have the right at its own expense and at a reasonable
time (after written notice to Landlord) within thirty (30) days after receipt of
the Statement to audit Landlord's books relevant to the Additional Rent due
under this Paragraph 5. In the event Tenant does not audit Landlord's books and
deliver the results thereof to Landlord within said 30-day period, the terms and
amounts set forth in the Statement shall be deemed conclusive and final and
Tenant shall have no further right to adjustment. In the event Tenant's
examination reveals that an error has been made in Landlord's determination of
Tenant's Pro Rata Share of Operating Expenses and Landlord agrees with such
determination, then the amount of such adjustment shall be payable by Landlord
or Tenant, to the other party as the case may be. In the event Tenant's
examination reveals an error has been made in Landlord's determination of
Tenant's Pro Rata Share of Operating Expenses, and Landlord disagrees with the
results thereof, Landlord shall have thirty (30) days to obtain an audit from an
accountant of its choice to determine Tenant's Pro Rata Share of Operating
Expenses. In the event Landlord's accountant and Tenant's accountant are unable
to reconcile their audits, both accountants shall mutually agree upon a third
accountant, whose determination of Tenant's Pro Rata Share
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of Operating Expenses shall be conclusive. In the event the amount of error by
Landlord is determined to be ten percent (10%) or more, the reasonable costs of
the three audits made pursuant to this subparagraph shall be paid by Landlord.
In the event the amount of error by Landlord is determined to be less than ten
percent (l0%), the reasonable costs of the three audits made pursuant to this
subparagraph shall be paid by Tenant.
(f) Landlord's failure during the Lease term to prepare and deliver any
statements or bills, or Landlord's failure to make a demand under this Paragraph
or under any other provision of this Lease shall not in any way be deemed to be
a waiver of, or cause Landlord to forfeit or surrender its rights to collect any
items of Additional Rent which may have become due pursuant to this Paragraph
during the term of this Lease. Tenant's liability for all Additional Rent due
under this Paragraph 5 shall survive the expiration or earlier termination of
this Lease.
6. Character of Occupancy:
(a) The Premises are to be used for general offices and product
demonstration to clients not inconsistent with the character and type of tenancy
found in comparable office buildings of a similar size, use and character in the
Northwest Suburban area of Denver, Colorado and for no other purpose without the
prior written consent of Landlord. Tenant shall, at its sole expense, comply
with all laws applicable to its use of the Premises and obtain all permits or
licenses required for the transaction of business at the Premises.
(b) Tenant shall not suffer nor permit the Premises nor any part
thereof to be used in any manner, nor anything to be done therein, nor suffer or
permit anything to be brought into or kept therein, which would in any way (i)
make void or voidable any fire or liability insurance policy then in force with
respect to the Building Complex, (ii) make unobtainable from reputable insurance
companies authorized to do business in the state of Colorado any fire insurance
with extended coverage, or liability, elevator, boiler or other insurance
required to be furnished by Landlord under the terms of any lease or mortgage to
which this Lease is subordinate at standard rates, (iii) cause or in Landlord's
reasonable opinion be likely to cause physical damage to the Building Complex or
any part thereof, (iv) constitute a public or private nuisance, (v) impair, in
the opinion of Landlord, the appearance, character or reputation of the Building
Complex, (vi) discharge objectionable fumes, vapors or odors into the Building
air conditioning system or into the Building flues or vents not designed to
receive them or otherwise in such manner as may unreasonably offend other
occupants of the Building, (vii) impair or interfere with any of the Building
services or impair or interfere with or tend to impair or interfere with the use
of any of the other areas of the Building by, or occasion discomfort, or
annoyance to Landlord or any of the other tenants or occupants of the Building
Complex, any such impairment or interference to be based upon the judgment of
Landlord, (viii) increase on an ongoing periodic basis the pedestrian traffic in
and out of the Premises or the Building above an ordinary level, (ix) create
waste in, on or around the Premises, Building, or Building Complex, or (x) make
any noise or set up any vibration which will disturb other tenants, except in
the course of permitted repairs or alterations at times permitted by Landlord.
(c) Tenant shall not use the Premises nor permit anything to be done in
or about the Premises or Building Complex which will in any way conflict with
any law, statute, ordinance, protective covenants affecting the Building Complex
or governmental or quasi-governmental rules or regulations now in force or which
may hereafter be enacted or promulgated. Tenant shall give written notice within
two (2) days from receipt thereof to Landlord of any notice it receives of the
violation of any law or requirement of any public authority with respect to the
Premises or the use or occupation thereof. Landlord shall give prompt notice to
Tenant of any notice it receives relative to the violation by Tenant of any law
or requirement of any public authority with respect to the Premises or the use
or occupation thereof.
(d) Tenant, by execution of this Lease and occupancy of the Premises,
agrees to comply with any declaration of covenants, conditions and restrictions
for the Westmoor Technology Park, now or hereafter entered into, as the same may
be amended from time to time ("Covenants") as applicable to Tenant's use and
enjoyment of the Premises, Building Complex and Westmoor Technology Park. In
addition to all rights available to Landlord hereunder, in the event Landlord is
obligated to pay to the association created pursuant to the Covenants
("Association") any fines, assessments, charges or other amounts on account of
any act or omission of Tenant, its
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agents, employees or invitees, Tenant shall, upon demand, reimburse Landlord for
such amounts, together with interest thereon at the Interest Rate. Landlord
shall deliver to Tenant a copy of the Covenants at such time as the same are
recorded in the real property records of Jefferson County, Colorado ("Records"),
and Landlord shall deliver copies of the amendments thereto at such time as such
amendments are recorded in the Records.
7. Services and Utilities:
(a) Landlord agrees, without charge except as provided herein with
respect to Operating Expenses, and in accordance with standards from time to
time prevailing for buildings in the Westmoor Technology Park area, to furnish
water to the Building for use in lavatories and drinking fountains (and to the
Premises if the plans for the Premises so provide); during ordinary business
hours to furnish such heated or cooled air to the Premises as may, in the
judgment of Landlord, be reasonably required for the comfortable use and
occupancy of the Premises provided that Tenant complies with the recommendations
of Landlord's engineer or other duly authorized representative, regarding
occupancy and use of the Premises; to provide janitorial services for the
Premises (including such interior and exterior window washing as may be
required), such janitorial services to be provided five days a week, except for
"Holidays" as herein defined; to cause electric current to be supplied for
lighting the Premises and public halls; and to furnish such snow removal
services to the Building Complex as may, in the judgment of Landlord, be
reasonably required for safe access to the Building Complex.
(b) Landlord shall provide electricity for normal office purposes
including but not limited to fluorescent and incandescent lighting, including
task and task ambient lighting systems and for normal office equipment including
but not limited to duplicating (reproduction) machines, communications and audio
visual equipment, vending machines, personal computers (provided they do not
require any additional voltage or special electrical requirements) executive
kitchen equipment, internal communication systems (which may include piped-in
music) and Tenant's data room. Tenant shall install, as part of its tenant
improvements, a check meter to determine the amount of electric current usage
Tenant is utilizing for the Premises. The cost of such usage, and check meter,
including but not limited to monitoring, installation and repair thereof, shall
be paid by Tenant.
(c) If Tenant requires water in excess of that usually furnished or
supplied for use in the Premises as general office space, Tenant shall first
procure the consent of Landlord for the use thereof. Tenant agrees to pay to
Landlord such amounts as Landlord determines are necessary to cover the costs of
such increased use of water, including, but not limited to, the cost of
installation, monitoring, maintenance and repair of any check meter or other
instrument necessary to measure the use of additional water.
(d) Tenant agrees that Landlord shall not be liable for failure to
supply any heating, air conditioning, elevator, electrical, janitorial, lighting
or other services during any period when Landlord uses reasonable diligence to
supply such services, or during any period Landlord is required to reduce or
curtail such services pursuant to any applicable laws, rules or regulations, now
or hereafter in force or effect, it being understood and agreed to by Tenant
that Landlord may discontinue, reduce or curtail such services, or any of them
at such times as it may be necessary by reason of accident, unavailability of
employees, repairs, alterations, improvements, strikes, lockouts, riots, acts of
God, application of applicable laws, statutes, rules and regulations, or due to
any other happening beyond the reasonable control of Landlord. In the event of
any such interruption, reduction or discontinuance of Landlord's services,
Landlord shall not be liable for damages to persons or property as a result
thereof, nor shall the occurrence of any such event in any way be construed as
an eviction of Tenant, or operate to release Tenant from any of Tenant's
obligations hereunder, except in the event that a discontinuance of services(s)
renders the Premises unuseable and continues for a period of more than seven
(7) days, in which case Base Rent shall be abated until said services(s) are
restored.
(e) Whenever heat generating machines or equipment are used by Tenant
in the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises in the event Landlord's independent
consulting engineer determines same are necessary as a result of Tenant's use of
lights or equipment which generate heat loads in excess
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of those for which the HVAC system is designed and the cost therefor, including
the cost of installation, operation and maintenance thereof, shall be paid by
Tenant to Landlord upon demand by Landlord.
(f) In the event that Tenant has any special or additional electrical
or mechanical requirements related to its use of the Premises, any such
electrical or mechanical equipment must be located within the Premises. Such
electrical or mechanical requirements, for the purposes hereof, shall include by
way of example, but not limitation, any internal telephone system. The foregoing
shall in no way be construed as granting to Tenant additional rights to use any
such special or additional electrical or mechanical equipment in its Premises
without the prior written consent of Landlord. Any additional cost or expense
related to or resulting from such electrical or mechanical requirements shall be
the sole obligation of Tenant.
(g) If Tenant requires HVAC service beyond ordinary business hours
(hereafter "After Hours Usage"), such service must be requested from the
Building manager at least twenty-four (24) hours prior thereto. After Hours
Usage shall only be supplied in one-half floor increments of the Building, for a
minimum of four (4) hours with increments of one half (1/2) hour thereafter.
Tenant shall reimburse Landlord, as Additional Rent, for all costs and expenses
for After Hours Usage in an amount equal to $38.00 per hour. If more than one
tenant is being furnished After Hour Usage during the same period, the charge to
Tenant shall be appropriately pro rated to reflect such multiple use of After
Hour Usage. The After Hours Usage rate may be modified by Landlord as utility
rates change.
8. Quiet Enjoyment: Subject to the provisions of this Lease, Landlord
covenants that Tenant on paying the rent and performing the covenants of this
Lease on its part to be performed shall and may peacefully and quietly have,
hold and enjoy the Premises for the term of this Lease. Landlord shall not be
responsible for the acts or omissions of any other tenant or third party which
may interfere with Tenant's use and enjoyment of the Premises. In the event of
any transfer or transfers of Landlord's interest in the Premises or in the real
property of which the Premises are a part, other than a transfer for security
purposes only, the transferor shall be automatically relieved of any and all
obligations and liabilities on the part of Landlord accruing from and after the
date of such transfer.
9. Maintenance and Repairs:
(a) Notwithstanding any other provisions of this Lease, Landlord shall
repair and maintain in a good condition the structural portions of the Building,
including the elevators, plumbing, air conditioning, heating and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect, fault or omission of Tenant,
its agents, servants, employees, licensees or invitees, in which case Tenant
shall pay to Landlord, on demand, the cost of such maintenance and repairs less
the amount of any insurance proceeds received by Landlord on account thereof, if
applicable. Landlord shall also maintain and keep in good order and repair the
Building roof; the curtain wall, including all glass connections at the
perimeter of the Building; all exterior doors, including any exterior plate
glass within the Building; the Building ventilating systems; elevators; Building
telephone and electrical closets; public portions of the Building or Building
Complex, including but not limited to the landscaping, walkways, and upper floor
lobbies and corridors, parking structure, and interior portions of the Building
above and below grade which are not covered by leases.
(b) Tenant, at Tenant's sole cost and expense, except for services
furnished by Landlord pursuant to Paragraph 7 hereof, shall maintain, in good
order, condition and repair, the Premises, including the interior surfaces of
the ceilings (if damaged or discolored due in whole or in part to the act,
neglect, omission or fault of Tenant), walls and floors, all doors, interior
glass partitions or glass surfaces (not exterior windows) and pipes, electrical
wiring, switches, fixtures and other special items, subject to the provisions of
Paragraph 15 hereof. In the event Tenant fails to so maintain the Premises in
good order, condition and repair, Landlord shall give Tenant notice to do such
acts as are reasonably required to maintain the Premises. In the event Tenant
fails to promptly commence such work and diligently pursue it to completion,
then Landlord shall have the right, but shall not be required, to do such acts
and expend such funds at the expense of Tenant as are reasonably required to
perform such work. The funds so expended plus twenty percent (20%) of such
amounts as an overhead/administrative charge shall be due and payable
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by Tenant within ten (10) days after receipt of Landlord's invoice therefor.
Landlord shall have no liability to Tenant for any damage, inconvenience or
interference with the use of the Premises by Tenant as a result of performing
any such work.
10. Alterations and Additions:
(a) Tenant shall make no alterations, additions or improvements to the
Premises or any part thereof without obtaining the prior written consent of
Landlord with the exception of additions or improvements that cost less than
$5,000.00 and are nonstructural in nature. Tenant shall submit any such request
to Landlord at least thirty (30) days prior to the proposed commencement date of
such work. Landlord may impose, as a condition to such consent, and at Tenant's
sole cost, such requirements as Landlord may deem necessary in its judgment,
including without limitation, the manner in which the work is done, a right of
approval of the contractor by whom the work is to be performed and the times
during which the work is to be accomplished, approval of all plans and
specifications and the procurement of all licenses and permits. Landlord shall
be entitled to post notices on and about the Premises with respect to Landlord's
non-liability for mechanics' liens and Tenant shall not permit such notices to
be defaced or removed. Tenant further agrees not to connect any apparatus,
machinery or device to the Building systems, including electric wires, fiber
optic systems, telecommunication systems, cable trays, duct work, water pipes,
fire safety, heating and mechanical systems, without the prior written consent
of Landlord.
(b) All alterations, improvements and additions to the Premises,
including, by way of illustration but not by limitation, all counters, screens,
grilles, special cabinetry work, partitions, paneling, carpeting, drapes or
other window coverings and light fixtures, shall be deemed a part of the real
estate and the property of Landlord and shall remain upon and be surrendered
with the Premises as a part thereof without molestation, disturbance or injury
at the end of the Lease term, whether by lapse of time or otherwise, unless
Landlord, by notice given to Tenant no later than fifteen (15) days prior to the
end of the term, shall elect to have Tenant remove all or any of such
alterations, improvements or additions (excluding non-movable office walls), and
in such event, Tenant shall promptly remove, at its sole cost and expense, such
alterations, improvements and additions and restore the Premises to the
condition in which the Premises were prior to the making of the same, reasonable
wear and tear excepted. Any such removal, whether required or permitted by
Landlord, shall be at Tenant's sole cost and expense, and Tenant shall restore
the Premises to the condition in which the Premises were prior to the making of
the same, reasonable wear and tear excepted. All movable partitions, machines
and equipment which are installed in the Premises by or for Tenant, without
expense to Landlord, and can be removed without structural damage to or
defacement of the Building or the Premises, and all furniture, furnishings and
other articles of personal property owned by Tenant and located in the Premises
(all of which are herein called "Tenant's Property") shall be and remain the
property of Tenant and may be removed by it at any time during the term of this
Lease. However, if any of Tenant's Property is removed, Tenant shall repair or
pay the cost of repairing any damage to the Building or the Premises resulting
from such removal. All additions or improvements which are to be surrendered
with the Premises shall be surrendered with the Premises, as a part thereof, at
the end of the term or the earlier termination of this Lease.
(c) If Landlord permits persons requested by Tenant to perform any
alterations, repairs, modifications or additions to the Premises, then prior to
the commencement of any such work, Tenant shall deliver to Landlord certificates
issued by insurance companies qualified to do business in the state where the
Premises are located evidencing that worker's compensation, public liability
insurance and property damage insurance, all in amounts, with companies and on
forms satisfactory to Landlord, are in force and maintained by all such
contractors and subcontractors engaged by Tenant to perform such work. All such
policies shall name Landlord as an additional insured and shall provide that the
same may not be canceled or modified without thirty (30) days prior written
notice to Landlord.
(d) Tenant, at its sole cost and expense, shall cause any permitted
alterations, decorations, installations, additions or improvements in or about
the Premises to be performed in compliance with all applicable requirements of
insurance bodies having jurisdiction, and in such manner as not to interfere
with, delay, or impose
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any additional expense upon Landlord in the construction, maintenance or
operation of the Building, and so as to maintain harmonious labor relations in
the Building.
11. Entry by Landlord:
Landlord and its agents shall have the right to enter the Premises at
all reasonable times and upon reasonable notice for the purpose of examining or
inspecting the same, to supply any services to be provided by Landlord
hereunder, to show the same to prospective purchasers of the Building, to make
such alterations, repairs, improvements or additions to the Premises, the
Building or other premises within the Building, as Landlord may deem necessary
or desirable, and to show the same to prospective tenants of the Premises.
Landlord shall use its best efforts to limit its entries into the Premises to no
more than two (2) times per month, by no more than five (5) people at a time,
and with at least twenty-four (24) hours notice. Landlord and its agent may
enter the Premises at all times and without advance notice for the purpose of
responding to an actual or apparent emergency. Landlord may for the purpose of
supplying scheduled janitorial services and evaluating janitorial services at
any time and from time to time enter the Premises by means of a master key
without liability to Tenant and without affecting this Lease. If, during the
last 60 days of the term hereof, Tenant shall have removed substantially all of
its property from the Premises, Landlord may immediately enter and alter,
renovate and redecorate the Premises without elimination or abatement of rent or
incurring liability to Tenant for any compensation.
12. Mechanic's Liens: Tenant shall pay or cause to be paid all costs for
work done by or on behalf of Tenant or caused to be done by or on behalf of
Tenant on the Premises of a character which will or may result in liens against
Landlord's interest in the Premises, Building or Building Complex and Tenant
will keep the Premises, Building and Building Complex free and clear of all
mechanic's liens and other liens on account of work done for or on behalf of
Tenant or persons claiming under Tenant. Tenant hereby agrees to indemnify,
defend and save Landlord harmless of and from all liability, loss, damages,
costs or expenses, including attorneys' fees, incurred in connection with any
claims of any nature whatsoever for work performed for, or materials or supplies
furnished to Tenant, including lien claims of laborers, materialmen or others.
Should any such liens be filed or recorded against the Premises, Building or
Building Complex with respect to work done for or materials supplied to or on
behalf of Tenant or should any action affecting the title thereto be commenced,
Tenant shall cause such liens to be released of record within ten (10) days
after notice thereof. If Tenant desires to contest any such claim of lien,
Tenant shall nonetheless cause such lien to be released of record by the posting
of adequate security with a court of competent jurisdiction if provided by
applicable law or statute of the state where the Premises are located. If Tenant
shall be in default in paying any charge for which such a mechanic's lien or
suit to foreclose such a lien has been recorded or filed and shall not have
caused the lien to be released as aforesaid, Landlord may (but without being
required to do so) pay such lien or claim and any costs associated therewith,
and the amount so paid, together with interest at the Interest Rate and
reasonable attorneys' fees incurred in connection therewith, shall be
immediately due and payable from Tenant to Landlord as Additional Rent.
13. Damage to Property, Injury to Persons:
(a) Tenant, for itself and its legal representatives, successors and
assigns, as a material part of the consideration to be rendered to Landlord
under this Lease, hereby waives all claims of liability against Landlord.
Tenant, for itself and its legal representatives, successors and assigns, hereby
indemnifies and agrees to hold harmless Landlord, its agents, employees,
contractors, legal representatives, successors and assigns, from any and all
claims of liability for any injury or damage to any person or property
whatsoever occurring in, on or about the Premises or the Building Complex or any
part thereof, to the extent such injury or damage is caused by the negligence,
fault or omission of Tenant, its agents, contractors, employees, licensees or
invitees. Tenant further agrees to indemnify and to hold Landlord harmless from
and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of its
agents, contractors, employees, licensees or invitees. Such indemnities shall
include by way of example, but not limitation, all costs, reasonable attorneys'
fees, expenses and liabilities incurred in or about any such claim, action or
proceeding.
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(b) Landlord shall not be liable to Tenant for any damage by or from
any act or negligence of any co-tenant or other occupant of the Building
Complex, or by any owner or occupant of adjoining or contiguous property.
Landlord shall not be liable for any injury or damage to persons or property
resulting in whole or in part from the criminal activities of others. To the
extent not covered by normal fire and extended coverage insurance, Tenant agrees
to pay for all damage to the Building Complex, as well as all damage to persons
or property of other tenants or occupants thereof, caused by the misuse,
neglect, act, omission or negligence of Tenant or any of its agents,
contractors, employees, licensees or invitees.
(c) Neither Landlord nor its agents or employees shall be liable for
any damage to property entrusted to Landlord, its agents or employees, or
employees of the building manager, if any, nor for the loss or damage to any
property occurring by theft or otherwise, nor for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building Complex
or from the pipes, appliances or plumbing works therein or from the roof, street
or subsurface or from any other place or resulting from dampness, or any other
cause whatsoever; provided, however, nothing contained herein shall be construed
to relieve Landlord from liability for any personal injury resulting from its
gross negligence. Neither Landlord nor its agents or employees shall be liable
for interference with the lights, view or other incorporeal hereditaments, nor
shall Landlord be liable for any latent defect in the Premises or in the
Building or Building Complex. Tenant shall give prompt notice to Landlord in
case of fire or accidents in or about the Premises or the Building or of defects
therein or in the fixtures or equipment located therein.
(d) In case any claim, demand, action or proceeding is made or brought
against Landlord, its agents or employees, by reason of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from any
act or negligence of Tenant, its agents or employees, or which gives rise to
Tenant's obligation to indemnify Landlord, Tenant shall be responsible for all
costs and expenses, including but not limited to reasonable attorneys' fees
incurred in defending or prosecution of the same, as applicable.
14. Insurance:
(a) Landlord agrees to carry and maintain general public liability
insurance against claims for personal injury, including death and property
damage in or about the Building Complex (excluding Tenant's Property), such
insurance to be in such amounts as Landlord (or its mortgagees) may deem
appropriate. Such insurance may expressly exclude property paid for by tenants
or paid for by Landlord for which tenants have reimbursed Landlord located in,
or constituting a part of the Building or the Building Complex. Such insurance
shall afford coverage for damages resulting from (a) fire, (b) perils covered by
extended coverage insurance, and (c) explosion of steam and pressure boilers and
similar apparatus located in the Building or the Building Complex. Landlord may
carry such other additional insurance coverage as Landlord or Landlord's
mortgagee deems appropriate including coverage for loss of rents. All such
insurance shall be procured from a responsible insurance company or companies
authorized to do business in the State where the Premises are located.
(b) Tenant shall, at its own cost, at all times during the term of this
Lease and any extensions hereof, procure and maintain insurance for hazard, fire
and extended coverage on Tenant's Property and the contents of the Premises in
an amount equal to full replacement cost thereof, and comprehensive general
liability insurance, including coverage for bodily injury, property damage,
personal injury (employee and contractual liability exclusions deleted),
products and completed operations, contractual liability, owner's protective
liability, host liquor legal liability and broad form property damage with the
following limits of liability: Two Million Dollars ($2,000,000.00) each
occurrence combined single limit for bodily injury, property damage and personal
injury; Two Million Dollars ($2,000,000.00) aggregate for bodily injury and
property damage for products and completed operations. All such insurance shall
be procured from a responsible insurance company or companies authorized to do
business in the State where the Premises are located, with general
policyholder's ratings of not less than "A" and a financial rating of not less
than "XI" in the most current available Best's Insurance Reports, and shall be
otherwise satisfactory to Landlord. All such policies shall name Landlord as an
additional insured, and shall provide that the same may not be canceled or
altered except upon thirty (30) days prior written notice to Landlord. All
insurance maintained by Tenant shall be
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primary to any insurance provided by Landlord. If Tenant obtains any general
liability insurance policy on a claims-made basis, Tenant shall provide
continuous liability coverage for claims arising during the entire term of this
Lease, regardless of when such claims are made, either by obtaining an
endorsement providing for an unlimited extended reporting period in the event
such policy is canceled or not renewed for any reason whatsoever or by obtaining
new coverage with a retroactive date the same as or earlier than the expiration
date of the canceled or expired policy. Tenant shall provide certificate(s) of
such insurance to Landlord upon commencement of the Lease term and at least
thirty (30) days prior to any annual renewal date thereof and upon request from
time to time and such certificate(s) shall disclose that such insurance names
Landlord as an additional insured, in addition to the other requirements set
forth herein. The limits of such insurance shall not, under any circumstances,
limit the liability of Tenant hereunder.
(c) Each party agrees to use its best efforts to include in each of its
policies insuring against loss, damage or destruction by fire or other casualty
a waiver of the insurer's right of subrogation against the other party, or if
such waiver should be unobtainable or unenforceable (i) an express agreement
that such policy shall not be invalidated if the insured waives the right of
recovery against any party responsible for a casualty covered by the policy
before the casualty; or (ii) any other form of permission for the release of the
other party. If such waiver, agreement or permission shall not be, or shall
cease to be, obtainable without additional charge or at all, the insured party
shall so notify the other party promptly after learning thereof. In such case,
if the other party shall so elect and shall pay the insurer's additional charge
therefor, such waiver, agreement or permission shall be included in the policy,
or the other party shall be named as an additional insured in the policy. Each
such policy which shall so name a party hereto as an additional insured shall
contain, if obtainable, agreements by the insurer that the policy will not be
canceled without at least thirty (30) days prior notice to both insureds and
that the act or omission of one insured will not invalidate the policy as to the
other insured. Any failure by either party, if named as an additional insured,
promptly to endorse to the order of the other party, without recourse, any
instrument for the payment of money under or with respect to the policy of which
the other party is the owner or original or primary insured, shall be deemed a
default under this Lease.
(d) Each party hereby releases the other party with respect to any
claim (including a claim for negligence) which it might otherwise have against
the other party for loss, damage or destruction with respect to its property
(including the Building, Building Complex, the Premises and rental value or
business interruption) occurring during the term of this Lease to the extent to
which it is insured under a policy or policies containing a waiver of
subrogation or permission to release liability or naming the above party as an
additional insured as provided above.
(e) Neither Landlord, the Building manager, if any, nor their
respective agents shall be liable for any damage to the property of Tenant or
others entrusted to employees of the Building, nor for the loss of or damage to
any property of Tenant by theft or otherwise and Tenant shall indemnify Landlord
of and from any loss or damages, costs or actions Landlord may suffer or incur
as a result of such loss or damage to Property.
15. Damage or Destruction to Building:
(a) In the event that the Premises or the Building are damaged by fire
or other insured casualty and the insurance proceeds have been made available
therefor by the holder or holders of any mortgages or deeds of trust covering
the Building, the damage shall be repaired by and at the expense of Landlord to
the extent of such insurance proceeds available therefor, provided such repairs
and restoration can, in Landlord's reasonable opinion, be made within two
hundred ten (210) days after the occurrence of such damage without the payment
of overtime or other premiums, and until such repairs and restoration are
completed, the Base Rent shall be abated in proportion to the part of the
Premises which is unusable by Tenant in the conduct of its business, as may be
reasonably determined by Landlord, (but there shall be no abatement of Base Rent
by reason of any portion of the Premises being unusable for a period equal to
one day or less). Landlord agrees to notify Tenant within forty-five (45) days
after such casualty if it estimates that it will be unable to repair and restore
the Premises within said two hundred ten (210) day period. Such notice shall set
forth the approximate length of time Landlord estimates will be required to
complete such repairs and restoration. Notwithstanding anything to the contrary
contained herein, if Landlord cannot or estimates it cannot make such repairs
and restoration within said two hundred ten (210) day period, then Tenant may,
by written notice
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to Landlord cancel this Lease, provided such notice is given to Landlord within
fifteen (15) days after Landlord notifies Tenant of the estimated time for
completion of such repairs and restoration. Notwithstanding the preceding
sentence, Tenant may not cancel this Lease as hereinabove stated if the damage
to the Premises or the Building is in whole or in part the result of the act,
omission, fault or negligence of Tenant, its agents, contractors, employees,
licensees or invitees. Except as provided in this Paragraph 15, there shall be
no abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business or property arising from the making of any
such repairs, alterations or improvements in or to the Building, Premises or
fixtures, appurtenances and equipment. Tenant understands that Landlord will not
carry insurance of any kind on Tenant's Property, including furniture and
furnishings, or on any fixtures or equipment removable by Tenant under the
provisions of this Lease, or any improvement installed in the Premises by or on
behalf of Tenant, and that Landlord shall not be obligated to repair any damage
thereto or replace the same.
(b) In case the Building throughout shall be so injured or damaged,
whether by fire or otherwise (though the Premises may not be affected, or if
affected, can be repaired within said 210 days) that Landlord, within sixty (60)
days after the happening of such injury, shall decide not to reconstruct or
rebuild the Building, then notwithstanding anything contained herein to the
contrary, upon notice in writing to that effect given by Landlord to Tenant
within said sixty (60) days, Tenant shall pay the rent, properly apportioned up
to date of such casualty, this Lease shall terminate from the date of delivery
of said written notice, and both parties hereto shall be released and discharged
from all further obligations hereunder (except those obligations which expressly
survive termination of the Lease term).
16. Condemnation:
(a) If the whole of the Premises or so much thereof as to render the
balance unusable by Tenant for the proper conduct of its business shall be taken
under power of eminent domain or transferred under threat thereof, then this
Lease, at the option of either Landlord or Tenant exercised by either party
giving notice to the other of such election within thirty (30) days after such
conveyance or taking possession, whichever is earlier, shall forthwith cease and
terminate and the rent shall be duly apportioned as of the date of such taking
or conveyance. No award for any partial or entire taking shall be apportioned
and Tenant hereby assigns to Landlord any award which may be made in such taking
or condemnation, together with any and all rights of Tenant now or hereafter
arising in or to the same or any part thereof. Notwithstanding the foregoing,
Tenant shall be entitled to seek, directly from the condemning authority, an
award for its removable trade fixtures, equipment and personal property and
relocation expenses, if any, to the extent Landlord's award is not diminished.
In the event of a partial taking which does not result in a termination of this
Lease, Base Rent shall be reduced in proportion to the reduction in the size of
the Premises so taken and this Lease shall be modified accordingly. Promptly
after obtaining knowledge thereof, Landlord or Tenant, as the case may be, shall
notify the other of any pending or threatened condemnation or taking affecting
the Premises or the Building.
(b) If all or any portion of the Premises shall be condemned or taken
for governmental occupancy for a limited period, this Lease shall not terminate
and Landlord shall be entitled to receive the entire amount of any such award or
payment thereof as damages, rent or otherwise. Tenant hereby assigns to Landlord
any award which may be made in such temporary taking, together with any and all
rights of Tenant now or hereafter arising in or to the same or any part thereof.
Tenant shall be entitled to receive an abatement of Base Rent in proportion to
the reduction in the size of the Premises so taken.
17. Assignment and Subletting:
(a) Tenant shall not permit any part of the Premises to be used or
occupied by any persons other than Tenant and its employees, nor shall Tenant
permit any part of the Premises to be used or occupied by any licensee or
concessionaire or permit any persons other than Tenant, its employees and
invitees, to be upon the Premises. Tenant shall not voluntarily, by operation of
law, or otherwise, assign, transfer or encumber this Lease or any interest
herein nor sublet or part with possession of all or any part of the Premises
(any and all of which shall
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hereinafter be referred to as "Transfer") without Landlord's prior written
consent, which shall not be unreasonably withheld. Any Transfer without the
prior written consent of Landlord shall constitute a default hereunder and shall
be void ab initio and shall confer no rights upon any third party,
notwithstanding Landlord's acceptance of rent payments from any purported
transferee. Landlord's consent to any requested assignment of this Lease or
subletting of all or any part of the Premises shall be subject to the following
conditions:
(1) such consent and resulting subletting or assignment shall not
relieve Tenant of its primary obligations hereunder, including the obligation
for payment of all rents due hereunder;
(2) Landlord, at its option and from time to time, may collect the
rent from the subtenant or assignee, and apply the net amount collected to the
rent herein reserved, but no such collection shall be deemed an acceptance by
Landlord of the subtenant or assignee as the tenant hereof, or a release of
Tenant from further performance of covenants on the part of Tenant herein
contained;
(3) any such subtenant or assignee shall be a company or other
entity of good repute, engaged in a business or profession compatible with and
in keeping with the then standards of the Building and financially capable of
performing its obligations with respect to the Premises;
(4) such subtenant or assignee shall assume and agree to perform all
of Tenant's obligations under this Lease insofar as they pertain to the space so
sublet or assigned; and
(5) Tenant is not in default of any term or condition of this Lease
at the time it requests Landlord's consent.
(b) In the event of any Transfer of this Lease or all or any part of
the Premises by Tenant, Landlord in addition to any rights contained herein,
shall have the option, at its discretion, to collect and receive the excess of
rent due to Tenant from such sublessee or assignee over the Base Rent due
hereunder. Further, in the event of any Transfer of this Lease of all or any
part of the Premises by Tenant without the prior written consent of Landlord,
Landlord, in addition to any rights contained herein shall have the following
options, at its discretion:
(1) To give Tenant written notice of Landlord's intention to
terminate this Lease on the date such notice is given or on any later date
specified therein, whereupon, on the date specified in such notice, Tenant's
right to possession of the Premises shall cease and this Lease shall thereupon
be terminated, except as to any uncompleted obligations of Tenant; or
(2) To re-enter and take possession of the Premises or the part
thereof subject to such Transfer, and to enforce all rights of Tenant, and
receive and collect all rents and other payments due to Tenant, in accordance
with such sublet or assignment of the Premises, or any part thereof, as if
Landlord was the sublettor or assignor, and to do whatever Tenant is permitted
to do pursuant to the terms of such sublease or assignment.
(c) At the time of making a request for Landlord's consent to a
Transfer and not less than thirty (30) days prior to the proposed effective date
thereof, Tenant shall provide to Landlord such information as Landlord, its
accountants and attorneys, shall reasonably require with respect to such
proposed Transfer, including but not limited to name and address of the proposed
transferee, description of business operations, financial information and
certificate of corporate authority and good standing or partnership certificate,
as applicable.
(d) Consent of Landlord to a Transfer shall not relieve Tenant from
seeking consent to any subsequent Transfers.
(e) Subletting or assignments by subtenants or assignees shall not be
permitted under any circumstances, nor shall Tenant be permitted to assign this
Lease or sublet all or any part of the Premises during any
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<PAGE> 20
period of time that all or any portion of the Base Rent is abated. Further, no
option to renew or extend the term of this Lease or to lease additional space,
if any, shall be exercisable by any subtenant or assignee.
(f) All subleases or assignments shall be in writing and a copy thereof
provided to Landlord within ten (10) days of its effective date. All subleases
shall further contain an express provision that in the event of any default by
Tenant under this Lease and upon notice thereof to the subtenant from Landlord,
all rentals payable by the subtenant shall be paid directly to Landlord, for the
Tenant's account, until subsequent notice from Landlord that such default has
been cured. Notwithstanding the foregoing, receipt by Landlord of rent directly
from the subtenant shall not be considered a waiver of the default on the part
of Tenant, nor an acceptance of such subtenant.
(g) Tenant shall have no right to sublet any portion of the Premises or
assign the Lease to any tenant in the Westmoor Business Park without Landlord's
prior written consent which may be withheld for any reason or no reason.
Furthermore, Tenant shall under no circumstances sublet space within the
Premises at a rental rate less than 80% of the then prevailing base rent within
the Building Complex.
(h) No consent of Landlord shall be required for any assignment or
sublease to a successor of Tenant whether by merger, reorganization, stock sale,
sale of substantially all of Tenant's assets, or to an "Affiliate" of Tenant,
which includes any entity controlled by or under common control with the Tenant.
18. Estoppel Certificate: Tenant further agrees at any time and from time
to time on or before five (5) days after written request by Landlord, to
execute, acknowledge and deliver to Landlord an estoppel certificate certifying
(to the extent it believes the same to be true) that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified, and stating the modifications), that
there have been no defaults thereunder by Landlord or Tenant (or if there have
been defaults, setting forth the nature thereof), the date to which the rent and
other charges have been paid, if any, that Tenant claims no present charge,
lien, claim or offset against rent, the rent is not prepaid for more than one
month in advance and such other matters as may be reasonably required by
Landlord, Landlord's mortgagee, or any potential purchaser of the Building, it
being intended that any such statement delivered pursuant to this Paragraph may
be relied upon by any prospective purchaser of all or any portion of Landlord's
interest herein, or a holder of any mortgage or deed of trust encumbering any
portion of the Building Complex. Tenant's failure to deliver such statement
within such time shall be a default under this Lease. Notwithstanding the
foregoing, in the event that Tenant does not execute the statement required by
this paragraph, Tenant hereby grants to Landlord a power of attorney coupled
with an interest to act as Tenant's attorney in fact for the purpose of
executing such statement or statements required by this Paragraph.
19. Default:
(a) The following events (herein referred to as an "event of default")
shall constitute a default by Tenant hereunder;
(1) Tenant shall fail to pay within five (5) days of when due any
installment of Base Rent, Additional Rent or any other amounts payable
hereunder;
(2) This Lease or the estate of Tenant hereunder shall be
transferred to or shall pass to or devolve upon any other person or party in
violation of the provisions of this Lease, except as permitted herein;
(3) This Lease or the Premises or any part thereof shall be taken
upon execution or by other process of law directed against Tenant, or shall be
taken upon or subject to any attachment at the instance of any creditor or
claimant against Tenant, and said attachment shall not be discharged or disposed
of within fifteen (15) days after the levy thereof;
(4) Tenant shall file a petition in bankruptcy or insolvency or
for reorganization or arrangement under the bankruptcy laws of the United States
or under any insolvency act of any state, or shall
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voluntarily take advantage of any such law or act by answer or otherwise, or
shall be dissolved or shall make an assignment for the benefit of creditors;
(5) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant shall be instituted against
Tenant, or a receiver or trustee shall be appointed of all or substantially all
of the property of Tenant, and such proceedings shall not be dismissed or such
receivership or trusteeship vacated within thirty (30) days after such
institution or appointment;
(6) Tenant shall fail to take possession of the Premises within
thirty (30) days of the Commencement Date;
(7) Tenant shall abandon or permanently vacate the Premises for
ten (10) consecutive days;
(8) Tenant shall fail to perform any of the other agreements,
terms, covenants or conditions hereof on Tenant's part to be performed (other
than the obligation to pay rent or any other charges payable hereunder), and
such nonperformance shall continue for a period of fifteen (15) days after
notice thereof by Landlord to Tenant; provided, however, that if Tenant cannot
reasonably cure such nonperformance within fifteen (15) days, Tenant shall not
be in default if it commences cure within said fifteen (15) days and diligently
pursues the same to completion, with completion occurring in all instances
within sixty (60) days; and
(9) Tenant shall fail to obtain a release of any mechanic's lien,
as required herein.
(10) Tenant shall violate or breach any covenants or condition
contained in the Covenants or any rules or regulations of the Association
established pursuant thereto and shall not cure such violation or breach within
fifteen (15) days after notice thereof from the Association or from Landlord.
(b) Upon the occurrence of an event of default, Landlord shall have the
right, at its election, then or at any time thereafter and while any such event
of default shall continue, either:
(1) To give Tenant written notice of Landlord's intention to
terminate this Lease on the date such notice is given or on any later date
specified therein, whereupon, on the date specified in such notice, Tenant's
right to possession of the Premises shall cease and this Lease shall thereupon
be terminated; provided however, all of Tenant's obligations, including but not
limited to, the amount of Base Rent and other obligations reserved in this Lease
for the balance of the term hereof, shall immediately be accelerated and due and
payable.
(2) To re-enter and take possession of the Premises or any part
thereof and repossess the same as Landlord's former estate and expel Tenant and
those claiming through or under Tenant, and remove the effects of both or
either, using such force for such purposes as may be reasonably necessary,
without being liable for prosecution thereof, without being deemed guilty of any
manner of trespass and without prejudice to any remedies for arrears of rent or
preceding breach of covenants or conditions. Should Landlord elect to re-enter
the Premises as provided in this Paragraph 19(b)(2) or should Landlord take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, Landlord may, from time to time, without terminating this Lease, relet
the Premises or any part thereof in Landlord's or Tenant's name, but for the
account of Tenant, for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the term of this
Lease) and on such conditions and upon such other terms (which may include
concessions of free rent and alteration and repair of the Premises) as Landlord,
in its discretion, may determine, and Landlord may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Premises or any part thereof or for any failure to collect any rent
due upon such reletting. No such re-entry or taking possession of the Premises
by Landlord shall be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention be given to Tenant. No
notice from Landlord hereunder or under a forcible entry and detainer statute or
similar law shall constitute an election by Landlord to terminate this Lease
unless such notice specifically so states.
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Landlord reserves the right following any such re-entry and/or reletting, to
exercise its right to terminate this Lease by giving Tenant such written notice,
in which event, this Lease will terminate as specified in said notice.
(c) In the event that Landlord does not elect to terminate this Lease
as permitted in Paragraph 19(b)(l) hereof, but on the contrary, elects to take
possession as provided in Paragraph 19(b)(2), Tenant shall pay to Landlord (i)
the rent and other sums as herein provided, which would be payable hereunder if
such repossession had not occurred, less (ii) the net proceeds, if any, of any
reletting of the Premises after deducting all Landlord's expenses in connection
with such reletting, including but without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, expenses of employees,
alteration and repair costs and expenses of preparation for such reletting. If,
in connection with any reletting, the new lease term extends beyond the existing
term, or the premises covered thereby include other premises not part of the
Premises, a fair apportionment of the rent received from such reletting and the
expenses incurred in connection therewith as provided aforesaid will be made in
determining the net proceeds from such reletting. Tenant shall pay such rent and
other sums to Landlord monthly on the days on which the rent would have been
payable hereunder if possession had not been retaken.
(d) In the event this Lease is terminated, Landlord shall be entitled
to recover forthwith against Tenant as damages for loss of the bargain and not
as a penalty, an aggregate sum which, at the time of such termination of this
Lease, represents the excess, if any, of the aggregate of the rent and all other
sums payable by Tenant hereunder that would have accrued for the balance of the
term over the aggregate rental value of the Premises (such rental value to be
computed on the basis of a tenant paying not only a rent to Landlord for the use
and occupation of the Premises, but also such other charges as are required to
be paid by Tenant under the terms of this Lease) for the balance of such term,
both discounted to present worth at the rate of eight percent (8%) per annum.
Alternatively, at Landlord's option, Tenant shall remain liable to Landlord for
damages in an amount equal to the rent and other sums arising under the Lease
for the balance of the term had the Lease not been terminated, less the net
proceeds, if any, from any subsequent reletting, after deducting all expenses
associated therewith and as enumerated above. Landlord shall be entitled to
receipt of such amounts from Tenant monthly on the days on which such sums would
have otherwise been payable.
(e) Suit or suits for the recovery of the amounts and damages set forth
above may be brought by Landlord, from time to time, at Landlord's election and
nothing herein shall be deemed to require Landlord to await the date whereon
this Lease or the term hereof would have expired had there been no such default
by Tenant or no such termination, as the case may be.
(f) After an event of default by Tenant, Landlord may sue for or
otherwise collect all rents, issues and profits payable under all subleases on
the Premises, including those past due and unpaid.
(g) After an event of default by Tenant, Landlord may without
terminating this Lease, enter upon the Premises, with force if necessary,
without being liable for prosecution of any claim for damages, without being
deemed guilty of any manner of trespass and without prejudice to any other
remedies, and do whatever Tenant is obligated to do under the terms of this
Lease. Tenant agrees to reimburse Landlord on demand for any expenses which
Landlord may incur in effecting compliance with the Tenant's obligations under
this Lease; further, Tenant agrees that Landlord shall not be liable for any
damages resulting to Tenant from effecting compliance with Tenant's obligations
under this subparagraph caused by the negligence of Landlord or otherwise.
(h) No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial rent
during the continuance of any such breach, shall constitute a waiver of any such
breach of such agreement, term, covenant or condition. No agreement, term,
covenant or condition hereof to be performed or complied with by Tenant, and no
breach thereof, shall be waived, altered or modified except by written
instrument executed by Landlord. No waiver of any breach shall affect or alter
this Lease, but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other then existing
or subsequent breach thereof. Notwithstanding any unilateral termination of this
Lease, this Lease shall continue in force
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and effect as to any provisions hereof which require observance or performance
of Landlord or Tenant subsequent to termination.
(i) Nothing contained in this Paragraph shall limit or prejudice the
right of Landlord to prove and obtain as liquidated damages in any bankruptcy,
insolvency, receivership, reorganization or dissolution proceeding, an amount
equal to the maximum allowed by any statute or rule of law governing such
proceeding and in effect at the time when such damages are to be proved, whether
or not such amount be greater, equal to or less than the amounts recoverable,
either as damages or rent, referred to in any of the preceding provisions of
this Paragraph.
(j) Any rents or other amounts owing to Landlord hereunder which are
not paid within five (5) days of the date they are due, shall thereafter bear
interest from the due date at the rate of eighteen percent (18%) per annum
("Interest Rate") until paid. Similarly, any amounts paid by Landlord to cure
any default of Tenant or to perform any obligation of Tenant, shall, if not
repaid by the Tenant within five (5) days of demand by Landlord, thereafter bear
interest from the date paid by Landlord at the Interest Rate until paid. In
addition to the foregoing, Tenant shall pay to Landlord whenever any Base Rent,
Additional Rent or any other sums due hereunder remain unpaid more than five (5)
days after the due date thereof, an administrative charge to compensate Landlord
for the costs and expenses associated with handling a delinquent account equal
to ten percent (10%) of the amount due. Further, in the event of default by
Tenant, in addition to all other rights and remedies, Landlord shall be entitled
to receive from Tenant all sums, the payment of which may previously have been
waived or abated by Landlord, or which may have been paid by Landlord pursuant
to any agreement to grant Tenant a rental abatement or other monetary inducement
or concession, including but not limited to any tenant finish allowance or
moving allowance, together with interest thereon from the date or dates such
amounts were paid by Landlord or would have been due from Tenant but for the
abatement, at the Interest Rate, until paid; it being understood and agreed that
such concession or abatement was made on the condition and basis that Tenant
fully perform all obligations and covenants under the Lease for the entire term.
Not withstanding the above, said ten Percent (10%) penalty shall be waived by
Landlord for the first two (2) occurrences during any calendar year provided the
Payment is received on or before the tenth (10th) day of the month.
(k) Each right and remedy provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease now or hereafter existing at law or in equity or by statute or
otherwise, including, but not limited to, suits for injunctive or declaratory
relief and specific performance. The exercise or commencement of the exercise by
Landlord of any one or more of the rights or remedies provided for in this Lease
now or hereafter existing at law or in equity or by statute or otherwise shall
not preclude the simultaneous or subsequent exercise by Landlord of any or all
other rights or remedies provided for in this Lease, or now or hereafter
existing at law or in equity or by statute or otherwise. All costs incurred by
Landlord in connection with collecting any amounts and damages owing by Tenant
pursuant to the provisions of this Lease or to enforce any provision of this
Lease, including by way of example, but not limitation, reasonable attorneys'
fees from the date any such matter is turned over to an attorney, shall also be
recoverable by Landlord from Tenant. LANDLORD AND TENANT AGREE THAT ANY ACTION
OR PROCEEDING ARISING OUT OF THIS LEASE SHALL BE HEARD BY A COURT SITTING
WITHOUT A JURY AND THUS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
20. Completion of Premises:
(a) Landlord has agreed to complete the Premises as more fully set
forth in a work letter (the "Work Letter") attached hereto and incorporated
herein as Exhibit D. Other than as set forth in the Work Letter, Landlord shall
have no obligation for the completion of the Premises, and Tenant shall accept
the Premises in its "as is" condition on the Commencement Date. Landlord shall
not have any obligation for the repair or replacement of any portions of the
interior of the Premises, including but not limited to carpeting, draperies,
window coverings, wallcoverings or painting, which are damaged or wear out
during the term hereof, regardless of the cause therefor, except as may
otherwise be specifically set forth in this Lease. If the Premises are not Ready
for Occupancy (as hereafter defined) on the Commencement Date, unless such delay
is caused by Tenant, its agents or employees, the
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rental obligations hereunder shall not commence until the Premises are Ready for
Occupancy, whereupon, this Lease and all covenants, conditions and terms hereof
shall be in full force and effect; and the Termination Date hereof shall be
postponed as set forth in paragraph 2(b). The postponement of the rent and term
herein provided for such period shall be in full settlement for all claims which
Tenant might have by reason of the Premises not being Ready for Occupancy on the
Commencement Date. If Tenant wishes to take possession of all or any part of the
Premises prior to the date the Premises are Ready for Occupancy, it must first
secure the prior written consent of Landlord and such occupancy shall in no way
hinder, delay or interfere with Landlord's work in completion of the Premises,
and in such event, all terms and provisions of this Lease, including the
obligation to pay rent at a rate equal to the monthly rate provided in Paragraph
3 (prorated accordingly) shall apply. "Ready for Occupancy" as that term is used
herein shall mean the date when all major construction aspects of the Premises
and any remodeling work to be performed by Landlord to the extent agreed to in
the Work Letter are completed although minor items are not completed (including
but not limited to, touch-up plastering or repainting which does not
unreasonably interfere with Tenant's ability to carry on its business in the
Premises). The certificate of the architect (or other representative of
Landlord) in charge of supervising the completion or remodeling of the Premises
shall control conclusively the date upon which the Premises are Ready for
Occupancy. If Landlord is delayed in delivering the Premises to Tenant because
the same are not Ready for Occupancy or due to the failure of a prior occupant
to vacate the same, then the rent and term shall be postponed as hereinabove set
forth, and such postponement shall be in full settlement of all claims which
Tenant may otherwise have by reason of the delay of delivery.
(b) Landlord, at its sole option, may allow Tenant to enter into the
Premises for the purpose of installing furniture, fixtures and equipment and
other leasehold improvements, including, but not limited to, wall and floor
coverings, millwork and draperies, subject to the terms of the Work Letter prior
to the Commencement Date at its sole risk and with no obligation to pay rent
provided that such entry and work do not unreasonably interfere in any way with
the performance of Landlord's work or other workers in and about the Building.
At any time during such period of early entry, if Landlord notifies Tenant that
Tenant's entry or work is interfering with or delaying the performance of work
to be performed by Landlord or other workers in and about the Building, or
causing any disruption whatsoever, Tenant shall forthwith discontinue any
further work and shall vacate the Premises, and shall cause its workmen or
contractors to remove therefrom, any equipment, materials or installations which
are the subject of Landlord's notice.
21. Removal of Tenant's Property: All movable furniture and personal
effects of Tenant not removed from the Premises upon the vacation or abandonment
thereof or upon the termination of this Lease for any cause whatsoever shall
conclusively be deemed to have been abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without notice to Tenant
and without obligation to account therefor, and Tenant shall reimburse Landlord
for all expenses incurred in connection with the disposition of such property.
22. Holding Over: Should Tenant, with Landlord's written consent, hold over
after the termination of this Lease, Tenant shall be deemed a tenant at will.
During such holdover period, Tenant shall be liable for all damages incurred by
Landlord as a result of Tenant's withholding of the Premises. Should Tenant
holdover after the termination of this Lease, with Landlord's consent, Tenant
shall become a tenant from month to month only upon each and all of the terms
herein provided as may be applicable to such month to month tenancy and any such
holding over shall not constitute an extension of this Lease. During such
holding over, Tenant shall pay monthly rent equal to one hundred fifty percent
(150%) of the last monthly rental rate and the other monetary charges as
provided herein. Such tenancy shall continue until terminated by Landlord, as
provided by law, or until Tenant shall have given to Landlord at least thirty
(30) days written notice prior to the last day of the calendar month intended as
the date of termination of such month to month tenancy.
23. Parking and Common Areas: Tenant shall have the right to utilize five
(5) parking spaces for every one thousand (1,000) usable square feet of the
Premises, in the parking area adjacent to the Building during the Primary Lease
Term. Landlord shall have the right, without obligation, and from time to time,
to change the number, size, location, shape and arrangement of parking areas and
other common areas, create designated or reserved spaces, restrict parking of
tenants or their guests to designated areas, designate loading or handicap
loading areas and to,
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change the level or grade of parking. Except as otherwise specifically provided
herein, all access roads, courtyards and other areas, facilities or improvements
furnished by Landlord are for the general and nonexclusive use in common of all
tenants of the Building, and those persons invited upon the land upon which the
Building is situated and shall be subject to the exclusive control and
management of Landlord, and Landlord shall have the right, without obligation to
establish, modify and enforce such rules and regulations, which the Landlord may
deem reasonable and/or necessary. Unless as otherwise provided, Tenant's use of
the parking area, as herein set forth, shall be in common with other tenants of
the Building and any other parties permitted by Landlord to use the parking
area. The parking rights herein granted shall not be deemed a lease but shall be
construed as a license granted by Landlord to Tenant for the term of this Lease.
Landlord shall not have the obligation to monitor the utilization of the parking
areas or to verify correct utilization of parking facilities by tenants of the
Building.
24. Surrender and Notice: Upon the expiration or earlier termination of
this Lease, Tenant shall promptly quit and surrender to Landlord the Premises
broom clean, in good order and condition, ordinary wear and tear and loss by
fire or other casualty excepted, and Tenant shall remove all of its movable
furniture and other effects and such alterations, additions and improvements as
Landlord shall require Tenant to remove pursuant to Paragraph 10 hereof. In the
event Tenant fails to so vacate the Premises on a timely basis as required,
Tenant shall be responsible to Landlord for all costs and damages, including but
not limited to any amounts required to be paid to third parties who were to have
occupied the Premises, incurred by Landlord as a result of such failure, plus
interest thereon at the Interest Rate on all amounts not paid by Tenant within
five (5) days of demand, until paid in full.
25. Acceptance of Premises by Tenant: Taking possession of the Premises by
Tenant shall be conclusive evidence as against Tenant that the Premises were in
the condition agreed upon between Landlord and Tenant, and acknowledgment of
satisfactory completion of the fix-up work which Landlord has agreed in writing
to perform, except as otherwise set forth herein.
26. Subordination and Attornment:
(a) This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all present and future ground leases,
overriding leases and underlying leases and/or grants of term of the real
property and/or the Building or the Building Complex now or hereafter existing
and to all deeds of trust, mortgages and building loan agreements, including
leasehold mortgages and building loan agreements, which may now or hereafter
affect the Building or the Building Complex or any of such leases, whether or
not such deeds of trust or mortgages shall also cover other lands or buildings,
to each and every advance made or hereafter to be made under such deeds of trust
or mortgages, and to all renewals, modifications, replacements and extension of
such leases, deeds of trust and mortgages. The provisions of this Paragraph
shall be self-operative and no further instrument of subordination shall be
required. However, in confirmation of such subordination, Tenant shall promptly
execute and deliver to Landlord (or such other party so designated by Landlord)
at Tenant's own cost and expense, within five (5) days after request from
Landlord an instrument, in recordable form if required, that Landlord, the
lessor of any such lease or the holder of any such deed of trust or mortgage or
any of their respective successors in interest or assigns may request evidencing
such subordination. Failure by Tenant to comply with the requirements of this
Paragraph shall be a default hereunder. Notwithstanding the foregoing, in the
event that Tenant does not execute such documents as may be required to confirm
the subordination set forth in this Paragraph, Tenant hereby grants to Landlord
a power of attorney coupled with an interest to act as Tenant's attorney in fact
for the purposes of executing whatever documents are necessary to evidence such
subordination. The leases to which this Lease is, at the time referred to,
subject and subordinate pursuant to this Paragraph are hereinafter sometimes
called "superior leases" and the deeds of trust or mortgages to which this Lease
is, at the time referred to, subject and subordinate are hereinafter sometimes
called "superior deeds of trust" or "superior mortgages". The lessor of a
superior lease or the beneficiary of a superior deed of trust or superior
mortgage or their successors in interest or assigns are hereinafter sometimes
collectively referred to as a "superior party". Notwithstanding the foregoing,
upon Tenant's request, Landlord agrees to request such superior party grant to
Tenant a non-disturbance agreement in the form then being used by such superior
party for such purposes, providing that Tenant, notwithstanding a default by
Landlord, shall be entitled to remain in
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possession of the Premises in accordance with the terms of this Lease for so
long as Tenant shall not be in default of any term, condition or covenant of
this Lease. Further, Tenant shall attorn to such superior party.
(b) Tenant shall take no steps to terminate this Lease, without giving
written notice to such superior party, and a reasonable opportunity to cure
(without such superior party being obligated to cure), any default on the part
of Landlord under this Lease.
(c) If, in connection with the procurement, continuation or renewal of
any financing for which the Building or the Building Complex or of which the
interest of the lessee therein under a superior lease represents collateral in
whole or in part, a lender shall request reasonable modifications of this Lease
as a condition of such financing, Tenant will not unreasonably withhold its
consent thereto provided that such modifications do not increase the obligations
of Tenant under this Lease or adversely affect any rights of Tenant or decrease
the obligations of Landlord under this Lease.
27. Payments After Termination: No payments of money by Tenant to Landlord
after the termination of this Lease, in any manner, or after giving of any
notice (other than a demand for payment of money) by Landlord to Tenant, shall
reinstate, continue or extend the term of this Lease or affect any notice given
to Tenant prior to the payment of such money, it being agreed that after the
service of notice of the commencement of a suit or other final judgment granting
Landlord possession of the Premises, Landlord may receive and collect any sums
of rent due, or any other sums of money due under the terms of this Lease or
otherwise exercise its rights and remedies hereunder. The payment of such sums
of money, whether as rent or otherwise, shall not waive said notice or in any
manner affect any pending suit or judgment theretofore obtained.
28. Authorities for Action and Notice:
(a) Except as otherwise provided herein, Landlord may, for any matter
pertaining to this Lease, act by and through its Building manager or any other
person designated in writing from time to time.
(b) All notices or demands required or permitted to be sent by one
party to the other hereunder as required by law shall be in writing and shall be
deemed to have been validly given or served by delivery of same in person to the
addressee by facsimile, or by depositing same with Fed Ex or other carrier,
service for next business day delivery, or in the United States mail, postage
prepaid, registered or certified mail return receipt requested, addressed as
follows:
LANDLORD: Westmoor Business Park Ltd., LLLP
717 Seventeenth Street, Suite 2000
Denver, CO 80202
Attn: Richard G. McClintock
Telephone Number: (303) 892-1111
Facsimile Number: (303) 892-6338
TENANT: ChannelPoint, Inc.
5755 Mark Dabling Boulevard, Suite 100
Colorado Springs, Colorado 80919
Attn: Tim Hoogheem
Telephone Number: 719-260-1232
Facsimile Number: 719-260-9776
All notices, demands and requests shall be effective upon such personal
delivery upon receipt of facsimile confirmation, or upon being deposited with
Fed Ex or other courier service or in the United States mail as required above.
However, with respect to notices, demands or requests so deposited with Fed Ex
or other courier service or in the United States mail, the time period in which
a response to any such notice, demand or request must be given
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shall commence to run from the next business day after deposit with Fed Ex or
other courier service or the date on the return receipt of the notice, demand or
request reflecting the date of delivery or rejection of the same by the
addressee thereof in the case of a deposit in the United States mail. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the
notice, demand or request sent. By giving to the other party hereto at least 30
days' written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses.
29. Liability of Landlord: Landlord's liability under this Lease shall be
limited to Landlord's estate and interest in the Building (or to the proceeds
thereof) and no other property or other assets of Landlord or its partners (if
Landlord is a partnership), agents, employees, legal representatives, successors
or assigns, shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this Lease,
the relationship of Landlord and Tenant hereunder or Tenant's use and occupancy
of the Premises. Nothing contained in this Paragraph shall be construed to
permit Tenant to offset against rents due a successor landlord, a judgment (or
other judicial process) requiring the payment of money by reason of any default
of a prior landlord, except as otherwise specifically set forth herein.
30. Brokerage: Landlord is represented by the Frederick Ross Company
("Landlord Broker") Tenant represents and warrants that it has dealt only with
Prime West Real Estate Services (the "Tenant Broker") in the negotiation of this
Lease. Landlord shall make payment of the brokerage fee due to the Landlord
Broker and Tenant Broker (through Landlord Broker's Agreement) pursuant to and
in accordance with Landlord's separate agreement with the Landlord Broker.
Tenant hereby agrees to indemnify and hold the Landlord harmless of and from any
and all loss, costs, damages or expenses (including, without limitation, all
attorneys' fees and disbursements) by reason of any claim of or liability to any
other broker or person claiming through Tenant and arising out of or in
connection with the negotiation, execution and delivery of this Lease.
Additionally, Tenant acknowledges and agrees that Landlord shall have no
obligation for payment of any brokerage fee or similar compensation to any
person with whom Tenant has dealt or may in the future deal with respect to
leasing of any additional or expansion space in the Building or renewals or
extensions of this Lease. In the event any claim shall be made against Landlord
by any other broker who shall claim to have negotiated this Lease on behalf of
Tenant or to have introduced Tenant to the Building or to Landlord, Tenant shall
be liable for payment of all reasonable attorneys' fees, costs and expenses
incurred by Landlord in defending against the same, and in the event such broker
shall be successful in any such action, Tenant shall, in addition, make payment
to such Broker.
31. Taxes:
(a) Tenant shall be liable for and shall pay at least ten (10) days
before delinquency and Tenant hereby agrees to indemnify and hold Landlord
harmless from and against any liability in connection with, all taxes levied
against any personal property, fixtures, machinery, equipment, apparatus,
systems and appurtenances placed by or on behalf of Tenant in or about or
utilized by Tenant in, upon or in connection with the Premises ("Equipment
Taxes"). If any Equipment Taxes are levied against Landlord or Landlord's
property or if the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon such personal property, fixtures,
machinery, equipment, apparatus, systems or appurtenances of Tenant, and if
Landlord, after written notice to Tenant, pays the Equipment Taxes or taxes
based upon such an increased assessment (which Landlord shall have the right to
do regardless of the validity of such levy, but under proper protest if
requested by Tenant prior to such payment and if payment under protest is
permissible), Tenant shall pay to Landlord upon demand, as Additional Rent
hereunder, the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment; provided, however, that in any
such event, Tenant shall have the right, on behalf of Landlord and with
Landlord's full cooperation, but at no cost to Landlord, to bring suit in any
court of competent jurisdiction to recover the amount of any such tax so paid
under protest, and any amount so recovered shall belong to Tenant (provided
Tenant has previously paid such amount to Landlord). Notwithstanding the
foregoing to the contrary, Tenant shall cooperate with Landlord to the extent
reasonably necessary to cause the fixtures, furnishings, equipment and other
personal property to be assessed and billed separately from the real property of
which the Premises form a part, and Landlord shall use reasonable efforts to
treat all other Tenants on the same basis.
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(b) Tenant shall pay to Landlord, as Additional Rent, any excise,
sales, privilege or other tax, assessment or other charge (other than income or
franchise taxes) imposed, assessed or levied by any governmental or
quasi-governmental authority or agency upon Landlord on account of this Lease,
the rent or other payments made by Tenant hereunder, any other benefit received
by Landlord hereunder, Landlord's business as a lessor hereunder, or otherwise
in respect of or as a result of the agreement or relationship of Landlord and
Tenant hereunder.
32. Substitution of Premises: Notwithstanding anything herein to the
contrary, Landlord shall have the right at any time and from to time to time to
substitute other premises located within the Building for the Premises subject
to the same terms and conditions set forth herein; provided, however, that the
substituted Premises shall contain at least as much square footage as the
originally leased Premises without any increase in the then rental rate. In
connection therewith, Landlord agrees to pay all reasonable moving expenses of
Tenant and of Tenant's permitted sub-lessees, including the reasonable
replacement of Tenant improvements. Tenant shall be required to move into such
substituted premises within 30 days of notice from Landlord of its exercise of
this right.
33. Rights Reserved to Landlord:
(a) All portions of the Building are reserved to Landlord except the
Premises and the inside surfaces of all walls, windows and doors bounding in the
Premises, but including exterior building walls, core corridor walls and doors
and any core corridor entrance. Landlord also reserves any space in or adjacent
to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks or other building facilities, and the use
thereof, as well as the right to access thereto through the Premises for the
purposes of operation, maintenance and repair, upon written notice of not less
than twenty-four (24) hours, except in the event of emergencies or apparent
emergencies, when no prior notice shall be required.
(b) Landlord shall have the following rights without liability to
Tenant for damage or injury to property, person or business (all claims for
damage being hereby waived and released), and without effecting an eviction or
disturbance of Tenant's use or possession of the Premises or giving rise to any
claim for setoffs or abatement of rent:
(1) To enter the Premises as more fully provided in this Lease.
(2) To install and maintain signs on the exterior and interior of
the Building, except within the Premises, provided the signs do not block either
completely or partially the exterior windows of the Premises.
(3) To have pass keys to the Premises.
(4) To have access to all mail chutes according to the rules of the
United States Postal Service.
(5) To do or permit to be done any work in or about the exterior of
the Building or any adjacent or nearby building, land, street or alley.
(6) To grant to anyone the exclusive right to conduct any business
or render any service in the Building, provided such exclusive right shall not
operate to exclude Tenant from the use expressly permitted by this Lease.
(7) To increase the size or alter the configuration of the Common
Area.
34. Force Majeure Clause: Wherever there is provided in this Lease a time
limitation for performance by Landlord of any obligation, including but not
limited to obligations related to construction, repair, maintenance or service,
the time provided for shall be extended for as long as and to the extent that
delay in compliance with such limitation is due to an act of God, governmental
control or other factors beyond the reasonable control of Landlord.
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35. Signage:
(a) No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building as shall be
first designated by Landlord, but there shall be no obligation or duty on
Landlord to allow any sign, advertisement or notice to be inscribed, painted or
affixed on any part of the inside or outside of the Building. A directory in a
conspicuous place in the Building lobby area, with the Tenant's name along with
the names of the other tenants in the Building, shall be provided by Landlord on
a one time basis. Any necessary revision to such directory shall be made by
Landlord, at Tenant's expense, within a reasonable time after written notice
from Tenant of the change making the revision necessary. Landlord shall have the
right to remove all nonpermitted signs without notice to Tenant and at the
expense of Tenant.
(b) Tenant shall only be permitted to install building standard signs
and logos, subject to Landlord's prior written consent and criteria as to size,
design, materials and location.
36. Attorneys' Fees: In the event of any dispute hereunder, or any default
in the performance of any term or condition of this Lease, the prevailing party
shall be entitled to recover all costs and expenses associated therewith,
including reasonable attorneys' fees.
37. Hazardous Materials:
(a) Tenant shall not cause or permit any Hazardous Material to be
brought upon, kept, or used in or about the Premises by Tenant, its agents,
employees, contractors, licensees or invitees, without the prior written consent
of Landlord (which Landlord shall not unreasonably withhold as long as Tenant
demonstrates to Landlord's reasonable satisfaction that such Hazardous Material
is necessary or useful to Tenant's business and will be used, kept and stored in
a manner that complies with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises). If Tenant breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material on the Premises caused or permitted by Tenant results in
contamination of the Premises or Building Complex, or any part thereof, or if
contamination of the Premises or Building Complex by Hazardous Material
otherwise occurs for which Tenant is legally liable to Landlord for damage
resulting therefrom, then Tenant shall indemnify, defend and hold Landlord, its
agents, employees, legal representatives, successors and assigns, harmless from
any and all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including, without limitation, diminution in value of the Premises and
Building Complex, damages for the loss or restriction on use of any rentable or
usable space or of any amenity of the Premises or Building Complex, damages
arising from any adverse impact on marketing of space in the Building, and sums
paid in settlement of claims, attorneys' fees, consultant fees and expert fees)
which arise during or after the Lease term as a result of such contamination.
This indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in or about the Building Complex or the soil or ground water on or under
the Building Complex. Without limiting the foregoing, if the presence of any
Hazardous Material on or about the Building Complex caused or permitted by
Tenant results in any contamination of any portion thereof, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Building Complex to the condition existing prior to the introduction of any such
Hazardous Material, subject to obtaining Landlord's prior written consent to the
actions to be taken by Tenant. Landlord may properly require its consent to the
selection of the contractors and other experts involved in the inspection,
testing and removal or abatement activities, the scope of activities to be
performed, the manner and method for performance of such activities, and such
other matters as may be required or requested by Landlord for the safety of and
continued use of the Building Complex and all occupants thereof. The obligations
and liabilities of Tenant herein shall survive expiration or termination of this
Lease.
(b) "Hazardous Material", as used in this Lease, shall be construed in
its broadest sense and shall include asbestos, other asbestotic material (which
is currently or may be designated in the future as a Hazardous
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<PAGE> 30
Material), any petroleum base products, pesticides, paints and solvents,
polychlorinated biphenyl, lead, cyanide, DDT, acids, ammonium compounds and
other chemical products (excluding commercially used cleaning materials in
ordinary quantities) and any substance or material if defined or designated as a
hazardous or toxic substance, or other similar term, by any federal, state or
local law, statute, regulation, or ordinance affecting the Building Complex or
Premises presently in effect or that may be promulgated in the future, as such
statutes, regulations and ordinances may be amended from time to time.
38. Americans with Disabilities Act.
(a) Landlord shall, subject to reimbursement as part of the Building's
Operating Expenses, be responsible for any alterations, modifications or
improvements to the Common Areas which are required under Title III of the
Americans With Disabilities Act ("ADA"). Not included as part of the Building's
Operating Expenses shall be any alterations or improvements made to another
tenant's premises in the Building.
(b) Tenant shall, at Tenant's sole cost and expense, be responsible for
any alterations, modifications or improvements to the Premises, and the
acquisition of any auxiliary aids, required under the ADA, including all
alterations, modifications or improvements required: (1) as a result of Tenant
(or any subtenant, assignee or concessionaire) being a Public Accommodation (as
defined in the ADA); (2) as a result of the Premises being a Commercial Facility
(as defined in the ADA); (3) as a result of any leasehold improvements made to
the Premises by, or on behalf of, Tenant or any subtenant, assignee or
concessionaire (whether or not Landlord's consent to such leasehold improvements
was obtained); or (4) as a result of the employment by Tenant (or any subtenant,
assignee or concessionaire) of any individual with a disability.
(c) With respect to the use restrictions set forth in Paragraph 6 of
this Lease, and the restrictions on assignments and subletting set forth in
Paragraph 17 of this Lease, it is hereby specifically understood and agreed that
Landlord shall have no obligation to consent to, or permit, a use of the
Premises, or an assignment of the Lease or a sublease of the Premises
(collectively herein a "Use Change") if such Use Change would require the making
of any alterations, modifications or improvements to the Premises or the Common
Areas, or the acquisition of any auxiliary aids, required under the ADA, unless
Tenant performs all such acts and satisfies Landlord's requirements for
financial responsibility for the costs of such compliance (which may include, by
way of example, posting of a completion bond, or establishment of an escrow
account).
(d) With respect to the Leasehold Improvements (as described in the
Work Letter Agreement), Tenant shall be responsible for compliance with the ADA
in the design and layout of the Leasehold Improvements and Landlord shall have
no responsibility therefore.
39. Bankruptcy or Insolvency. If the Tenant becomes a debtor under Chapter
7 of the United States Bankruptcy Code, or in the event that a petition for
reorganization or adjustment of debts is filed concerning the Tenant under
Chapter 11 or Chapter 13 of the Bankruptcy Code, or a proceeding filed under
Chapter 7 is transferred to Chapter 11 or 13, the Trustee or the Tenant, as
Debtor-in-Possession, shall be deemed to have rejected this Lease. No election
by the Trustee or Debtor-in-Possession to assume this Lease shall be effective
unless each of the following conditions, which Landlord and Tenant hereby
acknowledge to be commercially reasonable in the context of a bankruptcy
proceeding, has been satisfied, and the Landlord has so acknowledged in writing:
(a) The Trustee or Debtor-in-Possession has cured, or has provided the
Landlord "adequate assurance" (as hereinafter defined) that from the date of
such assumption, the Trustee or Debtor-In-Possession will promptly cure all
monetary and non-monetary defaults under this Lease.
(b) The Trustee or Debtor-in-Possession has compensated, or has
provided to the Landlord adequate assurance that within ten (10) days of the
date of assumption, the Landlord will be compensated, for any pecuniary loss
incurred by the Landlord arising from default of the Tenant, the Trustee or the
Debtor-in-Possession as recited in the Landlord's written statement of pecuniary
loss sent to the Trustee or Debtor-in-Possession.
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<PAGE> 31
(c) The Trustee or Debtor-in-Possession has provided the Landlord with
adequate assurance of future performance of each of the Tenant's, the Trustee's,
or Debtor-in-Possession's obligations under this Lease; provided, however, that:
(1) The Trustee or Debtor-in-Possession shall also deposit with the
Landlord, as security for the timely payment of rent and other sums due
hereunder, an amount equal to three months Base Rent, Additional Rent and other
monetary charges accruing under this Lease; and
(2) The obligations imposed upon the Trustee or
Debtor-in-Possession shall continue with respect to the Tenant or any assignee
of this Lease after the completion of the bankruptcy proceedings.
(d) For purposes of this Paragraph, Landlord and Tenant acknowledge
that, in the context of the bankruptcy proceeding of the Tenant, at a minimum,
"adequate assurance" shall mean:
(1) The Trustee or Debtor-in-Possession will continue to have
sufficient unencumbered assets after the payment of all secured obligations and
administrative expenses to assure the Landlord that the Trustee or
Debtor-in-Possession will have sufficient funds to fulfill all of the
obligations of Tenant under this Lease; or
(2) The Bankruptcy Court shall have entered an order segregating
sufficient cash payable to the Landlord, and the Trustee or Debtor-in-Possession
shall have granted to the Landlord a valid and perfected first lien and security
interest or mortgage in property of the Tenant, the Trustee or
Debtor-in-Possession, acceptable as to value and kind to the Landlord, in order
to secure to the Landlord the obligation of the Tenant, Trustee or
Debtor-in-Possession to cure the monetary or non-monetary defaults under the
Lease within the time period set forth above.
(e) The following conditions shall apply to any assignment of this
Lease in Bankruptcy Proceedings:
(1) If the Trustee or Debtor-in-Possession has assumed this Lease
and elects to assign the Lease to any other person, such interest or estate of
Tenant in this Lease may be so assigned only if the Landlord has acknowledged in
writing that the intended assignee can provide to the Landlord "adequate
assurance of future performance" (as hereinafter defined) of all of the terms,
covenants and conditions of this Lease to be performed by the Tenant.
(2) For the purposes of this provision, Landlord and Tenant
acknowledge that, in the context of a bankruptcy proceeding, at a minimum,
"adequate assurance of future performance" shall mean that each of the following
conditions has been satisfied, and the Landlord has so acknowledged in writing:
A. The proposed assignee has submitted a current financial
statement audited by a Certified Public Accountant which shows the net worth and
working capital and amounts determined by Landlord to be sufficient to assure
the future performance by such assignee of all of Tenant's obligations under
this Lease;
B. The proposed assignee, if requested by the Landlord, shall
have obtained guarantees in form and substance satisfactory to the Landlord from
one or more persons who satisfy the Landlord's standards of creditworthiness;
C. The Landlord has obtained all consents or waivers from any
third party required under any lease, mortgage, financing arrangement, or other
agreement by which the Landlord is bound, in order to permit the Landlord to
consent to such assignment.
40. Miscellaneous:
(a) The rules and regulations attached hereto as Exhibit E, as well as
such rules and regulations as may hereafter be adopted by Landlord for the
safety, care and cleanliness of the Premises and the Building and the
preservation of good order thereon, are hereby expressly made a part hereof, and
Tenant agrees to obey all such rules
26
<PAGE> 32
and regulations. The violation of any of such rules and regulations by Tenant
shall be deemed a breach of this Lease by Tenant affording Landlord all the
remedies set forth herein. Landlord shall not be responsible to Tenant for the
nonperformance by any other tenant or occupant of the Building of any of said
rules and regulations.
(b) The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners of the Building at the time in question, and in
the event of any transfer or transfers of the title thereto, Landlord herein
named (and in the case of any subsequent transfers or conveyances, the then
grantor) shall be automatically released from and after the date of such
transfer or conveyance of all liability in respect to the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed and relating to events occurring thereafter; provided
that any funds in the hands of Landlord or the then grantor at the time of such
transfer in which Tenant has an interest shall be turned over to the grantee,
and any amount then due and payable to Tenant by Landlord or the then grantor
under any provisions of this Lease shall be paid to Tenant.
(c) As used in this Lease, the term "ordinary business hours" shall
mean the hours from 7:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m.
to 1:00 p.m. on Saturday, except for New Year's Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and any other
national or state holiday as may be established from time to time ("Holidays").
(d) This Lease shall be construed as though the covenants herein
between Landlord and Tenant are independent and not dependent and Tenant shall
not be entitled to any setoff of the rent or other amounts owing hereunder
against Landlord, if Landlord fails to perform its obligations set forth herein,
except as herein specifically set forth; provided, however, the foregoing shall
in no way impair the right of Tenant to commence a separate action against
Landlord for any violation by Landlord of the provisions hereof so long as
notice is first given to Landlord and any holder of a mortgage or deed of trust
covering the Building Complex or any portion thereof whose address Tenant has
been notified in writing and so long as an opportunity has been granted to
Landlord and such holder to correct such violation as provided in Paragraph
40(h) hereof.
(e) If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there shall be added as
a part of this Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable, provided such addition does not increase or decrease the
obligations of or derogate from the rights or powers of either Landlord or
Tenant.
(f) The captions of each paragraph are added as a matter of convenience
only and shall be considered of no effect in the construction of any provision
or provisions of this Lease.
(g) Except as herein specifically set forth, all terms, conditions and
covenants to be observed and performed by the parties hereto shall be applicable
to and binding upon their respective heirs, administrators, executors,
successors and assigns. The terms, conditions and covenants hereof shall also be
considered to be covenants running with the land.
(h) Except as otherwise specifically provided herein, in the event
Landlord shall fail to perform any of the agreements, terms, covenants or
conditions hereof on Landlord's part to be performed, and such nonperformance
shall continue for a period of thirty (30) days after written notice thereof,
from Tenant to Landlord, or if such performance cannot be reasonably had within
such thirty (30) day period, and Landlord shall not in good faith have commenced
such performance within such thirty (30) day period and proceed therewith to
completion, it shall be considered a default of Landlord under this Lease.
Tenant shall give written notice to Landlord in the matter herein set forth and
shall afford Landlord a reasonable opportunity to cure any such default. In
addition, Tenant shall send notice of such default by certified or registered
mail, with proper postage prepaid, to the holder of any mortgages
27
<PAGE> 33
or deeds of trust covering the Building Complex or any portion thereof of whose
address Tenant has been notified in writing and shall afford such holder a
reasonable opportunity to cure any alleged default on Landlord's behalf.
(i) If there is more than one entity or person which or who are the
Tenants under this Lease, the obligations imposed upon Tenant under this Lease
shall be joint and several.
(j) No act or thing done by Landlord or Landlord's agent during the
term hereof, including but not limited to any agreement to accept surrender of
the Premises or to amend or modify this Lease, shall be deemed to be binding
upon Landlord unless such act or things shall be by an officer of Landlord or a
party designated in writing by Landlord as so authorized to act. The delivery of
keys to Landlord, or Landlord's agent, employees or officers shall not 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 monthly rent herein
stipulated 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.
(k) Landlord shall have the right to construct other buildings or
improvements in any common area, or any other area designated by Landlord for
use by tenants or to change the location, character or make alterations of or
additions to any of said common areas or other areas. Landlord, during the
entire term of this Lease, shall have the right to change the number and name of
the Building at any time without liability to Tenant.
(l) Tenant acknowledges and agrees that it has not relied upon any
statements, representations, agreements or warranties, except such as are
expressed in this Lease.
(m) Notwithstanding anything to the contrary contained herein,
Landlord's liability under this Lease shall be limited to its interests in this
building.
(n) Time is of the essence hereof.
(o) Tenant and Landlord and the party executing this Lease on behalf of
each of them represent to each other that such party is authorized to do so by
requisite action of the board of directors or partners, as the case may be, and
agree upon request to deliver to each other a resolution or similar document to
that effect.
(p) This Lease shall be governed by and construed in accordance with
the laws of the State where the Premises are located.
(q) This Lease, together with the exhibits attached hereto, contains
the entire agreement of the parties and may not be amended or modified in any
manner except by an instrument in writing signed by both parties. Tenant shall
not record this Lease or a memorandum hereof.
(r) In the event Landlord makes available any area in the Building
complex for use as an athletic/health facility, Tenant agrees that Landlord
shall not be liable for any injury or damage to persons or property arising out
of the use of such health facility by Tenant, its employees or invitees, and
further agrees to indemnify Landlord against any claims, demands or damages
associated therewith. Tenant further agrees to execute and deliver to Landlord,
upon request, an indemnification agreement, in form acceptable to Landlord, as a
condition precedent to use of any such health facility by Tenant and its
employees.
(s) Tenant shall not use the name of the Building, the Building Complex
or the development in which the Building is situated as part of its legal or
trade name, nor for any purpose other than as an address for the business to be
conducted by Tenant in the Premises.
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<PAGE> 34
(t) The submission or delivery of this document for examination and
review does not constitute an option, an offer to lease space in the Building or
an agreement to lease. This document shall have no binding effect on the parties
unless and until executed by both Landlord and Tenant.
(u) Tenant may not record this Lease and any such recordation shall at
the option of Landlord, be a default of Tenant hereunder.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
LANDLORD:
WESTMOOR BUSINESS PARK, LTD., a Colorado
limited liability limited partnership
By: Westfield Development Company, Inc.,
a Colorado corporation, general partner
By: /s/ RANDY SCHWARTZ
-------------------------------------
Its: Executive Vice President
------------------------------------
TENANT:
CHANNELPOINT, INC., a Colorado corporation
By: /s/ TIMOTHY HOOGHEEM
-------------------------------------
Name: Timothy Hoogheem
-----------------------------------
Its: CFO
------------------------------------
STATE OF COLORADO )
)SECTION
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 12th day of
July, 1999, by Randy M. Schwartz as Executive V.P. of Westfield Development
Company, Inc., a Colorado corporation as general partner of Westmoor Business
Park Ltd., LLLP, a Colorado limited liability limited partnership.
Witness my hand and official seal.
My commission expires: 10-26-02
/s/ BARBARA A. KRECKLOW
------------------------------------------
Notary Public
[SEAL]
My Commission Expires 10-26-2002
29
<PAGE> 35
STATE OF COLORADO )
)SECTION
COUNTY OF EL PASO )
The foregoing instrument was acknowledged before me this 12th day of
July, 1999, by Timothy Hoogheem as CFO of ChannelPoint, Inc.
Witness my hand and official seal.
My commission expires: 4/3/2002
[SEAL]
/s/ MARY LU HOFLAND
------------------------------------------
Notary Public
30
<PAGE> 36
ADDENDUM
This Addendum is attached to and forms an integral part to the Lease by and
between Westmoor Business Park Ltd., LLLP, a Colorado limited liability limited
partnership and ChannelPoint, Inc., a Colorado corporation, for the Premises
known as Suite 210, 10155 Westmoor Drive, Westminster, Colorado and shall
supercede the terms and conditions of the Lease and where inconsistent govern
the rights and obligations of the parties. All definitions used herein shall
except as set forth herein have the meanings set forth in the Lease.
1. Expansion Option: Tenant shall have the right to enlarge the area of the
Premises by a minimum of 6,000 additional square feet of rentable area. In the
event Tenant notifies Landlord ("Expansion Notice") of its desire to lease a
minimum of 6,000 additional square feet of rentable area, Landlord shall use
reasonable efforts to deliver said additional space ("Expansion Space") either
in the Tenant's existing Building or another building within Westmoor
Technology Park as determined by Landlord, within nine (9) months of the receipt
of Tenant's notice. Upon delivery of the Expansion Space the terms and
conditions of the Lease shall be modified as follows:
A. The term of the Lease for the Expansion Space shall be five (5)
years.
B. If the Expansion Space is within the Building and the Expansion
Notice is delivered within the first eighteen (18) months of the
Lease Commencement Date, the Base Rent for the Expansion Space
shall be the rate then in effect for the existing Premises and
the Tenant Improvement Allowance shall be the same as for the
Premises, provided the expansion occurs in space not previously
leased.
C. The term of the Lease for the existing Premises shall be extended
so as to be coterminous with the term of the Lease for the
Expansion Space. The Base Rent for the Expansion Space shall be
as provided for under this Lease for the Premises. If however,
the Expansion Space has previously been occupied, the Tenant
Improvement Allowance shall be the then equivalent to that which
is being given for comparable space being leased within the Park
at comparable rental rates.
D. If the Expansion Notice is received after the first eighteen (18)
months of the Primary Lease Term or the expansion occurs at any
time in a building within Westmoor Technology Park other than the
Building, the Base Rental Rate shall be the then current market
rate being charged for the Expansion Space as determined by
Landlord.
E. The Expansion Notice shall be delivered no later than twelve (12)
months prior to the expiration of the Primary Lease Term.
2. Consolidation Option: In the event Tenant notifies Landlord
("Consolidation Notice") of its desire to consolidate its existing Premises with
a minimum of 6,000 rentable square feet of additional space into a new location
("Consolidation Space"), Landlord shall use reasonable efforts to deliver said
Consolidation Space either in Tenant's existing Building or another building
within Westmoor Technology Park as determined by Landlord, within nine (9)
months of the receipt of Tenant's Consolidation Notice. The terms and conditions
of the Lease with respect to the Consolidation Space are as follows:
A. A new Lease shall be entered into for the Consolidation Space
("Consolidation Space Lease"). The term of the Lease for the
Consolidation Space shall be not less than five (5) years.
B. If the Consolidation Space is within the Building and
Consolidation Notice is delivered within the first eighteen (18)
months of the Lease Commencement Date, the Base Rent for
1
<PAGE> 37
the Consolidation Space shall be the rate then in effect for the
existing Premises and the Tenant Improvement Allowance shall be
the same as for the Premises, provided the consolidation occurs
in space not previously leased.
C. If Consolidation Notice is received after the first eighteen (18)
months of the Primary Lease Term or the consolidation occurs at
any time in a building within Westmoor Technology Park other than
the Building, the Base Rental Rate shall be the then current
market rate being charged for the Consolidation Space as
determined by Landlord, and the Tenant Improvement Allowance
shall be equivalent to that then offered for space in the Park.
D. If the Consolidation Space under either (B) or (C) above has been
previously leased and occupied, the Tenant Improvement Allowance
shall be the then equivalent to that which is being changed for
comparable space being re-leased within Westmoor Technology Park
as determined by Landlord.
E. The Lease for the Premises shall be terminated effective as of
the Commencement Date of the Consolidation Space Lease, and
Tenant shall pay (i) the unamortized portion of all commissions
paid under the Lease at an annual interest rate of 10%, and (ii)
a cancellation charge based on the following formulas:
o If the Consolidation Space is more than 15,000 net rentable
square feet, but less than 20,000 net rentable square feet,
Tenant shall pay a lease cancellation charge equal to the
product of $7.50 multiplied by the net rentable square feet
of the Premises at the time of relocation;
o If the Consolidation Space is greater than 20,000 net
rentable square feet, but less than 25,000 net rentable
square feet, Tenant shall pay a lease cancellation charge
equal to the product of $5.00 multiplied by the net rentable
square feet of the Premises at the time of relocation;
o If the Consolidation Space is greater than 25,000 net
rentable square feet, but less than 30,000 net rentable
square feet, Tenant shall pay a lease cancellation charge
equal to the product of $2.50 multiplied by the net rentable
square feet of the Premises at the time of relocation; or
o If the Consolidation Space is greater than 30,000 net
rentable square feet, no lease cancellation charge shall be
payable.
F. Notwithstanding the foregoing, if additional space is available
on the same floor as Tenant's Premises, Landlord shall not be
obligated to consolidate Tenant's premises into another building
in Westmoor Technology Park. Tenant shall then lease additional
space on the same floor as the Premises, whether or not
contiguous to the Premises, under the terms and conditions
described in this Addendum in Section 1, Expansion Option.
G. The Consolidation Notice shall be delivered no later than twelve
(12) months prior to the expiration of the Primary Lease Term.
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<PAGE> 38
3. Termination Right: If Landlord is unable to provide Expansion Space in
the park for Tenant's expansion as detailed in Section 1 above or Consolidation
Space as detailed in Section 2 above, Tenant shall have the right to terminate
the Lease effective 180 days after Landlord notifies Tenant that it is unable to
provide additional space in the Park, such notification from Landlord shall be
delivered to Tenant no more than thirty (30) days after Landlord receives
Tenant's notice of the exercise of the Expansion Option or the Consolidation
Option. Following notice from Landlord that additional space in the Park is not
available, Tenant shall have forty-five (45) days to locate suitable space to
which to relocate and notify Landlord of Tenant's intent to terminate the Lease,
in which case Tenant shall be obligated for paying (i) the unamortized portion
of the Tenant Improvement Allowance and all commissions paid under the lease at
an annual interest rate of ten percent (10%), and (ii) three (3) months Base
Rent. During that forty-five (45) days, Tenant shall also have the option to
rescind its option to terminate the Lease, thus remaining in the Premises for
the remainder of the Lease Term.
TENANT: LANDLORD:
CHANNELPOINTE, INC., WESTMOOR BUSINESS PARK, LTD.,
a Colorado corporation a Colorado limited liability
limited partnership
By: Westfield Development Company,
Inc., a Colorado corporation,
general partner
By: /s/ TIMOTHY HOOGHEEM By: /s/ RANDY M. SCHWARTZ
----------------------------- -----------------------------
Name: Its: Executive Vice President
--------------------------- ----------------------------
Title:
--------------------------
3
<PAGE> 39
EXHIBIT A
[DIAGRAM]
<PAGE> 40
EXHIBIT A-l
METHODOLOGY OF CALCULATION
Building Rentable Area:
Gross Building Area less penetrations through second floor per Exhibit
A-lb.
Useable Area:
Rentable Area less common areas (crosshatched) per Exhibits A-la and A-lb.
Multiplier:
The factor established by dividing the rentable area by the useable area on
a floor-by-floor basis.
Tenant's Rentable Area:
Area (useable) occupied by Tenant measured as follows:
o To exterior of exterior wall line at exterior walls
o To Tenant side of all interior or common area walls
o To centerline of adjoining tenant demising wall multiplied by the
floor multiplier
A-1-1
<PAGE> 41
EXHIBIT B-1a
[DIAGRAM]
<PAGE> 42
EXHIBIT B-1b
[DIAGRAM]
<PAGE> 43
EXHIBIT B
BUILDING THREE
Lot 3, Block 1, Westmoor Technology Park, City of Westminster, County of
Jefferson, State of Colorado.
B-1
<PAGE> 44
EXHIBIT C
ESTOPPEL AND COMMENCEMENT DATE CERTIFICATE
THIS ESTOPPEL AND COMMENCEMENT DATE CERTIFICATE ("Certificate") is
executed this ___ day of ____________, 1999 by WESTMOOR BUSINESS PARK LTD.,
LLLP, a Colorado limited liability limited partnership ("Landlord"), and
CHANNELPOINT, INC., a Colorado corporation ("Tenant") with respect to and
forming a part of that certain Building Lease ("Lease") dated
________________________________, 1999, for the premises commonly known as
______________________________, Colorado ____________ ("Premises").
WITNESSETH
WHEREAS, the parties desire to reaffirm and/or amend and certify to certain
provisions of the Lease; and
WHEREAS, the parties desire that the matters set forth herein be conclusive
and binding on the parties.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Lease Commencement Date is deemed and agreed to be ____________,
19__, and the Lease Termination Date is agreed and deemed to be
_________________, 19__, unless sooner terminated, as provided therein.
2. Tenant's first installment of Base Rent in the amount of
________________________ Dollars ($ ) for the period of ____ (is due on)
(was paid on) ___________, 19__.
3. Tenant's first installment of Tenant's Pro Rata Share of Operating
Expenses in the amount of ________________________________________ Dollars
($ ) _____ (is due on) (was paid on) ___________, 19___.
4. On _____________, 19__, Tenant deposited with Landlord a security
deposit in the form of _______________,in the amount of _______________________
Dollars ($___________).
5. By execution hereof, Tenant acknowledges and agrees that all
improvements or other work required of Landlord has been satisfactorily
performed and Tenant hereby accepts the Premises in full compliance with the
terms and conditions of the Lease.
6. Except as may be amended herein, all terms and conditions of the Lease
shall continue in full force and effect and are hereby republished, ratified
and reaffirmed in their entirety.
7. This Certificate shall be binding upon and may be relied upon by the
parties hereto and their respective legal representatives, successors and
assigns.
C-1
<PAGE> 45
IN WITNESS WHEREOF, the parties have executed this Certificate as of the
day and year first above written.
LANDLORD:
WESTMOOR BUSINESS PARK, LTD., a Colorado
limited liability limited partnership
By: Westfield Development Company, Inc.,
a Colorado corporation, general partner
By:
-------------------------------------
Its:
------------------------------------
TENANT:
CHANNELPOINT, INC., a Colorado corporation
By: /s/ TIMOTHY HOOGHEEM
-------------------------------------
Name: Timothy Hoogheem
-----------------------------------
Title: CFO and Senior VP
----------------------------------
STATE OF COLORADO )
)SS
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ______ day of
___________, 19____, by ___________as of Westfield Development Company, Inc., as
a Colorado corporation as general partner of Westmoor Business Park Ltd., LLLP,
a Colorado limited liability limited partnership.
Witness my hand and official seal.
My commission expires:
------------------------------------------
Notary Public
C-2
<PAGE> 46
STATE OF COLORADO )
)SECTION
COUNTY OF EL PASO )
The foregoing instrument was acknowledged before me this 9th day of
July, 1999, by Timothy Hoogheem as CFO and Senior VP of ChannelPoint, Inc.
Witness my hand and official seal.
My commission expires: 4/31/2002
[SEAL]
/s/ MARY LU HOFLAND
------------------------------------------
Notary Public
C-3
<PAGE> 47
EXHIBIT D
WORK LETTER AGREEMENT
This Work Letter ("Work Letter") Agreement supplements that certain lease
(hereinafter referred to as the "Lease") dated and executed concurrently
herewith by and between WESTMOOR BUSINESS PARK LTD., LLLP, a Colorado limited
liability limited partnership (hereinafter referred to as "Landlord"), and
CHANNELPOINT, INC., a Colorado corporation. (hereinafter referred to as
"Tenant") with the terms defined in the Lease to have the same definition where
used herein.
1. Plans and Specifications. Landlord agrees to improve the Premises in
accordance with the plans and specifications ("Plans and Specifications")
attached hereto as Exhibit D-l and in accordance with the procedures set forth
below.
2. Certain Definitions. For purposes of this Work Letter, the following
defined terms are used: They are:
Tenant's Representative: Tim Hoogheem
Landlord's Representative: Donald Slack / Anne Hayes
Submission Date: \N/A
Tenant Extra Work:
(a) work in excess of the Tenant Finish Allowance;
(b) all modifications, changes and change Orders (as defined in
Paragraph 8) requested by Tenant to the Plans and Specifications;
(c) all interior decorating services and decorator items; and
(d) relocation of any sprinkler lines, sprinkler heads, HVAC
component or other item previously installed by Landlord in the Building.
Tenant Finish Allowance: $22.00 (non-cash) per rentable square foot.
Any capitalized term which is used in this Work Letter but not defined in this
Work Letter has the meaning set forth for such term in the Lease.
3. Representatives. Landlord appoints Landlord's Representative to act for
Landlord in all matters covered by this Work Letter. Tenant appoints Tenant's
Representative to act for Tenant in all matters covered by this Work Letter. All
inquiries, requests, instructions, authorizations and other communications with
respect to the matters covered by this Work Letter will be made to Landlord's
Representative or Tenant's Representative, as the case may be. Tenant will not
make any inquiries of or request to, and will not give any instructions or
authorizations to, any other employee or agent of Landlord, including Landlord's
architect, engineers and contractors or any of their agents or employees, with
regard to matters covered by this Work Letter. Either party may change its
Representative under this Work Letter at any time by three (3) days' prior
written notice to the other party.
4. Building Standard. Except as shown or set forth in the Plans and
Specifications, Tenant must use items prescribed by Landlord for the Building
(the "Building Standard") in order to assure the consistent quality and
appearance of the Building.
D-1
<PAGE> 48
5. Landlord Work and Tenant Extra Work.
(a) Landlord will pay as much as the non-cash Tenant Finish Allowance
for the construction of Tenant's improvements in the Premises in accordance with
the Plans and Specifications (including, without limitation, all permits, taxes,
and construction management, architectural, engineering and construction
contractor's fees associated with the construction).
Tenant may be entitled to a credit against first Base Rents due for any Tenant
Finish Allowance which is not used.
(b) Tenant will pay for the costs of all Tenant Extra Work (including,
without limitation, permits, taxes, and all space planning, architectural,
engineering and construction contractor's fees associated with the Tenant Extra
Work, and an amount sufficient to reimburse Landlord for overhead and related
expenses incurred in connection with the Tenant Extra Work). All requested
Tenant Extra Work will be subject to Landlord's prior written approval in
accordance with Paragraph 6.
6. Landlord's Approval. Landlord, in its sole discretion, may withhold its
approval of any Tenant Space Plan, Tenant Work Drawings, Tenant Extra Work or
Change Orders which require work which:
(a) exceeds or affects the structural integrity of the Building, or any
part of the heating, ventilating, air conditioning, plumbing, mechanical,
electrical, communication or other systems of the Building;
(b) is not approved by the holder of any mortgage or deed of trust
encumbering the building at the time the work is proposed;
(c) would not be approved by a prudent owner of property similar to the
Building;
(d) violates any agreement which affects the Building or binds
Landlord;
(e) Landlord reasonably believes will reduce the market value of the
Premises or the Building at the end of the Term;
(f) does not conform to applicable building code or is not approved by
any governmental authority with jurisdiction over the Premises.
7. Schedule of Tenant Improvement Activities.
(a) On or before the Submission Date, Tenant will submit to Landlord
the improvement plan for the Premises (the "Tenant Space Plan"). Within five (5)
days after its receipt of the proposed Tenant Space Plan, Landlord shall provide
written notice of whether or not Landlord approves the proposed Tenant Space
Plan. If Landlord fails to give Tenant said notice by the fifth day, then the
Tenant Space Plan shall be deemed approved. If Landlord's notice objects to the
proposed Tenant Space Plan, the notice will set forth how the proposed Tenant
Space Plan fails to meet Landlord's requirements and how the proposed Tenant
Space Plan must be changed in order to overcome Landlord's objections. Tenant
will then submit a revised Tenant Space Plan to Landlord.
(b) Within 15 days after approval or deemed approval of the Tenant
Space Plan, Tenant shall furnish to Landlord the construction drawings the
"CD's" for the construction of Tenant's Improvements (the "Improvements"). The
CD's shall be in such a condition so as to allow the issuance of a building
permit for the construction.
D-2
<PAGE> 49
8. Payment for Tenant Extra Work. Tenant will pay to Landlord, in advance,
the total amount payable by Tenant for Tenant Extra Work.
9. Change Orders. Tenant may authorize changes in work during construction
only by written instructions to Landlord's Representative on a form approved by
Landlord. All such changes will be subject to Landlord's prior written approval
in accordance with Paragraph 6. Prior to commencing any change, Landlord will
prepare and deliver to Tenant, for Tenant's approval, a change order (the
"Change Order") setting forth the total cost of such change, which will include
associated architectural, engineering and construction contractor's fees, and an
amount sufficient to reimburse Landlord for overhead and related expenses
incurred in connection with the Change Order. If Tenant fails to approve and pay
for such Change Order within five (5) days after delivery by Landlord, Tenant
will be deemed to have withdrawn the proposed change and Landlord will not
proceed to perform the change. Upon Landlord's receipt of Tenant's approval and
payment, Landlord will proceed to perform the change.
10. Completion and Commencement Date. As provided in Section 2 and 20 of
the Lease, the Term of the Lease (and therefore Tenant's obligation for the
payment of Rent) shall not commence until Landlord has substantially completed
all work to be performed by Landlord as set forth in this Work Letter; provided,
however, that if Landlord is delayed in substantially completing such work as a
result of:
(a) late submission of Tenant information, Space Plan or CD's;
(b) Change Orders requested by Tenant;
(c) delays in obtaining non-Building standard construction materials
requested by Tenant;
(d) Tenant's failure to timely approve any item requiring Tenant's
approval;
(e) any other delays by Tenant; and
(f) any other act or omission of Tenant or Tenant's architects,
engineers, contractors or subcontractors (all of which shall be deemed to be
delays caused by Tenant),
the foregoing shall be items of "Tenant Delay",
then the Commencement Date shall only be extended pursuant to Section 20 of the
Lease until the date on which Landlord would have substantially completed
performance of such work but for such delays. Except as provided in the Lease,
postponement of the commencement of the Term shall be in full settlement of all
claims that Tenant might otherwise have against Landlord by reason of the
Premises not being ready for occupancy by Tenant as of the originally scheduled
Commencement Date set forth in Section 2 of the Lease.
D-3
<PAGE> 50
IN WITNESS WHEREOF, the parties have executed this Work Letter
Agreement this 12th day of July, 1999.
LANDLORD:
WESTMOOR BUSINESS PARK, LTD., LLLP, a Colorado
limited liability limited partnership
By: Westfield Development Company, Inc.,
a Colorado corporation, general partner
By: /s/ RANDY M. SCHWARTZ
-------------------------------------
Its: Executive Vice President
------------------------------------
TENANT:
CHANNELPOINT, INC., a Colorado corporation
By: /s/ TIMOTHY HOOGHEEM
-------------------------------------
Its:
------------------------------------
D-4
<PAGE> 51
EXHIBIT D-1
BUILDINGS ONE, TWO, THREE AND FOUR
LANDLORD CORE & SHELL WORK
SITE
All on and off site improvements generally including landscaping, irrigation,
sidewalks, paving, lighting, utilities, curb and gutter, monument signage and
striping at Landlord's discretion.
BUILDING
o Foundations
o Underground utilities (wet and dry) to a single termination point for
each utility
o Building structure including concrete slabs
o Exterior walls and building "skin" including windows, exterior doors,
insulation, and finish material
Note: Tenant side of exterior walls will be completed (drywalled,
taped, sanded and painted) as part of the tenant finish
allowance during tenant finish.
o Roof insulation and roofing
o Mechanical equipment screen sufficient in size to accommodate shell
mechanical equipment
o Common Areas including:
Toilet Core
Lobby
Elevators
Main Electrical Room
Fire Sprinkler Riser Room
Telecommunications Room
Stairways
Showers
Public Corridors
Note: Tenant side of common area spaces will be exposed studs or
structural walls. All finishes will be done under the tenant
finish allowance during tenant finish construction.
FIRE PROTECTION
Shell only sprinkler and alarm system more particularly described in this
section.
Note: Sprinkler heads will be installed pointing up into joist space at time of
shell construction. During tenant finish, under Tenant Finish Allowance,
heads will be "turned down" and lowered to finished ceiling height. Heads
will be relocated or additional heads added as required by code for the
tenant finish area again under the tenant finish allowance. Fire
protection shall be in compliance with NFPA 13, the owner's carrier, and
the jurisdictional authority.
FIRE ALARM SYSTEM
As required for shell and common area work only.
The fire alarm system will be a fully addressable system meeting the
requirements of the Uniform Fire Code, The Americans with Disabilities Act
(ADA), UI 1971, and the Westminster Fire Department. Manual pull stations will
be located to meet National Fire Protection Association (NFPA) requirements and
horn/strobe units will be located to provide complete coverage in terms of both
the visual and audible components.
D-1-1
<PAGE> 52
Detection may be required for special functions in selected areas and in
non-rated corridor-type open office areas. However, full smoke detection for the
building is not required by the 1991 National Fire Code or by the Westminster
Fire Department. Review of the tenant exiting paths will be required by the
Westminster Fire Marshall.
The fire alarm system will be installed for core and shell common areas only.
All fire alarm systems required for tenant finish will be installed during
tenant finish under that allowance.
MECHANICAL SYSTEM
AIR DISTRIBUTION
The buildings will be served by rooftop packaged heating and cooling units sized
to meet the demand loads. The units will have DX refrigeration, a gas-fired
heating section, and full economizer and VAV controls. The roof curbs will be
mounted on an 8" concrete slab for sound attenuation. The units will be located
near the toilet core and arranged so that certain units will serve the second
floor and the other units the first floor.
The system will be ducted to fan powered parallel flow type VAV boxes with
electric heating coils serving perimeter zones and cooling only pinch down boxes
serving interior spaces. On the average there will be one zone box for every
1,600 SF. Typically, each exposure will have two fan-powered boxes at an average
of 1,200 SF each, and the interior spaces will have a box for every 2,000 SF.
All zone boxes will be ducted to square ceiling diffusers during tenant finish
and all electrical and control wiring for the boxes will be done under the
tenant finish allowance.
HEATING
The gas-fired heating section inside each rooftop unit will be used for morning
warm-up and overnight heating.
Each perimeter fan terminal will be provided with an electric heating coil to
allow for zone heating when required. (Connected to power source under tenant
finish.)
CONTROLS
The proposed control system shall be Direct Digital Controls (DDC) and shall
communicate with the rooftop units, fan terminal units and VAV boxes. The
control system will provide the capability to monitor each VAV box and provide
for off-hour HVAC.
ELECTRICAL SYSTEMS DESIGN CRITERIA
POWER
The basis for the design of the electrical distribution system is a load density
of 30 watts/SF with the following breakdown:
<TABLE>
<S> <C>
Mechanical Systems (including elevators) 18.0 W/SF
Lighting 2.0 W/SF
General Purpose Power 8.0 W/SF
Spare 2.0 W/SF
---------
TOTAL 30.0 W/SF
</TABLE>
D-l-2
<PAGE> 53
ELECTRICAL SYSTEM
POWER DISTRIBUTION
The distribution system for this building will initiate from a main distribution
switchboard located in the main electrical room. The service will be fed from an
exterior pad mounted Public Service Company transformer.
The major mechanical equipment will be fed from the main switchboard located in
the main electrical room.
The tenant will need to provide and install an energy demand meter to monitor
their energy usage. The tenant shall also install a data connection between the
demand meter and the building management system.
All fan powered boxes shall be connected to the tenant panel by the tenant
during the tenant finish phase.
The tenant will be responsible for all electrical distribution equipment
starting at the 400 amp, 480 volt switch in the main electrical room.
COMMUNICATION RACEWAYS
Incoming communications cable from U S West and conduit capacity for other
providers into the main telecom room on the first floor will be pulled in 4"
conduits run from a telephone pedestal located on the perimeter of the site. In
addition to the incoming conduits, two, 4" conduits shall be installed between
each building. Additional conduit required to cross a tenant space to link the
telecommunications room to a future unfinished space will be the responsibility
of the landlord. The tenant shall be responsible for all telecommunication work
from the main telephone room on. Sleeves will be provided in the second floor
over the telephone room for the tenants use.
CARD ACCESS SYSTEM
A card access system will be provided at the main entry and each of two
stairwell entrances on the north side.
PLUMBING SYSTEM
WASTE AND VENT SYSTEM
A 6" sanitary sewer service shall be provided to the building. Conventional
waste and vent system with stubouts for future connection in core area. Tenant
stacks are also provided at two locations per floor. The pipe material shall be
cast iron hub and spigot below floor and cast iron no hub above floor. Future
connection sizes shall be 4" for waste and 3" for vent.
DOMESTIC WATER
A 1 1/2" water meter with 2" service into the building shall be provided. A
reduced pressure backflow preventer and PRV station, if required, shall be
provided at water entrance into the building. Domestic water shall be routed to
all fixtures. Two tenant risers with a 1" stubout provided at each riser on
every floor located with the tenant stacks. Additionally, a 1" stubout shall be
provided at the toilet core.
DOMESTIC HOT WATER
A gas fired hot water heater sized as necessary shall be provided to serve the
needs of the toilet core and showers.
D-1-3
<PAGE> 54
PLUMBING FIXTURES
Fixtures shall be provided at core area of building. Water closets shall be of
the pressure assist flush tank, floor set type with elongated bowl. Fixtures
shall be ADA accessible as required.
SHOWER FACILITIES
The building will contain public shower stalls with dressing areas divided
between men and women, located near or adjacent to the toilet rooms.
STORM
Roof drainage by leader heads and downspouts with overflow scuppers.
NATURAL GAS
Natural gas shall be extended from the gas meter to the rooftop units. Gas pipe
shall be black steel (threaded) for piping up to 2" in size. Piping 2 1/2" and
larger shall be butt weld black steel. All piping exposed to outdoor conditions
shall be painted.
WINDOW COVERINGS
Landlord shall provide Levolor mini blinds in all windows at Landlord's cost.
D-l-4
<PAGE> 55
EXHIBIT E
RULES AND REGULATIONS
Landlord and Tenant agree that the following Rules and Regulations
shall be and hereby are made a part of this Lease, and Tenant agrees that
Tenant's employees and agents, or any others permitted by Tenant to occupy or
enter the Premises, will at all times abide by said Rules and Regulations:
1. The sidewalks, entries, passages, corridors, stairways and elevators
of the Building shall not be obstructed by Tenant, or Tenant's agents or
employees, or used for any purpose other than ingress to and egress from the
Premises.
2. Furniture, equipment or supplies will be moved in or out of the
Building only upon the elevator designated by Landlord and then only during such
hours and in such manner as may be prescribed by Landlord and upon no less than
forty-eight (48) hours prior notice to Landlord. Landlord shall have the right
to approve or disapprove the movers or moving company employed by Tenant. Tenant
shall cause its movers to use only the loading facilities and elevator
designated by Landlord. In the event Tenant's movers damage the elevator or any
part of the Building, Tenant shall forthwith pay to Landlord the amount required
to repair said damage. Tenant shall insure 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 or to the Building or Building Complex caused by any person making
such deliveries.
3. No safe or articles, the weight of which may in the opinion of
Landlord constitute a hazard or damage to the Building or Building's equipment,
shall be moved into the Premises.
4. Safes and other equipment, the weight of which is not excessive,
shall be moved into, from and about the Building only during such hours and in
such manner as shall be prescribed by Landlord; and Landlord shall have the
right to designate the location of such articles in the Premises.
5. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building, as shall be
first designated and approved in writing by Landlord, provided, however, there
shall be no obligation or duty on Landlord to allow any sign, advertisement or
notice to be inscribed, painted or affixed on any part of the inside or outside
of the Building except as otherwise provided in the Lease. No furniture shall be
placed in front of the Building or in any lobby or corridor, without the prior
written discretionary consent of Landlord. Landlord shall have the right to
remove all non-permitted signs and furniture, without notice to Tenant, and at
the expense of Tenant.
6. Tenant shall not do or permit anything to be done in the Premises,
or bring or keep anything therein which would in any way increase the rate of
fire insurance on the Building or on property kept therein, constitute a
nuisance or waste, or obstruct or interfere with the rights of other tenants, or
in any way injure or annoy them, or conflict with any of the rules or ordinances
of the Fire Department or of the Department of Health of the County where the
Building is located.
7. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning or taking care of the Premises, without
the prior written consent of Landlord. Landlord shall be in no way responsible
to Tenant for any loss of property from the Premises, however occurring, or for
any damage done to Tenant's furniture or equipment by the janitor or any
of janitor's staff, or by any other person or persons whomsoever; provided,
however, that the janitorial staff is bonded. The janitor of the Building may at
all times keep a pass key, and other agents of Landlord shall at all times be
allowed admittance to the Premises.
E-1
<PAGE> 56
8. Water closets and other water fixtures shall not be used for any
purpose other than that for which the same are intended, and any damage
resulting to the same from misuse on the part of Tenant, Tenant's agents or
employees, shall be paid for by Tenant. No person shall waste water by tying
back or wedging the faucets or in any other manner.
9. No animals (except for those assisting disabled people) shall be
allowed in the offices, halls, corridors and elevators in the Building. No
person shall disturb the occupants of this or adjoining buildings or premises by
the use of any radio, sound equipment or musical instrument or by the making of
loud or improper noises.
10. No vehicles, including bicycles, shall be permitted in the offices,
halls, corridors, and elevators in the Building nor shall any vehicles be
permitted to obstruct the sidewalks or entrances of the Building.
11. Tenant shall not allow anything to be placed on the outside of the
Building, nor allow anything to be thrown by Tenant, Tenant's agents or
employees, out of the windows or doors, or down the corridors, elevator shafts,
or ventilating ducts or shafts of the Building. Tenant, except in case of fire
or other emergency, shall not open any outside window.
12. No additional lock or locks shall be placed by Tenant on any door
in the Building unless written consent of Landlord shall first have been
obtained. 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 this Lease to provide any service to
the affected areas which requires access thereto; (b) Tenant shall indemnify
Landlord against any expenses 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 Tenant's expense. A reasonable number
of keys to the toilet rooms, if locked by Landlord, will be furnished by
Landlord, and neither Tenant, Tenant's agents or employees shall have any
duplicate keys made. At the termination of this tenancy, Tenant shall promptly
return to Landlord all keys to offices, toilet rooms or vaults. Landlord may
from time to time install and change locking mechanisms on entrances to the
Building, Building Complex and the Premises, and shall provide Tenant with two
(2) sets of keys for each lockset at no additional charge. If now or at any
future time the locking mechanisms of the Building Complex or Premises utilize
"card keys," Landlord shall provide Tenant with one (1) card key per 1,000
square feet in the Premises without change. If Tenant requires additional card
keys, Tenant shall deposit with Landlord a reasonable sum not to exceed $25.00
for each additional card key issued to Tenant and Tenant's employees, as a
deposit to be refunded to Tenant upon return of the applicable card key(s).
13. No window shades, blinds, screens, draperies or other window
coverings will be attached or detached by Tenant without Landlord's prior
written consent. Tenant agrees to abide by Landlord's rules with respect to
maintaining uniform curtains, draperies and/or linings at all windows and
hallways.
14. No awnings shall be placed over any window.
15. If Tenant desires telegraphic, telephonic or other electric
connections, Landlord or Landlord's agents will direct the electricians as to
where and how the wires may be introduced and without such directions, no boring
or cutting for wires will be permitted. Any such installation and connection
shall be made at Tenant's expense.
16. Tenant shall not install or operate any steam or gas engine or
boiler, or carry on any mechanical operation in the Premises. The use of oil,
gas or inflammable liquids for heating, lighting or any other purpose is
expressly prohibited. Explosives or other articles deemed extra hazardous shall
not be brought into the Building Complex.
17. Any painting or decorating as may be agreed to be done by and at
the expense of Landlord shall be done during regular weekday working hours.
Should Tenant desire such work on Saturdays, Sundays, holidays or outside of
regular working hours, Tenant shall pay for the extra cost thereof. 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 the other tenants in the Building or
Building Complex.
E-2
<PAGE> 57
18. Except as permitted by Landlord and except for normal office
decorating, Tenant shall not mark upon, paint signs upon, cut, drill into, drive
nails or screws into, or in any way deface the walls, ceilings, partitions or
floors of the Premises or of the Building, and any defacement, damage or injury
caused by Tenant, Tenant's agents or employees, shall be paid for by Tenant.
19. Landlord shall at all times have the right, by Landlord's
representatives or agents, to enter the Premises and show the same to persons
wishing to lease them, and may, at any time within sixty (60) days preceding the
termination of Tenant's Lease term, place upon the doors and windows of the
Premises a "For Rent" sign, which notice shall not be removed by Tenant.
20. Tenant shall not obstruct or interfere with the rights of other
tenants of the Building, or of persons having business in the Building, or in
any way injure or annoy such tenants or persons.
21. Tenant shall not commit any act or permit anything in or about the
Building which shall or might subject Landlord to any liability or
responsibility for injury to any person or property by reason of any business or
operation being carried on in or about the Building or for any other reason.
22. Tenant shall not use the Building for lodging, sleeping, cooking
(except microwave use), or for any immoral or illegal purpose or for any purpose
that will damage the Building, or the reputation thereof, or for any purposes
other than those specified in the Lease.
23. Canvassing, soliciting, and peddling in the Building are
prohibited, and Tenant shall cooperate to prevent such activities.
24. Except as otherwise expressly permitted in the Lease, Tenant shall
not conduct mechanical or manufacturing operations, cook or prepare food, except
designated kitchen areas, or place or use any inflammable combustible explosive,
or hazardous fluid, chemical, device, substance or material in or about the
Building. Tenant shall comply with all statutes, ordinances, rules, orders,
regulations and requirements imposed by governmental or quasi-governmental
authorities in connection with fire and public safety and fire prevention and
shall not commit any act or permit any object to be brought or kept in the
Building, which shall result in a change of the rating of the Building by the
Insurance Services Officer or any similar person or entity.
25. Tenant shall not use the building for manufacturing or for the
storage of goods, wares or merchandise, except as such storage may be
incidental to the use of the Premises for general office purposes and except in
such portions of the Premises as may be specifically designated by Landlord for
such storage. Tenant shall not conduct in or about the Building any auction,
public or private, without the prior written approval of Landlord.
26. Tenant shall not use in the Building any machines, other than the
standard office machines such as computers, typewriters, calculators, copying
machines and similar machines, without the express prior written consent of
Landlord. Tenant shall not cause improper noises, vibrations, or odors within
the Building.
27. Tenant shall not deposit any trash, refuse, cigarettes, or other
substances of any kind within or out of the Building except in the refuse
containers provided therefore. Tenant shall not introduce into the Building any
substance which might add an undue burden to the cleaning or maintenance of the
Premises or the Building. Tenant shall exercise its best efforts to keep the
sidewalks, entrances, passages, courts, lobby areas, parking areas, elevators,
escalators, stairways, vestibules, public corridors and halls in and about the
Building clean and free from rubbish.
28. Tenant shall use the Common Areas only as a means of ingress and
egress, and Tenant shall permit no loitering by any persons upon Common Areas or
elsewhere within the Building. The Common Areas and roof of the Building are not
for the use of the general public, and Landlord shall, in all cases, retain the
right to control or prevent access thereto by all persons whose presence in the
judgment of the Landlord, shall be prejudicial to the safety, character,
reputation or interests of the Building and its tenants. Tenant shall not enter
the mechanical rooms,
E-3
<PAGE> 58
air conditioning rooms, electrical closets, or similar areas or go upon the roof
of the Building without the express prior written consent of Landlord.
29. Landlord its agents or representatives reserve the right to exclude
or expel from the Building any person, who, in the judgment of Landlord, is
intoxicated or under the influence of liquor or drugs or who shall in any manner
act in violation of the rules and regulations of the Building.
30. Tenant shall not use the washrooms, restrooms and plumbing fixtures
of the Building, and appurtenances thereto, for any other purpose then the
purposes for which they were constructed, and Tenant shall not deposit any
sweepings, rubbish, rags or other improper substances therein. Tenant shall not
waste water by interfering or tampering with the faucets or otherwise. If Tenant
or Tenant's employees, contractors, jobbers, agents, licensees, invitees, guests
or visitors cause any damage to such washrooms, restrooms, plumbing fixtures or
appurtenances, such damage shall be repaired at Tenant's expense and Landlord
shall not be responsible therefor.
31. The sashes, sash doors, skylights, windows and doors that reflect
or admit light or air into the common areas of the Building shall not be covered
or obstructed by Tenant, through placement of objects upon windowsills or
otherwise. Tenant shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system of the Building by closing drapes and other
window coverings when the sun's rays fall upon the windows of the Premises.
Tenant shall not obstruct, alter or in any way impair the efficient operation of
Landlord's heating, ventilating, air conditioning, electrical, fire, safety, or
lighting systems, nor shall Tenant tamper with or change the setting of any
thermostat or temperature control valves in the Building.
32. Subject to applicable fire or other safety regulations, all doors
opening into Common Area and all doors upon the perimeter of the Premises shall
be kept closed and, during nonbusiness hours, locked, except when in use for
ingress or egress. If Tenant uses the Premises after regular business hours or
on nonbusiness days, Tenant shall lock any entrance doors to the Building or to
the Premises used by Tenant immediately after using such doors.
33. Tenant shall not permit its employees or agents to smoke in any
lobby, hallway or restroom within the Building Complex or in any other areas of
the Building Complex either (i) posted as a non-smoking area or (ii) areas
prohibited by any authorized governmental agencies.
34. Tenant agrees that Landlord may reasonably amend, modify, delete or
add new and additional rules and regulations to the use and care of the Premises
and the Building, provided such changes shall not unreasonably interfere with
Tenant's use of the Premises for office purposes. Tenant agrees to comply with
all such rules and regulations upon notice to Tenant from Landlord thereof. In
the event of any breach of any rules and regulations herein set forth or any
reasonable amendments, modifications or additions thereto Landlord shall have
all remedies in this Lease provided for in the event of default by Tenant.
35. All references in these Rules and Regulations to "Tenant" shall be
deemed to include the employees, agents, invitees and licensees of Tenant and
others permitted by Tenant to use or occupy the Premises.
E-4
<PAGE> 59
EXHIBIT F
GUARANTY OF LEASE
Intentionally Deleted
F-1
<PAGE> 60
FIRST AMENDMENT
This First Amendment ("Amendment") is attached to and forms an integral part to
the Lease by and between Westmoor Business Park Ltd., LLLP, a Colorado limited
liability limited partnership and ChannelPoint, Inc., a Colorado corporation
("Original Lease") for the Premises known as Suite 210, 10155 Westmoor Drive,
Westminster, Colorado ("Original Premises") and shall supercede the terms and
conditions of the Original Lease and where inconsistent govern the rights and
obligations of the parties. All definitions used herein shall, except as set
forth herein, have the meanings set forth in the Original Lease. This Amendment
together with the Original Lease is hereinafter referred to as the "Lease".
1. Expansion. Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord an additional 15,078 rentable square feet located adjacent to the
Original Premises and more commonly known as Suite 200, as identified on
Exhibit A attached hereto and incorporated herein by this reference
("Additional Space"). The Additional Space, together with the Original
Premises, aggregate 24,118, and is hereinafter referred to collectively as
the "Premises." The Additional Space is leased by Tenant on the following
terms and conditions:
A. The Additional Space shall be completed in accordance with the terms
of the Work Letter attached as Exhibit D to the Original Lease, except
that the Submission Date with respect to Tenant's delivery of space
plans for the Additional Space shall be October 1, 1999 and the
Premises shall be Ready for Occupancy on or before January 1, 2000.
Landlord shall give Tenant a tenant finish allowance for the
Additional Space in the amount of $22.00 per rentable square foot of
the Additional Space (i.e. $331,716.00) ("Additional Space
Allowance"). The Additional Space Allowance shall be paid by Landlord
to Tenant on the same terms and conditions as provided in the Lease
with respect to payment by Landlord of the Tenant Finish Allowance.
B. On January 1, 2000, Tenant shall commence paying Base Rent and
Additional Rent on the Additional Space as hereinafter set forth.
1
<PAGE> 61
C. Simultaneously with execution of this Amendment, Tenant shall
increase the Security Deposit by depositing with Landlord an
additional Seventeen Thousand Three Hundred Thirty-Nine and
70/100 Dollars ($17,339.70) to be held by Landlord in accordance
with Section 4 of the Original Lease. The aggregate amount of the
Security Deposit to be held by Landlord shall be $28,108.70.
D. Tenant's Pro Rata Share is equal to 24.63%.
E. Except as modified by this Amendment, all other terms and
provisions of the Original Lease shall apply to Tenant's lease of
the Additional Space and all references in the Lease to the
"Premises" shall include the Additional Space.
2. Term. The Termination Date of this Lease shall be December 31, 2004,
unless sooner terminated pursuant to the terms of the Lease.
3. Base Rent. Commencing September 1, 1999 and continuing thereafter
during the Primary Lease Term, Tenant shall pay to Landlord Base Rent
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Period Annual Base Rent Monthly Base Rent Rate/RSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1, 1999 - $124,752.00 $10,396.000 $13.80
December 31, 1999
- --------------------------------------------------------------------------------
January 1, 2000 - $332,828.40 $27,735.70 $13.80
December 31, 2002
- --------------------------------------------------------------------------------
January 1, 2003 - $362,734.72 $30,227.89 $15.04
December 31, 2004
- --------------------------------------------------------------------------------
</TABLE>
4. Renewal Options: Landlord grants to Tenant an option (the "Renewal
Option") to extend the term of the Lease for one (1) period of five
(5) years ("Option Term").
A. The Renewal Option shall apply to all space under the Lease at
the time the Renewal Notice is given to the Landlord and shall be
on the following terms and conditions.
2
<PAGE> 62
1. Written notice ("Renewal Notice") of exercise of the Renewal
Option shall be given to Landlord no later than nine (9)
months prior to the expiration of the Primary Lease Term. If
Tenant timely exercises a Renewal Option, the Lease shall be
deemed extended, and thereafter the parties shall execute an
amendment to the Lease setting forth the terms of the
extension.
2. Unless Landlord is timely notified by Tenant in accordance
with subparagraph (1) above, it shall be conclusively deemed
that Tenant does not desire to exercise the Renewal Option,
and the Lease shall expire in accordance with its terms, at
the end of the Primary Lease Term.
3. Tenant's right to exercise a Renewal Option shall be
conditioned upon Tenant not being in default under the Lease
at the time of the exercise of a Renewal Option or at the
time of commencement of the Option Term.
4. If Tenant exercises the Renewal Option, Landlord shall
provide Tenant with a tenant improvement allowance
comparable to that being provided by Landlord to other
tenants in the Westmoor Technology Park renewing their
leases for comparable space and for comparable terms.
5. The Renewal Option granted hereunder shall be upon the terms
and conditions contained in the Lease, except the rental to
be paid by Tenant for the Option Term shall be the then
current "Market Rate" for such period for similar quality
buildings in the competitive market but no less than the
Base Rent for the Premises on the Commencement Date of the
Primary Lease Term.
B. For the purposes of this paragraph 4, the term "Market Rate"
shall mean an amount per rentable square foot per annum for the
Premises which is representative of and comparable to the
consideration then paid (as of the inception of the Renewal Term)
for substantially equivalent lease transactions ("Comparable
Transactions") for new or renewal leases which are executed
within six
3
<PAGE> 63
(6) months of Tenant's exercise of the Renewal Option for
substantially equivalent office space in the Westmoor Technology
Park (the "Competitive Market") taking into account (i) the
amount of space in the Premises; (ii) tenant improvement
allowances, relocation allowances, free rent, landlord-paid
brokerage commissions and other concessions required to attract
new tenants or retain existing tenants; and (iii) the applicable
base year or expense stop, if any, and as adjusted to reflect the
applicable Base Year applicable to a Renewal Option, for
operating expenses and real estate taxes; provided, however, that
any non-arms length lease transactions entered into between
landlords and tenants in the Competitive Market are expressly
excluded from consideration in determining the Market Rent.
C. Failure to Renew. A failure to renew in the time and manner set
forth herein and within the time period provided herein shall
result in automatic termination of the Renewal Option.
D. Arbitration of Market Rate. Landlord shall provide written notice
of its good faith determination of the Market Rate within thirty
(30) days after Tenant provides its Renewal Notice to Landlord.
Tenant shall have thirty (30) days ("Tenant's Review Period")
after receipt of Landlord's notice of Landlord's determination of
the Market Rate within which to accept Landlord's determination.
In the event Tenant fails to accept in writing such rental
proposed by Landlord then such proposal shall be deemed rejected,
and Landlord and Tenant shall attempt to agree upon such Market
Rate, using their best good faith efforts. If Landlord and Tenant
fail to reach agreement within fifteen (15) days following
Tenant's Review Period ("Outside Agreement Date"), then each
party shall place in a separate envelope a final proposal as to
the Market Rate and such determination shall be submitted to
arbitration in accordance with subsections (1) through (5) below.
If Landlord fails to timely deliver the initial written
determination of the Market Rate which triggers Tenant's Review
Period, then Tenant may commence such negotiations by providing
the initial notice, in which event Landlord shall have thirty
(30) days ("Landlord's Review Period") after receipt of Tenant's
notice of the new rental within
4
<PAGE> 64
which to accept such rental. In the event Landlord fails to
accept in writing such rental proposed by Tenant, then such
proposal shall be deemed rejected, and Landlord and Tenant shall
attempt in good faith to agree upon such Market Rate, using their
best good faith efforts. If Landlord and Tenant fail to reach
agreement within fifteen (15) days following Landlord's Review
Period (which shall be in such event, the "Outside Agreement
Date" in lieu of the above definition of such date), then each
party shall place in a separate sealed envelope its final
proposal as to the Market Rate and such determination shall be
submitted to arbitration in accordance with subsections (1)
through (5) below.
1. Landlord and Tenant shall meet with each other within five
(5) business days of the Outside Agreement Date and exchange
the sealed envelopes and then open such envelopes in each
other's presence. If Landlord and Tenant do not mutually
agree upon the Market Rate within one (1) business day of
the exchange and opening of envelopes, then, within ten (10)
business days of the exchange and opening of envelopes,
Landlord and Tenant shall agree upon and jointly appoint a
single arbitrator who shall by profession be a competent MAT
appraiser with at least five (5) years experience in
properties in the vicinity of the Building Complex
unaffiliated with either Landlord or Tenant.
2. The arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties
shall use Landlord's or Tenant's submitted Market Rate, and
shall notify Landlord and Tenant of such determination.
3. If Landlord and Tenant fail to agree upon and appoint an
arbitrator, then the appointment of the arbitrator shall be
made by the Presiding Judge of the Jefferson County District
Court, or, if he or she refuses to act, by any judge having
jurisdiction over the parties.
5
<PAGE> 65
4. The cost of arbitration shall be paid by Landlord and Tenant
equally.
5. The Market Rate as determined by the arbitration provision
specified above shall be final.
6. In addition to the Base Rent to be paid during the Option
Term, Tenant shall continue to be liable to pay its Pro Rata
Share of Operating Expenses, as more particularly provided
in the Lease.
5. Right of First Refusal. In the event that Landlord (i) offers to lease
space in the Building to a prospective tenant; or (ii) receives an offer to
lease space in the Building from a prospective tenant which it is willing
to accept (the events in (i) and (ii) are each a "Refusal Event" and such
prospective tenant is hereafter referred to as the "Third Party" with
respect to all or a portion of the balance of the leasable space in the
east wing of the second floor of the Building, of which Landlord has
control, which is hereafter referred to as the "Refusal Space") Landlord
shall first offer to Tenant the right to lease the Refusal Space (the
"Refusal Right") on the following terms, conditions and procedures:
A. Upon the occurrence of a Refusal Event, Landlord shall tender to
Tenant notice (the "Refusal Notice") of the fact of the Refusal Event
and the "Economic Terms" pursuant to which Landlord would be willing
to lease the Refusal Space to the Third Party. The Economic Terms
shall only include (x) the rentable area of the Refusal Space; (y) the
Base Rent to be charged (z) the term and commencement date of the
prospective lease; (aa) the amount of tenant finish allowance to be
granted to the Third Party; (bb) the operating expense methodology;
(cc) renewal and expansion options and (dd) the location of the
Refusal Space.
6
<PAGE> 66
B. Tenant shall have a period of five (5) business days from the tender
of the Refusal Notice to give notice to Landlord ("Refusal Notice
Response") of its irrevocable commitment to lease the Refusal Space
upon the Economic Terms and upon the other terms and conditions of the
Lease except that the term of the lease for the Refusal Space shall be
the greater of (i) the time remaining in the Primary Lease Term or any
Option Term or (ii) the term set forth in the Refusal Notice. Tenant's
failure to timely tender the Refusal Notice Response shall irrevocably
be deemed a rejection of the Refusal Space.
C. If Tenant rejects or is deemed to have rejected the Refusal Space,
Landlord may (i) lease the Refusal Space to the Third Party on the
Economic Terms and any other non Economic Terms and (ii) Tenant shall
have no further right to lease the Refusal Space.
D. Tenant shall only be afforded the Refusal Right if Tenant is not in
default of its obligations under the Lease at the time of the Refusal
Event.
E. If Tenant timely exercises the Refusal Right, Tenant shall execute and
deliver to Landlord all documentation reasonably requested by
Landlord.
Tenant hereby waives its Refusal Right with respect to Suite 201 of the
Building, for which Landlord is currently negotiating a lease with ATP,
Inc. and PPD Development, Inc.
6. Consolidation Option: In the event Tenant notifies Landlord ("Consolidation
Notice") of its desire to consolidate its existing Premises with a minimum
of 100% of the Premises then being leased by Tenant of additional space
into a new location ("Consolidation Space") (i.e. the rentable square
footage of the Consolidation Space must be no less than double the rentable
square footage of the Premises then being leased by Tenant at the time the
Consolidation Notice is given), Landlord shall use reasonable efforts to
deliver said Consolidation Space either in Tenant's existing Building or
another building within Westmoor Technology Park as determined by Landlord
within twelve (12) months of the receipt of Tenant's Consolidation Notice.
The terms and conditions of the Lease with respect to the Consolidation
Space are as follows:
7
<PAGE> 67
A. A new Lease shall be entered into for the Consolidation Space
("Consolidation Space Lease"). The term of the Lease for the
Consolidation Space shall be not less than five (5) years.
B. If the Consolidation Space is within the Building and Consolidation
Notice is delivered within the first eighteen (18) months of the Lease
Commencement Date, the Base Rent for the Consolidation Space shall be
the rate then in effect for the existing Premises and the Tenant
Improvement Allowance shall be the same as for the Premises, provided
the consolidation occurs in space not previously leased.
C. If Consolidation Notice is received after the first eighteen (18)
months of the Primary Lease Term or the consolidation occurs at any
time in a building within Westmoor Technology Park other than the
Building, the Base Rental Rate shall be the then current market rate
being charged for the Consolidation Space as determined by Landlord,
and the Tenant Improvement Allowance shall be equivalent to that then
offered for space in the Westmoor Technology Park.
D. If the Consolidation Space under either (B) or (C) above has been
previously leased and occupied, the Tenant Improvement Allowance shall
be the then equivalent to that which is being changed for comparable
space being re-leased within Westmoor Technology Park as determined by
Landlord.
E. The Lease for the Premises shall be terminated effective as of the
Commencement Date of the Consolidation Space Lease, and Tenant shall
pay (i) the unamortized portion of all commissions paid under the
Lease at an annual interest rate of 10%, and (ii) a cancellation
charge based on the following formulas:
8
<PAGE> 68
o If the amount of additional space being leased as part of the
Consolidation Space is more than 25,000 net rentable square feet,
but less than 35,000 net rentable square feet, Tenant shall pay a
lease cancellation charge equal to the product of $7.50
multiplied by the net rentable square feet of the Premises at the
time of consolidation;
o If the amount of additional space being leased as part of the
Consolidation Space is greater than 35,000 net rentable square
feet, but less than 45,000 net rentable square feet, Tenant shall
pay a lease cancellation charge equal to the product of $5.00
multiplied by the net rentable square feet of the Premises at the
time of consolidation;
o If the amount of additional space being leased as part of the
Consolidation Space is greater than 45,000 net rentable square
feet, but less than 55,000 net rentable square feet, Tenant shall
pay a lease cancellation charge equal to the product of $2.50
multiplied by the net rentable square feet of the Premises at the
time of consolidation; or
o If the amount of additional space being leased as part of the
Consolidation Space is greater than 55,000 net rentable square
feet, no lease cancellation charge shall be payable.
F. Notwithstanding the foregoing, if additional space is available on the
same floor as Tenant's Premises, Landlord shall not be obligated to
consolidate Tenant's premises into another building in Westmoor
Technology Park. Tenant shall then lease additional space on the same
floor as the Premises, whether or not contiguous to the Premises,
under the terms and conditions described in this Section.
G. The Consolidation Notice shall be delivered no later than twelve (12)
months prior to the expiration of the Primary Lease Term.
9
<PAGE> 69
7. Termination Right: If Landlord is unable to provide Consolidation Space as
detailed in the preceding Section, Tenant shall have the right to terminate
the Lease effective 180 days after Landlord notifies Tenant that it is
unable to provide additional space in the Westmoor Technology Park, such
notification from Landlord shall be delivered to Tenant no more than thirty
(30) days after Landlord receives Tenant's notice of the exercise of the
Consolidation Option. Following notice from Landlord that additional space
in the Westmoor Technology Park is not available, Tenant shall have
forty-five (45) days to locate suitable space to which to relocate and
notify Landlord of Tenant's intent to terminate the Lease, in which case
Tenant shall be obligated for paying (i) the unamortized portion of the
Tenant Improvement Allowance and all commissions paid under the lease at an
annual interest rate of ten percent (10%), and (ii) three (3) months Base
Rent. During that forty-five (45) days, Tenant shall also have the option
to rescind its option to terminate the Lease, thus remaining in the
Premises for the remainder of the Lease Term.
8. Deletion of Lease Addendum. The Addendum attached to the Original Lease is
hereby deleted and is null and void and of no further force or effect
whatsoever.
LANDLORD:
WESTMOOR BUSINESS PARK LTD., LLP
a Colorado limited liability limited partnership
By: Westfield Development Company, Inc.,
a Colorado corporation, general partner
By: /s/ RANDY M. SCHWARTZ
-------------------------------------
Its: Executive Vice President
-------------------------------------
TENANT:
CHANNELPOINT, INC., a Colorado corporation
By: /s/ TIMOTHY HOOGHEEM
-------------------------------------
Its: SVP Finance & CFO
-------------------------------------
10
<PAGE> 1
EXHIBIT 10.14
SUBLEASE
BY AND BETWEEN
QUANTUM CORPORATION
AND
CHANNELPOINT, INC.
FOR SUBLEASE PREMISES LOCATED AT
5825 MARK DABLING BOULEVARD
COLORADO SPRINGS, COLORADO 80919
<PAGE> 2
BASIC SUBLEASE INFORMATION
This Basic Sublease Information is provided solely as a convenience to summarize
certain Sublease provisions and is not intended as a complete summary of all
material terms and conditions of the Sublease. In the event of any inconsistency
between any information shown in this Basic Sublease Information and the
provisions of the Sublease, the provisions of the Sublease shall govern.
<TABLE>
<S> <C>
Subtenant's Address: ChannelPoint, Inc.
5755 Mark Dabling Boulevard
Colorado Springs, CO 80919
Sublandlord's Address: Quantum Corporation
500 McCarthy Blvd.
Milpitas, CA 95035
Attn: Real Estate Department
Master Landlord: Pocol Holdings, Ltd.
a Colorado limited partnership
Permitted Use: General office, warehouse, and any other
legally permitted use approved by Master
Landlord, provided such use does not involve
the use of Hazardous Materials
Rentable Area of Sublease Premises: Approximately 150,000 square feet,
constituting the entire Building
Sublease Premises: 5825 Mark Dabling Boulevard
Colorado Springs, CO 80919
Sublease Commencement Date: January 1, 2000
Sublease Expiration Date: September 30, 2002
Rent Commencement Date: July 1, 2000
Initial Monthly Base Rent (NNN): $96,875.00 (based on $7.75 per year per
square foot for 150,000 square feet)
Annual increases in Base Rent: Three percent (3%)
Security Deposit: $98,750.00
Subtenant's Broker: CRESA Partners
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. SUBLEASE PREMISES 1
- --------------------------------------------------------------------------------------------------------------------
2. INCORPORATION OF MASTER LEASE 2
- --------------------------------------------------------------------------------------------------------------------
3. TERM 2
- --------------------------------------------------------------------------------------------------------------------
4. USE 3
- --------------------------------------------------------------------------------------------------------------------
5. RENT 3
- --------------------------------------------------------------------------------------------------------------------
6. SERVICES AND UTILITIES 4
- --------------------------------------------------------------------------------------------------------------------
7. MAINTENANCE 4
- --------------------------------------------------------------------------------------------------------------------
8. ASSIGNMENT AND SUBLETTING 5
- --------------------------------------------------------------------------------------------------------------------
9. NOTICES 5
- --------------------------------------------------------------------------------------------------------------------
10. DEFAULTS 6
- --------------------------------------------------------------------------------------------------------------------
11. PROVISIONS OF MASTER LEASE 6
- --------------------------------------------------------------------------------------------------------------------
12. ALTERATIONS 6
- --------------------------------------------------------------------------------------------------------------------
13. SURRENDER AND HOLDOVER 7
- --------------------------------------------------------------------------------------------------------------------
14. SECURITY DEPOSIT 7
- --------------------------------------------------------------------------------------------------------------------
15. HAZARDOUS MATERIALS 7
- --------------------------------------------------------------------------------------------------------------------
16. SIGNAGE 8
- --------------------------------------------------------------------------------------------------------------------
17. SUBTENANT'S INSURANCE 8
- --------------------------------------------------------------------------------------------------------------------
18. MASTER LANDLORD CONSENT 9
- --------------------------------------------------------------------------------------------------------------------
19. MISCELLANEOUS 9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
[ILLEGIBLE]
amended by that certain First Amendment to Industrial Lease dated January 1,
1997 (collectively, the "Master Lease"). Subtenant acknowledges having reviewed
a copy of the Master Lease, which is attached hereto as Exhibit A.
B. Sublandlord desires to lease to Subtenant and Subtenant desires
to lease from Sublandlord the Premises on the terms and conditions set forth in
this Sublease.
1. SUBLEASE PREMISES
a. Sublandlord leases to Subtenant and Subtenant hires from
Sublandlord the following described premises together with the appurtenances
thereto, situated in the City of Colorado Springs, State of Colorado, commonly
known and described as 5825 Mark Dabling Road, Colorado Springs, CO 80919, and
consisting of approximately 150,000 rentable square feet, in three Phases, as
follows:
<TABLE>
<CAPTION>
Approximate
Phase Delivery Date Square Footage Location
----- ------------- -------------- --------
<S> <C> <C> <C>
I January 1, 2000 32,691 Office Space
II February 15, 2000 95,347 Assembly/warehouse
III April 30, 2000 21,962 Warehouse
-------
Total: 150,000
</TABLE>
Phase I, Phase II and Phase III are collectively referred to herein as the
"Sublease Premises." The location of each Phase of the Sublease Premises is
shown on the plan attached hereto as Exhibit B.
b. In the event Sublandlord is unable to deliver possession of any
Phase of the Sublease Premises to Subtenant on the dates indicated for any
reason, then Sublandlord shall not be liable for any damage caused thereby, nor
shall this Sublease be void or voidable nor shall the term hereof be extended
beyond September 30, 2002. In the event Phase III is not delivered to Subtenant
on or prior to April 30, 2000, the July 1, 2000 rent commencement date as to
the 21,962 square feet of Phase III shall be delayed one (1) day after July 1,
2000 for each day of late delivery of the Phase III. In the event the term of
this Sublease commences after January 1, 2000, the expiration date of this
Sublease shall continue to be September 30, 2002, and the term of the Sublease
shall be adjusted accordingly.
<PAGE> 5
This Sublease is subject to all of the terms and conditions of the
Master Lease and Subtenant hereby accepts, assumes and agrees to perform all of
the obligations of Sublandlord as Tenant under the Master Lease to the extent
such obligations are applicable to the Sublease Premises and all of the terms
and conditions of the Master Lease are incorporated herein as terms
and conditions of this Sublease (with each reference therein to Landlord, Tenant
and Premises to be deemed to refer to Sublandlord, Subtenant, and Sublease
Premises respectively), excepting only the following provisions of the Master
Lease and as set forth in Paragraph 11 below:
Section 1.A, 1.C
Section 2.A, 2.B, 2.C
Section 3.A, 3.B
Section 4
Section 12-paragraphs one, two & three
Section 26
Section 31
Section 35
Exhibit A, Exhibit B, Exhibit C, Exhibit D
In the event of any conflict or inconsistency between the
incorporated terms of the Master Lease and the terms of the Sublease which are
set forth in full, the terms of the Sublease which are set forth in full shall
prevail to the extent of any such inconsistency.
In the event that either Subtenant or Sublandlord shall receive any
notice from the Master Landlord regarding a default pursuant to any of the
provisions of the Master Lease, the party receiving such notice shall promptly
give a copy thereof to the other party.
3. TERM
a. The term of this Sublease ("Sublease Term") shall commence on
January 1, 2000 ("Sublease Commencement Date") and end on September 30, 2002
("Sublease Expiration Date"), unless earlier terminated pursuant to the
provisions of this Sublease.
b. In the event of the termination for any reason of Sublandlord's
interest as Tenant under the Master Lease, then this Sublease shall terminate
therewith without any liability of Sublandlord to Subtenant; provided, however,
that Sublandlord may be liable to Subtenant for any termination of the Sublease
that results from Sublandlord's breach of the Master Lease, so
2
<PAGE> 6
[ILLEGIBLE]
the Master Lease in full force and effect is caused in whole or in part by
Subtenant or its agents, employees or contractors); (b) Sublandlord shall not
agree to any amendment to the Master Lease that would materially adversely
affect Subtenant during the Sublease Term; (c) except on account of damage or
destruction or condemnation, Sublandlord shall not, without Subtenant's written
consent, exercise any right to terminate the Master Lease, with respect to any
period within the Sublease Term; (d) except to the extent such obligations are
assumed by Subtenant under this Sublease and except those obligations which
Sublandlord contests in good faith, Sublandlord shall perform its obligations
under the Master Lease during the Sublease Term (unless the failure to perform
is caused in whole or in part by Subtenant or its agents, employees or
contractors).
4. USE
Subtenant shall use the Sublease Premises solely for the Permitted
Use identified in the Basic Sublease Information and for no other purpose
without the consent of Sublandlord and Master Landlord. Subtenant agrees that
its use shall comply with all applicable laws, statutes, ordinances,
governmental rules, regulations and requirements, including without limitation
all applicable fire and building codes and all Environmental Laws
(collectively, "Governmental Requirements"), and that it shall not use or permit
the Sublease Premises to be used for any purposes other than those described
above. Subtenant shall not commit or permit to be committed on the Sublease
Premises any act or omission which shall violate any term or condition of the
Master Lease.
5. RENT
a. Subtenant shall pay Monthly Rental to Sublandlord as follows,
without offset or deduction for the Sublease Premises, in advance, on the first
day of each month of the Sublease Term, in lawful money of the United States.
Monthly Rental shall commence on July 1, 2000. Rent for any partial month shall
be prorated on the basis of the number of days in such month. All Monthly Rental
and other charges payable by Subtenant under this Sublease shall be referred
to herein as "Rent."
<TABLE>
<CAPTION>
PERIOD MONTHLY BASE RENT (NNN)
- ------------------------------------------------------ -------------------------------------------
<S> <C>
July 1, 2000 to June 30, 2001 $ 96,875.00
- ------------------------------------------------------ -------------------------------------------
July 1, 2001 to June 30, 2002 $ 99,781.25
- ------------------------------------------------------ -------------------------------------------
July 1, 2002 to September 30, 2002 $102,774.69
- ------------------------------------------------------ -------------------------------------------
</TABLE>
3
<PAGE> 7
c. Rent payments shall be sent to Sublandlord in care of the
following address:
Quantum Corporation
500 McCarthy Blvd.
Milpitas, CA 95035
Attn: Lease Administration
d. Subtenant shall pay Sublandlord a late charge equal to the lesser
of 8% of the late payment of Rent (including but not limited to Monthly Base
Rent, Common Operating Costs, utilities as provided in Section 6 below, and
maintenance costs as provided in Section 7 below) or the maximum rate permitted
by law, if Rent is not received by Sublandlord when due. Notwithstanding the
foregoing, the late charge shall not be applied the first time in any calendar
year in which Rent is not received by Sublandlord within five (5) days after
same is due. In addition, Sections 25.B and 25.C of the Master Lease shall apply
to late payments.
6. SERVICES AND UTILITIES
Subtenant shall pay for all water, gas, heat, light, telephone and
all other utilities applicable to the Sublease Premises together with any taxes
thereon. If any such services are not separately metered to the Sublease
Premises, Subtenant shall pay a reasonable proportion to be determined by
Sublandlord of all charges jointly metered with the remainder of the Building.
Subtenant shall contract for all utilities directly with the provider after
Subtenant is delivered occupancy of all Phases of the Sublease Premises.
Subtenant shall pay for all utilities for which Subtenant has not directly
contracted with the provider within twenty-five (25) days of receipt of invoice
from Sublandlord. Subtenant shall directly contract and pay for at least weekly
janitorial and such security services for the Sublease Premises as Subtenant
may require.
7. MAINTENANCE
As provided in Section 10 of the Master Lease, Subtenant shall
maintain all aspects of the Sublease Premises in good order, condition and
repair during the term of the Sublease. Sublandlord shall have the right to
enter the Sublease Premises upon reasonable prior notice to inspect the
condition thereof. Subtenant shall deliver a copy of its maintenance records for
the Sublease Premises to Sublandlord on a quarterly basis, within thirty (30)
days after the end of every calendar quarter (or portion thereof) during the
Sublease Term.
4
<PAGE> 8
9. NOTICES
All notices and demands of any kind required to be given by
Sublandlord or Subtenant hereunder shall be in writing and effective the next
business day after depositing with a nationally recognized overnight courier
service such as Federal Express or three (3) days after depositing in the United
States certified mail, return receipt requested, postage prepaid, and addressed
to Sublandlord or Subtenant, as the case may be, at the address set forth below
or at such other address as they may designate from time to time by giving
notice in accordance with the provisions of this Section 9.
If to Sublandlord: Quantum Corporation
500 McCarthy Boulevard
Milpitas, CA 95035
Attn: Vice President, Real Estate
Send copy to:
Mr. Wayne Timura
Director, Real Estate and Development
Quantum Corporation
10125 Federal Drive
Colorado Springs, CO 80908
If to Subtenant: ChannelPoint, Inc.
5755 Mark Dabling Boulevard
Colorado Springs, CO 80919
If to Master
Landlord: Pocol Holdings, Inc.
c/o Mr. Peter Culshaw
Denver Technology Center
8350 East Crescent Parkway, Suite 100
Englewood, CO 80111
5
<PAGE> 9
a. Subtenant shall indemnify and hold harmless both (i) Sublandlord,
and its agents, employees, directors and officers, and (ii) Master Landlord,
pursuant to the indemnity provisions of the Master Lease;
b. The obligations of Master Landlord under the Master Lease
(including the indemnification and maintenance obligations) shall remain the
obligations of Master Landlord and shall not be assumed by Sublandlord; and
c. The right of entry of Master Landlord under the Master Lease
shall be the right of each of Master Landlord and Sublandlord.
12. ALTERATIONS
In the event Subtenant desires to make alterations, additions or
improvements to the Sublease Premises, Subtenant shall concurrently provide to
each of Sublandlord and Master Landlord, in accordance with the notice
provisions herein, a description of the proposed alterations, additions or
improvements, together with and a copy of the proposed plans and specifications
for review and approval. Subtenant shall make no alterations, additions or
improvements in or to the Sublease Premises without the prior written consent of
both Sublandlord and Master Landlord. Sublandlord shall not unreasonably
withhold, condition or delay its consent to any proposed alteration, addition or
improvement. It shall not be unreasonable for Sublandlord to withhold consent to
any alteration, addition or improvement for which Master Landlord does not
provide consent. Sublandlord shall give its consent or reasons for failure to
consent to any proposed alteration, addition or improvement within five (5)
business days after Sublandlord has received from Subtenant a description of
the proposed alterations, additions or improvements, together with and a copy of
the proposed plans and specifications. Any such approved alterations, additions
or improvements shall be installed in accordance with the terms of the Master
Lease. Subtenant shall restore the Sublease Premises at the expiration or
earlier termination of the Sublease Term to its condition existing as of the
Commencement Date, reasonable wear and tear excepted, unless Master Landlord
otherwise agrees in writing.
Sublandlord shall be responsible for removal (and restoration
necessitated by such removal) at the end of the term of the Master Lease of any
alterations Sublandlord made to the Sublease Premises during its tenancy which
Master Landlord requires to be removed in accordance with the provisions of
Section 10.C of the Master Lease.
6
<PAGE> 10
[ILLEGIBLE]
as a result of such failure to vacate, plus interest at the rate of the lesser
of 18% per annum or the maximum rate allowed by law, on all amounts not paid by
Subtenant within ten (10) days of demand.
14. SECURITY DEPOSIT
Upon execution of this Sublease, Subtenant shall pay to Sublandlord
the sum of $98,750.00 as a non-interest bearing security deposit for Subtenant's
performance under this Sublease. In the event Subtenant has performed all of the
terms and conditions of this Sublease throughout the term, this amount paid as
security deposit shall be returned to Subtenant within 30 days after
Subtenant's vacating the Sublease Premises, after first deducting any sums owing
to Sublandlord. In the event Subtenant breaches this Sublease, Sublandlord will
be entitled but not obligated to use or retain some or all of this security
deposit to compensate for any loss, expense or risk associated with the breach,
all without seeking judicial relief. In the event of such recourse to the
security deposit, Sublandlord is entitled to require Subtenant to replenish the
security deposit funds on thirty days' written notice. In no event will
Subtenant be entitled to have access to or require any portion of Sublandlord's
deposit with the Master Landlord.
15. HAZARDOUS MATERIALS
a. As used herein, the terms "Environmental Laws," "Hazardous
Materials," and "Hazardous Material Activities" shall have the same meanings as
identified section 7D of the Master Lease.
b. Subtenant shall conduct any and all of its Hazardous Materials
Activities on the Premises and Sublease Premises in compliance with applicable
Environmental Laws.
c. Subtenant shall, at its own expense, procure, maintain in effect
and comply with all conditions of any and all environmental permits, licenses,
certificates, authorizations, or approvals required under any Environmental Laws
for any Hazardous Materials Activities at the Premises or Sublease Premises by
Subtenant ("Environmental Approvals").
d. Sublandlord and Subtenant each shall deliver promptly to the
other any notices, orders, or similar documents received from any governmental
agency or official or third party concerning any alleged violation of any
Environmental Law. Upon having knowledge thereof, Sublandlord and Subtenant each
shall promptly provide notice to the other party of:
7
<PAGE> 11
e. Sublandlord shall indemnify, hold harmless, and defend Subtenant
from and against any liabilities, claims, demands, obligations,
responsibilities, losses, damages (whether punitive or consequential), charges,
costs and expenses (including, without limitation, attorneys', experts', and
consultants' fees and costs of investigation and feasibility studies) fines,
penalties and monetary sanctions or interest which are incurred at any time
related directly or indirectly to Hazardous Materials Activities of Sublandlord
or its employees, agents, contractors or invitees on or about the Premises or
Sublease Premises.
f. Subtenant shall indemnify, hold harmless, and defend Sublandlord
from and against any liabilities, claims, demands, obligations,
responsibilities, losses, damages (whether punitive or consequential), charges,
costs and expenses (including, without limitation, attorneys', experts' and
consultants' fees, costs of investigation, and feasibility studies), fines,
penalties, and monetary sanctions or interest which are incurred at any time
related directly or indirectly to Hazardous Materials Activities of Subtenant or
its employees, agents, contractors or invitees on or about the Premises or
Sublease Premises.
g. The provisions of Sections 15.e and 15.f shall survive the
expiration or earlier termination of this Sublease.
16. SIGNAGE
Subtenant shall be entitled to utilize any building or monument
signage available to the Tenant under the Master Lease, with such signage being
subject to the approval of the Master Landlord and the terms of the Master
Lease. Subtenant shall remove such signage at the expiration or earlier
termination of the Sublease Term, and shall restore any damage caused by such
removal.
17. SUBTENANT'S INSURANCE
Subtenant shall during the Sublease Term keep in full force and
effect the general liability insurance, all risk property insurance, worker's
compensation insurance and any other insurance required to be carried by Tenant
under Section 5.A of the Master Lease, all in accordance with the provisions of
such Section 5.A of the Master Lease. Master Landlord, Master Landlord's
managing agent, and Sublandlord shall be named additional insureds against
claims for personal injury and property liability as described in Section 5.A of
the Master Lease. Subtenant shall deliver to Sublandlord at least ten (10) days
prior to the Sublease
8
<PAGE> 12
[ILLEGIBLE]
terminate this Sublease upon written notice to the other given prior to
receiving Master Landlord's consent.
b. This Sublease (and delivery of possession of the Sublease
Premises to Subtenant) is subject to the condition that Subtenant reach
acceptable agreement with Master Landlord regarding (i) options to lease the
Sublease Premises after expiration of the Sublease Term; (ii) rights to install
communications devices; and (iii) parking rights on adjacent land. This
condition is for the benefit of Subtenant and may be waived by Subtenant at any
time. In the event Subtenant has not reached satisfactory agreement with Master
Landlord regarding these three items by January 7, 2000 and notified Sublandlord
of thereof as of such date, Subtenant shall have the right to terminate this
Sublease by giving Sublandlord written notice of termination on or prior to
January 15, 2000, time being strictly of the essence. In the event Subtenant
fails to notify Sublandlord by January 15, 2000 of Subtenant's termination of
this Sublease pursuant to this Section 18.b, this condition shall be deemed
waived, and Subtenant's right to terminate the Sublease pursuant to this Section
18.b shall be void and of no further force or effect.
19. MISCELLANEOUS
a. Subtenant represents and warrants that it has not had dealings
with any real estate broker, finder or other person who could claim a commission
or finder's fee from Sublandlord with respect to this Sublease other than CRESA
Partners. Sublandlord represents and warrants that it has not had dealings with
any real estate broker, finder or other person who could claim a commission or
finder's fee from Sublandlord with respect to this Sublease. Each party shall
hold the other harmless from all damages resulting from such party's breach of
the foregoing representation and warranty. Sublandlord shall pay CRESA Partners
a commission for this transaction in the amount of $65,000, payable at rent
commencement in accordance with the provisions of a separate agreement.
b. This Sublease may be executed in one or more counterparts, each
of which shall be deemed the original, and together which shall constitute an
original.
9
<PAGE> 13
c. The individuals signing below represent that they have the
requisite corporate authority to execute this Sublease on behalf of their
respective corporations and to bind their respective corporations to the terms
and conditions of this Sublease. On or prior to January 31, 2000, Subtenant
shall deliver to Sublandlord evidence satisfactory to Sublandlord that the below
named individuals are authorized to execute this Sublease on behalf of
Subtenant.
d. This instrument contains all of the agreements and conditions
made between the parties hereto and may not be modified orally or in any other
manner other than by an agreement in writing signed by all of the parties
hereto. This Sublease supersedes and revokes all prior negotiations, letter of
intent and understandings, whether oral or in writing, between the parties
or their respective representatives.
<TABLE>
<CAPTION>
"SUBLANDLORD" "SUBTENANT"
<S> <C>
Quantum Corporation ChannelPoint, Inc.
a Delaware corporation a Colorado corporation
By: /s/ NORM CLAUS By: /s/ TIMOTHY D. HOOGHEEM
---------------------------------- ------------------------------------
Print Name: Norm Claus Print Name: Timothy D. Hoogheem
-------------------------- ------------------------------
Title: Worldwide Corporate Title: SVP Finance and Administration/CFO
Real Estate & Services/Vice ----------------------------------
President
-------------------------------
Date Executed: Dated Executed: February 15, 2000
---------------------- --------------------------
</TABLE>
10
<PAGE> 14
CERTIFIED SIGNATURE AUTHORITY & RESOLUTIONS
The undersigned, being duly elected Assistant Corporate Secretary of
ChannelPoint, Inc., a Colorado corporation ("Corporation"), hereby certifies
that the following is true in lieu of a special meeting of the Corporation's
Board of Directors.
RESOLVED, that the Corporation is hereby authorized to execute,
deliver and fully perform that certain sublease document dated January 1, 2000
by and between the Corporation and Quantum Corporation, a Delaware corporation
(the "Sublease"), for the sublease of space at 5825 Mark Dabling Boulevard,
Colorado Springs, Colorado.
RESOLVED FURTHER, that the following officers acting together:
Timothy Hoogheem, as Vice President Finance and Administration, and Philip
McNichols, as Vice President Human Resources and Facilities are authorized to
execute and deliver the Sublease on behalf of the Corporation, together with any
other documents and/or instruments ancillary to the Sublease. The execution
thereof to be conclusive evidence of such approval and to execute and deliver on
behalf of the Corporation all other documents necessary to effectuate said
transaction in conformance with these resolutions.
Dated: February 4, 2000
-----------------------------
/s/ JAMES C. T. LINFIELD
------------------------------------
James C. T. Linfield, Assistant
Corporate Secretary
and
/s/ ILLEGIBLE
------------------------------------
General Counsel
--------------------,
<PAGE> 1
EXHIBIT 10.15
LEASE AGREEMENT
DATE OF LEASE: JANUARY 1, 1999 MONTHLY RENT: SEE PARAGRAPH 3 OF ATTACHED RIDER
TERM: DECEMBER 14, 1998 TO MAY 31, 2004
LOCATION OF PREMISES: ADDRESS AND PORTION OF BUILDING DESCRIBED IN PARAGRAPH 2
OF ATTACHED RIDER
LESSEE: INSURQUOTE SYSTEMS, INC. LESSOR: THE JACOBSON GROUP
PROVO, UTAH P.O. BOX 296
PROVO, UT 84603
ATTN: RUSS JACOBSON
1. Lease. Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor for the purposes set forth in paragraph 2 the above designated premises,
together with the appurtenances thereto (the "Premises") for the above term.
2. Use of the Premises. Premises shall be used for the operation of an
office. Lessor warrants that the intended use of the Premises complies with all
applicable zoning regulations or that a variance has been obtained therefrom.
Lessee shall not use the premises for any illegal purposes; or in any manner to
vitiate the insurance or increase the rate of insurance on Premises. Lessee
shall not store any materials currently considered hazardous by any federal,
state, county, or city agency.
3. Rent. Lessee shall pay Lessor as rent for the Premises the sum stated
above, monthly in advance on the first business day of each such month, until
termination of this Lease, at Lessor's address stated above or such other
address as Lessor may designate in writing. Rent for any period less than a full
month shall be prorated based upon the actual number of days occupied over the
number of days in that month.
4. Condition of Premises. Prior to commencement of the term of this Lease,
Lessee and Lessor shall jointly inspect the Premises for the purpose of making a
punch list. Lessor shall promptly cure any defects noted thereon within 30 days
from receipt of written punch list. Subject to that punch list, Lessee accepts
the proposed premises as suited for the uses intended by Lessee. Lessee agrees
to return the premises to Lessor at the expiration or termination of this Lease
in as good condition and repair as when first received, natural wear and tear,
damage by storm, fire, lightning, earthquake, or other casualty alone excepted.
5. Lessor's Maintenance. Lessor agrees to keep in good repair the roof
foundations, and exterior walls of any building located on the Premises
(exclusive of all glass and exclusive of all exterior doors), and underground
power utility and sewer pipes, except repairs rendered necessary by the
negligence of Lessee, its agents, employees, or invitees. Lessor gives to Lessee
<PAGE> 2
exclusive control of the Premises and shall be under no obligation to inspect
the premises. Lessee shall promptly report in writing to Lessor any defective
condition known to it which Lessor is required to repair.
6. Lessee's Maintenance. Lessee shall, throughout the term of this Lease at
its expense, maintain in good order and repair the interior of any building
located on the Premises, electrical, heating and air conditioning equipment,
except those repairs expressly required to be made by Lessor hereunder. In no
event shall Lessee be obligated to replace the plumbing, electrical or HVAC
systems unless such damages are caused by the affirmative acts of the Lessee.
Lessee shall, throughout the term of this Lease, pay its prorated share of
common area maintenance based on the total cost of maintenance divided by the
total square footage of rentable space of all buildings in the development.
7. Insurance. Lessee shall obtain and keep current on the Premises
liability insurance coverage against all claims covered by the indemnification
contained in paragraph 13 with minimum limits of $2,000,000.
Lessee shall obtain and keep current fire and extended coverage
insurance on the building and any other improvements situated on the Premises in
an amount equal to their replacement value. Lessee shall obtain and keep current
fire and extended coverage insurance on any tenant improvements, fixtures,
equipment, furniture, and all other personal property of Lessee on or about the
Premises. Lessor and Lessee each hereby release the other from any loss or
damage to their property arising from a risk insured or could have been insured
against under the above fire and extended coverage insurance policies even
though such loss or damage was caused by the negligence of that party, its
agents, or employees.
Each such policy shall name the other party as an additional insured
party, shall be cancelable only upon 30 days' notice to the other party, and
shall contain a waiver of subrogation as against the other party. If either
party fails to obtain and pay for this insurance, the other party, at its
option, may obtain and pay for that insurance. On demand of the party so
obtaining that coverage, the premiums so paid shall become immediately due and
owing.
No insurance policy hereunder shall be cancelable without thirty days
written notice thereof to Lessor. Lessee shall submit a certificate of insurance
for each policy hereunder to Lessor on not less than an annual basis within
thirty days prior to the expiration date of each such policy, and within 10 days
after the signing of this Lease. Lessor shall be named as an additional insured
on said policies.
There shall not be allowed, kept, or used on the Premises any
inflammable or explosive liquids or materials save such as may be necessary for
use in Lessee's business, and in such case, any such substances shall be
delivered and stored in amount, and used, in accordance with the rules of the
applicable Board of Underwriters and statutes and ordinances now or hereafter in
force.
<PAGE> 3
8. Taxes. Lessee is solely responsible for and shall promptly pay when due
all real estate taxes and all ad valorem taxes on the Premises. Lessee shall
promptly pay when due all taxes assessed against and upon trade fixtures and
upon furnishings, equipment, and all other personal property of Lessee contained
in the Premises.
9. Utilities. Lessee will pay, in addition to the rent above specified, all
gas, and electric light and power bills taxed, levied, or charged on the
Premises, for and during the time for which this Lease is granted. (If any such
utility charge is for more than the space leased hereunder, Lessee shall pay its
pro rata share thereof based on square footage.) If the bills for gas, electric
light and power shall not be paid when due, Lessor shall have the right to pay
the same, which amounts so paid, together with any sums paid by Lessor to keep
the Premises in a clean and healthy condition, as above specified, are declared
to be so much additional rent payable with the installment of rent next due
thereafter. Lessee agrees to pay all metered water on the Premises. Irrigation
water will be prorated with area maintenance expense.
10. Improvements. Lessee shall not make any alterations or improvements to
the premises without Lessor's prior consent thereto. All such alterations or
improvements shall be at Lessee's sole expense.
Lessee shall be entitled upon the termination of this Lease to remove
any alterations or improvements made by it which can be removed without causing
material damage to the Premises or the building situated thereon. Lessee shall
repair any damage to the premises or the building situated thereon caused by any
such removal.
11. Liens. Lessee will not permit any mechanic's lien or liens to be placed
upon the Premises or any building or improvement thereon during the term hereof,
and in case of the filing of such lien, Lessee will promptly pay or discharge
the same. If default in payment thereof shall continue for 30 days after written
notice thereof from Lessor to Lessee, Lessor shall have the right to pay the
same or any portion thereof without inquiry as to the validity thereof, which
amounts so paid are declared to be so much additional rent payable with the
installment of rent next due thereafter.
12. Compliance with Laws. Lessee shall comply with all local or general
regulations, laws, and ordinances applicable thereto, as well as lawful
requirements of all competent authorities in that behalf, provided, however,
that Lessee shall not be required to make any alterations or repairs to the
Premises whether required by law or otherwise.
13. Indemnifications. Lessor shall not be liable to Lessee or to Lessee's
employees, agents, or visitors, or to any other person whomsoever, for any
injury to persons or damage to Premises on or about the Premises caused by the
negligence or misconduct of Lessee, its employees, sublessees, licensees, or
concessionaires, or any other person entering the Premises under express or
implied invitation of Lessee, or arising out of the use of the Premises by
Lessee and the conduct of its business therein, or arising out of any breach or
default by Lessee in the performance of its obligations hereunder; and Lessee
hereby agrees to indemnify Lessor and hold it harmless from any loss, expense,
or claims arising out of such damage or injury. Lessee shall
<PAGE> 4
not be liable for any injury or damage caused by the negligence or misconduct of
Lessor, or its employees or agents, and Lessor agrees to indemnify Lessee and
hold it harmless from any loss, expense, or damage arising out of such damage or
injury.
14. Destruction. If the whole of the Premises, or such portion thereof in
Lessee's reasonable opinion as will make the Premises unusable for the purposes
herein leased, are destroyed by storm, fire, lightning, earthquake, or other
casualty, then the term of this Lease shall cease from the date of such casualty
and rental shall be accounted for as between Lessor and Lessee as of that date.
If the Premises are damaged but not so destroyed by any such casualty, rental
shall abate in such proportion as use of Premises has been destroyed, and Lessor
shall restore Premises to substantially the same condition as before such damage
as speedily as practicable, whereupon full rental shall recommence. Should such
restoration exceed 90 days, lessee shall have the right to terminate this Lease
upon written notice to Lessor.
15. Condemnation. If the whole of the premises, or such portion thereof in
Lessee's reasonable opinion as will make the Premises unusable for the purposes
herein leased, are condemned by any legally constituted authority for any public
use or purpose, then the term of this Lease shall cease from the date when
possession thereof is taken by the applicable public authority, and rental shall
be accounted for as between Lessor and Lessee as of that date. Such termination,
however, shall be without prejudice to the rights of either Lessor or Lessee to
recover compensation and damage caused by such condemnation from the condemner.
If part of the Premises are condemned by any legally constituted authority for
any public use or purpose, but in Lessee's reasonable opinion the Premises are
usable for the purposes herein leased, then Lessor shall restore the premises to
an operable condition and the rent shall be adjusted to reflect the square
footage so condemned, such adjustment to be as of the date title vested in the
condemner. It is further understood and agreed that neither the Lessee nor
Lessor shall have any rights in any award made to the other by any condemnation
authority notwithstanding the termination of this Lease in whole or in part as
herein provided.
16. Access to Premises. Lessee will allow Lessor reasonable access to the
Premises during normal business hours for the purpose of examining or exhibiting
the same, or to make any needful repairs or such alterations which Lessor may
see fit to make. Lessee will allow to have placed upon the Premises notice of
"For Sale" and, during the last 90 days of the term of this lease, "To rent,"
and will not interfere with the same.
17. Defaults; Remedies. In the event that (a) Lessee shall default in the
payment when due of the rent, or any part thereof, including additional rent,
and such default continues for 10 days after written notice from Lessor, (b)
Lessee shall not perform any of the covenants herein contained to be kept by
Lessee and fails to cure the same within 30 days after written notice from
Lessor or is not proceeding diligently to cure the same if such default would
reasonably take more than 30 days to cure, or (c) Lessee shall become insolvent
within the meaning of the Federal Bankruptcy Reform Act of 1978, as amended, or
shall be unable to pay its debts as they mature, then Lessor may, at any time
thereafter at its election, declare the term of this Lease ended and reenter the
Premises or any part thereof, with or (to the extent permitted by law) without
notice or process of law, and remove Lessee or any persons occupying the same,
without prejudice to
<PAGE> 5
any remedies which might otherwise be used for arrears of rent. It is further
agreed that after the service of notice, or the commencement of a suit or after
final judgment for possession of the Premises, should Lessor receive and collect
any rent due, the payment of such rent shall not waive or affect that notice,
suit, or judgment.
18. Assignment. Lessee will not allow the Premises to be occupied in whole,
or in part, by any other person, and will not sublet the same or any part
thereof, nor assign this Lease without in each case the written consent of
Lessor first had. Such consent shall not be unreasonably held. Notwithstanding
the foregoing, Lessee shall be entitled to assign this Lease or sublet all or
part of the Premises to an affiliate without obtaining Lessor's consent thereto.
19. Signs. Lessee shall not place any signs (other than ones containing its
name or tradename without graphics) upon the outside walls or roof of the
Premises without the written consent of Lessor.
20. Option to Renew. Lessee is hereby granted an option to renew the term
of this Lease for two (2) additional (5) year terms subject to all the terms and
conditions hereof (except rent amount, which shall be negotiated on an arm's
length basis between Lessor and Lessee), which option is exercisable upon at
least 60 days written notice prior to the expiration of this Lease.
21. Holding Over. If Lessee remains in possession of the Premises or any
part thereof after the expiration of the term of this Lease, such occupancy
shall be a tenancy from month to month upon all the provisions of this Lease
pertaining to Lessee's obligations. Any option granted to Lessee hereunder shall
be deemed terminated.
22. Subordination. So long as Lessee is not in default hereunder, Lessee
shall have quiet enjoyment of the Premises for the entire term hereof. Lessee's
rights, however, shall be subject to any bona fide mortgage or deed to secure
debt which is now or may hereafter be placed upon the Premises by Lessor,
provided, however, that any such mortgage or deed shall have a nondisturbance
clause granting Lessee the right to use the Premises so long as Lessee is not in
default under this Lease.
23. Notice. Any notice required or permitted to be given hereunder shall be
in writing and delivered in person or by certified or registered mail, postage
prepaid, addressed to the appropriate party at that address set forth therefor
in the heading hereof. Any notice to Lessee shall also be with a copy to the
Premises. Either party may change its address by written notice to the other.
24. Rights Cumulative. The rights and remedies of Lessor under this lease
are cumulative. The exercise or use of any one or more thereof shall not bar
Lessor from exercise or use of any other right or remedy provided herein or
otherwise provided by law, nor shall exercise nor use of any right or remedy by
Lessor waive any other right or remedy.
<PAGE> 6
25. Definition of Lessor. The word "Lessor" whenever used herein shall be
construed to mean "Lessors" in case more than one legal entity executed this
Lease as such; and all the covenants and agreements contained shall be jointly
and severally binding upon, and jointly and severally inure to them, their
respective successors, heirs, executors, administrators, and assigns.
26. Severability. Wherever possible, each provision of this Lease shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Lease shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Lease.
27. Governing Law. This lease shall be construed in accordance with and
governed by the laws of the state in which the Premises are located.
28. Attorneys' Fees. If, on account of any breach or default by Lessor or
Lessee of their respective obligations under this Lease, it shall become
necessary for the other to employ an attorney to enforce or defend any of its
rights or remedies hereunder and should such party prevail, it shall be entitled
to any reasonable attorney's fees incurred in such connection.
A rider of 1 page containing 5 paragraphs is attached hereto.
IN WITNESS WHEREOF, the parties have executed this lease on the day and year
first above written.
LESSEE:
InsurQuote Systems, Inc. By: /s/ WILLIAM B. WOAHN
--------------------------
President and CEO
LESSOR:
The Jacobson Group By: /s/ S. R. JACOBSON
--------------------------
General Partner
<PAGE> 7
RIDER TO LEASE AGREEMENT BETWEEN THE JACOBSON GROUP (LESSOR) AND INSURQUOTE
SYSTEMS, INC. (LESSEE) FOR PREMISES LOCATED IN PROVO, UTAH, AS FURTHER DESCRIBED
IN PARAGRAPH 2 BELOW.
1. Anything to the contrary contained in the lease of which this Rider is a
part notwithstanding, the terms and provisions of this Rider shall
supersede same and shall govern.
2. It is understood and agreed by and between the parties that the premises is
identified as the land and buildings situated at 533, 549, and 585 East
1860 South, Provo, Utah. Lessor to complete building according to plans
attached in exhibit 1.
3. Lessee covenants and agrees to pay Lessor as rent for and during the terms
hereof the sum of thirty nine thousand two hundred dollars and no cents
($39,200.00) due on the first day of each month when all three buildings
are occupied. Rent will be payable on each building for the pro-rata
portion of each month occupied, in the month first occupied.
4. Lessee may terminate this lease without being in default by paying Lessor
50% of the total remaining balance of the lease due and payable at the
termination of the lease.
5. Lessee covenants and agrees to pay Lessor a penalty of 5% of one lease
payment if the payment is not paid before the 15th day of the month in
which the payment was due. If at any time the lease is terminated by the
Lessee before May 31, 2004 the Lessee agrees to pay an amount equal to one
half of the remaining value of the lease.
LESSEE: InsurQuote Systems, Inc. LESSOR: The Jacobson Group
By: /s/ WILLIAM B. WOAHN By: /s/ S. R. JACOBSON
-------------------------- ----------------------
President & CEO General Partner
A = 10,000 sqft @ 98 cents = 9,800
B = 15,000 sqft @ 98 cents = 14,700
C = 15,000 sqft @ 98 cents = 14,700
<PAGE> 8
[INSURQUOTE LETTERHEAD]
February 1, 1999
Mr. Russ Jacobson, General Partner
PO Box 296
Provo, Utah 84603
Dear Russ:
As we discussed, I am writing this letter to formalize our understanding that
the lease agreement dated January 1, 1999 supercedes all previous lease
agreements, riders and letters of understanding between InsurQuote Systems, Inc.
and The Jacobson Group, as each of the existing buildings are vacated and the
three new buildings are occupied. In addition, InsurQuote Systems, Inc. hereby
grants you ownership of all leasehold improvements abandoned in the existing
buildings. Please sign below to indicate your agreement with the provisions of
this letter.
Sincerely,
/s/ KENT THOMAS
Kent Thomas
Chief Financial Officer
Agreed and Accepted:
The Jacobson Group:
/s/ RUSS JACOBSON
- ------------------------------
Russ Jacobson, General Partner
<PAGE> 1
EXHIBIT 10.16
PARK EAST OFFICE BUILDINGS I AND II
3733 AND 3737 PARK EAST DRIVE
BEACHWOOD, OHIO
LEASE AGREEMENT
This Lease Agreement ("Lease") entered into at Cleveland, Ohio as of
the 29th day of July, 1998, between PARK EAST REALTY CO., an Ohio corporation
(hereinafter called "Lessor"), and Insurquote/IAS, Inc., a Utah Corporation
(hereinafter called "Lessee").
WITNESSETH:
1. Leased Premises. For the rent and term and upon the terms, conditions,
limitations and provisions hereinafter set forth, Lessor leases to Lessee and
Lessee leases from Lessor the premises described and identified in Exhibit A,
attached hereto and incorporated by reference herein (hereinafter called
"Leased Premises").
This Lease is granted and accepted upon the terms, covenants and
conditions herein contained and each of the parties covenants and agrees to
keep, perform and observe all the terms, covenants and conditions herein
contained on its or his part to be kept, performed and observed.
2. Term. The term of this Lease shall be for Thirty-Six (36) months
commencing on the first day of January, 1999, and ending on the 31st day of
December, 2001, unless sooner terminated as hereinafter provided (the "Term").
3. Use and General Obligations of Lessee. Lessee shall use and occupy the
Leased Premises only for general office use specific to its business, which
from time to time may include repair and service of equipment and for no other
purposes. Except with respect to those obligations of Lessor undertaken
hereunder, Lessee shall keep said Leased Premises at all times in good order,
condition and repair, and shall also keep said Leased Premises in a clean,
sanitary and safe condition in accordance with the laws of the State of Ohio,
of the United States, of Cuyahoga County, Ohio, and of the City of Beachwood,
Ohio, and in accordance with all directions, rules and regulations of the
health office, fire marshal, building inspector or other proper officers of the
governmental agencies having jurisdiction over the Leased Premises, at the sole
cost and expense of Lessee, and Lessee shall comply with all requirements of
law, ordinance or otherwise, affecting said Leased Premises. Lessee shall pay
on demand for any extraordinary use of heat, air conditioning, electricity or
water because of any special needs or practices of Lessee. Lessee shall permit
no waste or nuisance upon or damage or injury to said Leased Premises or
utilities supplied thereto; and, at the expiration of the tenancy created
hereunder, Lessee shall surrender said Leased Premises in as good condition and
repair as they were at the time Lessee took possession, excepting reasonable
wear and tear, loss through fire or other insured casualty or act of God.
Lessee agrees that Lessee shall commit no act which will cause either Lessee or
Lessor to be in noncompliance with the zoning ordinances of the City of
Beachwood, Ohio.
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4. Rent. Lessee shall pay Lessor without demand as rent for the Leased
Premises an annual amount equal to the greater of (i) Four Hundred Seventy Two
Thousand Two Hundred Dollars ($472,200.00) hereinafter called "Base Rent" or
(ii) the Adjusted Rent as calculated from time to time pursuant to the
provisions set forth in Paragraph 6 of this Lease, whichever sum is greater for
the Term. Lessee shall pay Lessor Base Rent in consecutive monthly installments
of Thirty Nine Thousand Three Hundred Fifty Dollars ($39,350.00) each payable
in advance, without deduction or set off, in the legal tender of the United
States of America, on the first day of each and every calendar month during said
Term commencing January 1, 1999, at the offices of Calabrese, Racek Management,
Inc., 1110 Euclid Avenue, Suite 300, Cleveland, Ohio 44115, or at such other
place as Lessor may from time to time in writing designate. Lessee shall pay
Lessor adjusted rent at the times specified in paragraph 6 of this Lease. Rent
and all other charges hereunder not paid by Lessee when due shall bear interest
at the rate of twelve percent (12%) per annum thereafter until paid commencing
fifteen (15) days after receipt of written notice from Lessor to Lessee.
5. Definitions. As used in this Lease, the following terms shall have the
following respective meanings:
(a) "Base Year" - The full calendar year commencing January 1, 1999,
and ending December 31, 1999.
(b) "Buildings" - Park East Office Buildings I and II, 3733 and 3737
Park East Drive, Beachwood, Ohio. "Building" - The Building in which
the Leased Premises is situated as set forth in Exhibit A to this
Lease.
(c) "Comparison Year" - The first full calendar year following the
Base Year and each subsequent full calendar year, or fraction thereof
at the termination of this Lease, during which this Lease shall
continue in effect.
(d) "Lessee's Share" - The percentage which the rentable area of said
Leased Premises is of the total rentable area of the Buildings, which
percentage is agreed upon by Lessor and Lessee as being Thirty Nine
Point Ninety Two percent (39.92%). In the event that additional areas
shall be included under this Lease, said agreed percentage shall be
proportionately increased.
(e) "Operating Expenses" - Those expenses incurred during the year,
whether the Base Year or a Comparison Year, in respect of the
operation and maintenance of the Buildings, including without
limitations landscaping, grounds, driveways, sidewalks and outside
parking areas contiguous to the Buildings, in accordance with
accepted principles of sound management and accounting practices as
applied to the operation and maintenance of first-class office
Buildings, and including without limitation thereof, cost of
insurance, materials and supplies, labor, electricity,
air-conditioning, repairs and maintenance, window washing,
management, rubbish removal and other services. Notwithstanding the
foregoing, Operating Expenses but shall not include:
(i) expenses for painting, redecorating, or other work
performed for other tenants' Leased Premises in the Buildings
other than painting, redecorating and other work which is
standard for the Buildings;
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(ii) expenses for repairs occasioned by fire, windstorm or
other insurable casualty;
(iii) expenses incurred in leasing or procuring new tenants
including lease commissions, advertising expenses and
expenses of renovating space for new tenants;
(iv) interest or amortization payment of any mortgages.
(f) "Taxes" - The taxes and assessments, special or otherwise,
including expenses incurred in connection with disputing or
contesting the amount thereof, levied or assessed for the year in
questions, by any federal, state, county or municipal government
whether the Base Year or a Comparison Year, or a partial year, upon
or with respect to the Buildings and the parcels of land upon which
they are located.
6. Adjusted Rent. In the event the amount of the Taxes and/or Operating
Expenses for any Comparison Year exceed those for the Base Year, the rent for
such Comparison Year shall be increased by an amount equal to Lessee's Share of
the net aggregate increase in the amount of Taxes and/or Operating Expense for
the Comparison Year over those for the Base Year (the "Adjusted Rent");
provided, however, that any increase in Operating Expenses incurred in a
Comparison Year resulting solely from the leasing to other tenants in the
Buildings of space which was not leased for the entire Base Year, rather than
resulting from an increase in costs, shall not be considered as part of
Operating Expenses in such Comparison Year. The Adjusted Rent for any
Comparison Year shall serve as an estimate of the Adjusted Rent to become due
for the next succeeding Comparison Year and this amount shall be paid in twelve
equal consecutive monthly installments during such next succeeding Comparison
Year. Any overpayments or underpayments of the Adjusted Rent for any Comparison
Year shall be settled and accounted for as soon as reasonably possible after
the close of such Comparison Year, and Lessor shall furnish Lessee a statement
showing such amount of overpayment or underpayment. For any fractional portion
of a calendar year at the termination of this Lease, any such overpayment or
underpayment shall be settled and accounted for in the same manner (including
the furnishing of a statement) as at the end of a Comparison Year, taking into
consideration, however, and properly adjusting for the fractional portion of
such calendar year.
Lessor shall keep and make available to Lessee, for a period of sixty
(60) days after statements above referred to are rendered to Lessee, records in
reasonable detail of Taxes and Operating Expenses for the period covered by
such statement or statements and shall permit Lessee and the representatives of
Lessee to examine and audit such statements at any reasonable time during
business hours. If Lessee shall dispute any item or items included by Lessor in
determining Taxes or Operating Expenses for the Base Year or any Comparison
Year, and such dispute is not amicably settled between Lessor and Lessee within
thirty (30) days after such statement has been rendered, either party may,
during the twenty (20) days next following the expiration of said thirty (30)
day period, notify the other of the election to arbitrate said dispute and may
then refer such disputed item or items to a reputable firm of independent
certified public accountants selected by Lessor and Lessee for decision and the
decision of such firm shall be conclusive and binding upon Lessor and Lessee.
The expense involved in such determination shall be borne by the party against
whom a decision is rendered by said accountants, provided that if more than one
item is disputed and the decision shall be in part against each party, the
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expenses shall be fairly apportioned by said accountants. If Lessee shall not
dispute any item or items of any such statement within thirty (30) days after
such statement has been rendered, Lessee shall be deemed to have approved such
statement.
Any overpayments or underpayments shall be payable upon
approval of the statement, upon settlement of the amount due in case of
disputes, or upon the decision of such firm of accountants in the case of
unsettled disputes, as the case may be, except, however, any overpayments by
Lessee shall be applied to rent or other charges due Lessor from Lessee.
7. Utilities and Services.
(a) Provided Lessee is not in default under any of the covenants and
agreements of this Lease, Lessor shall furnish Lessee the following
services:
(i) cleaning, janitor and window washing services standard
(i.e., determined as to both quantity and quality solely by
Lessor) for the Building (Lessee may provide its own cleaning
and janitor services, in which case Lessee shall be entitled
to a reduction in rent equal to the sum Lessor would have
expended for such services if such services had been
furnished by Lessor to Lessee, based upon the same rate or
formula which Lessor then expends for similar services
furnished by Lessor to its other tenants in the Buildings.
However, such services shall be at Lessee's sole
responsibility and expense and shall always be subject to
supervision by Lessor);
(ii) heating, ventilating and air-conditioning services
during the term of this Lease and water, subject however to
all other terms and conditions hereof, all of which, together
with access to the Leased Premises, parking areas and common
areas and facilities of the Building shall be furnished to
Lessee twenty-four (24) hours per day, seven (7) days per
week, but Lessor shall be required to keep the parking areas
free from snow only between 8:00 A.M. and 6:00 P.M. on
weekdays and 8:00 A.M. to noon on Saturdays;
(iii) as long as Lessor provides electrical service in the
Building, Lessee shall obtain all such service used in said
Leased Premises from Lessor and shall pay Lessor therefore,
based on usage determined by sub-metering said Leased
Premises, at standard Building Rates. In no event shall the
rate charged Lessee herein be in excess of the then published
commercial rate. Upon not less than sixty (60) days prior
written notice to Lessee, Lessor may cease to provide
electrical service to said Leased Premises without liability
or responsibility to Lessee except to connect, within the
period of said notice, the electrical system of said Leased
Premises with another source of electrical service;
thereafter, Lessee shall pay the charges for such service
directly to the public utility, or municipal corporation
supplying the same, upon billings thereof. Any new or
additional electrical facilities in or servicing said Leased
Premises required by Lessee shall be installed, furnished,
maintained and made by Lessor at Lessee's expense. All
expense of maintenance and cleaning of fluorescent lighting
equipment located in said Leased Premises shall be borne by
Lessee; and all electricity used during cleaning service or
alterations and repairs in said Leased Premises shall be paid
for by Lessee.
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(b) Lessee covenants and agrees that:
(i) Lessee at all times shall cooperate fully with Lessor
with respect to, and shall observe all reasonable regulations
which Lessor may from time to time establish, for the proper
functioning, protection and control of Lessor's
air-conditioning equipment;
(ii) Lessor, through Lessor's agents and employees, at all
reasonable times shall have the right to enter said Leased
Premises and to have free access to Lessor's equipment and
the components thereof located on said Leased Premises for
the purpose of the repair, maintenance and preservation of
the same;
(iii) Lessee will not damage or abuse Lessor's equipment nor
permit the same to be done; and
(iv) neither Lessee nor Lessee's agents, employees or
invitees shall tamper with, or otherwise in any manner
adversely affect, the mechanical or electrical components of
said equipment, and any damage to the same caused by the
willful or negligent act or acts of Lessee or Lessee's
agents, employees or invitees shall be paid for by Lessee
promptly upon receipt of a statement of the amount thereof.
(c) Lessee shall pay Lessor's charges for water and sewer, gas,
electrical and other services within fifteen (15) days after the
rendering of each statement of account. The charge for water and
sewer shall be "Lessee's Share" of total water and sewer charges, and
gas charges shall be based on gas usage determined by sub-metering
the Leased Premises of Lessee. The charge for water and sewer and gas
shall be at the same rate as charged by the utilities providing same.
Failure to pay either the rent reserved or any other charges
hereunder when due shall entitle Lessor, upon not less than fifteen
(15) days written notice, to discontinue furnishing water, electrical
or other services to Lessee, and no such discontinuance of services
shall be deemed an eviction or disturbance of Lessee's use of said
Leased Premises, nor render Lessor liable to Lessee for damages, nor
relieve Lessee from the performance of Lessee's covenants and
agreements hereunder.
(d) Lessor shall keep and make available to Lessee, for a period
of six (6) months after statements of account above referred to are
rendered to Lessee, records of all water and utility charges for the
period covered by such statements and shall permit Lessee and the
representatives of Lessee to examine and audit such statements and
charges at any reasonable time during business hours.
(e) Lessor, while not warranting that any of the Building's
services stipulated in Paragraph 7(a) will be free from interruptions
or suspensions caused by repairs, renewals, improvements, alterations,
strikes, lockouts, accidents, inability of Lessor to procure such
service, or to obtain fuel or supplies, or for other cause or causes
beyond Lessor's reasonable control, will nevertheless diligently
attempt to make such repairs or renewals to Building distribution
lines and facilities as may be required to restore any such service so
interrupted or suspended. An interruption or suspension of, or
fluctuation in, any Building service (resulting from any of said cause
or causes) shall never be deemed an eviction or disturbance of
Lessee's use and possession of said Leased
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Premises, or any part thereof, nor render Lessor liable to Lessee for
damages unless due to Lessor's negligence nor relieve Lessee from
performance of Lessee's covenants and agreements hereunder. In the
event, as a result of the interruption of service, Lessee's premises
are not tenantable for a period in excess of 30 days, then rent shall
be abated until the condition is corrected.
8. Reserved Rights of Lessor. Lessor reserves the following rights:
(a) to change the street address or name of the Buildings or the
unit number of said Leased Premises or the arrangement or location of
entrances, passageways, doors, doorways, corridors, stairs, toilets or
other public parts of the Buildings without liability to Lessee;
(b) to designate all sources furnishing sign painting and
lettering;
(c) to enter during the last ninety (90) days of the term,
provided Lessee shall have removed substantially all of Lessee's
property from said Leased Premises, for the purpose of altering,
remodeling, repairing, renovating or otherwise preparing said Leased
Premises for re-leasing;
(d) to grant anyone the exclusive privilege of conducting any
particular business or activity in the Buildings;
(e) to enter said Leased Premises at all reasonable times, with
prior notification to a designated employee of Lessee (1) for the
making of inspections and repairs to said Leased Premises or the
Buildings as Lessor may deem necessary or desirable; (2) to exhibit
said Leased Premises to others during the last six (6) months of the
Term hereunder; and (3) for any purpose whatsoever related to the
safety, protection, preservation or improvement of said Leased Premises
or of the Buildings or of Lessor's interest;
(f) at any time or times Lessor, either voluntarily or pursuant to
governmental requirements, may, at Lessor's expense, make repairs,
alterations or improvements in or to the Buildings or any part
thereof, and during such times may temporarily close public entrances,
public doors, public corridors or other public facilities; and
(g) to charge Lessee any expense (including overtime or premium
costs incurred by Lessor) in the event repairs, alterations, decorating
or other work in said Leased Premises or the Buildings are, at Lessee's
request, not made during ordinary business hours.
Lessor may exercise all or any of the foregoing rights hereby reserved
without being deemed guilty of an eviction or disturbance of Lessee's use and
possession, without being liable in any manner to Lessee, and without
elimination or abatement of rent, or payment of other compensation, and such
acts shall in no way affect this Lease.
9. Delayed Possession. If Lessor shall be unable to deliver possession of
said Leased Premises on the date of the commencement of the Term hereby created
because of the holding over of any tenant, or tenants, or for any other cause
beyond Lessor's reasonable control, then the rent specified in paragraph 4 of
this Lease shall not commence until the date possession of said Leased Premises
is available to Lessee, and Lessee agrees to accept such allowance and
abatement of rent as liquidated damages, in full satisfaction for the failure
of Lessor so to deliver possession on said date of
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commencement, and to the exclusion of all claims and rights which Lessee might
otherwise have by reason of delivery of possession not being made on said date.
No failure so to deliver possession on said date shall in any event extend, or
be deemed to extend, the term of this Lease. Unfinished extra work, if any,
undertaken by Lessor for Lessee shall not be considered in determining the date
when possession is available to Lessee.
In the event that Lessee shall occupy said Leased Premises or a
portion thereof prior to the commencement of the Term of this Lease with
Lessor's consent, all the provisions of this Lease shall be in full force and
effect during such period and rent shall be paid on a per diem basis up to the
date of commencement of the Term.
10. Lessee's Property. All personal property belonging to Lessee or to any
other person located in or about said Leased Premises or the Buildings shall be
there at the sole risk of Lessee or such other person, and neither Lessor nor
Lessor's agents or employees shall be liable for the theft or misappropriation
thereof, nor for any damage or injury thereto, nor for death or injury of
Lessee or any other persons or damage to property caused by fire, water, ice,
snow, frost, steam, heat, cold, dampness, falling plaster, explosions, sewers
or sewerage, gas, odors, noise, the bursting or leaking of pipes, plumbing,
electrical wiring, and equipment and fixtures of all kinds, or by any act or
neglect of other tenants or occupants of the Buildings or of any other person,
or caused in any other manner whatsoever unless due to the negligent act or
acts of Lessor. Lessee will protect, indemnify and save harmless Lessor from
all losses, costs or damages sustained by reason of any act or other occurrence
or failure to act causing death or injury to any person or damage to property
whomsoever or whatsoever due to the use or occupancy of said Leased Premises or
of the Buildings or any part thereof by Lessee, or due to any breach or default
on the part of Lessee in the performance of any covenant or agreement on the
part of Lessee to be performed, except losses, costs or damages proximately
resulting from the sole negligence of Lessor, Lessor's agents or employees.
Lessee covenants, upon notice from Lessor, to resist or defend, at Lessee's
expense, such action or proceeding by counsel reasonably satisfactory to
Lessor.
If, because of any act or omission of Lessee or anyone claiming by,
through, or under Lessee, any mechanic's or other lien or order for the payment
of money shall be filed against said Leased Premises or the Buildings or
against Lessor (whether or not such lien or order is valid or enforceable as
such), Lessee shall, at Lessee's own cost and expense, cause the same to be
canceled and discharged of record within sixty (60) days after the date of
filing thereof and shall also indemnify and save harmless Lessor from and
against any and all costs, expenses, claims, losses or damages, including
reasonable counsel fees, resulting therefrom or by reason thereof.
11. Holding Over. Should Lessee remain in possession of said Leased
Premises after the expiration of the Term of this Lease with the consent of
Lessor, then, unless a new agreement in writing shall have been entered into
between the parties hereto, Lessee shall be a tenant from month to month, and
such tenancy shall otherwise be subject to all of the covenants and agreements
of this Lease, at a monthly rental equal to the last monthly installment of
rent payable hereunder.
12. Negative Covenants. Lessee shall not, without prior written consent of
Lessor in each instance, Lessor's consent herein shall not be unreasonably
withheld or delayed, (a) assign, mortgage, hypothecate or convey this Lease or
any interest therein; (b) allow any transfer thereof or any lien upon
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Lessee's interest by operation of law; (c) sublet said Leased Premises or any
part thereof; or (d) permit the use or occupancy of said Leased Premises or any
part thereof by anyone other than Lessee. Consent to any such assignment,
conveyance or subletting by Lessor shall not operate as a waiver of the
necessity for a consent to any subsequent assignment, conveyance or subletting,
and the terms of such consent shall be binding upon any person holding by,
under, or through Lessee. Such prior written consent of Lessor shall not
relieve Lessee from primary liability hereunder for the payment of rental or
performance or observance of any of the terms and conditions of this Lease.
13. No Lessor Representations. Taking of possession by Lessee shall be
conclusive evidence as against Lessee that said Leased Premises were in good
order and satisfactory condition when Lessee so took possession. No
representation respecting the condition of said Leased Premises or the
Buildings has been made by Lessor to Lessee unless contained herein; and no
promise of Lessor to prepare, alter or improve said Leased Premises for
Lessee's use and occupancy shall be binding upon Lessor unless contained
herein. This Lease does not grant any right to light or air over property
except over public ways kept open by public authority, and Lessor shall not be
liable to Lessee for any expense, injury, death, loss or damages resulting from
work done in or upon, or by reason of the use of, any adjacent or nearby
building, land, or public or private way. At the expiration, or earlier
termination in any manner, of the term hereof, Lessee shall quit and surrender
said Leased Premises together with all installations, improvements and
alterations (including curtains, carpeting and partitions) which may have been
installed by Lessor or Lessee (except that Lessee's other furniture, trade
fixtures and standard business office machines and equipment shall remain
Lessee's property, and provided Lessee is not in default hereunder, may and
upon Lessor's request shall be removed by Lessee) broom clean and in as good
condition and repair as when possession was delivered, reasonable use and wear,
loss or damage by fire, the elements or other casualty not resulting from the
willful or negligent acts of Lessee, Lessee's agents, employees or invitees
excepted, failing which Lessor may restore said Leased Premises to such
condition and Lessee shall pay the cost thereof.
14. Alterations. Lessee shall not make any major alterations, additions,
improvements (which exceed $2,500.00 in value) or other changes in or to said
Leased Premises or the Buildings, or attach, affix or build therein any
improvement or installation without Lessor's prior written consent in each and
every instance. Lessor's written consent shall not be unreasonably withheld or
delayed. Before any such work is done or any materials therefore are delivered
on said Leased Premises or into the Buildings, Lessee shall provide Lessor with
plans, specifications, names of contractors, copies of contracts and necessary
permits; shall indemnify and hold harmless Lessor against liens, costs, damages
and expenses of all kinds; and shall submit to Lessor's reasonable supervision
of said work. All additions, installations, alterations, permanent fixtures and
permanent improvements in and upon said Leased Premises, whether installed by
Lessee or Lessor, shall become Lessor's property, and shall remain upon, and be
surrendered with, said Leased Premises without disturbance or injury upon the
termination of this Lease by lapse of time or otherwise, all without payment or
credit to Lessee. Lessee shall have the right to place in said Leased Premises,
at such locations therein as Lessee may from time to time determine, Lessee's
furniture, trade fixtures and standard business office machines and equipment,
and such personal property shall be and remain the property of Lessee. Provided
Lessee is not in default hereunder, such personal property may be removed by
Lessee at any time during the lease term, and may be, and shall be upon
Lessor's request, removed upon expiration, or upon earlier termination of this
Lease in any manner. Lessee, however, agrees to repair at Lessee's expense any
damage to said Leased Premises or the Buildings caused by such removal.
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15. Use and Occupancy. Lessee shall take good care of said Leased Premises
and the fixtures and improvements therein, and will use said Leased Premises
during the Term for the purpose above specified and no other; will not commit
waste nor do any act harmful to the Buildings or the systems and equipment
therein; will not illegally sell or store therein any spirituous, malt or
vinous liquors, or any narcotic drugs; will not exhibit, sell or offer for sale
on said Leased Premises or in the Buildings anything whatsoever except such as
are essentially connected with the stated use of said Leased Premises; will not
make or permit any use of said Leased Premises which directly or indirectly, is
forbidden by ordinance, statute or government regulations, or by any
restrictions of record, or which may increase the premium cost of, or
invalidate, any policy of insurance carried on the Buildings or covering its
operation, and will comply with the Rules and Regulations appearing at the end
of this Lease, including changes thereto, which Rules and Regulations are made
a part hereof by reference. Lessee at Lessee's sole expense shall comply with
all laws, orders and regulations of federal, state, county and municipal
authorities and any direction or any public officer or officers, pursuant to
law which shall impose any liability, order or duty upon Lessor or Lessee with
respect to Lessee's use or occupancy of said Leased Premises. All repairs
required to be made as a result of Lessee's misuse or neglect of said Leased
Premises or of damage to, or defacement of, the Buildings or any part thereof,
by reason of Lessee's tenancy therein shall be made at Lessee's expense except
ADA requirements to the exterior building and common areas which shall be
complied with by Lessor at Lessor's sole cost and expense. Lessee shall give
immediate notice to Lessor in case of fire or accident in said Leased Premises
or of any defect, damage or injury therein or in any fixtures or equipment.
Lessee shall not cause or permit any Hazardous Material (as hereafter
defined) to be brought upon, kept or used in or about the Leased Premises or
Buildings by Lessee, its employees, agents, contractors or invitees. As used
herein, the term "Hazardous Material" shall mean any hazardous or toxic
substance, material or waste (including but not limited to, those substances,
materials and wastes now or hereafter listed in the United States Department of
Transportation Hazardous Materials Table or by the Environmental Protection
Agency as hazardous substances), or such substances, materials and wastes the
use, storage, transportation, or disposal of which are or may become regulated
under any applicable federal, state or local law, regulation, code or
ordinance. If Lessee permits any Hazardous Material to be brought upon, kept or
used in or about the Leased Premises or Buildings that results in the violation
of any applicable law, regulation, code or ordinance or in the contamination of
the Leased Premises or Buildings, then Lessee shall indemnify, defend and hold
Lessor harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses, including but not limited to (i) diminution in
value of the Leased Premises or Buildings; (ii) damages for loss or restriction
on use of rentable or usable space or of any amenity in the Leased Premises or
Buildings; (iii) damages arising from any adverse impact on marketing of the
Leased Premises or Buildings; and (iv) sums paid in settlement of claims,
attorneys' fees, consulting fees and expert fees, which arise during or after
the term of the Lease, including but not limited to any claims for bodily
injury or death or for property damage, as a result of such violation or
contamination. This indemnification of Lessor by Lessee includes but is not
limited to costs incurred in connection with any investigation of site
conditions or clean-up, remedial removal or restoration work required by any
federal, state or local government agency or political subdivision because of
Hazardous Material present in the Leased Premises or Buildings or the soil or
ground water on which the Buildings located. Without limiting the foregoing, if
the presence of any Hazardous Material on the Leased Premises or Buildings
caused or permitted by Lessee results in any contamination of the Leased
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<PAGE> 10
Premises or Buildings, Lessee shall, upon request by Lessor, promptly take all
actions at its sole expense that are necessary to return the Leased Premises or
Buildings to the condition existing prior to the introduction or exposure of
any Hazardous Material in Leased Premises or Buildings. Lessee's obligations
hereunder shall survive the termination of this Lease and Lessee shall
indemnify, defend and hold harmless Lessor, its agents, employees and
contractors from and against, and, upon demand, reimburse Lessor for all
claims, demands, liabilities, losses, damages, judgments, penalties, costs and
expenses, including attorneys' fees, incurred by Lessor as a consequence of
Lessee's breach of its obligations hereunder.
16. Damage: Untenantability. If said Leased Premises shall be partially
damaged by fire or other casualty, the damage to said Leased Premises (but not
to Lessee's property, which shall remain the responsibility of Lessee to repair
or replace) shall be repaired by and at the expense of Lessor. Notwithstanding
the foregoing, however, fire or other casualty damage to the Leased Premises in
amounts of One Thousand Dollars ($1,000.00) or less per occurrence shall be
repaired by and at the expense of Lessee. Lessor shall incur no liability on
account of any delay in the completion of such repairs which may arise by
reason of adjustment of insurance, labor difficulties or any other cause beyond
Lessor's control. If all or substantially all of said Leased Premises or the
Buildings are made unfit for occupancy by fire or other casualty, acts of God
or other causes, Lessor may elect (a) to terminate this Lease as of the date
when said Leased Premises or the Buildings are so made unfit for occupancy, by
written notice to Lessee within ninety (90) days after that date, or (b) to
repair, restore or rehabilitate said Leased Premises at Lessee's expense, or
the Buildings at Lessor's expense, within ninety (90) days after Lessor is
enabled to take possession of the damaged Leased Premises and undertake
reconstruction or repairs; and if Lessor elects so to repair, restore or
rehabilitate said Leased Premises or the Buildings this Lease shall not
terminate, except as hereinafter provided, but rent shall be abated on a per
diem basis proportionate to the extent and for the period that said Leased
Premises are unfit for occupancy. In the event Lessor shall proceed under (b)
above and shall not substantially complete the work within said ninety (90) day
period (excluding from said period loss of time resulting from delays beyond
the reasonable control of Lessor) either Lessor or Lessee may then terminate
this Lease, as of the date when said Leased Premises or the Buildings were so
made unfit for occupancy, by written notice to the other not later than ten
(10) days after the expiration of said ninety (90) day period, computed as
herein provided.
17. Remedies of Lessor. All rights and remedies of Lessor herein set forth
are in addition to any and all rights and remedies which are or may be
available to Lessor at law or in equity.
(a) If any voluntary or involuntary petition or similar pleading
under any Act of Congress relating to bankruptcy shall be filed by or
against Lessee, or if any voluntary or involuntary proceedings in any
court or tribunal shall be instituted by or against Lessee to declare
Lessee insolvent or unable to pay Lessee's debts, then in any such
event Lessor may, if Lessor so elects, with notice of such election and
with or without entry or other action by Lessor, forthwith terminate
this Lease and Lessee's right to possession of said Leased Premises,
and, notwithstanding any other provisions hereof. Lessor shall
forthwith
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<PAGE> 11
upon such termination be entitled to recover damages in an amount
equal to the then present value of the rent specified in paragraph 4
of this Lease for the entire residue of the stated Term hereof.
(b) If Lessee shall fail to pay the rent specified in paragraph 4
of this Lease when due, or within ten (10) days thereafter or fails to
pay Lessor's charges for water, sewer, gas, electrical or other
services within twenty (20) days after rendition of statements, or
defaults in the prompt and full performance of any of Lessee's
covenants and agreements hereunder, and said latter default is not
corrected within fifteen (15) days after notice from Lessor of said
default, but shall not apply if the Lessee is commencing a cure to the
problem and is diligently pursuing same, provided such cure is
completed within 45 days after commencement of said cure, or if the
leasehold interest of Lessee be levied upon under execution or be
attached, or if Lessee makes an assignment for the benefit of
creditors or if a receiver be appointed for any property of Lessee, or
if Lessee abandons said Leased Premises, then and in any such event
Lessor may, if Lessor so elects, and with or without notice of such
election and with or without demand whatsoever, forthwith terminate
this Lease and Lessee's right to possession of said Leased Premises.
(c) Upon the termination of this Lease, Lessee shall surrender
possession and vacate said Leased Premises immediately, and Lessor may
enter into and repossess said Leased Premises with or without process
of law and remove all persons and property therefrom in the same
manner and with the same right as if this Lease had not been made, and
for the purpose of such entry and repossession Lessee waives any
notice provided by law or otherwise to be given in connection
therewith.
(d) If Lessor elects to terminate Lessee's right to possession,
without terminating the Lease as above provided, Lessor may remove
from said Leased Premises any and all property found therein and such
repossession shall not release Lessee from Lessee's obligation to pay
the rent reserved herein. After any such repossession by Lessor
without termination of the Lease, Lessor shall make reasonable efforts
to relet said Leased Premises, or any part thereof, as agent of Lessee
to any person, firm, or corporation and for such time and upon such
terms as Lessor, in Lessor's sole discretion, may determine. Lessor
may make repairs, alterations and additions in and to said Leased
Premises and redecorate the same to the extent deemed by Lessor
necessary or desirable, and Lessee shall, upon demand, pay the cost
thereof together with Lessor's expenses (including any broker's
commission) of reletting. If the rents collected by Lessor upon any
such reletting are not sufficient to pay monthly the full amount of
the rent reserved herein together with the costs of such repairs,
alterations, additions, redecorating and expenses, Lessee shall pay to
Lessor the amount of each monthly deficiency upon demand. If the rent
so collected from any such reletting is more than sufficient to pay
the full amount of the rent reserved herein together with the costs of
such repairs, alterations, additions, redecorating and expenses,
Lessor, at the end of the stated term of this Lease, shall account to
Lessee for any surplus.
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<PAGE> 12
(e) Any and all property which may be removed from said Leased
Premises by Lessor may be handled, removed, stored or otherwise
disposed of by Lessor at the risk and expense of Lessee, and Lessor
shall in no event be responsible for the preservation or safe-keeping
thereof. Lessee shall pay to Lessor, upon demand, any and all expenses
incurred in such removal and all storage charges against said property
so long as the same shall be in Lessor's possession or under Lessor's
control. If any property shall remain in said Leased Premises or in
the possession of Lessor and shall not be removed by Lessee within a
period of thirty (30) days from and after the time when said Leased
Premises are either abandoned by Lessee or repossessed by Lessor under
the term of this Lease, said property shall presumptively be deemed to
have been forever abandoned by Lessee.
(f) Paragraph (f) deleted.
(g) If Lessee shall default in performing any term, covenant or
condition of this Lease on the part of Lessee to be performed by
Lessee, which default may be cured by the expenditure of money, Lessor
at Lessee's option may, but shall not be obligated to, on behalf of
Lessee, expend such sum as may be necessary to perform and fulfill
such term, covenant or condition, and any and all sums so expended by
Lessor, with interest thereon at the rate of ten percent (10%) per
annum from the date of such expenditure, shall be and be deemed to be
additional rent, and shall be repaid by Lessee to Lessor on demand,
but no such payment or expenditure by Lessor shall be deemed a waiver
of Lessee's default nor shall it affect any other remedy of Lessor by
reason of such default.
18. Mortgages, Attornment and Estoppel Certificates. Lessor shall have the
right at any time, and from time to time, to place or permit to be placed upon
the Buildings and/or the parcels of land upon which the Buildings and Leased
Premises are located, any one or more mortgages, which shall be wholly prior to
the rights of Lessee under this Lease and Lessee will within ten (10) days,
upon request by Lessor, execute any and all instruments deemed to Lessor
necessary or advisable to subject and subordinate this Lease and all rights
given Lessee hereunder to such mortgage or mortgages. In the event any
proceedings are brought for the foreclosure of any such mortgage, Lessee
covenants that Lessee will, to the extent of the Lessor's interest affected by
such foreclosure, attorn to the purchaser upon any such foreclosure sale and
recognize such purchaser's interest as Lessor under this Lease. Lessee agrees
to execute and deliver within ten (10) days at any time and from time to time,
upon the request of Lessor or of any such holder, any instrument which, in the
sole judgment of Lessor, may be necessary or appropriate in any such
foreclosure proceeding or otherwise to evidence such attornment. In the event
that Lessee fails to execute and deliver within ten (10) days any such
instrument, Lessee hereby appoints Lessor and the holder of any such mortgage
or either of them, the attorney-in-fact, irrevocably, of Lessee to execute and
deliver for and on behalf of Lessee any such instrument. Lessee further waives
the provisions of any statute or rule of law, now or hereafter in effect, which
may give or purport to give Lessee any right or election to terminate or
otherwise adversely affect this Lease and the obligation of Lessee hereunder in
the event any such foreclosure proceeding is brought, and agrees that this
Lease shall not be affected in any way whatsoever by any such foreclosure
proceeding. In exchange for Lessee's subordination agreement, Lessor shall
provide a non-disturbance agreement to Lessee from said mortgagee.
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<PAGE> 13
Lessee agrees to furnish from time to time when requested by Lessor or the
holder of any mortgage covering the Leased Premises or Buildings or any interest
of Lessor therein, a certificate signed by Lessee to the effect (insofar as is
true) that this Lease is presently in full force and effect and unmodified; that
the Term of this Lease has commenced and the full rental is then accruing; that
the Lessee has accepted possession of the Leased Premises and that any
improvements required by the provisions of this Lease to be made by Lessor have
been completed to the satisfaction of Lessee; that no rent under this Lease has
been paid more than thirty (30) days in advance of its due date; that the
address for notices to be sent to Lessee is as set forth in this Lease; that
Lessee as of the date of such certificate has no charge, lien or claim of offset
under this Lease or otherwise against rents or other charges due or to become
due; and that to the knowledge of Lessee, Lessor is not then in default under
this Lease. Such certificate shall also contain an agreement by Lessee that from
the date of such certificate, Lessee will not to pay any rent under this Lease
more than thirty (30) days in advance of its due date, will not surrender or
consent to the modification of any of the terms of this Lease nor to the
termination of this Lease by Lessor and will not seek to terminate this Lease by
reason of any act or omission of Lessor until Lessee shall have given written
notice of such act or omission to the holder of such mortgage and until a
reasonable period of time has elapsed following the giving of such notice during
which period such holder or mortgagee shall have the right, but not the
obligation to remedy such act or omission. Lessee, upon the request of the
Lessor or any mortgagee of the Leased Premises or the Buildings, shall promptly
execute such instruments or certificates to carry out the intent of this
paragraph as shall be requested by Lessor or by any such mortgagee within ten
(10) days. In the event that Lessee fails to execute and deliver within ten (10)
days any such instrument or certificate, Lessee hereby irrevocably appoints
Lessor as attorney-in-fact for Lessee with full power and authority to execute
and deliver in the name of Lessee any such instruments or certificates.
19. Notices. In every instance where it shall be necessary or desirable
for Lessor to serve any notice or demand upon Lessee, or any other person
designated in writing for notice by Lessee, such notice or demand shall be
deemed sufficiently given or made if in writing and mailed to Lessee by
registered, or certified, United States mail, postage prepaid, addressed to
Lessee at the Buildings of which said Leased Premises are a part, and the time
of giving or making such notice or demand shall be deemed to be the time when
the same is mailed as herein provided. Any notice by Lessee to Lessor must be
sent by registered, or certified, United States mail, postage prepaid, addressed
to Lessor at the address where the last previous rent hereunder was paid and, in
addition, at any other address as Lessor may designate from time to time.
20. Common Areas. Lessee and Lessee's agents, employees, licensees, and
invitees shall have the right to use, in common with Lessor and Lessor's
tenants and the agents, employees, licensees and invitees of each, the public
sidewalks, entrances, lobbies, vestibules, stairways, corridors, public toilets
and other public areas of the Building; subject, however, to reasonable
applicable Building rules, regulations and security measures, provided they are
uniformly enforced in a non-discriminatory manner, and Lessee and Lessee's
agents, employees, licensees and invitees shall not obstruct or litter, or use
for storage (temporary or otherwise) or for the display of merchandise or
services or for any purpose other than the intended and normal purpose, any of
said public sidewalks, entrances, lobbies, vestibules, stairways, corridors,
public toilets and other public areas of said Buildings; and no floor mats,
runners, overshoes, rubbers, footwear or clothing shall be placed by Lessee or
Lessee's agents, employees, licensees or invitees in any Building corridor,
lobby or vestibule.
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<PAGE> 14
21. Eminent Domain. Lessee agrees with Lessor that if either (a) the
Buildings shall be appropriated, condemned, taken or otherwise acquired by any
public or quasi-public authority under the power of eminent domain,
condemnation or other proceedings, in whole or in such a part as to render the
remainder thereof no longer economically feasible to operate, as the Lessor
shall determine in Lessor's sole discretion, or (b) the whole or any part of
said Leased Premises shall be similarly appropriated, condemned, taken or
otherwise acquired, this Lease and the estate hereby created shall terminate
and wholly expire on the date legal title shall vest in the appropriator or
condemnor, and all rent shall be prorated and adjusted as of said date. In no
event whatsoever shall Lessee have any claim against Lessor by reason of any
appropriation, condemnation or taking of the whole or any part of said Leased
Premises, nor shall Lessee have any claim to the amount, or any portion
thereof, that may be awarded as damages or paid as a result of such
appropriation and taking. Lessee hereby assigns to Lessor all of Lessee's
right, title and interest in and to any and all amounts awarded or paid by
reason of such appropriation, condemnation and taking. Notwithstanding the
above, Lessee shall have the right to claim moving expenses and the like
provided same does not diminish Lessor's award.
22. Limitation of Lessor's Liability. (a) No receipt of money by Lessor
from Lessee with knowledge of the breach of any covenants of this Lease, or
after the termination hereof, or after the service of any notice, or after the
commencement of any suit, or after final judgment for possession of said Leased
Premises shall be deemed a waiver of such breach, nor shall it reinstate,
continue or extend the Term of this Lease or affect any such notice, or demand
or suit.
(b) No reasonable delay on the part of Lessor in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege
preclude any other, or further, exercise thereof or the exercise of
any other right, power or privilege.
(c) No act done or thing said by Lessor or Lessor's agents or
employees shall constitute a cancellation, termination or modification
of the Lease, or a waiver of any covenant, agreement or condition
hereof, nor relieve Lessee from Lessee's obligation to pay the rents
reserved or other charges to be paid hereunder. Any waiver or release
by Lessor and any cancellation, termination or modification of this
Lease must be in writing signed by Lessor.
23. Insurance. Insofar as Lessor is able to do so without impairing
Lessor's right of recovery under any policy of fire and extended coverage
insurance on the Buildings, Lessor agrees and does hereby waive all rights of
recovery and causes of action against Lessee, Lessee's employees, servants,
agents and all parties claiming through or under Lessee for any damage to said
Leased Premises, caused by any of the perils covered by fire and extended
coverage insurance policies, notwithstanding the fact that said damage to or
destruction of said Leased Premises by fire or other casualty shall be due to
the negligence of Lessee or Lessee's employees, servants or agents. If the
premiums paid by Lessor for said fire and extended coverage insurance, during
the Term of this Lease are increased by reason of the foregoing, then Lessee
shall have the option to pay said increase. Lessee's failure to pay said
increase in insurance premiums, if any, after thirty (30) days notice to
Lessee, shall render Lessor's waiver, as contained in this Paragraph 23, null
and void. Likewise, insofar as Lessee is able to do so without impairing
Lessee's right of recovery under any policy of fire and extended coverage
insurance which the Lessee carries relative
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<PAGE> 15
to said Leased Premises, leasehold improvements or personal property contained
therein, the Lessee agrees to and does hereby waive all rights of recovery and
causes of action against the Lessor, Lessor's employees, servants, agents and
all parties claiming through or under the Lessor for any damage to the property
insured, caused by any of the perils covered by such fire and extended coverage
insurance policies, notwithstanding the fact that said damage to or destruction
of said Lessee's property by fire or other casualty shall be due to the
negligence of Lessor or Lessor's employees, servants or agents. If the premiums
paid by Lessee for such fire and extended coverage insurance during the term of
this Lease are increased by reason of the foregoing, then Lessor shall have the
option to pay such increases. Lessor's failure to pay such increase in
insurance premiums, if any, after thirty (30) days notice to Lessor, shall
render Lessee's waiver as contained in this Paragraph 23, null and void.
24. Rules and Regulations. Lessee and Lessee's agents, employees and
invitees shall faithfully observe, and strictly comply with the Rules and
Regulations set forth in Exhibit B attached hereto and made a part hereof, and
with such further Rules and Regulations as Lessor may, after notice to Lessee
from time to time adopt. Nothing in this Lease contained shall be construed to
impose upon Lessor any duty or obligation to enforce the Rules and Regulations
in any other lease of the Buildings as against any other lessee, and Lessor
shall not be liable to Lessee for violation of the same by any other lessee or
the agents, employees, licensees or invitees of such other lessee.
25. Offer by Agent. This Lease is offered to Lessee by an agent of Lessor
subject to Lessor's acceptance and approval. In the absence of fraud, no
person, firm or corporation, or the heirs, personal representatives, successors
and assigns, respectively, thereof, executing this Lease as agent,
administrator, executor, trustee, or in any other representative capacity shall
ever be deemed or held individually liable hereunder for any reason or cause
whatsoever.
26. Broker. Lessor and Lessee each represents and warrants to the other
that no broker negotiated or was instrumental in negotiating or consummating
this Lease except Calabrese, Racek and Markos, Inc., Lessor's agent, and
Cleveland Real Estate Partners, Lessee's Agent, and Lessor shall be solely
responsible for any commissions due Calabrese, Racek and Markos, Inc., and
shall indemnify and hold harmless Lessee against all claims for real estate
commissions and finder's fees by Calabrese, Racek and Markos, Inc. Calabrese,
Racek and Markos, Inc. agrees to pay Cleveland Real Estate Partners the
commission agreed upon between Mark Askelson and David Calabrese as full
payment.
27. Entire Agreement. This Lease (together with Exhibits A and B attached
hereto) contains the entire agreement between the parties hereto and shall not
be modified in any manner except by an instrument in writing executed by said
parties or their respective successors in interest.
28. Recording. If either of the parties hereto desire to record this Lease,
Lessor and Lessee agree to execute a Memorandum of this Lease, which Memorandum
of Lease may then be recorded in the office of the Recorder of Cuyahoga County,
Ohio. Upon written request of Lessor, Lessee will at any time and from time to
time execute with Lessor such forms of security agreement and financing
statements for filing as in the opinion of counsel for Lessor is reasonably
necessary to protect the rights, priorities and liens of Lessor hereunder.
15
<PAGE> 16
29. Headings. The captions of paragraphs appearing in this Lease are
inserted only as a matter of convenience and for reference purposes, and in no
way define, limit or describe the scope and intent of this Lease, or any
paragraph hereof, nor in any way affect it.
30. Quiet Enjoyment. If Lessee shall (1) pay the rent reserved, the charges
for services stipulated herein and other amounts to be paid by Lessee to
Lessor, and (2) well and faithfully keep, perform and observe all of the
covenants, agreements, and conditions herein stipulated to be kept, performed
and observed by Lessee, Lessee shall at all times during the term of this Lease
have the peaceable and quiet enjoyment of said Leased Premises without
hindrance of Lessor or any person lawfully claiming under Lessor, subject,
however, to the terms of this lease and any mortgage provided for in this
Lease.
The covenants, agreements and conditions contained in this Lease shall
bind and inure to the benefit of Lessor and Lessee and their respective heirs,
legal representatives, successors and assigns, subject, however, to the
provisions hereof requiring the consent of Lessor to any assignment of this
Lease or subletting of said Leased Premises.
31. Security Deposit. There shall be no security deposit for the space
herein.
32. Option to Renew. Provided that Lessee is not in default at the time for
exercise of this option, Lessee shall have one, two year option to extend this
lease. Lessee shall notify Lessor in writing of Lessee's option to renew the
lease for a two (2) year period (commencing January 1, 2002 and ending December
31, 2003) no later than April 1, 2001. In the event Lessee exercises its option
to renew this lease, all provisions of this lease shall remain in effect except
that the annual "base rent" specified in Paragraph 4 hereof shall be increased
from Four Hundred Seventy Two Thousand Two Hundred Dollars ($472,200.00) to
Four Hundred Eighty Seven Thousand Nine Hundred and Forty Four Dollars
($487,944.00). Rent subject to increase if expansion option is exercised.
33. Expansion Option. Lessee shall have an option to expand into Suite 206
(2,680 square feet) commencing June 1, 2001. This option is subordinate to the
existing tenant's right to renew. The rental rate and term of the expansion
space shall be equal and coterminus to the balance of Lessee's leasehold
interests in the building. Lessee may exercise this expansion option only if it
exercises its option to renew.
34. Full Execution. Open full execution of the lease, Lessee may utilize
Suites 204 and 209 rent free until January 1, 1999. Lessee will be responsible
for in-suite utilities during this free rent period.
35. Construction Allowance. This lease requires no leasehold improvement
contribution or construction allowance from Lessor.
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<PAGE> 17
GUARANTY
Personal guarantee not required.
17
<PAGE> 18
IN WITNESS WHEREOF, Lessor and Lessee have respectively executed
duplicate counterparts of this LEASE AGREEMENT as of the date, month and year
first above written.
Signed and acknowledged PARK EAST REALTY CO.
in the presence of: "Lessor"
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------------- ---------------------------------
/s/ DEBRA DUNCAN Its: President
- ----------------------------- --------------------------------
Signed and acknowledged Insurquote/IAS, Inc.
in the presence of: -------------------------------------
"Lessee"
- ---------------------------- By /s/ WILLIAM B. WOAHN
--------------------------------
William Woahn,
- ---------------------------- President
18
<PAGE> 19
STATE OF OHIO )
) SS:
CUYAHOGA COUNTY )
Before me, a Notary Public in and for said County and State,
personally appeared PARK EAST REALTY CO, an Ohio Corporation, identified as
Lessor, by Gordon Anhold, its President, who acknowledged that he, being
thereunto duly authorized, did sign the foregoing LEASE AGREEMENT for and on
behalf of said corporation and that the same is his free act and deed
individually and as said Officer, and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Cleveland, Ohio, this 28th day of October, 1998.
/s/ DINA BACA
--------------------
Notary Public
[NOTARY STAMP]
STATE OF UTAH )
) SS:
UTAH COUNTY )
Before me, a Notary Public in and for said County and State,
personally appeared Insurquote/IAS, Inc., a(n) Utah Corporation, identified as
Lessee, by William Woahn, its President, who acknowledged that he, being
thereunto duly authorized, did sign the foregoing LEASE AGREEMENT for and on
behalf of said Lessee, and that the same is his free act and deed individually
and as said President, and the free act and deed of said Lessee.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Provo, Utah, this 1st day of September, 1998.
/s/ MARILYN J. THURSTON
-----------------------
Notary Public
[NOTARY STAMP]
19
<PAGE> 20
EXHIBIT A
DESCRIPTION OF LEASED PREMISES
The following premises in the Building known as Park East II, located at 3737
Park East Drive, Beachwood, Ohio: Suite #202 containing 15,200 square feet.
[FLOOR PLAN]
A-1
<PAGE> 21
EXHIBIT A
DESCRIPTION OF LEASED PREMISES
The following premises in the Building known as Park East II, located at 3737
Park East Drive, Beachwood, Ohio: Suite #109 containing 12,280 square feet.
[FLOOR PLAN]
A-2
<PAGE> 22
EXHIBIT A
DESCRIPTION OF LEASED PREMISES
The following premises in the Building known as Park East II, located at 3737
Park East Drive, Beachwood, Ohio: Suite #204 and 209 containing 4,000 square
feet.
[FLOOR PLAN]
A-3
<PAGE> 23
EXHIBIT B
RULES AND REGULATIONS
WINDOWS AND PROJECTIONS. Nothing shall be affixed to or projected
beyond the outside of the Buildings by Lessee without the prior written consent
of Lessor. If Lessee desires, and Lessor permits, blinds, shades, or other form
of outside or inside window covering shall be furnished and installed at the
expense of Lessee and must be of such shape, color, material and make as are
approved by Lessor.
ADVERTISING, PICTURES AND SIGNS. No picture, plaque, sign,
advertisement, notice or other lettering, temporary or permanent, shall be
exhibited, inscribed, painted or affixed on any part of the outside or inside
of the Buildings or of the walls or doors of said Leased Premises without the
consent of Lessor, which consent shall not be unreasonably withheld. If
permitted, the subject matter and the color, size, style and material thereof
and the method of installing or hanging thereof shall conform to the reasonable
specifications of Lessor. Lessor reserves the right to remove all such items
exhibited, inscribed, painted or affixed without Lessee's permission without
notice to Lessee, at the expense of Lessee.
BICYCLES AND ANIMALS. Unless expressly permitted by Lessor, no bicycle
or other vehicle and no animal shall be brought or permitted to be in the
Buildings.
CLOSING AND LOCKING DOORS AND WINDOWS. Unless expressly permitted by
Lessor, all doors to said Leased Premises are to be kept closed at all times
except when in actual use for entrance to or exit from said Lease Premises.
Lessee shall be responsible for the locking of doors and the closing of
transoms and windows in and to said Leased Premises. Lessee shall be
responsible for any damage or loss resulting from violation of this rule.
MACHINERY. Unless Lessor gives prior written consent in each and
every instance, Lessee shall not install or operate any steam or internal
combustion engine, boiler, machinery, refrigerating or heating device or air
conditioning apparatus, large or heavy office machines or equipment in or about
said Leased Premises, or carry on any mechanical business therein. All
equipment of any electrical or mechanical nature shall be placed in settings
which absorb and prevent vibration, noise, or annoyance, or the spillage or
leakage of fluids, oils or grease on the floors of said Leased Premises. It is
expressly acknowledged, however, that Lessee has the right to install
kitchen/cafeteria equipment, computer equipment and copying and data processing
equipment.
FLOOR COVERING. Lessee shall not lay linoleum, or other similar floor
covering, so that the same shall come in direct contact with the floor of said
Leased Premises, and if linoleum, or other similar floor covering, is desired
to be used, an interlining of builder's deadening felt shall be first affixed
to the floor by an adhesive which may be easily removed.
UNSIGHTLY PLACEMENT OF EQUIPMENT. Unless expressly permitted by
Lessor, Lessee shall not place or allow anything to be against or near the
glass of partitions or doors of said Leased Premises which may diminish the
light in, or be unsightly from, halls and corridors.
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<PAGE> 24
NOISES AND OTHER NUISANCES. Lessee shall not make or permit any
noise or odor that is objectionable to Lessor or to other occupants of the
Buildings to emanate from said Leased Premises, and shall not create or
maintain a nuisance therein, and shall not disturb, solicit or canvass any
occupant of the Buildings, and shall not do any act tending to injure the
reputations of the Buildings.
Lessee shall not install or operate any phonograph, musical instrument, radio
or television receiver or similar device in the Buildings so as to cause a
nuisance to other tenants without prior approval of Lessor. The use thereof, if
permitted, shall be subject to control by Lessor to the end that others shall
not be disturbed or annoyed.
SAFES OR HEAVY ARTICLES. Lessee shall not overload any floor. Safes,
furniture and all large articles shall be brought into said Leased Premises or
removed therefrom at Lessee's sole risk and responsibility.
LEDGES AND WINDOWS. Lessee shall not place or permit to be placed any
article of any kind on the window ledges or elsewhere on the exterior walls,
and shall not throw or drop, or permit to be thrown or dropped, any article
from any window of the Buildings.
TELEGRAPHS, ANTENNAE, ETC. No electric wires, telegraphs, telegraph
call boxes, antennae, aerial wires or other electrical equipment or apparatus
shall be installed inside or outside of the Buildings without approval of
Lessor.
SOLICITORS. Lessor reserves the right, but shall not be held obligated
to exclude or eject from the Buildings any or all solicitors, canvassers or
peddlers, and any person conducting themselves in such manner as, in the sole
judgment of Lessor, constitutes an annoyance to any of the tenants of the
Buildings or an interference with Lessor's operation of the Buildings or who
are otherwise undesirable.
FLAMMABLE MATERIALS. No article extra hazardous on account of fire and
no explosive shall be brought into said Leased Premises or into the Buildings.
The storage and use of all flammable and volatile materials or substances shall
be in conformity with applicable laws, rules and regulations of all duly
constituted public authorities.
LODGING, ETC. The Leased Premises hereby leased shall not be used for
lodging or sleeping purposes, and no cooking of food shall be done therein,
without the express consent of Lessor; provided, however, that it is expressly
acknowledged that Lessee has the right to install a kitchen/cafeteria for the
preparation, cooking and serving of food to its employees or employees of one or
more other companies that may elect to share such facilities.
ACCESS TO ROOF. Lessee shall not give his employees or other persons
permission to go upon the roof of the Buildings without the written consent of
Lessor.
FLOOR MATS. Lessee shall not place door mats in public corridors
without the consent of Lessor.
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ELECTRIC HEATING DEVICES. Lessee shall not use any electric heating
device in the Leased Premises without consent of Lessor.
SHADES OR BLINDS. Lessee shall not install any shades, blinds, or
awnings without consent of Lessor.
INSURANCE REGULATIONS. Lessee shall not do anything in the rooms, or
bring or keep anything therein, which will in any way increase or tend to
increase the risk of fire, or which will conflict with the regulations of the
Fire Department or the fire laws, or with the rules and regulations of the City
of Beachwood, or equivalent bodies, or with any law, ordinance, rule or
regulation affecting the occupancy and use of the rooms, now existing or
hereafter enacted or promulgated by any public authority or by the City of
Beachwood or any equivalent body.
RIGHTS RESERVED TO LESSOR. Without abatement or diminution in rent,
Lessor reserves and shall have the following additional rights consistent with
the operation of the Buildings as a first class office complex:
1. To change the arrangement and/or location of entrances, passageways,
doors, doorways, corridors, stairs, toilet or other public parts of the
Buildings;
2. To install and maintain a sign or signs on the exterior of the
Buildings;
3. To have access for Lessor and other tenants of the Buildings to mail
chutes, if any, located on the Leased Premises according to the rules
of the United States Post Office;
4. To designate all sources furnishing sign painting and lettering,
ice, drinking water, towels and toilet supplies, and other like
services used on the Leased Premises except sources for food and other
services provided to Lessee's cafeteria;
5. At any time or times Lessor either voluntarily or pursuant to
governmental requirement may, at Lessor's own expense, make repairs,
alterations or improvements in or to the Buildings or any part thereof
and during alterations, may close entrances, doors, windows,
corridors, elevators or other facilities, provided that such acts
shall not unreasonably interfere with Lessee's use and occupancy of
the Leased Premises as a whole;
6. To erect, use and maintain pipes and conduits in and through the
Leased Premises;
7. During the last six (6) months of the term or any part thereof, if
during or prior to that time Lessee vacates the Leased Premises, to
decorate, remodel, repair, alter or otherwise prepare the Leased
Premises for reoccupancy;
8. To constantly have pass keys to the Leased Premises;
9. To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Buildings;
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<PAGE> 26
10. To exhibit the Leased Premises to others for rentals; and
11. To take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Leased Premises or to
the Buildings, as may be necessary or desirable for the safety,
protection or preservation of the Leased Premises or the Buildings.
Lessor may enter upon the Leased Premises and may exercise any or all
of the foregoing rights hereby reserved without being deemed guilty of an
eviction or disturbance of Lessee's use or possession.
PARKING. Lessee shall observe and respect all rules established by
Lessor designating the use by certain tenants of reserved parking areas and
shall cause its employees and invitees to observe and respect the same.
ADDITIONAL RULES. Lessor reserves the right to make such other and
further Rules and Regulations as in Lessor's judgment may from time to time be
needful or desirable for the safety, care, cleanliness and efficient operation
of the Buildings and for the preservation of good order therein; provided,
however, that Lessor shall obtain the express written approval of Lessee of
such Rules and Regulations, which approval shall not be unreasonably withheld.
CONTROLLING DOCUMENTS. In the event of a conflict between these Rules
and Regulations and the Lease entered into between Lessor and Lessee, the
provisions of the Lease shall govern and control in all respects.
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EXHIBIT 10.18
*** Text Omitted and Filed Separately
CONFIDENTIAL TREATMENT REQUESTED
Under 17 C.F.R. Sections 200.80(b)(4)
and 230.406
BUSINESS AND TECHNOLOGY PARTNERSHIP AGREEMENT
This BUSINESS AND TECHNOLOGY PARTNERSHIP AGREEMENT (the "AGREEMENT") is
made as of December 30, 1999 (THE "EFFECTIVE DATE"), by and among CHANNELPOINT,
INC., a Delaware corporation having its place of business located at 5755 Mark
Dabling Boulevard, Suite 100, Colorado Springs, Colorado 80919 ("CP" or
"CHANNELPOINT") and UNITED HEALTHCARE SERVICES, INC., a Minnesota corporation
having its place of business located at 9900 Bren Road East, Minnetonka,
Minnesota 55343 on behalf of itself and its affiliates ("UHS"). Any reference
herein to UHS shall mean United HealthCare Services, Inc. and its affiliated
companies.
RECITALS
A. ChannelPoint is in the business of, among other things, providing an
Internet-based electronic commerce exchange platform, electronic market
technology and web-based services to provide insurance brokers and customers
with access to quotes, proposals and policy information and to enable the
purchase of insurance policies (the "SERVICES") via websites established and
operated by ChannelPoint (the "CP EXCHANGE" as defined below).
B. The CP Exchange provides a link between its software and technology
known as "Commerce" and its software and technology known as "Insure" to provide
support for the operational functions of insurance companies.
C. UHS is in the business of providing managed health care insurance
and other health insurance products, including those "UHS INSURANCE PRODUCTS"
defined below.
D. UHS and ChannelPoint desire to enter into an agreement whereby
ChannelPoint will license software, provide access to the technology of the CP
Exchange, and provide services to UHS as its strategic, electronic market
technology provider, to enable UHS to distribute the UHS Insurance Products, as
well as those products supplied by third parties, in UHS private and
semi-private branded platforms based upon and integrated with the CP Exchange
and through other open markets in the CP Exchange, at the election of UHS.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions of this Agreement, the parties to this Agreement
agree as follows:
AGREEMENT
1. DEFINITIONS.
1.1 "AFFILIATED COMPANY" means a corporation or entity whose
outstanding equity interests are owned, directly or indirectly 51% or more by
United HealthCare Services, Inc, or its parent and which interests are entitled
to vote for management of such corporation or entity.
1.2 "BRANDED PLATFORMS" means the web-based interfaces to the CP
Exchange branded with the UHS Marks as provided in Section 5.1 below that are
created by CP under this Agreement, including the Private Branded Platform and
the Semi-Private Branded Platforms.
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<PAGE> 2
For purposes of this definition, "Platform" means Internet-based electronic
commerce exchange platform developed or created by CP and "Branded" means the
application of brands designated by UHS for use on such Platforms in connection
with this Agreement.
1.3 "COMMERCELINK(TM)" means the CommerceLink software for facilitating
brokers and customers to obtain access to quotes, proposals, and policy
information using the Internet and connecting with back office systems.
1.4 "CP CONTENT" and "CARRIER PLUG-INS" are defined in Section 6.3
below.
1.5 "CP EXCHANGE" means CP's Internet-based electronic commerce
exchange product, including all related electronic market technology, currently
known as "Commerce" made available to UHS under this Agreement, to provide
insurance brokers and customers with access to quotes, proposals and policy
information and to enable the purchase of insurance policies via websites and
Platforms (including, without limitation, the Branded Platforms) established and
operated by ChannelPoint.
1.6 "CP EXCHANGE ROADMAP" means ChannelPoint's currently anticipated
schedule of new features and functionality.
1.7 "CP SERVICES" means the installation, security, maintenance and
other ancillary services related to the ChannelPoint Software.
1.8 "CP SOFTWARE" means software that is developed and licensed to UHS
hereunder, including all releases, enhancements and error corrections and all CP
third party software included therein.
1.9 "CUSTOMIZATION SERVICES" means CP's customization of the Branded
Platforms, and integration of Insure (including multi-site capabilities and
interface with ancillary insurance products) together with other customizations
requested by UHS and performed by CP for Professional Service Fees.
1.10 "INSURE" means the Insure(TM) software product marketed and
distributed by CP, including Insure Release 2.5, which is capable of providing
the Insure Services set forth on Exhibit A attached hereto, and including all
Service Upgrades, new releases, versions and modifications thereto.
1.11 "MARKS" means the trademarks, trade names, trade dress, service
marks, service names and logos of a party provided for use by the other party
under the terms of this Agreement.
1.12 "POLICYHOLDER" means a broker or client who has obtained a quote
or purchased a UHS Insurance Product from UHS using the Services.
1.13 "PRIVATE BRANDED PLATFORMS" means the Branded Platforms through
which UHS may offer all or a subset of the UHS Insurance Products for sale via
the CP Exchange and/or using Insure.
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<PAGE> 3
1.14 "SEMI-PRIVATE BRANDED PLATFORMS" means the Branded Platforms
through which UHS may offer all or a subset of the UHS Insurance Products and
certain insurance products
1.15 "SERVICES" means the ChannelPoint's Internet-based electronic
commerce exchange service that provides insurance brokers and customers with
access to quotes, proposals and policy information to enable the purchase of
insurance policies via a website.
1.16 "SERVICE UPGRADES" means the commercially available service
upgrades and related documentation to the CP Exchange and/or Insure, as the case
may be, that are provided to customers of CP as part of their maintenance fees
and which are provided to UHS pursuant to Section 4 below.
1.17 "SOURCE CODE" means a human-readable copy of the source code (the
computer instructions in human readable computer language) to Insure,
CommerceLink and all software included in or a part of the CP Exchange that is
necessary to operate the Branded Platforms and Semi-Private Branded Platforms
(herein referred to as "Software" in the Escrow Agreement attached hereto as
Exhibit D), plus any pertinent commentary or explanation that may be used by
ChannelPoint's programmers, and all related documentation, description of
development environment, a list of all third party software and any
customizations made thereto, system documentation, statements or principles of
operation, and schematics, all as necessary or useful for the effective
understanding, maintenance and use of the Source Code. To the extent that the
development environment employed by ChannelPoint for the development,
maintenance, compilation, and implementation of the Source Code includes any
device, programming, or documentation not commercially available to Customer on
reasonable terms through readily known sources other than ChannelPoint, the
Source Code shall include all such devices, programming, or documentation. The
foregoing reference to such development environment is intended to apply to any
programs, including compilers, workbenches, tools, and high-level (or
proprietary) languages, used by ChannelPoint for the development, maintenance,
and implementation of the Source Code.
1.18 "THIRD PARTY CARRIERS" means third party underwriters and issuers
of insurance products that are made available through the CP Exchange and the
Semi-Private Branded Platform.
1.19 "THIRD PARTY SOFTWARE" means software incorporated into
Insure(TM), or CommerceLink(TM), or any other software licensed or otherwise
provided to UHS that is owned by an entity other than ChannelPoint and licensed
to ChannelPoint.
1.20 "UHS CONTENT" is defined in Section 6.1 below.
1.21 "UHS INSURANCE PRODUCTS" means the Individual and Small Group
insurance products offered by UHS for sale through the CP Exchange and/or
through the use of Insure.
1.22 "UHS PROPRIETARY CONTENT" is defined in Section 6.1 below.
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<PAGE> 4
1.23 "UHS SALES FORCE" means UHS' independent and dedicated brokers,
sales agents or other UHS distribution intermediaries that are authorized by UHS
to access the Branded Platforms pursuant to this Agreement.
2. ACCESS AGREEMENT; RESOURCE COMMITMENTS; APPOINTMENT
2.1 ACCESS AGREEMENT. ChannelPoint shall have access to the UHS systems
and data in accordance with the terms and for the purposes set forth in the
Access Agreement attached hereto as Exhibit B.
2.2 RESOURCE COMMITMENTS. CP and UHS will establish a joint product
team ("PRODUCT TEAM") consisting of a number of representatives from
ChannelPoint and a number of representatives from UHS to be mutually agreed to
who will develop a plan and provide input to CP regarding the future development
of CP products and services for UHS. CP shall establish a dedicated team of
Professional Services personnel and assign that team exclusively to projects for
UHS as set forth in this Agreement. Such team or a subset thereof shall
participate in the Product Team. The Product Team will be responsible for
preparation of Letters of Engagement, as described in Section 4.5 below. The
Product Team will also serve as the point of contact for UHS' role as a Design
Partner (as described in Section 5.2) and will coordinate the parties' ongoing
development of implementation plans and milestones, and supplemental UHS
financial commitments, under this Agreement.
2.3 ELECTRONIC AGENT. UHS hereby appoints ChannelPoint as UHS'
"Preferred" electronic agent (as further defined in Section 2.5 below)
authorized to market and solicit offers for UHS Insurance Products, based on the
rates, terms and conditions of any UHS Insurance Policies, via the Internet
through the CP Exchange (including without limitation through the Branded
Platforms), and ChannelPoint hereby accepts such appointment, subject to the
terms and conditions of this Agreement. UHS may at any time alter coverages,
provisions or exclusions of the UHS Insurance Products without the consent of
ChannelPoint. UHS agrees to give ChannelPoint written notice of such
modifications in a timely manner.
2.4 LIMITS ON AUTHORITY. ChannelPoint is not authorized to (i) make,
alter or waive any of the rates, terms or conditions of any of UHS Insurance
Products, including forms, policies, contracts or advertising materials, (ii)
bind coverage under an Insurance Product without UHS' express prior written
approval, (iii) sign any contract on behalf of UHS or its affiliates or (iv)
prepare or distribute any promotional or descriptive material relating to this
Agreement or any UHS Insurance Products without first obtaining UHS' written
approval of such materials.
2.5 PREFERRED PROVIDER. In connection with ChannelPoint's appointment
as a preferred electronic agent of UHS, UHS agrees that, so long as CP is in
compliance with this Agreement, CP shall be UHS' preferred third party provider
of all member, employee and employer desktop web-based front-end services via
ChannelPoint's Commerce at Work and Commerce Administrative Portals or
ChannelPoint's successor products thereto for all broker assisted pre-sale
activities (including but not limited to distribution, benefit selection,
enrollment administration and post-sale benefits administration, but not
including [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 5
[...***...], and other applications developed inhouse by UHS without
participation of third party vendors) for the UHS Insurance Products, and UHS
agrees that all such services will be provided via the Branded Platforms in
accordance with this Agreement. UHS also agrees to use its best efforts to refer
to ChannelPoint as its "Preferred Internet Insurance Exchange Services Provider"
or to use similar language to the extent practical in press releases and
marketing collateral material when such written material refers to electronic
commerce insurance distribution initiatives undertaken by UHS.
3. CP EXCHANGE SERVICES AND INSURE LICENSE
3.1 LICENSE TO USE CP EXCHANGE. CP hereby grants to UHS and properly
licensed members of the UHS Sales Force the non-exclusive, non-transferable
right and license during the term of this Agreement to access and use the CP
Exchange through the Branded Platforms for the sole purpose of providing
insurance procurement services to UHS' customers and potential customers.
Concurrently with the delivery of the Branded Platform, CP shall issue to UHS
for each properly licensed member of the UHS Sales Force a user name and
Password to enable access to the CP Exchange, provided that any such Sales Force
who is not employed by UHS shall have first signed a Broker Agreement on a form
provide by ChannelPoint.. UHS shall treat the user name and Password as CP's
Confidential Information (as defined in Section 9 below) and to make such
information only available to UHS and the UHS Sales Force for use as permitted
under this Agreement. Use of the CP Exchange shall be subject to CP's
then-current terms and conditions of use and privacy policy, as published by CP
on the CP Exchange. No other uses of the CP Exchange are permitted except by
separate agreement.
3.2 LICENSE TO INSURE AND COMMERCELINK. CP hereby grants to UHS the
license rights to Insure and CommerceLink in accordance with the terms of the
Software License attached hereto as Exhibit C.
3.3 CORE FUNCTIONALITY. In consideration of the Transaction Fees (as
defined in Section 7.3 below), CP will deliver the Branded Platforms which
include the basic core functionality and other elements specified in Letters of
Engagement described in Section 4.5 below. UHS will specify the Branded
Platforms to be developed and will have the sole discretion in the selection of
UHS Insurance Products offered through the Branded Platforms and in the
selection of the insurance products offered by Third Party Carriers through the
Semi-Private Branded Platforms.
3.4 CUSTOMIZATION SERVICES. In consideration of the Professional
Service Fees (as described in Section 7.6), CP will perform the Customization
Services relating to (a) implementation of any Branded Platform elements not
included in the basic core functionality described in Exhibit A; (b) the import
and repurposing of UHS Content in data centers on the Commerce Exchange; and (c)
additional unique and/or proprietary UHS requirements, features and
functionality that are not part of the Commerce Exchange. Either party may
propose Customization Services, and if agreed as to scope, cost and schedule,
the parties shall execute a Letter of Engagement.
3.5 SOURCE CODE ESCROW. CP shall place into escrow source code for
Insure and CommerceLink, and such other Software as necessary for UHS to operate
its Branded Platforms
* CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 6
and Semi-Private Branded Platforms, including all written and electronic
documentation necessary to modify and operate such software, pursuant to the
terms of the Escrow Agreement attached hereto as Exhibit D.
3.6 SECURITY. ChannelPoint shall ensure that all security measures
related to the CP Exchange, the UHS Content and other data described in Section
6.5, and their use by UHS, shall conform to reasonable security methodology,
standards and requirements of Customer. ChannelPoint acknowledges and agrees
that it will (a) execute all security agreements reasonably required by UHS
prior to any access to the UHS network, and (b) provide all information
necessary, such as user names, in order for UHS to preauthorize and control
access to the UHS network by ChannelPoint's employees.
3.7 HEALTH CARE AND INSURANCE REGULATIONS. ChannelPoint acknowledges
that (a) the UHS operates in a regulated industry, (b) the use of the CP
Exchange and Insure will involve a number of governmental regulations covering
the heath care and insurance industries, and (c) the CP Exchange and Insure must
effectively and efficiently accommodate such governmental regulations in order
for it to be useful to UHS. ChannelPoint, in cooperation with UHS, will ensure
that the specifications for all releases and versions of CP Exchange and Insure
accommodate UHS' need to comply with all such governmental regulations, subject
to UHS' being current on all maintenance obligations pursuant to Section 7.6.
ChannelPoint shall also provide Service Upgrades and updates to Insure in a
timely manner after UHS has notified CP of any such regulatory changes so as to
enable UHS to comply with any additional and applicable regulatory changes at
all times. UHS agrees to inform ChannelPoint of such regulatory changes and
assist ChannelPoint in its updates resulting from such regulatory changes. The
parties may from time to time change and update this provision based on
regulatory developments and analysis. The parties agree that Service Upgrades
and updates needed to accommodate minor changes due to regulations shall be
provided free of charge by CP to UHS. ChannelPoint reserves the right to charge
additional fees for other changes, in an amount to be mutually agreed upon
between ChannelPoint and UHS, prior to providing such Service Upgrades resulting
from other than minor changes.
3.8 INTERNET AND E-COMMERCE REGULATIONS. ChannelPoint, in cooperation
with UHS, will ensure that the operation of the CP Exchange accommodates UHS'
need to comply with all governmental regulations related to use of the Internet
and electronic commerce, including, without limitation, any regulations or laws
covering confidentiality and privacy of individuals' personally identifiable
data.
3.9 [...***...]
4. UPGRADES, ENHANCEMENTS, SUPPORT AND OTHER SERVICES
4.1 GENERAL UPGRADES/ENHANCEMENTS TO THE CP EXCHANGE. In consideration
of the Transaction Fees (as defined in Section 7.3 below), CP will deliver to
UHS the Branded Platforms which include the basic core functionality and other
elements that are commercially available from ChannelPoint as of the effective
date, and any modifications made or future
* CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 7
capabilities and features added and made commercially available from time to
time. Substantially all features and functionality then currently available will
be provided to UHS within the scope of the Transaction Fees and CP shall make
available to UHS all Service Upgrades for the CP Exchange as and when made
commercially available by CP.
4.2 CP EXCHANGE ROADMAP. The CP Exchange will generally evolve to
include new features and functionality in accordance with the CP Exchange
Roadmap attached hereto as Exhibit E ("CP Exchange Roadmap"); UHS acknowledges
that the CP Exchange Roadmap is provided for information purposes only and does
not represent a binding commitment on behalf of CP; provided, however, that CP
and UHS shall cooperate and shall devote resources and experience to define,
prioritize and plan future to CP Exchange and Insure that may become part of
CP's general product releases.
4.3 SUPPORT SERVICES AND MAINTENANCE.
4.3.1 SUPPORT SERVICES AGREEMENT. The parties will execute a
mutually acceptable support and services agreement within sixty (60) days after
the Effective Date of this Agreement. Such agreement will contain service
levels, support response times, and other terms that will govern CP's support
and maintenance of the CP Exchange and the Branded Platforms , substantially to
the service levels, support response times and other terms that govern support
and maintenance currently in effect as attached hereto on Exhibit F. The rates
for such services shall be the applicable rates as set forth on Exhibit F at the
time of delivery of such Services. Such support shall include provide support
provided by CP via email ([email protected]) and telephone (at (insert
telephone number) to UHS and the UHS Sales Force relating to the authorized use
of the CP Exchange and the Branded Platforms, including, without limitation,
verifying data on the exchange, investigating bugs, and validating error
conditions, UHS or the UHS Sales Force shall provide direct support to end-user
customers related to inquiries about UHS products and services, such as plan
availability, how to use the product, and capture of information on other
questions or problems, and shall use commercially reasonable efforts to respond
to all customer service inquiries promptly after receipt.
4.3.2. CUSTOMER COMMUNICATIONS. All written customer support
communications relating principally to the CP Exchange shall state that the CP
Exchange is provided or powered by ChannelPoint and shall include a reference to
"Commerce(TM)" or such other brand designations specified by ChannelPoint from
time to time. UHS shall also display on all websites hosted or built by CP, the
phrase "Powered by ChannelPoint".
4.3.3 MAINTENANCE. In exchange for maintenance fees described in
Section 7.6 below, CP shall provide to UHS all bug fixes, modifications,
enhancements, error corrections and new versions or releases of Insure,
CommerceLink and the CP Exchange which are generally made available to other
participants in ChannelPoint's Insure, CommerceLink and CP Exchange maintenance
program at no additional charge.
4.4 SERVICE UPGRADES. CP will provide to UHS at no charge beyond
maintenance fees then in effect and paid by UHS in accordance with the terms of
this Agreement, the option to implement any Service Upgrade and enhancements to
the current release of Insure, as soon as such Service Upgrade or enhancements
become commercially available. If UHS decides to exercise this option with
respect to Service Upgrades for Insure, the parties shall mutually agree
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<PAGE> 8
upon whether UHS, shall install such Service Upgrade or enhancement itself or
have CP install the Service Upgrade or enhancement, and which sites such
upgrades or enhancements shall be installed, and, if the parties agree that
ChannelPoint shall perform the installation, such work shall be performed in
consideration of Professional Service fees in accordance with the professional
service fee schedule in effect at such time.
4.4.1 SERVICE UPGRADES TIME FRAMES. ChannelPoint shall maintain and
provide Service Upgrades for any reported errors in the release of Insure or
CommerceLink then being used by UHS for a period of twenty-four (24) months
after execution of the Certificate of Final Acceptance for any subsequent
release.
4.4.2 CHANGE CONTROL GUIDELINES. ChannelPoint shall adhere to
mutually agreed to change control practices and guidelines in accordance with
UHS' commercially reasonable standards when installing Service Upgrades,
enhancements and new releases at any UHS site. ChannelPoint shall also utilize
prudent and reasonable server and software administration practice guidelines to
ensure that UHS is aware of the installation or delivery of any of the same
sufficiently in advance, so that no disruption to UHS' production operations
results from any such proposed delivery or installation. All Service Upgrades,
enhancements and new releases must be applied in an auditable and controlled
manner.
4.5 PROFESSIONAL SERVICES AND LETTERS OF ENGAGEMENT. In consideration
of UHS' payment of agreed upon Professional Service Fees (as described in
Section 7.6), CP will perform mutually agreed Professional Services
("PROFESSIONAL SERVICES") described and in accordance with the terms set forth
on written Letters of Engagement, which Letters of Engagement shall be in
substantially the form attached hereto as Exhibit G ("LETTERS OF ENGAGEMENT")
describing the scope of services, deliverables, milestones, and Professional
Service Fees, expenses and/or economic arrangements, and which Letters of
Engagement shall contain a "not to exceed price" rather than an "estimated
price."
4.6 THIRD PARTY SOFTWARE. UHS shall pay to CP the cost for any third
party software incorporated into products or services sold or licensed to UHS
pursuant to this Agreement at the same rates and pursuant to the same terms as
CP charges its other customers for such software.
5. BRANDING; MARKETING AND OTHER COOPERATIVE ACTIVITIES
5.1 BRANDING. The Branded Platform licensed to UHS shall be identified
and branded in accordance with UHS' direction, provided that all permitted use
of the Branded Platform by or on behalf of UHS shall bear the Marks of CP
throughout, in form reasonably approved by CP and UHS, such as "Powered by
ChannelPoint" with CP logos and other related marking.
5.2 DESIGN PARTNER. UHS agrees to serve as CP's Design Partner by using
commercially reasonable efforts to (a) provide to CP complete and timely input
on products and services provided by CP under this Agreement, (b) provide input
from UHS Sales Force and UHS' customers relating to the Services,, including any
customer service comments and complaints and (c) participate in marketing events
as specified in the Marketing and Sales Plan described in Section 5.3 below,
including participation in user group activities. As CP's design
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partner, UHS will be entitled to [...***...], (ii) [...***...], and (iii) advise
CP of UHS' preferences and suggestions for the future direction of the Branded
Platforms and Insure generally to help retain UHS' "first mover" advantages.
5.3 MARKETING AND SALES PLAN. The parties agree to work together to
develop a marketing and sales plan within ninety (90) days of the Effective Date
that materially meets the mutual objectives of both parties (the "MARKETING AND
SALES PLAN"). The Marketing and Sales Plan will include priority plans to
reflect the parties' agreements: (a) that in marketing of bundled services
capabilities to small-group customers, including any direct-to-consumer features
available through the CP Exchange (e.g., the bundling of CP's expertise and the
CP Exchange and Branded Platform with UHS' value-added domain knowledge, UHS
Content, fulfillment systems, and call center capabilities), UHS will in good
faith market bundled services for joint delivery by UHS and CP; and (b) such
other marketing and sales activities as the parties may agree. The Marketing and
Sales Plan is intended to provide a tangible measurement of results that are in
the interests of both parties, and are evaluated on a periodic basis, but not
less than quarterly. Upon completion, the marketing and sales plan shall be
included in this Agreement as an Exhibit. In conducting the Marketing and Sales
Plan, both parties may use Marks specified by the other party under the licenses
specified in Section 8 below and in accordance with the procedures specified
therein.
5.4 PRESS RELEASE. The parties will cooperate in good faith in creating
a mutually agreed upon press release and other public correspondence concerning
this Agreement for simultaneous national and local release as soon as possible
after the Effective Date. Neither party will issue a press release or otherwise
publicize the terms of this Agreement without the prior written consent of the
other party.
5.5 RATING ENGINES EXCLUSIVITY. UHS agrees to use the CP rating engine,
or where mutually agreed, call out to an existing UHS rating engine, provided
that UHS agrees to use CP as a preferred provider of rating engine capabilities
to UHS. As UHS' preferred provider for rating engines, UHS shall notify CP at
the earliest possible time of UHS' interest in deploying new, different or
additional rating engines, and, [...***...].
5.6 MEMBER, EMPLOYEE AND EMPLOYER DESKTOP PREFERRED PROVIDER. UHS
agrees that CP shall be its preferred third party provider for member, employee,
and employer desktop web-based front-end services via CP's Commerce At Work and
Commerce Administrative Portals (or CP's successor products thereto) for all
broker assisted pre-sale activities (including, but not limited to distribution,
benefit selection, enrollment, administration, but not including [...***...],
and other applications developed inhouse by UHS without participation of third
party vendors) and post-sale benefits administration for all UHS Insurance
Products. As UHS' preferred provider under this Section 5.6, UHS shall notify CP
at the earliest possible time of UHS' interest in deploying new, different or
additional desktop web front-end services, provide CP's product and technical
teams with access to all UHS requirements information, [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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5.7 [...***...].
6. CONTENT AND TECHNOLOGY LICENSING AND OWNERSHIP
6.1 UHS CONTENT AND LICENSING. UHS has acquired and developed, and
intends to continue to acquire and develop, a body of insurance product content,
rules, algorithms, procedures and policy materials, including the UHS
Proprietary Content, (collectively, the "UHS CONTENT"). UHS will, at its own
expense, generate and deliver to CP all UHS Content to be included in the CP
Exchange Subject to the terms and conditions of this Agreement and during the
Term, UHS hereby grants CP a royalty-free, worldwide, non-sublicensable license
to reproduce, distribute, publicly perform, publicly display and digitally
perform the UHS Content via the Internet solely as part of the CP Exchange;
provided, however, that the proprietary algorithms, rules, rating methodology
and the like, and all other information used by UHS to create quotes for the UHS
Products (collectively, the "UHS PROPRIETARY CONTENT") are and shall remain the
Confidential Information of UHS and may not be disclosed to any third party
without the prior written consent of UHS Notwithstanding anything to the
contrary in this Agreement, the UHS Proprietary Content may only be used by CP
to repurpose the Content to be used on the CP Exchange. CP may make a reasonable
number of archival copies of the UHS Content. Title to and ownership of all
intellectual property rights of the UHS Content shall remain with UHS or its
third party licensors.
6.2 UHS CONTENT MANAGEMENT. UHS will be solely responsible for
creating, managing, editing, reviewing, testing, deleting and otherwise
controlling the UHS Content via the procedures set forth below. CP shall deliver
to UHS certain tools and API's to enable UHS to implement and manage all changes
to the UHS Content accessible via the Branded Platforms (the "CP TOOLS"). CP
hereby grants UHS a royalty-free, worldwide license to use the CP Tools during
the Term solely to manage the UHS Content. Upon conversion of the UHS Content
and any updates thereto, UHS shall verify that all rating and similar algorithms
that are part of the UHS Content produce correct results. Except for any
transformation required to convert the content to CP's proprietary data format,
CP shall not modify or alter the UHS Content without UHS' written consent. UHS
shall be solely responsible for any liability associated with the use,
publication and distribution of the UHS Content, except for any errors in the
UHS Content that are created through CP's negligent modification, translation or
use of the same in the CP Exchange.
* CONFIDENTIAL TREATMENT REQUESTED
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6.3 CP CONTENT AND CARRIER PLUG-INS. CP has acquired and developed, and
intends to continue to acquire and develop, a body of content, including without
limitation, insurance product content, rules, algorithms, procedures and policy
materials (the "CP CONTENT") comprised of materials that were either licensed
from Third Party Carriers to CP, or developed by CP. UHS and CP intend that
certain of the CP Content may be made available via Semi-Private Branded
Platform as mutually agreed upon by UHS and CP in accordance with Section 3.2
above. In this event, the parties agree that CP shall have the right to solicit
Third Party Carriers to make their content ("Carrier Plug-Ins") available to
enable electronic distribution of such carrier's insurance products through the
Branded Platform subject to Exchange Service Fees payable to CP by UHS pursuant
to Section 7.3. CP grants UHS a worldwide license to use, with right to
sublicense to reproduce, distribute, modify, and prepare derivative works from,
and publicly perform and publicly display the CP Content via the Internet solely
for use with and as part of the Branded Platforms, including without limitation
the right to make the CP Content available to third parties for downloading and
copying over the Internet. Title to and ownership of all intellectual property
rights of the CP Content shall remain with CP or its third party licensors. CP's
license grant to UHS for CP Content shall be restricted to use in conjunction
with permitted use of the Branded Platform and the purposes of this Agreement.
6.4 OWNERSHIP.
(a) CP PROPERTY. As between CP and UHS, CP or its third party
suppliers will retain sole ownership of all intellectual property rights in and
to the CP Marks, the CP Content, the CP Tools, the Open Portals, the the CP
Exchange, Insure, CommerceLink, the Private Branded Platforms, the Semi-Private
Branded and the Branded Platforms (exclusive of the UHS Content and UHS Marks),
including all software, content, documentation, technology and trademarks used
in connection with the CP Services and all enhancements thereto and the CP
Exchange and the Branded Platforms (the "CP PROPERTY"), subject to UHS'
ownership of the UHS Content and the UHS Marks as provided in subsection (b)
below. The CP Property includes any and all modifications, enhancements or
derivative works made to the CP Property by CP during the term of this
Agreement, whether or not made in response to UHS suggestions or requirements.
Except for licenses expressly granted to UHS under this Agreement, UHS is not
granted any other intellectual property rights, or any other rights, franchises
or licenses, with respect to the CP Property.
(b) UHS PROPERTY. As between UHS and CP, UHS will retain sole
ownership of all intellectual property rights in and to the UHS Marks, the UHS
Content (including the UHS Proprietary Content) and any other information,
content, documentation, look and feel in the presentation and interface of
Branded Platforms and trademarks that CP develops specifically for the UHS
Branded Platforms, or that UHS develops or makes available under the terms of
this Agreement (the "UHS PROPERTY"), subject to CP's ownership of the CP
Property as provided in subsection (a) above and the CP Marks. The UHS Property
includes any modifications, enhancements or derivative works made to the UHS
Property by UHS during the term of this Agreement. Except as provided herein, CP
is not granted any other intellectual property rights, or any other rights,
franchises or licenses, with respect to the UHS Property.
(c) OTHER INTELLECTUAL PROPERTY. Ownership of intellectual property
rights in any technology (other than the UHS Property and the CP Property)
developed, made or
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conceived by either CP or UHS, jointly or alone, in connection with and during
the term of this Agreement pursuant to a Services Supplement will be specified
in any such mutually agreed Services Supplements. In the event any such
technology is developed, made, authored or conceived by either CP or UHS,
jointly or alone, in connection with and during the term of this Agreement, but
not subject to the provisions of any Services Supplement, all intellectual
property rights in and to such technology shall be (i) solely owned by CP, in
the case of technology developed, made, authored or conceived solely by CP; (ii)
solely owned by UHS, in the case of technology developed, made, authored or
conceived solely by UHS; or (iii) jointly owned by CP and UHS, in the case of
technology developed, made, authored or conceived jointly by CP and UHS
personnel (including its employees and consultants) for which, where relevant,
such personnel would be considered joint inventors under United States Patent
Act or joint authors under the United States Copyright Act.
(d) TRANSFER OF OWNERSHIP. Should the intellectual property created
hereunder or otherwise in connection with this Agreement be found not to be
owned exclusively by the party identified as the owner in 6.4 (a), (b) or (c)
above, but rather, to be owned exclusively by the other party, the other party
agrees to assign, convey and transfer and does hereby assign, convey and
transfer, to the party identified any and all its rights, including but not
limited to the right to register or patent such rights worldwide, to the extent
thereof, and to cooperate and assure the cooperation of its employees,
representatives and agents in such registration or patenting efforts.
6.5 DATA ACCESS. CP shall keep secure as required by this Agreement,
and UHS shall own all right, title and interest in and to all data created
through the use by any person that inquires about or obtain a UHS Insurance
Product through use of the Branded Platforms or the CP Exchange, including,
without limitation, the following: (a) use and traffic data concerning such
persons, including but not limited to impression data, usage summaries and click
through activity ("IMPRESSION DATA"); (b) data collected and stored on the CP
Exchange through the processing of inquiries, quotations and proposals using the
UHS Rating Content; (c) all information submitted to the CP Exchange by or on
behalf of persons and their dependents seeking insurance coverage from UHS
(whether through an employer or on an individual basis), which information is
broken down on an individual, rather than aggregate, basis; (d) all information
submitted to the CP Exchange by or on behalf of employers seeking UHS insurance
coverage or other information (whether directly from such employers or
indirectly through brokers or agents concerning UHS Products); (e) the list of
all persons who have requested information, proposals or quotations for any UHS
Insurance Product. As used herein, "aggregate" means that the data does not
contain or does not have associated with it any information that is identifiable
to UHS, a member of the UHS Sales Force, an employer, employee or a particular
individual who inquires about or purchases a UHS Insurance Product. Upon UHS'
request, CP shall provide all such data to UHS in a mutually acceptable format.
6.6 DATA CAPTURE. Subject to applicable data privacy laws and
regulations relevant to the Impression Data, CP shall be entitled to capture and
collect Impression Data in its operation of the CP Exchange and the hosting of
the Branded Platforms and CP may use Impression Data in any aggregate or generic
form that does not identify any particular customer.
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7. FEES
7.1 TARGET REVENUES. To secure CP's ongoing reasonable availability and
CP's provision of the services provided hereunder, UHS agrees to target revenues
AS FOLLOWS:
(a) [...***...] in total Target Revenue over the term of this
Agreement payable and earned as follows: [...***...] of Target Revenue for 1999
and [...***...] of Target Revenue for each calendar year of the term beginning
in the year 2000 and ending in 2004, for a total target revenue of [...***...]
("TARGET REVENUE"). Such Target Revenue shall include all sources of fees due
CP, including fees earned from Transaction Fees as set forth below in Section
7.3, Maintenance Fees as set forth below in Section 7.7, Project Management Fees
as set forth in Section 7.9 below, License Fees as set forth below in Section
7.1 (c) and Professional Service Fees, as set forth below in Section 7.1 (b)
(b) Professional Service Fees in the amount of: [...***...], shall
be earned and payable as follows: [...***...] for Professional Services to be
used in each of the years 2000; 2001; 2002; 2003; and [...***...] for 1999. Each
separate project establishing Professional Service Fees shall be set forth in a
separate Letter of Engagement.
(c) License Fees payable as follows: [...***...] that shall be
earned and nonrefundable upon the delivery and acceptance of Insure 2.x; Insure
3.0; Commerce and CommerceLink, which amount includes platform customization
that is deliverable upon payment of [...***...], with allocation for each such
delivery to be set forth on Exhibit H attached hereto and by this reference
incorporated herein. License Fees paid under this Agreement shall be deemed to
be earned and nonrefundable upon deployment and acceptance by UHS.
(d) Installation of Software, for such activities including but not
limited to configuration and customization, shall be separately billed and such
amounts therefor shall be included as a separate item in the relevant Letter of
Engagement.
7.2 TRANSACTION FEES. UHS shall pay to CP Transaction Fees equal to a
percentage of gross premiums paid by a Policyholder to UHS for each UHS
Insurance Product purchased by such Policyholder that has been quoted using the
Service. For purposes of calculating the Transaction Fees, the Percentage shall
be established in accordance with the schedule specified in Section 1(a) of
Exhibit I attached hereto. Transaction Fees are not payable on Insurance
Products which have not been quoted or purchased over any one of the following:
the CP Exchange, Private Branded Platforms or Branded Platforms. Such
Transaction Fees are earned when such gross premiums are paid, and such
Transaction Fees are independent of any other fee earned or service provided
under this Agreement.
* CONFIDENTIAL TREATMENT REQUESTED
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7.3 PROFESSIONAL SERVICE FEES. UHS shall pay all Professional Service
Fees, time plus expenses, unless otherwise agreed, pursuant to the applicable
Letter of Engagement for the Professional Services requested therein.
7.4 MAINTENANCE FEES. In consideration for the Service Upgrades and
related support services provided by CP hereunder, UHS shall pay Maintenance
Fees on a calendar quarterly basis equal to [...***...] payable as provided in
Section 7.10 below. Maintenance shall begin at the same time as the warranty
begins.
7.5 INSURE LICENSE FEES. In consideration for the rights granted to UHS
under the Insure License, UHS shall pay CP the Insure and CommerceLink License
Fees specified in the Insure and CommerceLink License in accordance with the
terms specified therein and in this Agreement. herein
7.6 PROJECT MANAGEMENT FEES. CP shall be responsible for the quality
and timely performance of all Professional Services set forth in each Letter of
Engagement, whether performed by CP or any third party operating under the
direction of CP. To the extent that CP engages the services of any third parties
with respect to any Letter of Engagement, CP shall:
7.6.1 negotiate and assume responsibility for commitments
(including fees, quality and timeliness) with all third party vendors,
7.6.2 separately itemize in the Letter of Engagement, CP's fees as
a project manager, assuming responsibility for the third party services,
7.6.3 not add any premiums or additional charges (other than as
identified in the project management fees permitted by Section 7.9.2 above, and
7.6.4 be responsible for recommending the appropriate use of third
party resources (including those of UHS), subject to the approval of UHS, whose
approval hall not be unreasonably withheld.
7.7 TRAVEL EXPENSES. Subject to UHS' prior consent, not to be withheld
unreasonably, in accordance with UHS' expense reimbursement policies, UHS shall
reimburse ChannelPoint for reasonable travel, lodging and related expenses
incurred by ChannelPoint in connection with ChannelPoint's performance of its
obligations under this Agreement. ChannelPoint shall provide Customer with
reasonable documentation for all such travel, and Customer shall pay such
expenses within thirty (30) days of receipt of such documentation.
7.8 REPORTING AND INVOICING. Each party shall keep reasonably accurate
and complete books and records as necessary to verify the fees owing under this
Agreement. Each payment of Transaction Fees based upon Third Party Commissions
shall include a report specifying the Third Party Carrier, the insurance product
sold and the amounts received as Third Party Commissions during the applicable
quarter For all fees owed to ChannelPoint by UHS as described in Section 7, UHS
shall provide ChannelPoint with quarterly reports as necessary for ChannelPoint
to properly bill UHS, and ChannelPoint shall invoice UHS on a quarterly basis
and UHS shall pay such fees within thirty (30) days of the date of
ChannelPoint's invoice. UHS shall use diligent efforts to track Policyholders
who have purchased Insurance Products that had
* CONFIDENTIAL TREATMENT REQUESTED
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been quoted or purchased through use of the Service. On a quarterly basis, UHS
shall provide to ChannelPoint a report listing by insurance broker or client the
Insurance Products sold during the prior month, specifying the products,
associated gross premiums, commissions or override payments, designated brokers
and other relevant information relating to such Policyholders, In addition to
the invoices provided to UHS under this section, ChannelPoint will provide UHS
with quarterly reports listing those insurance brokers and clients that have
obtained quotes or purchased Insurance Products through the Service during the
prior ninety-day (90) period. In addition, the parties shall comply with any
special tracking, reporting or reconciliation procedures agreed to by the
parties. Both parties will have the right to engage, at its own expense, an
independent auditor to examine the other party's records once per year as may be
necessary to determine the correctness of any report or payment made under this
Agreement, such audits to be conducted during normal business hours and upon
reasonable advance notice to the other party. Such invoices, payments and
reports shall become due monthly once UHS has rolled out Insure and CommerceLink
to 20 health plans.
7.9 TAXES. All fees owed by UHS to CP are exclusive of, and UHS shall
pay, all sales, use, excise and other taxes that may be levied upon UHS in
connection with this Agreement, or other transactions contemplated under this
Agreement, except for taxes based on CP's net income.
7.10 [...***...].
8. TRADEMARKS
8.1 LICENSE TO UHS MARKS. UHS grants to CP a non-exclusive,
nontransferable, royalty-free, worldwide license to use UHS' Marks to promote
CP's relationship with UHS. Further, UHS grants to CP a non-exclusive,
nontransferable, royalty-free, worldwide license to use UHS' Marks: (i) on the
CP Exchange to denote that the UHS Content is owned by UHS; and
* CONFIDENTIAL TREATMENT REQUESTED
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(ii) to promote the Branded Platform as containing the UHS Content in
promotional materials including but not limited to brochures, presentations,
advertising, and marketing. The foregoing grants are subject to the provisos
that: (a) CP shall at all times use the UHS Marks in accordance with UHS'
standard trademark usage guidelines provided to CP; (b) CP shall not engage in
any action associated with the UHS Marks that adversely affects the good name,
good will, image or reputation of UHS; and (c) all use of the UHS Marks in any
manner other than on the CP Exchange shall be subject to the prior written
approval of UHS, which approval will not be unreasonably withheld. CP agrees
that all use of the UHS Marks hereunder shall inure to the benefit of UHS. No
other rights or licenses to the UHS Marks are granted to CP hereunder except as
expressly provided in this Section 8.1.
8.2 LICENSE TO CP MARKS. CP grants to UHS a non-exclusive,
nontransferable, royalty-free, worldwide license to use the CP Marks (i) to
promote the Branded Platform bearing CP's co-branding and to promote UHS'
relationship with CP, as provided in the Marketing and Sales Plan, in
promotional materials including but not limited to brochures, presentations,
advertising, and marketing; and (ii) to publicly display hypertext links to the
CP Exchange from appropriate areas of the Branded Platform and UHS' web site;
provided that: (a) UHS shall at all times use the CP Marks in accordance with
CP's standard trademark usage guidelines provided to UHS; and (B) UHS shall not
engage in any action associated with the CP Marks that adversely affects the
good name, good will, image or reputation of CP. UHS agrees that all use of the
CP Marks hereunder shall inure to the benefit of CP. No other rights or licenses
to the CP Marks are granted to UHS hereunder except as expressly provided in
this Section 8.2.
9. CONFIDENTIALITY
9.1 DEFINITION. "CONFIDENTIAL INFORMATION" means confidential and
proprietary information which relates to UHS' or CP's business, products and
services, including but not limited to data, trade secrets, discoveries, ideas,
concepts, know-how, techniques, software, business activities and operations,
reports, studies and other technical and business information, including
personal Policyholder information, the UHS Proprietary Content, the Impression
Data and other data referenced in Section 6.5. Notwithstanding the foregoing,
Confidential Information shall not include any information which (a) is known by
the receiving Party at the time of disclosure, free of any obligation to keep it
confidential, as evidenced by credible evidence; (b) is or becomes publicly
available through authorized disclosure by the owner of such information; (c) is
rightfully obtained by the receiving Party from a third party who has the right
to transfer or disclose it; or (d) is independently developed by receiving Party
without reference to Confidential Information of the other Party.
9.2 NON-DISCLOSURE. Each Party shall keep in during the Term and after
termination or expiration of this Agreement all Confidential Information of the
other party and that it will not directly or indirectly disclose to any third
party or use for its own benefit, or use for any purpose other than the
performance of its obligations under this Agreement, any Confidential
Information it receives from the other party. Each party shall use reasonable
care to protect the other Party's Confidential Information, and in no event less
than the same degree of care as it would employ with respect to its own
information of like importance which it does not desire to have published or
disseminated. Each party may make Confidential Information of the other party
available to those of its employees, contractors or agents who have a need to
know such information and who
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are subject to binding use and disclosure restrictions at least as protective as
those set forth herein. Notwithstanding the foregoing, either party may make
disclosures as lawfully required or requested by a court of law, or any
governmental entity or agency in connection with seeking any governmental or
regulatory approval or in connection with a judicial proceeding, provided that
reasonable measures are taken to limit such disclosure and to obtain
confidential treatment or a protective order and the disclosing party is allowed
to participate in such efforts. Nothing herein shall be deemed to prevent or
limit CP from capturing, collecting and using the Impression Data as provided in
Section 6.5 above.
9.3 REMEDIES. UHS and CP each agree that any breach of this Section 9
would cause irreparable harm or injury to the other Party significantly in
excess of the value received by such other party pursuant to this Agreement, and
that such other party shall be entitled to declaratory, injunctive or other
equitable relief, in addition to any other legal or equitable remedies it may
have, for any such breach.
10. WARRANTIES AND COVENANTS
10.1 UHS WARRANTIES. UHS represents and warrants that:
(a) neither the UHS Content or any portion thereof in connection
with the Branded Platform or the CP Exchange will: (i) infringe or violate any
third party's copyright, patent, trademark, trade secret or other proprietary
rights; (ii) violate any law, statute, ordinance or regulation, including
without limitation the laws and regulations governing export control; (iii) be
defamatory or trade libelous; (iv) be pornographic or obscene; (v) be outdated
or inaccurate in any way that could mislead, in any material respect, any
applicant for UHS Insurance Products or users of the Branded Platform or the CP
Exchange; or (vi) to the extent such may contain code or other electronic files,
contain viruses, trojan horses, worms, time bombs, cancelbots or other similar
harmful or deleterious routines;
(b) UHS will promptly notify CP if it receives any complaint or if
it is served with any paper or has knowledge of any legal or administrative
action, investigations or proceeding against CP or involving CP.
10.2 CP GENERAL AND CONTENT WARRANTIES. In connection with its
obligations under this Agreement, CP represents and warrants that:
(a) it will not hold itself out as an agent other than for certain
insurance industry fee collection purposes or as the electronic agent described
in Section 2.3 above, employee, partner, joint venturer or officer of UHS;
(b) it will promptly notify UHS if it receives any complaint or if
it is served with any paper or has knowledge of any legal or administrative
action, investigations or proceeding against UHS or involving UHS;
(c) none of the CP Content, CP Property or Source Code, or their
use as permitted hereunder, will: (i) infringe or violate any third party's
copyright, patent, trademark, trade secret or other proprietary rights; (ii)
violate any law, statute, ordinance or regulation,
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including without limitation the laws and regulations governing export control;
(iii) be defamatory or trade libelous; (iv) be pornographic or obscene; (v) be
outdated or inaccurate in any way that could mislead, in any material respect,
any applicant for UHS Insurance Products or user of the Branded Platforms; or
(vi) to the extent such content may contain code or other electronic files,
contain viruses, trojan horses, worms, time bombs, cancelbots or other similar
harmful or deleterious routines; provided, however that the foregoing warranties
shall not apply to (A) the UHS Content, (B) the UHS Marks or (C) to the extent
any CP Content was created in accordance with UHS specifications or
instructions.
(d) it owns, or has the right to grant the licenses granted
hereunder, to the CP Exchange and Insure, and that it will provide the CP
Exchange, Insure, and all services hereunder in a workmanlike and timely manner
in accordance with the terms of this Agreement.]
10.3 CP EXCHANGE AND SERVICES WARRANTY AND DISCLAIMER. CP shall make
the Services generally available to UHS and the UHS Sales Team and, if
applicable end users Exchange in substantial conformance with CP's Service Level
Agreement attached hereto as Exhibit L, then-current specifications therefore,
in the event of CP's breach of the foregoing warranty, UHS's sole remedy and
CP's sole obligation shall be as specified in the Service Level Agreement.
Except as provided in this Section 10, CP provides all services and deliverables
hereunder "AS IS" AND CP EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED
AND STATUTORY, INCLUDING WITHOUT LIMITATION WARRANTIES OF TITLE,
MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. EXCEPT
AS SPECIFIED HEREIN OR IN THE SOFTWARE LICENSE AGREEMENT, CP DOES NOT GUARANTEE
CONTINUOUS OR UNINTERRUPTED ACCESS TO AND USE OF THE SOFTWARE.
10.4 THIRD PARTY SOFTWARE AND EQUIPMENT. ChannelPoint acknowledges that
all third party software and equipment that it procures on behalf of UHS
hereunder shall be owned, or in the case of software the license shall be owned,
by UHS. ChannelPoint shall provide to UHS relevant license agreements for such
third party software. UHS shall pay to CP as set forth above in Section 4.6 the
cost of new or incremental third party software, including without limitation,
such software related to upgrades, enhancements, and additional deployments at
new UHS locations.
11. INDEMNITIES
11.1 UHS INDEMNITY. UHS shall indemnify, hold harmless and defend CP
from any and all damages, costs and (including attorneys' fees) arising or
resulting from any and all claims, suits, actions or proceedings brought by any
third party against CP or its directors, officers, agents and employees arising
from (a) any breach of the representations, warranties or covenants in Section
10.1, or (b) any claims relating to the provision of the insurance services
offered by UHS or any claims by UHS' customers or representatives relating to
use of or access to the Branded Platform, except to the extent such claim arose
out of any breach of this Agreement by CP or modifications to the UHS Content
made by or for CP except for those made at the request of UHS and correctly
implemented by ChannelPoint. As a condition of the foregoing, CP shall (i)
promptly notify UHS of any indemnifiable claim (ii) give UHS sole control over
the defense and settlement of such claims; and (iii) provide reasonable
cooperation
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and assistance to UHS in conducting its defense, at UHS' expense; provided,
however, that CP may participate in the defense at its expense; and CP's advance
written approval is required for any settlement that imposes any executory
obligation on CP and does not unconditionally release CP.
11.2 CP INDEMNITY. CP shall indemnify, hold harmless and defend UHS and
from any and all] damages, costs and (including attorneys' fees) arising or
resulting from any and all claims, suits, actions or proceedings brought by any
third party against UHS or its directors, officers, agents and employees,
arising from (a) any breach of the warranties in Section 10.2, (b) any claim
alleging that UHS' use of the Branded Platform, CP Exchange or InsurE in
conformance with this Agreement infringes any third party intellectual property
right or privacy right, except to the extent such claim arose out of any breach
of this Agreement by UHS, or (c) any modifications made to the UHS Content by or
for CP, except for those made at the request of UHS and implemented correctly by
ChannelPoint. As a condition of the foregoing, UHS shall (i) promptly notify CP
of any indemnifiable claim; (ii) give CP sole control over the defense and
settlement of such claims; and (iii) provide reasonable cooperation and
assistance to CP in conducting its defense, at CP's expense; provided, however,
that UHS may participate in the defense at its expense and UHS' advance written
approval is required for any settlement that imposes any executory obligation on
UHS and does not unconditionally release UHS.
12. LIMITATIONS OF LIABILITY
IN NO EVENT SHALL EITHER UHS OR CP BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO
SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR
STRICT LIABILITY, OR FOR INTERRUPTED COMMUNICATIONS, LOST DATA OR LOST PROFITS
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF CP HAS BEEN ADVISED
OF OR KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL
EITHER PARTY'S LIABILITY FOR ANY AND ALL CLAIMS OR CAUSES OF ACTION RELATING TO
THIS AGREEMENT EXCEED, IN THE AGGREGATE, [...***...]. THE EXISTENCE OF ONE OR
MORE CLAIMS WILL NOT ENLARGE THIS LIMIT. THE LIMITATIONS OF THIS SECTION 12
SHALL NOT REDUCE THE AMOUNT OF FEES PAYABLE BY UHS TO CP UNDER THIS AGREEMENT.
THE LIMITATION OF LIABILITY SPECIFIED IN THIS SECTION WILL APPLY REGARDLESS OF
WHETHER ANY LIMITED OR EXCLUSIVE REMEDY SPECIFIED IN THIS AGREEMENT FAILS OF ITS
ESSENTIAL PURPOSE.
13. TERM AND TERMINATION
13.1 TERM. The term of this Agreement (the "TERM") shall commence on
the Effective Date and continue until December 31, 2004, and shall automatically
renew for one-year periods thereafter unless either party notifies the other
party of its desire to terminate the Agreement at least six (6) months prior to
the expiration of the then-current term.
13.2 TERMINATION. Either party may terminate this Agreement upon the
material breach of the other party, if such breach remains uncured, to the
extent such breach is capable of cure, for ninety (90) days (thirty (30) days
for any breach of Sections 8, 9, 10 or 11) following written notice to the
breaching party specifying the breach in reasonable detail and demanding its
cure.
* CONFIDENTIAL TREATMENT REQUESTED
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13.3 TERMINATION FOR BREACH. This Agreement may also be terminated as
follows:
13.3.1 If either party (i) is adjudicated bankrupt or insolvent by
a court of competent jurisdiction, (ii) substantially ceases to do business as
currently conducted, (iii) fails to pay its debts generally as they become due,
or (iv) declares bankruptcy, winds up, dissolves or liquidates (in each case,
other than for the purposes of an amalgamation, restructuring, or reconstruction
pursuant to which the surviving entity becomes bound by or assumes the
obligations under this Agreement), or a receiver, trustee or similar officer is
appointed over (or a lien holder takes possession of) all or a substantial part
of such party's property or assets, or anything similar to any of the foregoing
occurs in relation to such party under the laws of any jurisdiction, the
non-bankrupt party may terminate this Agreement effective immediately on notice
to the bankrupt party.
13.3.2 UHS may, in its sole discretion, terminate this Agreement,
in whole or in part, in the event that ChannelPoint is merged with or acquired
by, or if a controlling interest in ChannelPoint is, or the assets of
ChannelPoint to which this Agreement relates are, sold to or acquired by, any
third party, which, itself or through its affiliates, competes directly or
indirectly with UHS. ChannelPoint shall give sixty (60) days notice (or more, if
practicable) UHS prior to the closing date of any such transaction, and shall
provide such information regarding such transaction as UHS may reasonably
request. As of the date UHS receives such notice from ChannelPoint, ChannelPoint
shall no longer have any right to terminate (i.e., not renew) this Agreement
pursuant to Section 13.1 above for the next renewal term. Any termination of
this Agreement by UHS pursuant to this Section 13.3.2 shall be effective
immediately upon notice to ChannelPoint, and shall specify any and all
obligations of either party that UHS elects to terminate, provided that UHS may
not terminate any obligations of either party that expressly survive any
termination of this Agreement pursuant to Section 13.4 below.
13.4 EFFECT OF TERMINATION.
13.4.1 SURVIVAL OF TERMS. Sections 2.1, 6.4, 6.5, 7, 9, 10, 11,
12, 13, and 14 shall survive any termination or expiration of this Agreement.
The license to Insure shall continue in perpetuity after termination of this
Agreement pursuant to the terms of Exhibit C.
13.4.2 AUDIT RIGHTS. Upon termination, UHS may, at its expense and
on fifteen (15) days notice to ChannelPoint, have an independent accounting
firm, reasonably acceptable to both parties, review the books and records of
ChannelPoint to assure compliance with the provisions of Section 7.12 The
parties agree that the accounting firm shall only report to UHS whether
ChannelPoint is in compliance with the requirements of Section 7.12 and, if the
accounting firm determines that ChannelPoint is not in compliance with such
requirements, the nature of such noncompliance, without disclosing the names of
any ChannelPoint customer or any other proprietary or confidential information
regarding such ChannelPoint customer to UHS.
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13.5 BANKRUPTCY. THE PARTIES INTEND FOR THIS AGREEMENT AND THE LICENSES
TO THE CP EXCHANGE, INSURE, AND SOURCE CODE GRANTED HEREIN TO UHS TO COME WITHIN
SECTION 365(n) OF THE U.S. BANKRUPTCY CODE AND, NOTWITHSTANDING THE BANKRUPTCY
OR INSOLVENCY OF CHANNELPOINT, THIS AGREEMENT AND SUCH LICENSES SHALL REMAIN IN
FULL FORCE AND EFFECT SO LONG AS UHS IS IN MATERIAL COMPLIANCE WITH THE TERMS
AND CONDITIONS HEREOF.
14. AUDIT RIGHTS
AUDIT OF CP. Upon Notice from UHS, no more frequently than every year,
CP shall provide and/or cause its affiliates and agents to provide to any
auditors and inspectors of UHS (including, without limitation, any auditors of a
regulatory agency) who are performing an audit of UHS' business, (a) reasonable
access to the CP all physical locations at which the CP Exchange and CP Services
are available or provided and all other related information, and (b) all
assistance reasonably required in order for UHS to comply with such audits,
solely in order for such auditors and inspectors of UHS to perform an audit or
inspection. Such access shall be during normal business days and hours,
provided, however, that no audits shall be conducted during CP's year-end or
quarter-end audits, and provided further, that UHS shall cooperate with CP by
conducting its audits in such locations and at such time to minimize, to the
extent practicable, disruption to the conduct of CP business (except as may be
necessary to perform security audits). If any such audit results in UHS being
notified that it is not in compliance with any generally accepted or statutory
accounting principle, statutory requirements, or other audit requirements
relating to the CP software, CP Services, CP shall, and shall cause its
affiliates and agents to, at its own expense and within the period of time
specified by such auditor or inspector of UHS, make such necessary changes as
are required for UHS to comply with such audit.
15. GENERAL PROVISIONS
15.1 GOVERNING LAW. This Agreement, including all Exhibits attached
hereto, shall be governed and construed in accordance with the laws of the State
of Delaware without giving effect to principles of conflict of laws.
15.2 ARBITRATION. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof shall be sent to
nonbinding mediation conducted in Denver, Colorado The mediation shall be
conducted by a mediator agreed upon by the parties, provided that if the parties
cannot agree upon a single mediator, each party shall choose one independent
mediator, who shall jointly choose a third mediator, who shall act as the
mediator of the dispute. If mediation does not result in settling the dispute,
the parties may pursue binding arbitration or litigation, but nothing herein
shall require the parties to seek arbitration.
15.3 SEVERABILITY; WAIVER. If any provision of this Agreement is held
to be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way. The
parties agree to replace any invalid provision with a valid provision that most
closely approximates the intent and economic effect of the invalid provision.
The waiver by either party of a breach of any provision of this Agreement will
not operate or be interpreted as a waiver of any other or subsequent breach.
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15.4 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such section, or in any way affect this Agreement.
15.5 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns.
15.6 FORCE MAJEURE. Each party will not be liable for any failure to
fulfill its obligations hereunder due to causes beyond its reasonable control,
including acts or omissions of government or military authority, acts of God,
shortages of materials, telecommunications failures (including any systemic
Internet failures and any interruptions in services of Internet service
providers), transportation delays, earthquakes, fires, floods, labor
disturbances, riots or wars (a "FORCE MAJEURE EVENT"). If a Force Majeure Event
continues for sixty (60) days or more, the party awaiting performance from the
party suffering the Force Majeure Event may terminate this Agreement immediately
upon written notice to such party.
15.7 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors, and no agency, partnership, joint venture or
employee-employer relationship is intended or created by this Agreement.
15.8 NONSOLICITATION. The parties agree that neither will solicit for
employment, an employee of the other party, without first giving the other party
written notice and receiving written consent for such action. If, after thirty
days of the effective date of such notice, consent is neither granted nor
denied, the other party shall be free to solicit or hire such employee.
15.8 NOTICE. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail, return receipt requested, first class postage
prepaid, addressed as set forth below. If delivered personally, the date on
which a notice, request, instruction or document is delivered shall be the date
on which such delivery is made and, if delivered by mail, the date on which such
notice, request, instrument or document is received shall be the date of
delivery. Any party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section.
(A) If to UHS:
United HealthCare Services, Inc.
Attn: President Small Group
9900 Bren Road East
Minnetonka, MN 55343
cc: General Counsel
(B) If to CP:
ChannelPoint, Inc.
Attn: General Counsel
10155 Westmoor Drive, Suite 210
Westminster, CO 80020
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15.9 ENTIRE AGREEMENT. This Agreement, including the items attached
hereto, sets forth the entire understanding and agreement of the parties on this
matter and supersedes any and all oral or written agreements or understandings
between the parties as to the subject matter of this Agreement. This agreement
may be modified only by writing signed by both parties.
IN WITNESS WHEREOF, each party has executed this Agreement on its
behalf, all on the day and year first above written.
UNITED HEALTHCARE SERVICES, INC. CHANNELPOINT, INC.
By: /s/ Stephen Hemsley By: /s/ Kenneth E. Hollen
---------------------------------- -------------------------------
Printed Name: Stephen Hemsley Printed Name: Kenneth E. Hollen
------------------------ ---------------------
Title: President Title: President & CEO
------------------------------- ----------------------------
Date: 12/30/99 Date: November 30, 1999
-------------------------------- -----------------------------
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LIST OF EXHIBITS
A. INSURE SERVICES DESCRIPTION
B. ACCESS AGREEMENT
C. INSURE AND COMMERCELINK LICENSE
D. ESCROW AGREEMENT
E. CP EXCHANGE ROADMAP
F. SERVICE LEVEL AGREEMENT
G. LETTER OF ENGAGEMENT TEMPLATE
H. ALLOCATION OF LICENSE FEE
I. TRANSACTION FEE SCHEDULE
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EXHIBIT A
SERVICE DESCRIPTION
DESCRIPTION OF INSURE SERVICES
o Product Modeling support for health, dental, pharmacy, term life, long
term care, short and long term disability.
o Customizable workflow engine that enables UHS to codify the workflow
steps and business rules required to process applications.
o Integrated messaging that can automatically generate status messages
via email or fax as applications move through the workflow.
o Underwriting/workflow rules engine to enable routing of cases through
the workflow based on defined risk factors.
o Customizable underwriting desktop that enables UHS to define a rollup
of risk factors relevant to the lines of business being processed and
based on UHS business practices.
o Underwriting drilldown to enable individual underwriters to review key
risk factors and view relevant application information from the Insure
desktop.
o Automated generation of acceptance letters (where applicable to the
line of business).
o Integrated rating and product modeling environment to enable final
rating based on risk factors (for relevant lines of business).
o Application installation interface to electronically transfer customer
information into legacy systems.
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EXHIBIT B
ACCESS AGREEMENT
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EXHIBIT C
INSURE AND COMMERCELINK LICENSE TERMS AND CONDITIONS LICENSE
THIS INSURE AND COMMERCELINK LICENSE (THIS "LICENSE") GOVERNS UHS' (WHICH TERM
INCLUDES ALL UHS AFFILIATES) USE OF INSURE AND COMMERCELINK (AS DEFINED IN THE
ATTACHED AGREEMENT) ON COMPUTER SYSTEMS OWNED BY OR LEASED TO UHS AT ANY UHS
FACILITY. ALL TERMS, CONDITIONS AND LIMITATIONS SPECIFIED IN THE AGREEMENT SHALL
APPLY TO THE LICENSES AND OBLIGATIONS SPECIFIED IN THIS LICENSE.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, ChannelPoint grants
UHS a perpetual (subject to termination as provided in Section 3),
non-exclusive, non-transferable (except as provided in Section 8), royalty-free
license to use Insure and CommerceLink for internal purposes only and in
accordance with the applicable user documentation provided by ChannelPoint and
subject to the restrictions set forth herein and in the Agreement. If
ChannelPoint provides UHS access and documentation to any application program
interface for Insure, through which UHS may integrate Insure and CommerceLink
with and into other software running on UHS' computer systems, (the "APIs")
subject to the terms and conditions of this License, UHS is granted a
non-exclusive, non-transferable, royalty-free license to use the APIs internally
for UHS' integration of its systems with Insure, to connect to appropriate front
end APIs used by UHS in servicing or administering its UHS Insurance Products,
such as, for example, to employee information downloaded from ADP, and to create
application programs that access the API's, ("Application Programs"). UHS may
not provide access to the APIs to any end users or permit any third party to use
or access the APIs or view the documentation thereto, except that UHS may permit
a third party contractor to use and access the APIs and associated documentation
in order to permit such contractor to integrate Insure with UHS' systems,
provided that such contractors are informed that the APIs are proprietary to
ChannelPoint and are bound by written agreement to maintain the APIs in strict
confidence. ChannelPoint and its licensors retain ownership of Insure and
CommerceLink, APIs, and all copies and portions thereof and all rights not
expressly granted herein are reserved by ChannelPoint. UHS may not use Insure,
CommerceLink or APIs for any purpose or in any manner not expressly permitted in
this License or in the Agreement.
2. RESTRICTIONS. UHS may not copy any Insure software except as reasonably
required to use Insure as permitted hereunder and except for a reasonably number
of copies which may be made solely for back-up purposes. UHS must reproduce and
include the copyright notice and any other notices that appear on the original
Insure software on any permitted copies and any media therefor. UHS acknowledges
that Insure and CommerceLink contains certain third party programs which may
include routines to ensure conformity with the terms of the licenses granted in
this Agreement. ChannelPoint shall use commercially reasonable efforts to inform
UHS of any such routines that come to the attention of ChannelPoint. Except as
expressly permitted under Section 1 or the Agreement, UHS shall not (and shall
not allow any third party to) (i) decompile, disassemble, or otherwise reverse
engineer or attempt to reconstruct or discover any source code or underlying
ideas or algorithms or file formats or programming or interoperability
interfaces of Insure or of any files contained or generated using Insure by any
means whatsoever, (ii) remove any product identification, copyright or other
notices,
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(iii) provide, lease, lend, use for timesharing or service bureau purposes or
otherwise use or allow others to use Insure, APIs or any portion thereof to or
for the benefit of third parties, (iv) modify, incorporate into or with other
software or create a derivative work of any part of Insure, (v) disseminate
performance information or analysis (including, without limitation, benchmarks
on the APIs) from any source relating to Insure to any third party, or (vi)
permit or encourage any third party to do the foregoing. UHS has no right to
receive any source code or design documentation relating to Insure, except as
otherwise provided in the Agreement and, with respect to design documentation,
ChannelPoint shall provide access to limited design documentation as necessary
and appropriate for UHS to fully access and use the API's. To the extent that
applicable law would permit UHS to reverse-engineer Insure, UHS agrees to
negotiate with ChannelPoint in good faith prior to such undertaking on the terms
under which ChannelPoint would grant access to the source code. UHS recognizes
and agrees that there is no adequate remedy at law for a breach of this Section
2, that such a breach would irreparably harm ChannelPoint and that ChannelPoint
is entitled to seek equitable relief (including, without limitation, injunctions
with respect to any such breach or potential breach) in addition to any other
remedies available at law.
3. TERMINATION OF LICENSE. This License will terminate automatically if UHS
fails to cure any material breach of this License within thirty (30) days after
written notice is provided to UHS specifying the breach in reasonable detail and
demanding its cure. Upon any termination of this License, UHS shall continue to
have the right and license to use Insure and APIs for a period of two (2) years
in order transition to another product, and upon expiration of such time period,
UHS shall promptly cease all use of Insure and APIs and return or destroy all
copies of Insure and CommerceLink and APIs and all portions thereof and so
certify in writing to ChannelPoint.
4. LIMITED WARRANTY AND DISCLAIMER.
(a) FUNCTIONALITY. ChannelPoint warrants and represents to UHS that for a
period of 180 days from UHS' acceptance of each version of Insure, CommerceLink
and service upgrades, when operated in conformance with this Agreement, such
version of Insure, CommerceLink and service upgrades will materially conform to
the applicable specifications for such version of Insure, CommerceLink and
service upgrades as delivered to UHS. This warranty covers only problems
reported to ChannelPoint during the foregoing warranty period.
(b) OWNERSHIP. ChannelPoint warrants and represents that it owns all right,
title and interest in or has the right to license Insure and CommerceLink to UHS
and that Insure and CommerceLink (solely in the form delivered to UHS) will not
infringe any patent, copyright, trademark, database, trade secret or other
intellectual property right of any third party.
(c) YEAR 2000. ChannelPoint warrants and represents to UHS that Insure and
CommerceLink (solely in the form delivered to UHS), when operated in accordance
with the documentation, are Year 2000 Compliant (as defined below). UHS
acknowledges that the capability of Insure and CommerceLink to manage and
manipulate date-related information appropriately depends on the quality of
information imported or input into Insure and CommerceLink, including the
presence of adequate indicators of century in such information. ChannelPoint
disclaims any warranty relating to the quality of any such imported or input
information. "Year 2000 Compliant" means that Insure and CommerceLink shall be
able to
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provide specific dates and calculate spans of dates, and to record, store,
process and provide true and accurate dates and calculations for dates and spans
of dates within and between the twentieth and twenty-first centuries prior to,
including and following January 1, 2000, including by: (i) correctly processing
correctly inputted day and date data; (ii) recognizing September 9, 1999 as a
valid date; (iii) recognizing the year 2000 as a leap year having 366 days, and
correctly processing February 29, 2000 as a valid leap year date; and (iv)
employing only four-digit year internal year representations. Any claims brought
under this Section 4(b) must be brought within (90) days after January 1, 2000.
(d) REMEDIES. For any breach of the warranties specified in this Section 4
(except as otherwise provided herein) ChannelPoint shall, at UHS' option, (i)
promptly use diligent efforts to revise Insure and CommerceLink, as the case may
be, such that it conforms with the foregoing warranties, (ii) to replace the
non-conforming Insure software with Insure software that conforms with the
foregoing warranties, or (iii) refund sums paid therefor.
(e) DISCLAIMER. EXCEPT FOR THE FOREGOING AND THE WARRANTIES IN THE AGREEMENT,
INSURE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND AND CHANNELPOINT HEREBY
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND OR NATURE, WHETHER
EXPRESS, IMPLIED OR STATUTORY, RELATING TO INSURE AND COMMERCELINK INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. CHANNELPOINT DOES NOT WARRANT OR REPRESENT THAT THE USE OF
INSURE OR COMMERCELINK WILL BE UNINTERRUPTED OR ERROR-FREE OR MAKE ANY OTHER
REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF INSURE OR
WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE.
UHS UNDERSTANDS THAT CHANNELPOINT IS NOT RESPONSIBLE FOR AND WILL HAVE NO
LIABILITY FOR HARDWARE, SOFTWARE, OR OTHER ITEMS OR ANY SERVICES PROVIDED BY ANY
PERSONS OTHER THAN CHANNELPOINT.
6. NO EXPORT. UHS acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including Insure and APIs. UHS agrees that it will not
export or re-export Insure or APIs from the United States or the country
originally shipped to by ChannelPoint in any form, without the appropriate
United States and foreign governmental licenses.
7. INDEMNITY. ChannelPoint shall indemnify, hold harmless and defend UHS and its
affiliates from any and all damages, costs and expenses (including attorneys'
fees) arising or resulting from any and all claims, suits, actions or
proceedings brought by any third party against UHS or its affiliates, or their
respective directors, officers, agents and employees, arising from and pay any
resulting damages, costs and expenses finally awarded to a third party or paid
in settlement of any claims, suits or proceedings brought against UHS by any
third party that alleges that Insure or CommerceLink, or UHS' use thereof,
infringes any patent, copyright, trademark or other intellectual property right
of a third party; provided that UHS provides ChannelPoint (a) prompt written
notice of the existence of such claim, suit, action or proceeding, (b) sole
control over the defense or settlement of such claim, and (c) assistance at
ChannelPoint's
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request and expense to the extent reasonably necessary for the defense of such
claim or suit. UHS may, at its own expense, participate in the defense of such
claim with counsel of its own choosing. Notwithstanding the foregoing,
ChannelPoint shall not indemnify UHS for any claims based on (i) any UHS or
third party intellectual property or software incorporated in or combined with
Insure where in the absence of such incorporated item, Insure or CommerceLink
would not have been infringing, (ii) Insure or CommerceLink software that has
been altered or modified by UHS or any third party without ChannelPoint's
consent where in the absence of such alteration or modification Insure would not
be infringing; and (iii) any use of a superseded version of Insure or
CommerceLink for which ChannelPoint has delivered to UHS and UHS has accepted an
updated, revised or repaired version which is not infringing. Upon notice of any
claim of infringement or upon reasonable belief of the likelihood of such a
claim, ChannelPoint shall, at its option, (A) obtain the rights to continued use
of Insure or CommerceLink, (B) substitute other suitable,
functionally-equivalent, non-infringing software, or (C) replace or modify
Insure or CommerceLink so that it is no longer infringing.
8. ASSIGNABILITY. UHS may assign this License to any affiliated company, except
that an assignment to any company that competes with CP shall be void,
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EXHIBIT D
UNITED SOURCE CODE ESCROW AGREEMENT
I. Within ten (10) business days of delivery of the Certificate of Installation
for a particular Release, ChannelPoint shall place the Source Code for such
Release of the ChannelPoint Software, excluding all ChannelPoint Third Party
Software therein, into escrow with Data Securities, Inc. or another reputable,
financially responsible, escrow agent acceptable to Customer ("Escrow Agent"),
under the terms of an escrow agreement to be agreed to in writing by
ChannelPoint, Customer and the Escrow Agent ("Escrow Agreement"). Such Escrow
Agreement shall provide for ChannelPoint to deposit into escrow, (a) on a
monthly basis all Enhancements and Error Corrections (in source and object code
forms) for such Release, and (b) once every six (6) months a complete copy of
the then-current version of the Source Code for such Release. With each such
deposit, ChannelPoint shall also include the then-current Documentation,
Specifications, internal programming specifications used by ChannelPoint to
create the code, a list of ChannelPoint Third Party Software (including a
listing of any modifications made thereto in order for such ChannelPoint Third
Party Software to operate as part of the ChannelPoint Software), and all other
information and materials reasonably necessary for Customer to modify and
perform maintenance using the Source Code. The Escrow Agreement shall also (a)
provide for the Escrow Agent, at Customer's expense, to test and verify that all
such required materials have been deposited by ChannelPoint on a regular basis,
(b) for Customer to have the right to terminate the Escrow Agreement (with a
cure period mutually acceptable to the parties) if ChannelPoint fails to do so,
and (c) for the ongoing escrow of the then-current and all prior versions and
Releases of the ChannelPoint Software that are then being used by Customer at
any Customer Site. Customer shall pay all of the costs incurred in maintaining
such escrow account and such failure of Customer to pay such costs will result
in the return of the source code to ChannelPoint.
II. RELEASE EVENTS. The Escrow Agreement shall provide for the release of the
Source Code to Customer in the following events: (a) ChannelPoint (i) is
adjudicated bankrupt or insolvent by a court of competent jurisdiction, or (ii)
takes steps to declare bankruptcy, wind up, dissolve or liquidate (in each case,
other than for the purposes of an amalgamation, restructuring, or reconstruction
pursuant to which the surviving entity becomes bound by or assumes the
obligations under this Agreement); (b) at any time after the end of the Pilot
Period and within ten (10) business days after ChannelPoint's receipt of written
notice from Customer that ChannelPoint has committed an Egregious Breach of this
Agreement (subject to satisfaction of any dispute resolution procedures set
forth in the Escrow Agreement); (c) termination of the Escrow Agreement for
ChannelPoint's breach of its escrow obligations thereunder; or (d) if, prior to
an initial public offering where ChannelPoint's Series B Preferred Stock is
automatically converted into common stock, ChannelPoint is merged with or
acquired by, or if a controlling interest in ChannelPoint is, or substantially
all of the assets of ChannelPoint to which this Agreement relates are, sold to
or acquired by, Cigna Insurance Company, Aetna/US HealthCare, PacifiCare/FHP,
Prudential Insurance Company, WellPoint, Humana, or other health plans with over
3 million risk-bearing health insured lives, or a successor to or affiliate of
any of the foregoing companies, and Customer elects in writing to terminate this
Agreement on written
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notice given to ChannelPoint within sixty (60) days of the closing of such
merger or acquisition, and, provided further and only in the case of a
termination under this clause (d), Customer shall pay to ChannelPoint as of the
effective date of such termination a fee of $5 million for release of all of the
then-currently escrowed ChannelPoint Software and obtain the right to use all
materials then in escrow, including, without limitation, all Source Code for all
prior Releases.
III. USE OF SOURCE CODE. In the event of any such release event, Customer shall
have the right to modify, or engage third parties to modify on Customer's
behalf, the Source Code in order to use the ChannelPoint Software in a manner
consistent with the license granted in the Agreement to which this Exhibit is
attached, , provided that such use is within the scope of the functionality for
the Releases of the ChannelPoint Software delivered to UHS pursuant to such
Agreement, and any additional design changes that have been mutually agreed to
by the parties. Customer may make no other use of the Source Code, and such
Source Code shall remain the Proprietary Information of ChannelPoint, provided
that Customer shall have no obligation to provide or otherwise permit
ChannelPoint or any third party to use any modifications or Derivative Works of
the ChannelPoint Software created by or for Customer using the Source Code.
Release of the Source Code to Customer shall in no way affect Customer's or any
Internal End Users' or External End Users' ability or right to use and access
the ChannelPoint Datacenter, or the Customer Network via the ChannelPoint
Datacenter; provided that Customer will pay new business acquisition fees and
monthly maintenance fees in accordance with the terms of this Agreement for the
time during which ChannelPoint maintains, at Customer's request, such ability or
right to use and access the ChannelPoint Datacenter or the Customer Network via
the ChannelPoint Datacenter.
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EXHIBIT E
CP EXCHANGE ROADMAP
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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EXHIBIT F
SERVICE LEVEL AGREEMENT
ChannelPoint will make the Commerce Exchange available Sunday through Friday at
23 hours per day, with one downtime period of one hour each of those days. The
hour of the day for such planned downtime will be at the sole discretion of
ChannelPoint. Such downtime period is normally scheduled between 2300 and 0400.
ChannelPoint will make the Commerce Exchange available Saturday for 18 hours,
with one downtime period of 6 hours. The specific hours of such downtime period
will be at the sole discretion of ChannelPoint. Such downtime period is normally
scheduled between 1800 and 0400.
The parties agree there will be additional downtime necessary from time to time
to accommodate environmental change issues in the ChannelPoint data center,
during which time it would be impracticable to invoke recovery at an alternative
data center; provided that ChannelPoint shall use its best efforts to give UHS
advanced notice of such downtime.
The parties recognize that ChannelPoint has no control over response time over
the Internet. ChannelPoint has both a primary and backup link to the Internet
backbone, which both parties agree is reasonable to meet ChannelPoint's
responsibilities to provide service under this Agreement.
ChannelPoint and UHS acknowledge that the service levels specified in this
Exhibit L are preliminary based upon early commercial versions of the Commerce
Exchange. ChannelPoint and UHS will work together, to establish more rigorous
standards based upon actual UHS business volume, UHS volume commitments for
Commerce Exchange business and service levels established by other similar
ecommerce businesses. In addition, ChannelPoint and UHS shall negotiate, in good
faith, appropriate remedies for any failure by ChannelPoint to adhere to the
standards so established, taking into account severity, loss of value resulting
from such failure and industry standards; provided that such remedies shall not
be any less favorable than those provided to other similarly-situated users of
the Commerce Exchange.
34
<PAGE> 35
EXHIBIT G
LETTER OF ENGAGEMENT TEMPLATE
================================================================================
(PROJECT NAME)
Statement of Work
================================================================================
35
<PAGE> 36
================================================================================
(month, year)
================================================================================
36
<PAGE> 37
EXECUTIVE SUMMARY
United Healthcare (UHc) requires (high-level description of required
functionality). UHc requests that ChannelPoint (CP) develop a solution to meet
the required functionality. The business requirements for this functionality are
documented by UHc (see Attachment A). ChannelPoint has analyzed these business
requirements and developed a preliminary estimate of the effort (see Attachment
B) and a high-level project plan (see Attachment C) outlining the tasks and
schedule necessary to develop the requested solution.
The purpose of this Statement of Work is to define understanding of the project
scope and UHc's and ChannelPoint's responsibilities relative to this project. In
addition, this document consolidates previously created project documentation
and serves as the approved baseline for the project's business requirements.
We understand the deliverables assigned to ChannelPoint to be:
(itemize project deliverables, including business requirements as appropriate)
NOTE: (if any)
PROJECT SCOPE
SCOPE:
We, at ChannelPoint, understand our responsibilities relative to the (name of
project) to include the following high level requirements:
(restate specific business requirement and/or) See Attachment B for the
ChannelPoint understanding of the UHc business requirements and priorities.
Attachment B was used to determine the scope and estimate for this project.
Any change to the business requirements detailed in Attachment B are subject to
UHc/ChannelPoint project change management procedures.
37
<PAGE> 38
UHC RESPONSIBILITIES:
1. (itemize UHc specific responsibilities)
CHANNELPOINT APPROACH
METHODOLOGY:
UHc will review this Statement of Work including the estimated effort and
authorize acceptance of the stated business requirements (See Attachment B) and
initial estimate.
ChannelPoint will provide, as necessary, further refinement of the business
requirements analysis (see Attachment B), development of the functional and
technical design, development, testing, and acceptance criteria.
ChannelPoint (via the Project Manager) will provide, at a minimum, bi-weekly
written feedback to UHc on high-level project status and issues.
Project success will be determined by meeting the authorized business
requirements, within the project timeframe and range of hours estimate.
RESOURCES:
ChannelPoint will assign resources with the appropriate skill set for every
aspect of this project for which ChannelPoint is assigned. ChannelPoint will
commit to the timely delivery of all the phases of the agreed upon components to
ensure a successful project conclusion.
The ChannelPoint Account Manager responsible for the initial engagement of this
project is (insert name). The Project Manager leading the effort for this
project is (insert name). Technical resources (as assigned or specifically
named, if known). (Also name UHc resources and/or 3rd party resources, if
known.)
PROJECT PLAN:
See Attachment C for the high-level project plan.
QUALITY COMMITMENT
The project deliverables will be in conformance with the documented and
authorized requirements. ChannelPoint will conform to documented constraints, of
the UHc environment ((i.e., (specifics as appropriate))).
ASSUMPTIONS
o Timely access to UHc IT and business resources, end-users, and subject
matter experts.
o Timely access to any available system or project documentation.
38
<PAGE> 39
o Scope commitment: UHc and ChannelPoint will work together to control the
project scope in order to accomplish timely delivery of all components of
this project. Alternatively, agreed upon changes to project scope may change
the timeframe and estimate for this project.
o (other)
CRITICAL SUCCESS FACTORS
UHc's commitment to provide clear direction, timely resolution to issues, and
access to systems and personnel resources as required.
ChannelPoint's commitment to provide the technical experience and business
expertise in delivering project components within established timeframes and
budgets.
(other)
CONTRACTUAL DISCLAIMER
This Statement of Work and its attachments, including any Letter of Engagement,
is subject to the terms and conditions of the contract between UHc and
ChannelPoint dated (TBD).
39
<PAGE> 40
LETTER OF ENGAGEMENT BETWEEN CHANNELPOINT, INC. AND
Client: United HealthCare (UHc)
PROJECT: (name of project)
INITIAL TIMEFRAME: (project due date). This estimated timeframe is
for developing UHc's defined business
requirements for (brief description of
deliverables).
NOTES: ().
PLANNED ACTIVITIES: (brief description of project tasks) will
include the following: (See attached Statement
of Work)
ASSUMPTIONS: UHc project team and Health Plan subject matter
experts will provide ChannelPoint with content
specific information according to the defined
project schedule and project requirements. In
addition, ChannelPoint will need sufficient
access to the UHc systems environment.
TOTAL NOT TO EXCEED COST: (not to exceed costs) (see attached detail)
PREPARED BY: (name)
ChannelPoint, Inc.
(title)
DATE: (date)
APPROVED BY: (name)
SIGNATURE: (signature)
40
<PAGE> 41
TITLE: (title)
DATE: (date)
CONTRACTUAL DISCLAIMER: This Letter of Engagement is subject to the
terms and conditions of the contract between UHc
and ChannelPoint dated (date).
41
<PAGE> 42
<TABLE>
<CAPTION>
(NAME OF PROJECT)
TASK HOURS BILLING TOTAL % OF
RATE BUDGET
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACCOUNT MANAGEMENT
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
PROJECT MANAGEMENT
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
ENGINEERING/CONSULTING
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
TESTING
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
IMPLEMENTATION SERVICES
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
PRODUCTION SUPPORT
- --------------------------------------------------------------------------------
(detail listing of known tasks)
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
GRAND TOTAL
- --------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 43
EXHIBIT H
ALLOCATION OF LICENSE FEE
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
[...***...]
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
43
<PAGE> 44
EXHIBIT I
TRANSACTION FEE SCHEDULE
TRANSACTION FEES:
Customer will pay ChannelPoint Transaction Fees, based on a percentage of
Gross Premium Revenues paid by a Policy Holder to UHS for each UHS Insurance
Product purchased by such Policy Holder, at the rates set forth below:
HEALTH AND LIFE INSURANCE PRODUCTS
<TABLE>
<CAPTION>
GROUP SIZE PERCENTAGE OF GROSS PREMIUM TO BE PAID
- --------------------------------------------------------------------------------
<S> <C>
1-50 Subscribers [...***...]
51-100 Subscribers [...***...]
</TABLE>
ANCILLARY INSURANCE PRODUCTS
<TABLE>
<CAPTION>
GROUP SIZE PERCENTAGE OF GROSS PREMIUM TO BE PAID
- --------------------------------------------------------------------------------
<S> <C>
1 - 100 Subscribers [...***...]
</TABLE>
The Parties will negotiate in good faith to determine a comparable rate for
groups of more than 100 Subscribers. Transaction Fees shall be paid monthly,
within thirty (30) days after the receipt by UHS of the Gross Premium Revenues.
As used herein, "Gross Premium Revenues" means all revenues received by UHS for
a UHS Insurance Product purchased by a Policy Holder that has been quoted or
purchased using the Service
The Transaction Fees will be paid on the gross premiums collected on the monthly
invoices billed to a new customer in the twelve month period beginning on the
date of the first such monthly invoice.
* CONFIDENTIAL TREATMENT REQUESTED
44
<PAGE> 1
EXHIBIT 10.19
*** Text Omitted and Filed Separately
CONFIDENTIAL TREATMENT REQUESTED
Under 17 C.F.R. Sections 200.80(b)(4)
and 230.406
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Agreement") is entered into as of this
10th day of September, 1999 between First Colony Life Insurance Company, a
Virginia corporation having its principal place of business at 700 Main Street,
Lynchburg, Virginia 24505 ("Owner"), and ChannelPoint, Inc. a Delaware
corporation having its principal place of business at 10155 Westmoor Drive,
Suite 210, Westminster, Colorado 80020 ("Purchaser").
WITNESSETH:
WHEREAS, subject to those exceptions disclosed in this Agreement, Owner
owns all right, title, and interest in and to that certain computer software
identified as "p.d.,q." (including source and object code, documentation and
related documentation, data and information used by Owner as of the Closing Date
to provide support for any of the above) as more fully set forth in Exhibit A
attached hereto (the "Programs");
WHEREAS, the Programs contain certain software components duly licensed
to Owner for inclusion in the Programs pursuant to the agreements identified in
Exhibit B attached hereto (the "Remarketing Agreements"), which are to be
assigned to, and assumed by, Purchaser pursuant to this Agreement;
WHEREAS, Owner has granted rights in copies of the Programs to third
parties pursuant to the end-user license agreements identified in Exhibit C
attached hereto (the "End-User Agreements"), which are to be assigned to, and
assumed by, Purchaser pursuant to this Agreement;
WHEREAS, Owner desires to sell, assign, grant, convey, and transfer the
Programs to Purchaser, and Purchaser desires to buy and acquire the Programs, in
accordance with the terms and conditions of this Agreement; and
WHEREAS, Owner desires to sell to Purchaser certain hardware used by
Owner to develop and maintain the Programs, as set forth in Exhibit D attached
hereto, including the specifications and documentation related thereto (the
"Hardware"), and Purchaser desires to buy and acquire the Hardware in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Owner and Purchaser, intending to
be legally bound, hereby agree as follows:
<PAGE> 2
ARTICLE 1. CONVEYANCE OF RIGHTS / OWNERSHIP
1.1. PROGRAMS. Effective as of the Closing Date, subject to ARTICLE 13 and
to the rights reserved and retained pursuant to ARTICLE 4, Owner hereby
agrees to transfer, grant, convey, assign, and relinquish exclusively to
Purchaser all of Owner's right, title, and interest in and to both the
tangible and the intangible property constituting the Programs, in
perpetuity (or for the longest period of time otherwise permitted by law),
including the following corporeal and incorporeal incidents to the
Programs, which shall be included within the meaning of the term "Programs"
as used herein (with the Programs and all intellectual property rights
related thereto collectively referred to herein as the "Technology"):
1.1.1. Title to and possession of the Programs, their component parts,
and all documentation relating thereto, possessed or controlled by
Owner, which are to be delivered to Purchaser pursuant to ARTICLE 3 of
this Agreement;
1.1.2. All copyright interests owned or claimed by Owner pertaining to
the Programs, including without limitation the U.S. Registered
Copyright Numbers set forth in Exhibit A together with all other
copyright interests accruing by reason of international copyright
conventions;
1.1.3. All right, title, and benefit of Owner in and to the
inventions, discoveries, improvements, ideas, trade secrets, know-how,
confidential information, and all other intellectual property owned by
Owner and embodied in the Programs;
1.1.4. All right, title and interest in and to the trademarks and the
respective registrations thereof and pending applications therefor in
the United States Patent and Trademark Office set forth in Exhibit E
attached hereto, together with the goodwill of the business symbolized
by such trademarks, the right to recover for any past, present or
future infringement thereof and the right to file foreign applications
under any convention or treaty; and
1.1.5. All of the right, title, interest, and benefit of Owner in, to,
and under the Acquisition Agreement (as defined in ARTICLE 7), the
Cybertek Agreement (as defined in ARTICLE 8), the Development Licenses
and the Maintenance Agreements (as defined in ARTICLE 10), the
Remarketing Agreements identified in Exhibit B and Owner's rights as
licensor under the End-User License Agreements identified in Exhibit C
(collectively, the "Assigned Agreements").
1.2. HARDWARE. Effective as of the Closing Date, Owner hereby agrees to
transfer, convey, assign and sell to Purchaser all right, title and
interest in and to the Hardware.
1.3. PURCHASE PRICE. As consideration for the assets, rights and ownership
interests acquired by Purchaser hereunder (the "Assets"), on the Closing
Date Purchaser shall issue and deliver to Owner One Million Fifty Eight
Thousand Four Hundred Fifty
2
<PAGE> 3
(1,058,450) shares of Series D Preferred Stock of Purchaser (the "Shares,"
and such Shares constituting the "Purchase Price").
1.4. PURCHASE PRICE ALLOCATION. The allocation of the Purchase Price shall
be mutually agreed to by Owner and Purchaser within sixty (60) days after
the Closing Date (as hereinafter defined). The parties acknowledge that
such allocation will fairly reflect the fair market value of the Assets,
and will use such allocation in reporting for all federal, state and local
tax purposes.
1.5. TAXES. The parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows:
1.5.1. Each party shall be responsible for any personal property taxes
on property it owns or leases, for franchise and privilege taxes on
its own business, and for taxes based on its own net income or gross
receipts.
1.5.2. Owner shall bill Purchaser and Purchaser shall be liable for
applicable sales, use, excise, gross receipts, value-added, services,
consumption and other taxes (collectively, "Taxes") which are imposed
on the transfer of software, goods and services to Purchaser
hereunder; provided, however, that Owner shall not bill Purchaser and
shall bear no responsibility for such applicable Taxes if Purchaser
provides Owner with a properly completed resale or exemption
certificate with respect to any qualifying software, good or services.
1.6. NO ASSUMPTION OF LIABILITIES. Under this Agreement, Purchaser does not
assume, undertake or agree to perform, pay or discharge any of Owner's
liabilities (including liabilities for taxes and related interest and
penalties, other than as set forth in Section 1.5), obligations or the
like, except for any obligations to be performed under the Assigned
Agreements after the Closing Date.
ARTICLE 2. CLOSING
2.1. CLOSING. The closing of the transactions provided for herein (the
"Closing") shall take place at the offices of Weil, Gotshal & Manges LLP in
New York, New York, at 3:00 p.m. within five (5) business days after the
expiration of the applicable waiting period under the HSR Act (as
hereinafter defined) (the "Closing Date"), or such other place, time and
date as the parties may agree.
3
<PAGE> 4
ARTICLE 3. DELIVERY
3.1. PROGRAMS. On the Closing Date, Owner, at its own expense, shall
deliver to Purchaser: (a) a master copy of the Programs (in both source and
object code form) in electronic form to a location designated by Purchaser;
and (b) all system and user documentation pertaining to the Programs,
including, but not limited to, the p.d.,q. 2000 Training Manual version 3.0
and any design or development specifications in Owner's possession
(collectively, the "Documentation"), and all error reports, and related
correspondence and memoranda.
3.2. HARDWARE. Owner, at its own expense, shall deliver to Purchaser the
Hardware, except for the Hardware specified in Exhibit D as located on the
premises of third parties, in accordance with the timetable agreed upon in
the Transition Plan under Section 9.1.2.
ARTICLE 4. RIGHTS RETAINED OR RESERVED BY OWNER
4.1. RESERVATION. Notwithstanding any other provision of this Agreement,
Owner reserves and retains for its own benefit and the benefit of its
Affiliates (as hereinafter defined), and Purchaser grants Owner and its
Affiliates, effective as of the Closing Date, the non-exclusive,
royalty-free, non-assignable right and license (with no right to
sublicense) to copy, modify, and distribute internally the Programs as they
exist as of the Closing Date, and subject to the limitations set forth in
Section 4.2 below, to continue to use the Programs as they have been used
in the business of Owner and its Affiliates as of the Closing Date, in
perpetuity (or for the longest time permitted by law). In addition, Owner
and its Affiliates may retain copies of the Programs (in both object code
and source code form, and including all Documentation) solely for the
purposes set forth in this Section 4.1. Notwithstanding anything herein to
the contrary, the Programs, including its source code and all
Documentation, shall be considered Purchaser's Confidential Information for
purposes of ARTICLE 16 hereof. For the purposes of this ARTICLE 4, an
"Affiliate" of Owner is any entity which Owner controls, is controlled by,
or is under common control with, where "control" means the direct or
indirect ownership or control of more than fifty percent (50%) of an
entity's total outstanding voting power.
4.2. LICENSE RESTRICTIONS. The rights retained by Owner and its Affiliates
pursuant to Section 4.1 above shall be solely for their own internal
business purposes, and Owner and its Affiliates shall not, on or after the
Closing Date, directly or indirectly, on their own behalf or on behalf of
any person, firm, partnership, joint venture, corporation, business entity
or any other third party, (a) sell, license, sublicense, grant, transfer,
distribute or otherwise dispose of the Programs or the Documentation or (b)
use the Programs to provide services to any third party that is active in
the brokerage business or could be construed to be a "Broker General
Agent," "broker," "field agent" or "Managing General Agency," without
obtaining the prior consent of ChannelPoint.
4
<PAGE> 5
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1. OWNER REPRESENTATIONS AND WARRANTIES.
5.1.1. Owner represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, with its principal place of business as
indicated in the first paragraph of this Agreement.
5.1.2. Owner represents and warrants that the execution, delivery and
performance of this Agreement by Owner and all instruments and
documents to be delivered by Owner hereunder: (a) are within the
corporate power of Owner; (b) have been duly authorized by all
necessary or proper corporate action; (c) are not in contravention of
any provision of the certificate of incorporation or bylaws of Owner;
(d) will not violate any law or regulation or any order or decree of
any court of governmental instrumentality; (e) will not conflict with,
constitute a breach of, or in any way violate the terms of any
indenture, mortgage, deed of trust, lease, arrangement, understanding
or agreement, or other instrument to which Owner is a party or by
which Owner or any of its property is bound, to the extent any such
conflict, breach or violation would have a material adverse effect on
the financial condition of Owner or on the ability of Owner to perform
its obligations hereunder, or would have a material adverse effect on
the value of the Programs; and (f) do not require any filing or
registration with or the consent or approval of, any governmental
body, agency, authority or any other person, which has not been made
or obtained previously (excluding (i) any filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and (ii) any filings Purchaser may desire to make with the
United States Copyright Office, Patent and Trademark Office or other
governmental agency to reflect its acquisition of title to certain
intellectual property assets hereunder). This Agreement has been duly
executed and delivered by Owner and constitutes a legal, valid and
binding obligation of Owner, enforceable against Owner in accordance
with its terms, except as such enforceability may be limited by
applicable insolvency and other laws affecting creditors' rights
generally or by the availability of equitable remedies.
5.1.3. Owner represents and warrants that the relevant portions of the
Programs shall substantially conform in all material respects to the
general description, features and functionality set forth in the
"p.d.,q. 2000 Training Manual, Version 3.0," or in the "p.d.,q. Lite
Version 4.0 User Manual."
5.1.4. Owner represents and warrants that neither the Programs nor the
Hardware contain any copy protection device, computer virus, Trojan
horses, worm or other software routines that are intended to disable,
erase, or otherwise harm the Programs or Hardware or other software or
hardware used with the Programs or Hardware.
5
<PAGE> 6
5.1.5. Owner has previously delivered to Purchaser certain unaudited
financial schedules attached hereto as Exhibit J detailing certain
historical costs (collectively, the "Financial Schedules"). The
Financial Schedules are accurate and complete in all material respects
for the periods referred to therein, and are consistent with the books
and records of the Owner.
5.1.6. The Assigned Agreements collectively constitute all of the
agreements, contracts, understanding or arrangements necessary to
enable Purchaser to support, distribute, operate and commercially
exploit the Programs in the manner in which the Programs are currently
being supported, distributed, operated and commercially exploited.
Owner has no knowledge of any basis upon which any party to any
Assigned Agreement (other than the agreements set forth in Exhibit I
hereto) may object to (a) the assignment to Purchaser of any right
under such Assigned Agreement, or (b) the delegation to or performance
by Purchaser of any obligation under such Assigned Agreement. Except
for the End-User Agreements marked "N/A" in Exhibit C, Owner has made
available to Purchaser or its advisers true and correct copies of the
Assigned Agreements for review.
5.1.7. With respect to the Technology and the Hardware, no action,
suit, proceeding or investigation of any nature (including, but not
limited to, claims that the Technology or Hardware infringe any
patent, trade secret or other intellectual property right of any third
party) is pending or, to the best of Owner's knowledge, threatened in
writing against Owner, nor, to the best knowledge of Owner, is there
any basis therefor. There is no judgment, decree, injunction, rule or
order of any court, governmental department, commission agency,
instrumentality or arbitrator or other similar ruling outstanding
against Owner affecting the Programs or the Hardware.
5.1.8. Owner represents and warrants that Purchaser shall receive,
pursuant to this Agreement as of the Closing Date, complete and
exclusive right, title, and interest in and to all tangible and
intangible property rights existing in the Programs subject only to
the rights reserved and retained pursuant to ARTICLE 4 of this
Agreement, and subject to the rights of third parties as set forth in
ARTICLE 6 (concerning software components licensed from third parties
and contained in the Programs), ARTICLE 7 (concerning software
components purchased from a third party and contained in the Programs)
ARTICLE 8 (concerning copies of the Programs licensed to end-users)
and ARTICLE 10 (concerning software used in the development and
maintenance of the Programs) of this Agreement. Subject to the
foregoing exceptions, Owner represents and warrants that it has
developed the Programs entirely through its own efforts for its own
account and that the Programs and the Hardware are free and clear of
all liens, claims, encumbrances, security interests, rights, or
equities whatsoever of any third party.
5.1.9. The Technology includes all proprietary rights, patent rights
of which Owner is aware, copyrights, trade secrets, and/or other
intellectual property rights
6
<PAGE> 7
required to reproduce, develop, maintain, support, distribute, operate
and create object versions of the Programs as currently operated by
Owner and to fulfill all outstanding obligations contained in the
End-User Agreements (collectively the "Intellectual Property").
5.1.10. Owner represents and warrants that all registered copyrights,
trademarks and trademark applications which are owned by Owner and are
used by Owner in connection with the Technology are listed in Exhibit
A (with respect to copyrights) and Exhibit E (with respect to
trademarks). All such trademarks and trademark applications have been
duly registered in, filed in or issued by the United States Patent and
Trademark Office or the corresponding offices of other countries, and
have been properly maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the
United States and each such country, and all such registered
copyrights have been duly registered in, filed in or issued by the
United States Copyright Office or the corresponding offices of other
countries. Owner has not prepared or filed any patent applications,
and no patents have been issued to Owner in any country, relating to
the Technology.
5.1.11. Owner represents and warrants that, except for royalties
payable under the Remarketing Agreements and Development Licenses and
sums payable under the Acquisition Agreement, Owner is not under any
obligation to pay any third party royalties or other fixed or
contingent amounts with respect to the Technology or the Intellectual
Property, including, but not limited to, any royalties or other fixed
or contingent amounts based upon the sale, license, distribution or
other use or exploitation of the Technology or the Hardware.
5.1.12. Owner represents and warrants that the Programs do not
infringe, conflict with or violate any intellectual property right of
any kind (including, without limitation, any trade secret right) or
similar rights of any third party; provided, however, that with
respect to patent rights, Owner represents and warrants only that the
Programs do not infringe, conflict with or violate the claims of any
patent existing and issued as of the date hereof. Owner is not aware
of any violation or infringement by any person of any Intellectual
Property nor is the Intellectual Property subject to any outstanding
order, decree, judgment or stipulation. Owner represents and warrants
that it has taken and will take all reasonable security measures to
protect the secrecy, confidentiality and value of all Intellectual
Property transferred in accordance with this Agreement. Owner agrees
to promptly inform the Purchaser of any such claim of which it becomes
aware arising or threatened in the future with respect to the
Intellectual Property or any part of the Technology or the Hardware.
5.1.13. Owner represents and warrants that, except with respect to
portions of the Programs supplied by third parties as set forth in
ARTICLE 6 (concerning software components licensed from third parties
and contained in the Programs), ARTICLE
7
<PAGE> 8
7 (concerning software components purchased from a third party and
contained in the Programs) and ARTICLE 10 (concerning software used in
the development and maintenance of the Programs) of this Agreement,
all personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception
and development of the Technology either (a) have been party to a
for-hire relationship with Owner that has accorded Owner full,
effective, and exclusive original ownership of all tangible and
intangible property thereby arising with respect to the Technology or
(b) have executed appropriate instruments of assignment in favor of
Owner as assignee that have conveyed to Owner full, effective, and
exclusive ownership of all tangible and intangible property thereby
arising with respect to the Technology. Owner has made available to
Purchaser or its advisers true and correct copies of all such
instruments of assignment for review.
5.1.14. Owner represents and warrants that the Programs record, store,
process, calculate and present calendar dates falling on and after
(and, if applicable, spans of time including) January 1, 2000, and
will calculate any information dependent on or relating to such dates
in the same manner (and with the same functionality, data integrity
and performance) as the Programs record, store, process, calculate and
present calendar dates on or before December 31, 1999 or any
information dependent on or relating to such dates. None of the
Programs will lose functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000.
5.1.15. Owner represents and warrants that upon delivery of the
Hardware to Purchaser and payment in full of the Purchase Price,
Purchaser shall obtain good and marketable title to the Hardware, free
from any lien or encumbrance (except for such liens or encumbrances as
may be imposed by Purchaser's creditors).
5.1.16. The representations and warranties set forth in Sections 4.2
(other than subsection (g) thereof) and 4.3 of the Purchase Agreement
dated the date hereof between Purchaser and General Electric Capital
Corporation (the "Purchase Agreement") are hereby incorporated by
reference, with Owner hereby making the representations and warranties
made by General Electric Capital Corporation in such Sections of the
Purchase Agreement. Owner further represents and warrants that the
office of Owner in which its investment decision was made is located
at the address of Owner first set forth in this Agreement.
5.2. PURCHASER REPRESENTATIONS AND WARRANTIES.
5.2.1. Purchaser represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with its principal place of business as indicated
in the first paragraph of this Agreement.
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<PAGE> 9
5.2.2. Purchaser represents and warrants that the execution, delivery
and performance of this Agreement by Purchaser and all instruments and
documents to be delivered by Purchaser hereunder: (a) are within the
corporate power of Purchaser; (b) have been duly authorized by all
necessary or proper corporate action; (c) are not in contravention of
any provision of the certificate of incorporation or bylaws of
Purchaser; (d) will not violate any law or regulation or any order or
decree of any court of governmental instrumentality; (e) will not
conflict with, constitute a breach of, or in any way violate the terms
of any indenture, mortgage, deed of trust, lease, agreement, or other
instrument to which Purchaser is a party or by which Purchaser or any
of its property is bound, to the extent any such conflict, breach or
violation would have a material adverse effect on the financial
condition of Purchaser or on the ability of Purchaser to perform its
obligations hereunder; and (f) do not require any filing or
registration with or the consent or approval of, any governmental
body, agency, authority or any other person, which has not been made
or obtained previously (excluding (i) any filings under the HSR Act,
and (ii) any filings Purchaser may desire to make with the United
States Copyright Office, Patent and Trademark Office or other
governmental agency to reflect its acquisition of title to certain
intellectual property assets hereunder). This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforceability may be
limited by applicable insolvency and other laws affecting creditors'
rights generally or by the availability of equitable remedies.
5.2.3. The rights, preferences, privileges and restrictions of the
Shares are as stated in the Restated Certificate of Incorporation of
the Purchaser (the "Restated Certificate") attached as Exhibit B to
the Purchase Agreement. The shares of the Purchaser's Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares") have
been duly and validly reserved for issuance. When issued in compliance
with the provisions of this Agreement and the Restated Certificate,
the Shares and the Conversion Shares will be duly and validly issued,
fully paid and nonassessable, and will be free of any preemptive
rights, liens, encumbrances or other restrictions on transfer;
provided, however, that the Shares and the Conversion Shares may be
subject to restrictions on transfer under state and/or federal
securities laws as set forth in the Purchase Agreement as otherwise
required by such laws at the time a transfer is proposed. The
representations of Purchaser as to its capitalization set forth in
Section 3.2 of the Purchase Agreement are hereby incorporated by
reference.
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ARTICLE 6. THIRD-PARTY SOFTWARE COMPONENTS
6.1. THIRD PARTY AUTHORIZATION. Owner represents and warrants that it has
duly obtained the right and license to use, copy, modify, and distribute
the software components contained in the Programs pursuant to the
Remarketing Agreements identified in Exhibit B and the Acquisition
Agreement; that the Programs contain no other software components in which
any third party may claim superior or joint ownership; and that the
Programs are not derivative works of any other software programs not owned
in their entirety by Owner.
6.2. REMARKETING AGREEMENTS. Owner represents and warrants that (a) each
Remarketing Agreement is in full force and effect in accordance with its
terms without modification or amendment and without default by either party
thereto; (b) no condition exists which, with or without the giving of
notice or passage of time, would constitute a breach under any Remarketing
Agreements, (c) each Remarketing Agreement grants Owner the full and
effective right and license to use, copy, modify, display and distribute
the pertinent software components as part of the Programs; (d) each
Remarketing Agreement provides only for the payment of fees and royalties
that, to the extent accrued as of the Closing Date, will have been paid in
full; (e) except for any Remarketing Agreement specifically identified in
Exhibit I hereto, each Remarketing Agreement is freely assignable to and
assumable by Purchaser pursuant to this Agreement, without the requirement
of obtaining any consent or approval or giving any prior or subsequent
notice; and (f) Owner has not received notice that any party to any
Remarketing Agreement intends to terminate or exercise any remedy under
such Remarketing Agreement.
6.3. REMARKETING AGREEMENTS ASSIGNMENT. Effective as of the Closing Date,
Owner hereby agrees to assign, transfer, and convey the Remarketing
Agreements to Purchaser, and Purchaser hereby agrees to assume the
obligations of Owner set forth in the Remarketing Agreements and agrees to
indemnify and hold harmless Owner from and against any Damages resulting
from failure of Purchaser to perform its obligations under the Remarketing
Agreements in accordance with their terms after the Closing Date. Owner
agrees to indemnify and hold harmless Purchaser from and against any
Damages resulting from failure of Owner to perform its obligations
(including any payment obligations accruing) under the Remarketing
Agreements in accordance with their terms prior to the Closing Date. Owner
and Purchaser shall jointly notify all licensors under the Remarketing
Agreements of the foregoing assignment and assumption.
ARTICLE 7. ACQUISITION AGREEMENT
7.1. ACQUISITION AGREEMENT. Purchaser recognizes that certain components of
the software comprising the Programs were acquired by Owner from T.U.G.,
Inc., under the Agency Automation Software Package Sales Agreement between
T.U.G., Inc. and Owner dated December 29, 1995 (the "Acquisition
Agreement"), and that Owner
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remains subject to certain ongoing payment obligations under the
Acquisition Agreement. Prior to Closing, Owner shall be solely responsible
for all ongoing payment obligations under the Acquisition Agreement and
shall indemnify and hold harmless Purchaser for any liability therefor.
Owner represents and warrants that (a) all payment obligations under the
Acquisition Agreement that have accrued as of the Closing Date will have
been paid in full; (b) the Acquisition Agreement is in full force and
effect in accordance with its terms without modification or amendment and
without default by it, or to its knowledge by any other party thereto, (c)
no condition exists which, with or without the giving of notice or passage
of time, would constitute a breach under the Acquisition Agreement; (d) the
Acquisition Agreement grants Owner the full and effective right and license
to use, copy, modify, and distribute the pertinent software components as
part of the Programs; (e) the Acquisition Agreement is freely assignable to
and assumable by Purchaser pursuant to this Agreement, without the
requirement of obtaining any consent or approval or giving any prior or
subsequent notice; and (f) Owner has not received notice that T.U.G., Inc.
or any successor in interest thereto intends to terminate or exercise any
remedy under such Acquisition Agreement.
7.2. ACQUISITION AGREEMENT ASSIGNMENT. Effective as of the Closing Date, Owner
hereby agrees to assign, transfer and convey the Acquisition Agreement to
Purchaser, and Purchaser hereby agrees to assume the obligations of Owner
set forth in the Acquisition Agreement (with the exception of any remaining
payment obligations of Owner thereunder) and agrees to indemnify and hold
harmless Owner from and against any Damages resulting from failure of
Purchaser to perform its obligations under the Acquisition Agreement after
the Closing Date. Owner agrees that, as of the Closing Date, (a) it will
have terminated any provisions in the Acquisition Agreement setting forth
ongoing payment obligations, or (b) that Owner will remain liable for any
such ongoing payment obligations that are not terminated prior to the
Closing Date, and agrees to indemnify and hold harmless Purchaser from and
against any Damages resulting from Owner's failure to perform its
obligations under this sentence. Owner agrees to indemnify and hold
harmless Purchaser from and against any Damages resulting from failure of
Owner to perform its obligations (including payment obligations accruing)
under the Acquisition Agreement prior to the Closing Date. Owner and
Purchaser shall jointly notify T.U.G., Inc. or any successor in interest
thereto of the foregoing assignment and assumption. Notwithstanding the
provisions of subsection (b) above, Purchaser shall be responsible for
paying royalty payments under the Acquisition Agreement in an amount equal
to [...***...] of the license fees charged by Purchaser to any end-user or
customer (in any new or upgrade installations) in consideration for a
license to use the Agency Automation Software (as defined in the
Acquisition Agreement), to the extent such license fees exceed [...***...];
provided that the foregoing limitation shall not apply to any other pricing
mechanisms used by Purchaser in connection with the Agency Automation
Software, including transaction fees, service fees, development
* CONFIDENTIAL TREATMENT REQUESTED
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fees, maintenance fees or any other fees that are clearly distinguished
from license fees in Purchaser's license agreements with such end-user or
customer.
ARTICLE 8. END-USER AGREEMENTS
8.1. GRANTS TO THIRD PARTIES. Owner represents and warrants that it has
granted rights in the Programs to third parties solely pursuant to the
nonexclusive End-User Agreements, and the following other non-exclusive
agreements:
8.1.1. Value Added Remarketing Agreement between Owner and Cybertek
Corporation, dated August 4, 1998 (the "Cybertek Agreement").
8.2. END-USER AGREEMENTS. Owner represents and warrants that (a) each
End-User Agreement is in full force and effect in accordance with its terms
without modification or amendment and without default by it, or to its
knowledge by any other party thereto; (b) no condition exists which, with
or without the giving of notice or passage of time, would constitute a
breach under any of the End-User Agreements, (c) each End-User Agreement
grants the licensee thereunder solely the nonexclusive right and license to
use the Programs; (d) each End-User Agreement provides only for rendering
of services (including warranty coverage, maintenance, and support) that,
to the extent required to have been performed as of the Closing Date, will
have been performed in full; (e) except for any End-User Agreement
specifically identified in Exhibit I hereto, each End-User Agreement is
freely assignable to and assumable by Purchaser pursuant to this Agreement,
without the requirement of obtaining any consent or approval or giving any
prior or subsequent notice; (f) Owner has not received notice that any
party to any End-User Agreement intends to terminate or exercise any remedy
under such End-User Agreement; and (g) each End-User Agreement marked as
"N/A" in Exhibit C is substantially similar to the End-User Agreements for
the same version of the Programs marked as "Provided" in Exhibit C.
8.3. END-USER AGREEMENTS ASSIGNMENT. Effective as of the Closing Date,
Owner hereby agrees to assign, transfer, and convey the End-User Agreements
to Purchaser, and Purchaser hereby agrees to assume the obligations of
Owner set forth in such End-User Agreements and agrees to indemnify and
hold harmless Owner from and against any Damages resulting from failure of
Purchaser to perform its obligations under the End-User Agreements in
accordance with their terms after the Closing Date. Owner agrees to
indemnify and hold harmless Purchaser from and against any Damages
resulting from failure of Owner to perform its obligations under the
End-User Agreements in accordance with their terms prior to the Closing
Date. Owner and Purchaser shall jointly notify all end-users under the
End-User Agreements of the foregoing assignment and assumption. It is
mutually agreed that Owner shall retain all amounts previously paid to
Owner under the End-User Agreements and that, to the extent further
payments may be made thereunder after the Closing Date, Purchaser
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shall be entitled to receive them directly from such end-users. If such
further payments nonetheless are made to Owner, Owner shall remit such
payments to Purchaser.
8.4. CYBERTEK AGREEMENT. Owner represents and warrants that (a) the
Cybertek Agreement is in full force and effect in accordance with its terms
without modification or amendment and without default by it, or to its
knowledge by any other party thereto; (b) no condition exists which, with
or without the giving of notice or passage of time, would constitute a
breach under any Cybertek Agreement; (c) the Cybertek Agreement grants the
licensee thereunder solely the nonexclusive rights and license to market
the Programs to end-users and to install copies of the Programs internally
for testing and support purposes; and (d) Owner has not received notice
that Cybertek Corporation or any successor in interest thereto intends to
terminate or exercise any remedy under the Cybertek Agreement.
8.5. CYBERTEK AGREEMENT ASSIGNMENT. Effective as of the Closing Date, Owner
hereby agrees to assign, transfer, and convey the Cybertek Agreement to
Purchaser, and Purchaser hereby agrees to assume the obligations of Owner
set forth in the Cybertek Agreement and agrees to indemnify and hold
harmless Owner from and against any Damages resulting from failure of
Purchaser to perform its obligations under the Cybertek Agreement in
accordance with its terms after the Closing Date. Owner agrees to indemnify
and hold harmless Purchaser from and against any Damages resulting from
failure of Owner to perform its obligations under the Cybertek Agreement in
accordance with its terms prior to the Closing Date. It is mutually agreed
that Owner shall retain all amounts previously paid to Owner under the
Cybertek Agreement and that, to the extent further payments may be made
thereunder after the Closing Date, Purchaser shall be entitled to receive
them directly. If such further payments nonetheless are made to Owner,
Owner shall remit such payments to Purchaser.
ARTICLE 9. TRANSITION ASSISTANCE
9.1. COOPERATION. Owner and Purchaser shall cooperate in good faith in
order to accomplish the effective and orderly transition to Purchaser of
the Programs and support for the clients of Owner using such Programs, as
follows:
9.1.1. Attached hereto as Exhibit F is a list of employees of Owner
involved in the development, maintenance, sale and support of the
Programs (the "Programs Employees"). Owner hereby consents to
Purchaser's offering employment to the Programs Employees, on terms
and conditions to be separately negotiated by the respective Programs
Employees and Purchaser. Any decisions as to whether or not to accept
such offers of employment shall be made in the sole discretion of the
relevant Programs Employees. Purchaser shall extend offers to any
Programs Employees it wishes to employ no later than two (2) days
after the Closing Date unless otherwise agreed by the parties. Prior
to extending any such offers, Purchaser shall inform Owner of the
Programs Employees to which it intends to extend offers. Purchaser
shall cooperate with Owner in the timing of its
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communications with and making of offers to Programs Employees in
order to allow Owner to simultaneously communicate with any Programs
Employees to which Purchaser does not intend to extend offers of
employment. Any decisions regarding the continued employment by Owner
of any Programs Employees to whom Purchaser does not extend employment
offers within such two (2) day period (or such other period as is
agreed by the parties), or who do not accept any such offer extended
by Purchaser, shall be made in Owner's sole discretion. Purchaser
shall bear no responsibility with regard to any Programs Employees to
whom Purchaser does not extend offers of employment.
9.1.2. Owner shall provide transition assistance to Purchaser for the
time reasonably necessary, not to exceed six (6) months, to ensure an
effective and orderly transition of the business supported by the
Programs and the clients of Owner using such Programs, and shall
cooperate in good faith with Purchaser in the transfer to Purchaser of
responsibilities toward end-users. Such assistance shall include, but
not be limited to, (a) transferring knowledge of the Programs to
designated Purchaser personnel, (b) introducing Purchaser to end-users
through joint visits to such end-users with Owner and Purchaser
personnel and (c) assisting Purchaser with the transition of customer
support obligations to Purchaser, (d) allowing Purchaser to access and
use the facilities of Owner and to house the Hardware and Purchaser
personnel for a mutually agreed period of time for the purposes
described herein, (e) assisting Purchaser with the transition of key
customer accounts, (f) participating at Purchaser's request, subject
to Owner's discretion, in joint public or company announcements
regarding Purchaser's acquisition and support of the Programs; (g)
delivering the Hardware to Purchaser; and (h) providing such other
transition services as are reasonably requested by Purchaser and
agreed to by Owner. The parties to this Agreement shall jointly
develop and agree to a transition plan (the "Transition Plan") within
thirty (30) days of the Closing Date which shall specify each party's
responsibilities in accomplishing the foregoing objectives.
9.1.3. Owner shall pay to Purchaser, no later than sixty (60) days
after the Closing Date, the sum of [...***...] (the "Transition
Payment"). It is the intention of the parties that Purchaser will use
the Transition Payment the pay salaries and other expenses associated
with any Programs Employees hired by Purchaser under Section 9.1.1.
9.1.4. In accordance with its obligation to Support (as defined in
Section 13.1) the Programs following the Closing Date under Section
13.1, Purchaser shall maintain a staffing level with regard to the
Programs substantially similar to that maintained by Owner prior to
the Closing Date. Notwithstanding the foregoing, Purchaser shall be
free to achieve such staffing level through outsourcing, or to replace
employees involved in Supporting the Programs as it deems appropriate
in its reasonable judgment.
* CONFIDENTIAL TREATMENT REQUESTED
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9.1.5. Owner shall introduce Purchaser to Patni Computer Services
Ltd. ("Patni") and endeavor to facilitate an agreement between
Purchaser and Patni containing terms and conditions similar to the
terms and conditions under which Owner has employed the services of
Patni with respect to the Programs.
ARTICLE 10. ANCILLARY AGREEMENTS
10.1. MAINTENANCE AGREEMENTS AND DEVELOPMENT LICENSES. Exhibit G hereto
sets forth a list of (a) maintenance agreements pertaining to the Hardware
(the "Maintenance Agreements") and (b) agreements licensing to Owner
certain software packages used in the development and maintenance of the
Programs (the "Development Licenses"). Owner represents and warrants that
(a) each Maintenance Agreement and Development License is in full force and
effect in accordance with its terms without modification or amendment and
without default by it, or to its knowledge by any other party thereto; (b)
no condition exists which, with or without the giving of notice or passage
of time, would constitute a breach under any Maintenance Agreement or
Development License; (c) each Development License grants Owner the full and
effective right to use the pertinent software packages in the development
and maintenance of the Programs; (d) each Maintenance Agreement and
Development License provides only for the payment of fees and royalties
that, to the extent accrued as of the Closing Date, will have been paid in
full; and (e) Owner has not received notice that any party to any
Maintenance Agreement or Development License intends to terminate or
exercise any remedy under such Maintenance Agreement or Development
License.
10.2. MAINTENANCE AGREEMENTS AND DEVELOPMENT LICENSES ASSIGNMENT. Effective
as of the Closing Date, Owner hereby agrees to assign, transfer and convey
to Purchaser the Maintenance Agreements and the Development Licenses, and
Purchaser hereby agrees to assume the obligations of Owner set forth in
such Maintenance Agreements and Development Licenses and agrees to
indemnify and hold harmless Owner from and against any Damages resulting
from failure of Purchaser to perform its obligations under the Maintenance
Agreements or the Development Licenses in accordance with their terms after
the Closing Date. Owner agrees to indemnify and hold harmless Purchaser
from and against any Damages resulting from failure of Owner to perform its
obligations under the Maintenance Agreements or the Development Licenses in
accordance with their terms prior to the Closing Date. Owner and Purchaser
shall jointly notify all service providers under the Maintenance Agreements
and licensors under the Development Licenses of the foregoing assignment
and assumption.
ARTICLE 11. FURTHER ASSURANCES
11.1. COOPERATION IN TRANSFER. Owner shall, without further consideration,
execute and deliver such further conveyance instruments and take such
further actions as may
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be necessary to procure, maintain, perfect, and enforce the full benefits,
enjoyment, rights, title and interest, on a worldwide basis of the
Technology and the Hardware. Owner therefore agrees that upon Purchaser's
written request and at Purchaser's expense Owner shall, as reasonably
necessary, (a) execute, acknowledge, and deliver any affidavits or
documents of assignment and conveyance regarding the Technology or the
Hardware; (b) provide testimony in connection with any proceeding affecting
the right, title, or interest of Purchaser in the Technology or the
Hardware; and (c) perform any other acts deemed necessary to carry out the
intent of this Agreement.
11.2. AUDIT. After Closing, Owner and its third party auditors shall
render any assistance and cooperation reasonably required and requested in
writing by Purchaser to conduct an independent audit, which shall include
the production of audited financial statements, of the business conducted
by Owner concerning the Programs (the "P.D.,Q. Business") for three (3)
years prior to Closing. For the purposes of conducting such audit Owner
shall permit Purchaser access to pertinent books and records concerning the
P.D.,Q. Business during normal business hours at times mutually agreed upon
by the parties.
ARTICLE 12. ACKNOWLEDGMENT OF RIGHTS
12.1. PURCHASER RIGHTS. In furtherance of this Agreement, Owner hereby
acknowledges that, from and after the Closing Date, Purchaser has acceded
to all of Owner's right, title, and standing to:
12.1.1. Receive all rights and benefits pertaining to the
Technology, the Hardware, the Remarketing Agreements, the
Acquisition Agreement, the End-User Agreements, the Cybertek
Agreement, the Maintenance Agreements and the Development Licenses;
12.1.2. Institute and prosecute all suits and proceedings and take
all actions that Purchaser, in its sole discretion, may deem
necessary or proper to collect, assert, or enforce any claim, right,
or title of any kind in, to or under any and all of the Technology,
the Hardware, the Remarketing Agreements, the Acquisition Agreement,
the End-User Agreements, the Cybertek Agreement, the Maintenance
Agreements and the Development Licenses; and
12.1.3. Defend and compromise any and all such action, suits, or
proceedings relating to such transferred and assigned rights, title,
interest, and benefits, and perform all other such acts in relation
thereto as Purchaser, in its sole discretion, deems advisable.
ARTICLE 13. PROGRAMS PROMOTION; SOURCE CODE ESCROW
13.1. MAINTENANCE AND PROMOTION OF PROGRAMS. As additional consideration
for the assets, rights and ownership interests acquired by Purchaser
hereunder, Purchaser shall,
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for a period of two (2) years following the Closing Date, use commercially
reasonable efforts actively to promote, maintain, support, market and
upgrade (collectively, such activities constituting "Support") the
Programs, and in any event shall conduct such activities on a level at
least equivalent to that performed by Owner prior to the Closing Date. The
following procedure shall be used to determine whether Purchaser is
fulfilling its obligations under this Section 13.1:
13.1.1. In the event that Owner is dissatisfied with Purchaser's
activities pursuant to Section 13.1, it shall have the right to
convene an arbitration proceeding to determine whether Purchaser is
satisfying its obligations under Section 13.1. If the arbitrator(s)
determine that Owner has shown by clear and convincing evidence that
Purchaser has demonstrated a pattern of failing to (a) maintain the
Programs properly, or (b) to provide effective support to end users
of the Program, Purchaser shall be deemed in breach of its
obligations under Section 13.1. In reaching its determination, the
arbitrator shall specifically consider (a) with regard to maintaining
the Programs properly, whether Purchaser has demonstrated a pattern
of failing to maintain the distributed code to the Programs in
reasonably error-free condition, or of failing to keep current
Program functionality with regard to industry and market
requirements; and (b) with regard to providing effective support to
end users, whether Purchaser has demonstrated a pattern of
introducing defects to the Programs that are injurious to the
businesses of end users, or of failing to cure reported defects in a
timely manner consistent with industry standards and reasonable
customer expectations.
13.2. RIGHT TO REACQUIRE PROGRAMS. Purchaser acknowledges that Purchaser's
obligations under Section 13.1 constituted a material inducement to Owner's
entering into this Agreement, and accordingly agrees that any breach by
Purchaser of Purchaser's obligations under Section 13.1, as determined by
an arbitrator's ruling in Owner's favor in accordance with the procedures
set forth in Section 13.1.1 above, shall entitle Owner to reacquire from
Purchaser all right, title and interest in and to the Programs, Assigned
Agreements and Trademarks transferred to Purchaser hereunder (hereinafter,
such right to reacquire to be referred to as the "Option"). In the event of
a breach of Section 13.1, as determined by an arbitrator's ruling in
Owner's favor in accordance with the procedures set forth in Section 13.1.1
above, which breach has not been cured within thirty (30) days after Owner
has provided notice thereof to Purchaser, Owner may exercise the Option by
providing written notice (the "Option Notice") to Purchaser and paying to
Purchaser the fair market value of the Programs in their then current form,
as determined by a third party auditor mutually acceptable to the parties.
In the event that the parties are unable to agree to an acceptable auditor
within seven (7) days after the date of the Option Notice, the fair market
value of the Programs shall be determined by a panel of three auditors,
with one chosen by each party and a third chosen by the first two auditors.
Notwithstanding the foregoing, in the event that Purchaser is in Bankruptcy
(as hereinafter defined) as of the date of the Option Notice, Purchaser may
exercise the Option by either, at Owner's choice, (a) paying the fair
market value of the Programs, determined as set forth above, or
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(b) delivering to Purchaser the Shares received by Owner hereunder.
Purchaser shall cooperate fully with Owner in executing all documents
necessary to effectuate Owner's reacquisition of the Programs, Remarketing
Agreements and Trademarks under the Option. As security for Purchaser's
obligations under this ARTICLE 13, Purchaser will grant to Owner a lien and
security interest in the Programs (including without limitation all
copyright registrations thereof) and Trademarks pursuant to a security
agreement to be executed by the parties at the Closing hereunder. As used
in this Section 13.2, the term "Bankruptcy" shall mean the institution of
any proceeding by or against Purchaser seeking relief, reorganization or
arrangement under any laws relating to bankruptcy or insolvency; the
assignment for the benefit of creditors, or upon the appointment of a
receiver, liquidator or trustee, of any of Purchaser's property or assets;
or the liquidation, dissolution or winding up of Purchaser's business.
13.3. SOURCE CODE ESCROW.
13.3.1. Pursuant to a source code escrow agreement in a form to be
mutually agreed upon by both parties (the "Escrow Agreement"),
Purchaser shall deposit a copy of the source code and all
documentation for the Programs (collectively, the "Deposit") with a
third party escrow agent reasonably acceptable to both parties (the
"Escrow Agent"), no later than thirty (30) days after Purchaser's
receipt thereof under Section 3.1. The Deposit will be held in escrow
as security for the Option, for a period of two (2) years following
the Closing Date. During such two (2) year period, the Deposit will
be updated and kept current by Purchaser as changes are made to any
part of the Programs. Purchaser agrees continuously to store, deposit
and maintain the Deposit for the benefit of Owner.
13.3.2. Purchaser shall provide a copy of the Escrow Agreement to
Owner upon request, and Owner shall have the right to verify the
completeness and currency of the Deposit upon reasonable notice to
the Escrow Agent and Purchaser.
13.3.3. The Deposit shall be held in escrow by the Escrow Agent and
Owner shall, upon payment of the duplication costs and other
reasonable handling charges of the Escrow Agent, be entitled to
obtain a copy of the Deposit from the Escrow Agent upon Owner's
exercise of the Option under Section 13.2.
ARTICLE 14. LIMITED WARRANTY; NO SUPPORT
14.1. LIMITED WARRANTY. Other than the representations and warranties
explicitly set forth in this Agreement, OWNER WILL ASSIGN THE PROGRAMS AND
HARDWARE TO PURCHASER "AS IS," AND OWNER DISCLAIMS ALL WARRANTIES EXPRESS
OR IMPLIED WITH RESPECT TO THE PROGRAMS AND HARDWARE, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
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14.2. NO SUPPORT. Except as may otherwise be expressly provided in a
separate agreement, Owner shall not be responsible to Purchaser for, or
have any duty to conduct or perform, any training or instruction; any
presale or postsale marketing support; any licensing, sublicensing,
leasing, or distribution; or any modification, correction, updating,
enhancement, or technical support of the Programs.
ARTICLE 15. INDEMNIFICATION
15.1. INDEMNIFICATION FOR BREACH OF REPRESENTATION AND WARRANTIES. Each
party hereto shall indemnify and hold harmless the other party, and such
party's directors, officers, employees and agents, from and against all
Damages (as defined in Section 15.4) resulting from, arising from, based on
or relating to such party's breach of its representations and warranties
hereunder or in any certificate, document or instrument furnished by each
party pursuant to this Agreement or in connection with the transactions
contemplated hereby; provided, however, that Owner shall have no obligation
under this ARTICLE 15 with respect to any Damages to the extent such
Damages would not have been incurred but for (a) modifications made by
Purchaser to the Programs or Hardware; and/or (b) Purchaser's combination
of the Programs and/or Hardware, or operation or use thereof in combination
with, equipment, data or software not furnished by Purchaser except for any
combination which is specified in the Program documentation or that
otherwise forms part of the normal operating environment for the Programs.
15.2. TAX INDEMNIFICATION. Purchaser shall indemnify and hold harmless
Owner, and Owner's directors, officers, employees and agents, from and
against all Damages (as defined in Section 15.4) resulting from, arising
out of, based on or relating to any taxes for which Purchaser is liable
under Section 1.5.
15.3. SURVIVAL. All representations, warranties, covenants, agreements and
obligations set forth in this Agreement or any other certificate,
instrument or document furnished in connection with this Agreement or the
transactions contemplated hereby shall survive the consummation of the
transactions contemplated hereby. The representations, warranties,
covenants and obligations of Owner, and the rights and remedies that may be
exercised by Purchaser, shall not be limited or otherwise affected by or as
a result of any information furnished to, or any investigation made by or
any knowledge of, any of Purchaser or any of their representatives.
15.4. DAMAGES. "Damages" means any and all losses (including, but not
limited to liquidated damages), claims, damages, liabilities, obligations,
judgments, equitable relief granted, settlements, awards (including back
pay awards), demands, offsets, defenses, counterclaims, actions or
proceedings, reasonable out-of-pocket costs, expenses and attorneys' fees
(including any such reasonable costs, expenses and attorneys' fees incurred
in enforcing any right of indemnification or with respect to any appeal),
interest and penalties.
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ARTICLE 16. CONFIDENTIALITY
16.1. DEFINITION. "Confidential Information" means confidential and
proprietary information which relates to Owner's or Purchaser's business,
products and services, including but not limited to data, trade secrets,
discoveries, ideas, concepts, know-how, techniques, software, business
activities and operations, reports, studies and other technical and
business information. Notwithstanding the foregoing, Confidential
Information shall not include any information which (a) is known by the
receiving party at the time of disclosure, free of any obligation to keep
it confidential, as evidenced by credible evidence; (b) is or becomes
publicly available through authorized disclosure by the owner of such
information; (c) is rightfully obtained by the receiving party from a third
party who has the right to transfer or disclose it; or (d) is independently
developed by receiving party without reference to Confidential Information
of the other party.
16.2. NO DISCLOSURE. Each party shall keep in confidence for a period of
five (5) years after termination or expiration of this Agreement all
Confidential Information of the other party and that it will not directly
or indirectly disclose to any third party or use for its own benefit, or
use for any purpose other than the performance of its obligations under
this Agreement, any Confidential Information it receives from the other
party; provided, however, that obligations concerning confidentiality of
personal information relating to policyholders or potential policyholders
shall survive in perpetuity. Each party shall use reasonable care to
protect the other party's Confidential Information, and in no event less
than the same degree of care as it would employ with respect to its own
information of like importance which it does not desire to have published
or disseminated. Each party may make Confidential Information of the other
party available to those of its employees, contractors or agents who have a
need to know such information and who are subject to binding use and
disclosure restrictions at least as protective as those set forth herein.
Notwithstanding the foregoing, either party may make disclosures as
lawfully required or requested by a governmental entity or agency, as
required by any judicial authority or process or in connection with any
judicial proceeding, or in connection with seeking any governmental or
regulatory approval, provided that reasonable measures are taken to limit
such disclosure and to obtain confidential treatment or a protective order
and the disclosing party is allowed to participate in such efforts.
16.3. REMEDIES. Owner and Purchaser each agree that any breach of this
ARTICLE 16 would cause irreparable harm or injury to the other party
significantly in excess of the value received by such other party pursuant
to this Agreement, and that such other party shall be entitled to
declaratory, injunctive or other equitable relief, in addition to any other
legal or equitable remedies it may have, for any such breach.
20
<PAGE> 21
ARTICLE 17. NON-COMPETE
17.1. LIMITED NON-COMPETITION. Subject to ARTICLE 13, for a period of three
(3) years following the Closing Date (the "Restricted Period"), Owner shall
not compete with Purchaser by developing, marketing or distributing, or
assisting third parties to develop, market or distribute, a product or
service which is directly competitive with the Programs. Owner agrees that
neither it nor any affiliate shall during the Restricted Period, employ, or
directly or indirectly solicit for employment or advise or recommend to any
other person that he or she employ or solicit for employment, any person
employed at that time by Purchaser; provided, however, nothing contained
herein shall prevent it or any affiliate from hiring any such employee who
responds to a general hiring program conducted in the ordinary course of
business not specifically directed to such employees or who approaches
Owner or any affiliate on a wholly unsolicited basis. Following the Closing
Date, neither Owner nor any affiliate shall, without the prior written
consent of Purchaser, make any use of the trademarks listed in Exhibit E.
ARTICLE 18. CLOSING
18.1. CONDITIONS TO PURCHASER'S AND OWNER'S OBLIGATIONS AT CLOSING. The
obligations of Purchaser to purchase the Programs and Hardware hereunder
and consummate the transactions contemplated hereby, and the obligations of
Owner to transfer the Programs and Hardware hereunder and consummate the
transactions contemplated hereby, are conditioned on the satisfaction,
unless waived, of the following conditions at the Closing:
18.1.1. All applicable waiting periods under the HSR Act shall have
expired.
18.1.2. The Business and Technology Strategic Alliance Agreement in
substantially the form attached hereto as Exhibit K shall have been
executed by the parties thereto.
18.2. FAILURE TO CLOSE. If for any reason the Closing has not occurred
within sixty (60) days after the date on which this Agreement is executed,
this Agreement shall terminate except for any liability either party may
have hereunder for breach of this Agreement.
18.3. DELIVERY OF DOCUMENTS. At the Closing, Owner shall deliver to
Purchaser appropriate assignment and bill of sale documents in a form
reasonably acceptable to Purchaser, and Purchaser shall deliver to Owner
certificates constituting the Shares representing the Purchase Price as set
forth in Section 1.3.
21
<PAGE> 22
18.4. COVENANTS.
18.4.1. Owner and Purchaser shall make commercially reasonable efforts
to ensure that all conditions to Closing under Section 18.1 occur as
soon as reasonably practicable.
18.4.2. Owner shall make commercially reasonable efforts to effect the
assignment to Purchaser of all of the Assigned Agreements no later
than the Closing Date, and to obtain written consents to such
assignments from all third parties listed in Exhibit I and deliver
such consents to Purchaser no later than the Closing Date or promptly
thereafter. Purchaser shall provide reasonable assistance in effecting
such assignments and obtaining such written consents, as requested by
Owner. To the extent that any Assigned Agreements have not been
assigned to Purchaser as of the Closing Date, Owner agrees to make
available to Purchaser any benefits received thereunder after the
Closing Date, at no cost to Purchaser, and Purchaser agrees to assume
any obligations thereunder (except for any obligations explicitly
disclaimed under this Agreement) after the Closing Date.
ARTICLE 19. MISCELLANEOUS
19.1. HEADINGS AND REFERENCES. Unless otherwise stated, all references to
Articles, Sections and Exhibits refer to the articles and sections of, and
exhibits to, this Agreement. The headings of the Articles and Sections of
this Agreement are for convenience only and in no way limit or affect the
terms or conditions of this Agreement.
19.2. SEVERABILITY. If any provision or any portion of any provision of
this Agreement is construed to be illegal, invalid or unenforceable, such
provision or portion thereof shall be deemed stricken and deleted from this
Agreement to the same extent and effect as if it were never incorporated
herein, but all other provisions of this Agreement and the remaining
portion of any provision that is construed to be illegal, invalid or
unenforceable in part shall continue in full force and effect; provided
that such resulting construction of the Agreement does not frustrate the
main purpose of the Agreement.
19.3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto, together with their respective
legal representatives, successors, and assigns, and may not be assigned by
either party without the prior written consent of the other party hereto.
19.4. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado.
19.5. ENTIRE AGREEMENT. This Agreement, including the Exhibits referred to
herein, which are incorporated herein and made a part hereof, merges and
supersedes all prior and contemporaneous agreements, assurances,
representations, and communications
22
<PAGE> 23
between the parties hereto with respect to the subject matter contained
herein, and may be amended or terminated only by a written agreement
executed by the Owner and Purchaser.
19.6. NO RELATIONSHIP BETWEEN THE PARTIES. Neither party shall represent
itself as the agent or legal representative of the other or as joint
venturers for any purpose whatsoever, and neither shall have any right to
create or assume any obligations of any kind, express or implied, for or on
behalf of the other in any way whatsoever.
19.7. NON-WAIVER. A failure of either party to enforce at any time any
term, provision or condition of this Agreement, or to exercise any right or
option herein, shall in no way operate as a waiver thereof, nor shall any
single or partial exercise preclude any other right or option herein; and
no waiver of any term, provision or condition of this Agreement shall be
valid unless in writing, signed by the waiving party, and only to the
extent set forth in such writing.
19.8. NOTICES. Unless expressly stated otherwise, all notices required
herein shall be given in writing and shall be delivered (and notice shall
be deemed effective upon delivery) in person, by courier, or sent by
certified United States mail, postage prepaid, return receipt requested, to
the address set forth in the first paragraph of this Agreement.
IN WITNESS WHEREOF, Owner and Purchaser have caused this Agreement to be signed
and delivered, all as of the date first set forth above.
First Colony Life Insurance Company ChannelPoint, Inc.
By: /s/ Kim D. Thorpe By: /s/ Kenneth E. Hollen
-------------------------- --------------------------------
Name: Kim D. Thorpe Name: Kenneth E. Hollen
Title: Senior Vice President Title: President and CEO
23
<PAGE> 24
EXHIBIT A - PROGRAMS
1. p.d.,q.: Comprehensive AS400 based brokerage general agency
administration system, frequently referred to as "Classic" to
distinguish it from the replacement/upgrade offering p.d.,q. 2000.
o p.d.,q. source code - all versions extant in the p.d.,q. software
archives, 1 through 20 (current)
o p.d.,q. object code - all versions extant in the p.d.,q. software
archives, 1 through 20
o All p.d.,q. system documentation
o All end user documentation
2. p.d.,q. Lite: PC based status and e-mail application in support of
NAILBA standards
o U.S. Copyright Registration: TX 4-865-613, 5/1/98
o p.d.,q. Lite source code - all versions, 1 through 4 (current)
o p.d.,q. Lite object code - all versions, 1 through 4
o All system documentation
o All end user documentation
3. p.d.,q. 2000: Windows based replacement for p.d.,q. "Classic", a
comprehensive brokerage general agency administration system
o U.S. Copyright Registration: TX 4-906-365, 5/18/98
o p.d.,q. 2000 source code libraries - all modules, all application
versions, 1 through 3.21 (current), all standalone components
such as utilities, scripts, reports, and so on, all enhancements
currently in development both on shore in Lynchburg VA as well as
off shore in the offices of Patni Consulting Services in Mumbai,
India.
Modules:
o Resource module
o p.d.,q. 2000 module
o Cash Receipts module
o p.d.,q. 2000 object code - all modules, application versions, 1
through 3.21, all standalone components such as utilities,
reports, and so on.
o All system documentation
o All other manuals and documentation acquired by Owner in support
of the p.d.,q. 2000 application development environment
(.PowerBuilder, Oracle, APOL, etc.)
o All technical documentation regarding enhancements both proposed,
planned and in development
o p.d.,q. 2000 ver 3.0 end user training manual and related
documentation
o All printed copies and source files
o All on-line copies
o All p.d.,q. 2000 marketing material and software demos
24
<PAGE> 25
4. All miscellaneous programs
o Extract Programs:
Multidata "E" series export
o Conversion programs:
Multidata "D" series to p.d.,q. "Classic" version 19
Multidata "E" series to p.d.,q. "Classic" version 19
Multidata "E" series to p.d.,q. 2000 version 3.n
p.d.,q. "Classic" version 19 to p.d.,q. "Classic" version 20
p.d.,q. "Classic" version 19 to p.d.,q. 2000 version 3.n
o Installation utilities
p.d.,q. "Classic" version 20 installation tape
p.d.,q. Lite version 4.0 installation and setup program
p.d.,q. 2000 database configuration and installation scripts
o All other miscellaneous programs and utilities developed by the
p.d.,q. department during the course of, or as part of
application development and customer support
25
<PAGE> 26
EXHIBIT B - REMARKETING AGREEMENTS
1. NAPS Purchase Agreement, dated November 8, 1983
2. Comm-Press Software License Agreement, dated November 24, 1993
3. advantis Licensed Program Redistribution Agreement, signed by Owner on
June 28, 1995
4. Oracle Business Alliance Program Agreement, dated March 5, 1996
26
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT C - END-USER AGREEMENTS
GA NAME PRODUCT COMMENT CONTRACT
<S> <C> <C> <C> <C> <C>
1 1 Algren Associates, Inc *
2 2 Benefit Brokerage, Inc. Converted from Classic *
3 3 Bisys Insurance Services Inc. *
4 4 Brokerage Services Of Carolina Converted from Classic Provided (Original
"Classic")
5 5 Brown And Brown Associates Converted from Classic Provided (Original
"Classic")
6 6 Business Underwriters *
Associates
7 7 Carrol & Associates Converted from Multidata *
8 8 CPS Converted from Classic *
9 9 Donald R. Love Agency, Inc. *
10 10 Financial Services Corp. *
11 11 First Northern Also Classic Provided (Original
"Classic")
12 12 First Quote *
13 13 Harrison James Group, LLC Converted from Classic *
14 14 IFS Agencies Converted from Classic *
15 15 Independent Financial Network 2000 *
16 16 Merz Agency, Inc. 2000 *
WASHINGTON
17 17 Metlife Brokerage 2000 Evaluating Multidata *
conversion
18 18 Pacific Southwest Finance 2000 *
19 19 State Life 2000 *
20 20 Target Insurance Services, 2000 Converted from Classic Provided (Original
Inc. "Classic")
21 21 Tennessee Brokerage Agency, 2000 Converted from Classic Provided (Original
Inc. "Classic")
22 22 The Herman Agency, Inc. 2000 *
23 23 The Milner Agency, Inc. 2000 Converted from Classic Provided (British
American Insurance
Intermediaries from
Classic)
24 24 Tom Bridgers Agency 2000 *
25 25 U S A Associates Limited 2000 Converted from Classic *
26 26 Wiig-Codr Underwriters Co., 2000 *
Inc.
27 27 DAI 2000 - sched Scheduled by 12/99
28 28 Life Brokerage Corporation 2000 - sched Scheduled by 12/99
29 29 Pinney Insurance Agency 2000 - sched Scheduled by 12/99
30 30 Taber Brokerage 2000 - sched Scheduled by 12/99
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C>
31 31 The Palmer Agency 2000 - sched Scheduled by 12/99
32 32 URL 2000 - sched Scheduled by 12/99
33 33 Weinstein Associates 2000 - sched Scheduled by 12/99
34 34 Zenith Data Systems 2000 - sched Scheduled by 12/99
35 1 Ascensus Insurance Services CLASSIC N/A
Inc.
36 2 Aspegren Financial Coporation CLASSIC Provided
37 3 Belman Klein Assoc., Ltd. CLASSIC N/A
38 4 Brokerage Services, CLASSIC Provided (L&J
Inc.(Mayer-Meyer) Associates)
39 5 Brokerage Unlimited, Inc. CLASSIC N/A
40 6 Brokers Clearing House, Ltd. CLASSIC Provided
41 7 Brokers Service Marketing CLASSIC Provided
(LEA)
42 8 Brokers Source, Ltd. CLASSIC Provided
43 9 BSI, Inc. CLASSIC Provided
44 10 Charitable Estates CLASSIC Provided (Life
Insurance Counselors)
45 11 Colonial Brokerage House, Inc. CLASSIC 2000 conversion sched Provided (MaryJane
Dolan)
46 12 Continental-Southern Ins. CLASSIC Provided
Agency
47 13 Crisis Management Agency, Inc. CLASSIC 2000 conversion sched N/A
48 14 Dick Peters (R & P Health) CLASSIC 2000 conversion sched Provided (R&P Health
RUPRIGHT and Financial Services)
49 15 Equity, Inc. CLASSIC Provided
50 16 Executive Underwriters CLASSIC Provided
51 17 F P A, Inc. CLASSIC Provided
52 18 Felton McCrary Brokerage, Inc. CLASSIC Provided
53 19 First Northern Financial CLASSIC 2000 conversion sched Provided
Resources, Inc.
54 20 Flynn Assoc. Ins. Mrktg., Inc. CLASSIC Provided
55 21 Fry-Clement Agency, Inc. CLASSIC 2000 conversion sched Provided
56 22 Garden City Brokerage Inc. CLASSIC Provided
57 23 Guardian Of Hawaii, LTD CLASSIC 2000 conversion sched Provided
58 24 H. D. Mooers & Co. CLASSIC Provided
59 25 Infinity Financial & Ins. CLASSIC Provided
Serv.
60 26 Innovative Brokers Corp. CLASSIC Provided
61 27 Insurance Marketing Concepts, CLASSIC Provided
Inc.
62 28 Insurance Marketing CLASSIC N/A
Resources, Inc.
63 29 Issue Insurance Agency,Inc. CLASSIC Provided
64 30 J. L. Thomas & Co. Inc. CLASSIC 2000 conversion sched Provided (J D
Investment Company)
65 31 James C. McGill Assoc. CLASSIC Provided
66 32 James F. Sullivan Agency, Inc. CLASSIC 2000 conversion sched Provided
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
67 33 Jervey & Company Inc. CLASSIC N/A
68 34 John C. Davis Agency CLASSIC Provided
69 35 Merz Agency, Inc. OREGON CLASSIC Provided
70 36 Moneymetrics CLASSIC N/A
71 37 National Benefit Corp. CLASSIC Provided
72 38 Norman Barken CLASSIC 2000 conversion sched Provided
73 39 Northern States Brokerage, CLASSIC N/A
Inc.
74 40 Oldfield Associates, Inc. CLASSIC Provided
75 41 P. Joline, Assoc. In CLASSIC N/A
Brokerage, Inc.
76 42 Profit Plans, LLC CLASSIC Provided (Mr. Bob
Hopper)
77 43 Prudential Brokerage CLASSIC N/A
78 44 Richard T. Brown Agency, Inc. CLASSIC Provided
79 45 Robert Poage Insurance CLASSIC Provided
Services Inc
80 46 Security House, Inc. CLASSIC 2000 conversion sched Provided
81 47 Shaw American Financial Corp CLASSIC Provided (American
Insurance Marketers)
82 48 South Pacific Insurance Agency CLASSIC Provided
83 49 Special Risk Underwriters, CLASSIC Provided (E. Donald
Inc. Fuerst)
84 50 Special Service Agency Inc. CLASSIC Provided
85 51 TGR Insurance Services, Inc. CLASSIC N/A
86 52 The Conway Group CLASSIC Provided
87 53 The Loving Insurance Group CLASSIC Provided (William P
Loving)
88 54 The Shaw Group II CLASSIC N/A
89 55 Thorp Brokerage Resources CLASSIC 2000 conversion sched Provided
90 56 Total Life Concepts CLASSIC 2000 conversion sched N/A
91 57 United Underwriters CLASSIC Provided (from BSI
merger)
92 58 Upstate Special Risk CLASSIC 2000 conversion sched Provided (Kalinowski
Services, Inc. Investment Trust)
93 59 USA Brokerage Network, Inc CLASSIC N/A
94 60 W. R. Ryno & Company CLASSIC N/A
95 61 W. S. Vogel Agency, Inc. CLASSIC Provided
96 1 A G Edwards & Sons, Inc. LITE Sample Agreement
Attached
97 2 Alex Joseph Associates LITE "
98 3 American Benefits Group LITE "
99 4 AMPAC-Brent Giroux LITE "
100 5 Ash Brokerage Corporation LITE "
101 6 Barnett Bank - BISYS LITE "
102 7 Benefit Consultants LITE "
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C> <C>
103 8 Brast & Bellig Financial LITE "
104 9 Brent O. Giroux LITE "
105 10 Brokerage Professionals, Inc. LITE "
106 11 Brokerage Resource Inc LITE "
107 12 Bufkin, Hefferon & Siegel LITE "
108 13 Byron Udell & Associates, Inc. LITE "
109 14 Centerstone Life & Annuity LITE "
110 15 Chase Fin Srvcs-BISYS LITE "
111 16 Chase Manhattan-BISYS LITE "
112 17 CMC & Associates LITE "
113 18 Cogswell Agency LITE "
114 19 Component Insurance Service, LITE "
Inc.
115 20 Consumer Insurance Group, Inc. LITE "
116 21 Corbitt Brokerage Service, LITE "
Inc.
117 22 Corporate Compensation Plans, LITE "
Inc.
118 23 Corporate Financial Services, LITE "
Inc. RIKER
119 24 Coverdale - THE MILNER AGENCY LITE "
120 25 David A. Carr, Associates, LITE "
Inc.
121 26 Dennis R. Isabell & Associates LITE "
122 27 Dime N.J.Agency LITE "
123 28 Diversified Brokerage LITE "
Services Inc.
124 29 Diversified Brokerage LITE "
Specialists
125 30 Diversified Investments, Inc. LITE "
126 31 Donny Randall Wells LITE "
127 32 Doug Jones Insurance Agency LITE "
128 33 Douglass Capital Corp. LITE "
129 34 Elite Marketing Group LITE "
130 35 Enroll American - ASH LITE "
BROKERAGE
131 36 Equity Analysts Agency, Inc. LITE "
132 37 Essex Corporation LITE "
133 38 Extra Risk Associates, Inc. LITE "
134 39 First Union East LITE "
Coast-EQUITY, INC.
135 40 First Union West LITE "
Coast-EQUITY, INC.
136 41 Fleet Insurance Agcy-ESSEX, LITE "
CORP
137 42 Frank E. Skaw LITE "
138 43 Gary H. Johnson LITE "
139 44 Glassford Agency, Inc. LITE "
140 45 Golden American LITE "
141 46 Harris, Welger LITE "
142 47 IIC Marketing, Ltd. LITE "
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C> <C>
143 48 Ins. Professionals Of West LITE "
Tx, Inc.
144 49 Insurance Brokerage Services, LITE "
Inc.
145 50 Insurance Designers Of LITE "
Dallas, Inc.
146 51 Insurance Exchange Of America LITE "
147 52 Insurance Innovations, LITE "
Unlimited
148 53 Insurance Planning, Inc. LITE "
149 54 James Ira Tucker LITE "
150 55 James R. Young LITE "
151 56 John D. Wink, III LITE "
152 57 John Rupright LITE "
153 58 Joseph Zullo LITE "
154 59 K. W. Brokerage, Inc. LITE "
155 60 Kleiner, Chisholm & LITE "
Associates, Inc.
156 61 KMS Financial Serv. Inc LITE "
157 62 Larry Gordon Agency Inc. LITE "
CHRIS LUNDE
158 63 Larry Gordon Agency Inc. LITE "
Glenview
159 64 Larry Gordon Agency Inc. LITE "
Lunde/Firstar
160 65 Leejon Agency, Inc. LITE "
161 66 Legg Mason Financial Services LITE "
162 67 Leisure Werden Terry Agy. LITE Sched conversion to 2000 "
Inc. LA OFF
163 68 Leisure Werden Terry Agy. LITE Sched conversion to 2000 "
Inc. SF OFF
164 69 Management Consolidated LITE "
Corp., Inc.
165 70 Michael D. Carothers Ins. LITE "
Agency
166 71 Mississippi Insurance LITE "
Brokerage
167 72 Nashville Brokerage LITE "
168 73 Nathan & Lewis Associates, LITE "
Inc.
169 74 National Brokerage Co., Inc. LITE "
170 75 National Brokerage Consortium LITE "
171 76 Northeast Risk Management LITE "
172 77 O.D.I. LITE "
173 78 Partners Marketing Group LITE "
174 79 Pension Actuaries Of LITE "
Philadephia
175 80 Personalized Brokerage LITE "
Services
176 81 Peterson Brokerage Agency LITE "
177 82 Producers Financial Group LITE "
178 83 Randi R Street TBA R R S LITE "
Agency
179 84 Ray Drobny LITE "
180 85 Reliable Insurance Brokers LITE "
</TABLE>
31
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C> <C>
181 86 Robert W. Hays LITE "
182 87 Robinson-Hornbeck, Inc. LITE "
183 88 Ronald Carter Agency LITE "
184 89 Selectquote Insurance Services LITE "
185 90 Shumate Brokerage Corp. LITE "
186 91 Source Brokerage, Inc. LITE "
187 92 Special Service Agency LITE "
Inc.-COMPULIFE
188 93 The Palmer Agency LITE "
189 94 The Whitlock Agency, Inc. LITE "
190 95 Thomas Insurance Marketing LITE "
191 96 Thomas Insurance Services LITE "
192 97 Towne Brokers, Inc. LITE "
193 98 Underwriting Service Agency LITE "
194 99 Vandermast Agencies LITE "
195 100 W. E. Stanley/BB&T Bank LITE "
196 101 Ward Financial Service, Inc. LITE "
197 102 Willard Insurance Agency, Inc LITE "
198 103 William A. Dippel LITE "
199 104 William Tavenner & Assoc., LITE "
Inc.
200 1 Aetna Life Insurance Co. EXPRESS Provided
201 2 Connecticut General Life EXPRESS Provided
Insurance Company
202 3 Continental Casualty Company EXPRESS Provided
203 4 First Penn-Pacific Life EXPRESS Provided
Insurance Company
204 5 GECS Insurance Companies EXPRESS Provided
205 6 Grenel Financial Corporation EXPRESS Provided
(Connecticut National)
206 7 Life Insurance Company of EXPRESS Provided
Virginia
207 8 Lincoln Benefit Life EXPRESS N/A
210 9 Metropolitan Life Insurance EXPRESS Provided
Co.
211 10 North American Company for EXPRESS Provided
Life and Health
212 11 Prudential Select EXPRESS Provided
213 12 Security Connecticut Life EXPRESS Provided
Insurance Company
214 13 The Midland Mutual Life EXPRESS Provided
Insurance Company
215 14 Transamerica Occidental Life EXPRESS Provided
216 15 United of Omaha EXPRESS Provided
217 16 Zurich Kemper Life and EXPRESS Provided
Fidelity Life
</TABLE>
NOTES:
* = p.d.,q. 2000 Agencies agreed to participate subject to final contracts
being approved and offered. Issues associated with pricing and production
credits have delayed this.
N/A= Contracts were not found in the normal location and a search for them
continues.
" = p.d.,q. Lite agencies were provided an end user license agreement along
with their software at time of installation. Sample is attached as
Appendix 1.
32
<PAGE> 33
APPENDIX 1 TO EXHIBIT C
P.D.,Q. LITE END-USER AGREEMENT
This Agreement is made between First Colony Life Insurance Company, a Virginia
Corporation, ("First Colony") and the Customer.
First Colony markets certain computer software called p.d.,q. 2000TM and/or
p.d.,q. LiteTM ("Software") to its General Agents.
The Software is the exclusive property of First Colony. First Colony grants to
the Customer a limited, non-exclusive license to use the Software in accordance
with this Agreement.
The Customer agrees not to reproduce the Software for any purpose other than as
needed as a back-up or to add to multiple computers in a single office. If the
Software is used in multiple offices, a separate license must be purchased for
each office. The Software may not be distributed to third parties without the
prior express written consent of First Colony.
This Agreement may not be assigned by Customer without the express written
consent of First Colony.
THE SOFTWARE AND RELATED DOCUMENTATION ARE PROVIDED "AS IS" WITHOUT WARRANTY OF
ANY KIND, EITHER EXPRESS OR IMPLIED, WITHOUT LIMITATION, IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL FIRST
COLONY BE LIABLE FOR ANY FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM
THE USE OR OPERATION OF THE SOFTWARE.
The Customer agrees that First Colony will not be liable and that it will hold
First Colony harmless for any losses, costs, or damages arising out of the
installation, use, or failure of the Software.
This agreement may be terminated at any time upon receipt of written notice by
one party from the other. Upon termination, the Customer agrees to return all
copies of the Software, plus any related materials, to First Colony within five
working days.
This agreement is governed by the laws of the Commonwealth of Virginia.
33
<PAGE> 34
EXHIBIT D - HARDWARE
<TABLE>
<CAPTION>
TYPE DESCRIPTION SERIAL # GEFA # USER LOCATION LEASE
<S> <C> <C> <C> <C> <C> <C>
PC HP Vectra VL 6/350 US584328708 039074 David Arthur Office Yes
Monitor HP D2837 17" KR82968761 039075 David Arthur Office Yes
Printer IBM 4019 Laser 11-0013773 039076 David Arthur Office No
Laptop IBM Thinkpad 600 78-HG722 David Arthur Office Yes
Modem US Robotics Sportster 28.8 00083901534255 David Arthur Office No
Fax Modem 65
PC HP Vectra VL 6/350 US84328425 001522 Sherri Office Yes
Schultze
Monitor HP D2837 17" KR82864344 001523 Sherri Office Yes
Schultze
Laptop Toshiba Satellite PRO 68810179A 001525 All Office Yes
470CDT
Laptop IBM Thinkpad 755CX 9545-HBD 78-0043R 001524 All Office No
Laptop IBM Thinkpad 600 78-HH296 Sherri Office Yes
Schultze
PC HP Vectra VL 6/266 US82610597 014450 Carla Latshaw Office Yes
Monitor HP D2837 17" KR82761271 014451 Carla Latshaw Office Yes
Laptop IBM Thinkpad 600 78-FD051 Carla Latshaw Office Yes
Printer HP Laser Jet 4 (Network) USBC213966 021089 All Office No
Printer HP Laser Jet IIIP 3208JL3B7H 021222 All Office No
Scanner Fujitsu Model M3096EX 3858 All Office No
Image Scanner
PC Dell Optiplex Gs 8XPQ4 021220 Kazi Office ?
Monitor Dell D1025HT 17" 7006516 021221 Kazi Office ?
PC HP Vectra VL 6/266 US83007984 021216 Nirmal Office Yes
Monitor NEC Multisync XV17+ 7303007RA 021217 Nirmal Office ?
PC Dell Optiplex Gs 8XPNR 001518 Maya Office ?
Monitor Dell D1025HT 17" 7006519 001519 Maya Office ?
Printer HP LaserJet II D01381 001520 Maya Office No
PC Dell Optiplex Gxa C87GX 039068 Allison Office ?
Monitor Dell D1025HT 17" 7007010 039069 Allison Office ?
Printer Okidata 321 205C0395188 Allison Office No
PC HP Vectra VL 6/350 US84328460 021209 Tyke Office Yes
Monitor HP D2837 17" KR82864688 021208 Tyke Office Yes
Modem US Robotics Sportster 56K 222M29G8M04F 021207 Tyke Office No
Faxmodem
Disk IOMEGA Zip 100 RBBG13A16E 021206 Tyke Office No
PC Dell Optiplex XL 575 4ZXKS 021211 Tyke Office No
Monitor Dell D1028L 17" 84779-C08RC 021210 Tyke Office No
PC HP Vectra VL 6/350 US84328485 014446 Clint Office Yes
Monitor HP D2837 17" MY82867623 014447 Clint Office Yes
PC Compaq Deskpro 590 6524HKW4D114 014445 Clint Office No
Monitor Dell D1025HT 17" 66510A6VNGC7 014444 Clint Office No
Modem US Robotics Sportster 56K 225BB3D98FI1 Clint Office No
Faxmodem
PC Dell Optiplex Gn C87HF 014448 General Office No
Monitor CTX 1565D 15" 1HO-53802341 014449 General Office No
PC Dell Optiplex Gs 9VMWQ 012327 Linda Office ?
Monitor Dell D1028L 17" 84779-COFQ6 012328 Linda Office ?
Printer HP Laserjet IIIP 3128JG41WF 012328 Linda Office No
Laptop IBM Thinkpad 760LD 78-NY182 012329 Linda Office No
Laptop IBM Thinkpad 600 78-FC970 John Office Yes
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Dock IBM Thinkpad 600 872100621 039070 John Office Yes
Monitor NEC Multisync M700 17" 8803832UC 039072 John Office Yes
Printer HP Laserjet IIP 3049J02W6S 039073 John Office No
Fax Pitney Bowes 9820 Fax 9837098 General Office ?
Machine
PC Toshiba Satellite Pro 58731618A Tony Office Yes
Dock Toshiba 38082624 Tony Office Yes
Monitor NEC Multisync M700 17" 8400646UC Tony Office Yes
PC HP Vectra VL 6/266 US80912200 Rightfax Office Yes
Monitor HP D2837 17" KR82761265 Rightfax Office Yes
CRT IBM 3477 23-DVH29 AS400 Office No
CRT IBM 3477 23-HXD47 AS400 Office No
PC Dell Optiplex GL5133 66X3C Tyke Home No
Monitor CTX 00163404344 Tyke Home No
Tape Interface Data 1600BPI Reel 7594 AS400 Office No
To Reel
Modem IBM 7857-017 53-A7652 AS400 Office No
Control Interface Data StOP Tape 92190003 AS400 Office No
Interface
Tape IBM 7208-012 8MM 26-40119 AS400 Office No
Modem US Robotics Sportster 28.8 00083901432265 AS400 Office No
Fax Modem 36
AS400 IBM 9404-D20 10-14935 AS400 Office No
CRT IBM 3477 23-DVL11 AS400 Office No
Printer IBM 4226-302 11-D9714 AS400 Office No
CRT IBM 3477 23-HXD42 AS400 Office No
UPS Best Power Fortress 1050 UPS 199PFE2056C AS400 Office No
AS400 IBM 9402-200 10-16377 AS400 Office No
Fax Supportnet Faxserver 401 2190 AS400 Office No
PC Compaq Deskpro 386s/20 4107HAN20818 AS400 Office No
Monitor Compaq 420T 13" 106298160285 AS400 Office No
Printer Okidata 321 909C0148619 AS400 Office No
Modem Intel 96/96E ? AS400 Office No
Modem IBM 5853 23-00E1948 AS400 Office No
CRT IBM 3477 23-HXD40 AS400 Office No
Printer Okidata 321 309C0503117 AS400 Office No
AS400 IBM 9401-P03 44-90147 AS400 Office No
CRT IBM 3477 23-HXD48 AS400 Office No
Tape IBM 3450-001 QIC1000 1/4" 26-50142 AS400 Office No
Monitor NEC Multisync 2a 1XM19400F AS400 Office No
CRT IBM 3477 23-DVH35 AS400 Office No
AS400 IBM 9401-150 10-2732R AS400 Office No
Printer IBM 4019-001 Laser 11-8025 AS400 Office No
AS400 IBM 9402-E04 10-22221 AS400 Loan-BKA No
AS400 IBM 9402-200 D93FA AS400 Loan-IFS No
CRT IBM 3486 NB093 AS400 Loan-IFS No
Modem IBM 7852-400 42-B6968 AS400 Loan-IFS No
UPS Best Power Fortress LI660B 1S21H178710D1 AS400 Loan-IFS No
DGW
AS400 IBM 9402-200 D942A AS400 Loan-TLC No
CRT IBM 3486 NB094 AS400 Loan-TLC No
Modem IBM 7852-400 42-B8070 AS400 Loan-TLC No
UPS Best Power Fortress LI660B ? AS400 Loan-TLC No
PC HP Vectra XU 6/200 NT US72357314 Test Office Yes
Server
Monitor HP Ultra VGA 1024 15" MY71476071 Test Office Yes
D2825
PC HP Vectra VL 6/266 NT US83006174 Test Office Yes
Server FS14
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Monitor HP D2837 17" MY81911024 Test Office Yes
CD Philips CDD3610 Recordable 81570364 Test Office No
PCA363RW01
PC Dell Optiplex GL5133 PC WEX99 Test Office No
Win/98
Monitor Dell D1728D-LS 17" 04036A6C02 Test Office No
PC Dell Optiplex GL5133 Novell 76S1W Test Office No
Server
Monitor Dell D1025HT 17" 8097013 Test Office No
PC Dell Optiplex Gn+ C87HJ Test Office ?
Monitor Dell D1028L 17" 66746-J2FXN-97 Test Office ?
PC Dell Optiplex Gxa Winframe E0V8X Test Office Yes
Server
Monitor Dell D1025TM 17" 7093071 Test Office Yes
PC Dell Optiplex GL5133 7SHSH Test Office No
Winfax Pro Host
Modem IBM 7852-400 42-B9508 Test Office No
Modem US Robotics Sportster 56K 22SBB3B97P10 Test Office No
Faxmodem
PC Compaq Prolinea 2500 NT D741BPT11136 Development FCL CR ?
Server (DB04)
PC HP Vectra VL 6/266 US81922843 001528 Jill Office Yes
Monitor HP D2837 17" KR82115030 001529 Jill Office Yes
Laptop IBM Thinkpad 600 78-HH147 043560 Jill Office Yes
Printer IBM 4019-001 Laser 11-M2613 001530 Jill Office Yes
PC HP Vectra VL 6/350 US84328729 012324 Randall Office Yes
Monitor HP D2837 17" MY82867608 012325 Randall Office Yes
PC Dell Optiplex Gxa D593S 023574 Owen Office Yes
Monitor Dell Trinitron 17" 7090856 023573 Owen Office Yes
PC Dell Optiplex GS 84C9G Owen Home ?
Monitor Dell Trinitron 17" 7142058 Owen Home ?
PC Dell Optiplex Gs 8XPPR 023545 Tanya Office ?
Monitor HP D28327 17" MY82980458 023546 Tanya Office ?
PC Dell Optiplex Gs 8XPQ1 023543 Kelvin Office ?
Monitor Dell D1058L 17" 84779-CODSX 023544 Kelvin Office ?
PC Dell Optiplex Gs 8XPPW 023541 April Office ?
Monitor CTX VL700 17" 001-63601178 023542 April Office No
Modem Intel FM-96VR/1 039408 Kelvin Office No
</TABLE>
36
<PAGE> 37
EXHIBIT E - TRADEMARKS
<TABLE>
<CAPTION>
Mark Serial No. Registration No. Filing Date International Class
- ---- ---------- ---------------- ----------- -------------------
<S> <C> <C> <C> <C>
P.D.,Q. 2000 75-378190 2218631 10/22/1997 009
P.D.,Q. Lite 74-412193 1849814 7/12/1993 009
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT F - PROGRAMS EMPLOYEES
Employee Title
- -------- -----
<S> <C>
[...***...] VP-Group Leader, IT
[...***...] Asst. VP-Leader, IT
[...***...] Asst. VP-Project Leader
[...***...] Sr. Programmer/Analyst
[...***...] Sr. Programmer/Analyst
[...***...] Sr. Programmer/Analyst
[...***...] Programmer/Analyst
[...***...] Programmer/Analyst
[...***...] Proj. Spec.
[...***...] Educ. Coord.
[...***...] Supp. Rep.
[...***...] Supp. Rep.
[...***...] Supp. Rep.
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
38
<PAGE> 39
EXHIBIT G - ANCILLARY AGREEMENTS
MAINTENANCE AGREEMENTS:
1. IBM ServicePlan, Service Plan Offerings between Owner and International
Business Machines Corp., dated 4/9/90
DEVELOPMENT AGREEMENTS:
The following end-user/shrink wrap software licenses:
<TABLE>
<CAPTION>
DESCRIPTION QTY
----------- ---
<S> <C>
Microsoft Windows NT Server Version 4.0 5
Citrix WinFrame Version 1.7 (15 User License) 1
Microsoft Windows NT Workstation Version 4 20
Microsoft Windows 95 6
Microsoft Windows 98 2
Novell Netware 1
Fax/401 1
GUI/400 ADK 2
Oracle Workgroup Server Version 7.3.4 For NT 4
Oracle Workgroup Server Version 7.3.4 For Novell 1
Personal Oracle Version 7.3.3 10
Microsoft Office 97 30
Microsoft Project 98 7
Microsoft Outlook 98 30
Powerbuilder Version 4 6
Powerbuilder Version 5 6
Powerbuilder Version 6 6
Powerdoc For Powerbuilder 6
APOL 6
Intersolv PVCS 6
Powerbuilder FUNCKY 32 6
</TABLE>
39
<PAGE> 40
<TABLE>
<S> <C>
Norton Antivirus 33
Norton Utilities 1
Winfax Pro 9.0 1
Rightfax Version 6.0 1
Castelle FaxPress Version 5.0 (Includes Interface) 1
Quickbooks 1
Peachtree Accounting 1
Visual SlickEdit 4
Microsoft Visual Studio 2
Activebar 1
Sheridan Datawidgets Version 3.1 2
Sheridan Calendar Widgets 2
True DB Grid 2
Laplink 7.5 3
PC Anywhere 3
Crystal Reports 7.0 3
Crescent Internet Toolpak 1
Sheridan ActiveListBar 2
Installshield 5.1 1
Microsoft Act 1
Goldmine 1
ccMail Mobile 1
Avery LabelPro 3.0 1
Hardcore Visual Basic 1
Helpbreeze 2.0 1
Sheridan Code Assist V1.1 1
VB5.0 Enterprise Edition 1
Infomaker 5.0 3
Paperclip 1
Demoshield 5.0 1
</TABLE>
40
<PAGE> 41
<TABLE>
<S> <C>
Paintshop Pro 1
IBM AS/400 Operating System/400 Version 4.1 1
IBM AS/400 Program Development Manager Version 4.1 1
IBM AS/400 ILE RPG Version 4.1 1
IBM Query/400 Version 4.1 1
IBM Client Access/400 Version 3.2 3
IBM Operating System/400 Version 3.1 1
IBM AS/400 Program Development Manager Version 3.1 1
IBM AS/400 ILE RPG Version 3.1 1
IBM Query/400 Version 3.1 1
IBM Operating System/400 Version 3.2 3
IBM AS/400 Program Development Manager Version 3.2 3
IBM AS/400 ILE RPG Version 3.2 1
IBM Query/400 Version 3.2 3
IBM AS/400 Operating System/400 Version 2.2 1
IBM AS/400 Program Development Manager Version 2.2 1
IBM AS/400 RPG/400 Version 2.2 1
IBM Query/400 Version 2.2 1
IBM Officevision/400 Version 2.2 1
IBM Client Access/400 Version 2.2 1
Netsoft NS/Portfolio Select Version 2.2 1
Netsoft NS/Elite Version 3.1 1
IBM 3164 Remote Emulation Software 5
PKZip 6
PKWare 4
Microsoft FrontPage Express 1
Microsoft Source Safe Version 5.0 1
Mouse Ware NT 1
Microsoft Outlook Express 2
MGA NT Power Desk 3.32 1
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
HTML Help Workshop 1
Powerbuilder 5.0 Computer Based Training - Performance Package 1
</TABLE>
42
<PAGE> 43
EXHIBIT H - PURCHASE PRICE ALLOCATION
Exhibit H will be mutually agreed upon by Owner and Purchaser and incorporated
herein within sixty (60) days after the Closing Date.
43
<PAGE> 44
EXHIBIT I - REQUIRED CONSENTS
The following agreements require consent in order to be assigned to Purchaser
hereunder:
1. Customer Agreements for p.d.,q. Express, and Agreements for Licensed
Programs for p.d.,q. Express Customers, with the following customers:
VENDEE (CUSTOMER):
Aetna Life Insurance Co.
Connecticut General Life Insurance Company
Continental Casualty Company
Grenel Financial Corporation (Connecticut National)
First Penn.-Pacific Life Insurance Company
GECS Insurance Companies
Life Insurance Company of Virginia
Lincoln Benefit Life
Metropolitan Life Insurance Co.
North American Company for Life & Health
Prudential Select
Security Connecticut Life Insurance Company
Zurich Kemper Life Ass., Co. and Fidelity Life Assoc.
The Midland Mutual Life Insurance Company
Transamerica Occidental Life
United of Omaha
44
<PAGE> 45
2. Oracle Business Alliance Program Agreement, dated March 5, 1996
3. Cybertek Value Added Remarketing Agreement, dated August 4, 1998
4. NAPS Exclusive Remarketing Agreement, dated November 8, 1983
The following agreements are silent as to assignability by Owner:
1. NAPS Purchase Agreement, dated November 8, 1983
2. Comm-Press Software License Agreement, dated November 24, 1993.
3. advantis Licensed Program Redistribution Agreement, signed by Owner on
June 28, 1995
45
<PAGE> 46
EXHIBIT J - FINANCIAL SCHEDULES
<TABLE>
<CAPTION>
p.d.,q. EXPENSE ANALYSIS COMPARISON
1997 / 1998 / 1999
1997 1998 1999
TOTAL TOTAL TOTAL
--------- ---------- ---------
<S> <C> <C> <C>
Salaries [...***...] [...***...] [...***...]
Employee Welfare [...***...] [...***...] [...***...]
Subscriptions [...***...] [...***...] [...***...]
Legal Fees [...***...] [...***...] [...***...]
Outside Consultants (see detail, below) [...***...] [...***...] [...***...]
Travel and Living [...***...] [...***...] [...***...]
Printing & Postage [...***...] [...***...] [...***...]
IVANS (Telecommunications) [...***...] [...***...] [...***...]
Agents' Balances Charged-off [...***...] [...***...] [...***...]
Agent Conferences [...***...] [...***...] [...***...]
Cost of Equipment [...***...] [...***...] [...***...]
Equipment Rental, Including PCs [...***...] [...***...] [...***...]
Hardware Maintenance [...***...] [...***...] [...***...]
Office Supplies [...***...] [...***...] [...***...]
PC Supplies [...***...] [...***...] [...***...]
Software Maintenance [...***...] [...***...] [...***...]
Write-off of p.d.,q. Inventory [...***...] [...***...] [...***...]
--------- ---------- ---------
[...***...] [...***...] [...***...]
--------- ---------- ---------
Less: Charges not part of P.D.,Q. cost
structure, but part of First Colony Life:
IVANS [...***...] [...***...] [...***...]
Y2K Consultants [...***...] [...***...] [...***...]
--------- ---------- ---------
p.d.,q. RUN RATE EXPENSES [...***...] [...***...] [...***...]
--------- ---------- ---------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
46
<PAGE> 47
EXHIBIT K - FORM OF BUSINESS AND TECHNOLOGY STRATEGIC ALLIANCE AGREEMENT
47
<PAGE> 1
EXHIBIT 10.20
*** Text Omitted and Filed Separately
CONFIDENTIAL TREATMENT REQUESTED
Under 17 C.F.R. Sections 200.80(b)(4)
and 230.406
BUSINESS AND TECHNOLOGY
STRATEGIC ALLIANCE AGREEMENT
This STRATEGIC ALLIANCE AGREEMENT (the "AGREEMENT") is made as of November 15,
1999 (the "Effective Date"), by and between CHANNELPOINT, INC., a Delaware
corporation having its place of business located at 10155 Westmoor Drive, Suite
210, Westminster, Colorado 80020 ("CHANNELPOINT"), and GE FINANCIAL ASSURANCE
HOLDINGS, INC., a Delaware corporation having its place of business located at
6610 West Broad Street, Richmond, Virginia 23230 ("GEFA"or "CLIENT" on Services
Addendum).
RECITALS
A. ChannelPoint is in the business of, among other things, providing (1) an
Internet-based electronic commerce exchange service that provides insurance
brokers and customers with access to quotes, proposals and policy information
and enables the purchase of insurance policies via a website established and
operated by ChannelPoint (the "COMMERCE EXCHANGE" or the "SERVICE"), and (2) the
Insure(tm) software platform marketed and distributed by ChannelPoint under
ChannelPoint's software license agreements (the "INSURE PLATFORM").
B. GEFA, through any GEFA Affiliate (as hereinafter defined), is in the
business of underwriting and issuing insurance policies, including fixed and
variable annuities and fixed and variable life insurance, long term care
insurance, and insurance policies sold through the worksite channel (the
"INSURANCE PRODUCTS"). References to GEFA herein shall include GEFA Affiliates,
except where the context otherwise requires.
C. GEFA and ChannelPoint desire to enter into an agreement whereby (1)
ChannelPoint will provide GEFA an Internet-based set of services (including
without limitation those services marketed by ChannelPoint under the trademarks
"Commerce(TM)" and "Insure(TM)" that provide GEFA insurance distribution
channels and its customers with access to quotes, proposals and policy
information to enable the purchase and administration of insurance policies via
a website established and operated by ChannelPoint; (2) ChannelPoint will create
and provide electronic commerce portals to the Commerce Exchange that are
branded with the GEFA trademarks (on an exclusive basis) and include GEFA's
quote, proposal and insurance plan information (the "BRANDED PORTALS"),
including Branded Portals through which all or a subset of the Insurance
Products are offered for sale (the "PRIVATE PORTALS") and Branded Portals
through which a subset of the Insurance Products and the insurance products of
third party carriers are offered for sale (the "SEMI-PRIVATE PORTALS"); (3)
ChannelPoint will include GEFA's quote, proposal and insurance plan information
in Internet portals to the Commerce Exchange, including broker portals and
portals made available to GEFA and other distribution intermediaries (the "OPEN
PORTALS"); and (4) GEFA will use ChannelPoint as GEFA's preferred electronic
service provider authorized to market and submit for sale, via the Service,
Insurance Products underwritten and issued by GEFA.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions of this Agreement, the parties to this Agreement agree
as follows:
1
<PAGE> 2
AGREEMENT
1. APPOINTMENT
1.1 ELECTRONIC SERVICE PROVIDER. GEFA hereby designates ChannelPoint as
GEFA's preferred (as further defined in Section 1.4 below) electronic service
provider authorized to provide technology and market, solicit and submit the
Insurance Products for sale via the Internet through the Service and
ChannelPoint hereby accepts such appointment, subject to the terms and
conditions of this Agreement. GEFA may at any time alter coverages, provisions
or exclusions of the Insurance Products or discontinue or replace Insurance
Products without the consent of ChannelPoint. GEFA agrees to give ChannelPoint
written notice of such modifications in a timely manner.
1.2 LIMITS ON AUTHORITY. ChannelPoint is authorized to obligate GEFA only
to the extent (a) provided by this Agreement, (b) set forth in the published
rules, procedures and practices of GEFA and (c) as may be authorized in writing
by an officer of GEFA. ChannelPoint is not authorized to (i) make, alter or
waive any of the rates, terms or conditions of any of GEFA's Insurance Products,
including forms, policies, contracts or advertising materials, (ii) bind
coverage under an Insurance Product without GEFA's express prior written
approval, (iii) sign any contract on behalf of GEFA or its affiliates or (iv)
prepare or distribute any promotional or descriptive material relating to this
Agreement or any Insurance Products without first obtaining GEFA's written
approval of such materials.
1.3 NO RESTRICTIONS. ChannelPoint may form alliances with any third party
(including other insurance carriers) in which ChannelPoint makes such third
parties' insurance products and content available through the Service, and,
subject to the provisions of Section 1.4 below, GEFA may authorize other third
parties as electronic service providers authorized to market, solicit and submit
and products of GEFA (including without limitation the Insurance Products) for
sale via the Internet or other electronic networks.
1.4 PREFERRED PROVIDER. In connection with ChannelPoint's appointment as a
"Preferred" electronic service provider, GEFA shall refer to ChannelPoint as a
"Preferred" electronic service provider in any press releases, advertisements or
promotional materials that relate to any electronic commerce initiatives
undertaken by GEFA in connection with the Services under this Agreement.
2. COMMERCE EXCHANGE SERVICES AND GEFA'S USE OF THE SERVICE
2.1 ACCESS TO THE SERVICE. ChannelPoint hereby grants to GEFA and its
independent and dedicated brokers, sales agents and other GEFA distribution
intermediaries (collectively, the "GEFA SALES TEAM") the non-exclusive,
non-transferable right and license during the term of this Agreement to access
and use the Service through the Branded Portals for the sole purpose of
providing insurance procurement services to GEFA customers. Promptly upon the
delivery of any Branded Portals,, ChannelPoint shall issue to GEFA a user name
and Password to enable access to the Branded Portals. GEFA shall treat the user
name and Password as ChannelPoint's Confidential Information (as defined in
Section 7 below) and make such information available only to GEFA employees and
the GEFA
2
<PAGE> 3
Sales Team for use as permitted under this Agreement. Use of the Service shall
be subject to the terms and conditions of use and the privacy policy applicable
to all users of the Services, as posted on the Commerce Exchange.
2.2 GEFA ENROLLMENT. To the extent commercially reasonable, GEFA agrees and
shall use reasonable efforts to cause other members of the GEFA Sales Team to
agree to use only the Service to sell Insurance Products to all customers that
have received quotes or sales proposals generated by the Service (a "LEAD");
provided, however, that enrollment of Leads shall be using GEFA's standard
procedures until the Service includes direct enrollment capability. ChannelPoint
will notify GEFA upon the commercial availability of enrollment capabilities.
Thereafter, to the extent commercially reasonable, enrollment of Leads shall be
completed only through the Service. GEFA shall, on or before the fifteenth
(15th) day of each month, provide to ChannelPoint a report listing all Insurance
Products sold to Leads during the prior month, including the associated gross
premiums and other relevant information. Any Leads that subsequently purchase
Insurance Products shall be deemed "Policyholders" under this Agreement. In
addition, the parties shall comply with any special tracking, reporting or
reconciliation procedures as may be reasonably requested by ChannelPoint.
ChannelPoint may examine GEFA's records as provided in Section 5.4 below to
determine the accuracy of GEFA's report and GEFA's compliance with this Section
2.2.
2.3 SUPPORT AND INSURE PLATFORM MAINTENANCE. ChannelPoint shall provide
second-line support via email (at [email protected]) and telephone (at a
support telephone number to be provided to GEFA by ChannelPoint) to GEFA and the
GEFA Sales Team relating to the authorized use of the Service and the Insure
Platform, such support to be provided during the hours of 6:00 a.m. until 6:00
p.m. Mountain Time. GEFA or the GEFA Sales Team shall provide direct first-line
support to end-user customers of Insurance Products and shall use commercially
reasonable efforts to respond to all customer service inquiries promptly after
receipt. All written customer support communications relating to the Service
shall state the Service is provided or powered by ChannelPoint and shall include
a reference to "Commerce"(tm) or such other brand designations specified by
ChannelPoint from time-to-time. In consideration of the Insure Platform Fees
described in Section 5.1 below, ChannelPoint shall provide all updates,
modifications, enhancements, error corrections and new versions or releases of
the Insure Platform which are generally made available to other participants in
ChannelPoint's Insure maintenance program at no charge.
2.4 SERVICE DESCRIPTION. In consideration of the Exchange Service Fees (as
defined in Section 5.1 below), ChannelPoint will deliver the Branded Portals
which include the basic core functionality and other elements specified in
Exhibit A that are commercially available from ChannelPoint as of Effective
Date, and any modifications made or future capabilities and features added and
made commercially available by ChannelPoint from time-to-time. GEFA will specify
layout and configuration of the Branded Portals and will have the sole
discretion in the selection of Insurance Products offered through the Branded
Portals and in the selection of the insurance products offered by third party
carriers offered through the Semi-Private Branded Portals. Substantially all
features and functionality included in Exhibit A will be provided to GEFA within
the scope of the Exchange Service Fees. ChannelPoint reserves the right to
increase the level of the Exchange Service Fee as the parties
3
<PAGE> 4
create more detailed specification documents and if increased functionality and
enhancements are added to the ChannelPoint Exchange; provided that such
increases shall be subject to GEFA's consent (not to be withheld unreasonably).
2.5 INSURE PLATFORM LICENSE. In consideration of the Insure Platform Fees
(as described in Section 5.1 below), ChannelPoint hereby grants to GEFA a
non-exclusive perpetual, non-transferable world-wide right and license to use
the Insure Platform for GEFA's internal back-office data processing for all
Insurance Products. The terms of the licenses granted are specified in Exhibit B
(the "INSURE PLATFORM AGREEMENT").
2.6 PLATFORM CUSTOMIZATION SERVICES. In consideration of the Professional
Service Fees (as described in Section 5.2), ChannelPoint will perform services
relating to (a) implementation of any Branded Portal elements not included in
Exhibit A; (b) the import and repurposing of GEFA Content in data centers on the
Commerce Exchange; (c) additional unique and/or proprietary GEFA requirements,
features and functionality that are either not part of the Commerce Exchange;
and (d) the integration of the Insure Platform licensed to GEFA under this
Agreement with and into the Commerce Exchange and GEFA data centers
(collectively, the "PLATFORM CUSTOMIZATION SERVICES"). Either party may propose
Platform Customization Services, and if agreed as to scope, cost and schedule,
the parties shall execute a written Statement of Work, which shall be subject to
the terms of the services addendum attached hereto as Exhibit C (the "SERVICES
ADDENDUM").
2.7 HOSTING SERVICES. ChannelPoint will host the Branded Portals for the
sole use and benefit of GEFA in accordance with the Service Level Agreement
attached to this Agreement as Exhibit D. ChannelPoint will not charge a separate
hosting fee for these services during the term of this Agreement.
2.8 PRODUCT IMPROVEMENTS AND ENHANCEMENTS. The Commerce Exchange and Insure
Platform will generally evolve to include new features and functionality in
accordance with the ChannelPoint Service roadmap attached hereto as Exhibit I
(the "SERVICE ROADMAP"); GEFA acknowledges that the Service Roadmap is provided
for information purposes only and does not represent a binding commitment on
behalf of ChannelPoint; provided, however, that ChannelPoint and GEFA shall
cooperate and shall devote resources and experience to define, prioritize and
plan future enhancements to the Commerce Exchange and the Insure Platform that
will become part of ChannelPoint's general product releases ("SERVICE
ENHANCEMENTS"), in accordance with the procedures specified in Exhibit J ("JOINT
PLANNING ACTIVITIES"). If ChannelPoint deviates from the Service Roadmap or
fails to develop any features or functionality currently included in the Service
Roadmap, all fees previously paid are fully earned and non-refundable pursuant
to Section 5 and ChannelPoint will not be obligated to provide any refunds or
other concessions upon such failure, except as set forth in Section 5.2(b).
ChannelPoint will bear the development costs associated with Service
Enhancements or any enhancements or features made generally available by
ChannelPoint to all customers, whether or not such Service Enhancements or
features were suggested by GEFA. ChannelPoint will work with GEFA, as part of
the Consulting Services included within Exhibit H and under Section 4.5 below,
to develop GEFA-specific enhancements and modifications to the Commerce
4
<PAGE> 5
Exchange and Insure Platform, subject to the terms of the Services Addendum and
the payment of Professional Service Fees under Section 5.2 below.
3. BRANDING, MARKETING AND OTHER COOPERATIVE ACTIVITIES
3.1 BRANDING. The Branded Portals licensed to GEFA shall be identified and
branded in accordance with the provisions of Section 6.1 below, provided that
all permitted use of the Branded Portal by or on behalf of GEFA shall bear
co-branding of ChannelPoint throughout, in form reasonably approved by
ChannelPoint, such as "Powered by ChannelPoint" with ChannelPoint logos and
other related marking.
3.2 DESIGN CONSULTANT. GEFA agrees to serve as ChannelPoint's design
Consultant by using commercially reasonable efforts to (a) provide to
ChannelPoint complete and timely input on products and services provided by
ChannelPoint under this Agreement, (b) provide input from the GEFA Sales Team
and GEFA's customers relating to the Service, including any customer service
comments and complaints and (c) participate in marketing events as specified in
the Marketing and Sales Plan, including participation in user group activities.
In consideration for GEFA's efforts as ChannelPoint's Primary Design Consultant
and the financial commitments made to ChannelPoint under Section 5, GEFA will be
given preferred status as ChannelPoint's Primary Design Consultant with regard
to the Insurance Products and substantially similar products. As ChannelPoint's
Primary Design Consultant, GEFA may elect to (i) become the alpha test site for
any Service enhancements except for Service enhancements constituting features
specific to third party design Consultants or made at the sole suggestion of
third party design Consultants, and (ii) participate in ChannelPoint's Beta test
programs for all future releases of the Service made by ChannelPoint.
3.3 MARKETING AND SALES PLAN. The parties agree to work together to develop
a marketing and sales plan within thirty (30) days of the Effective Date that
materially meets the mutual objectives of both parties (the "MARKETING AND SALES
PLAN"). The Marketing and Sales Plan is intended to provide quantifiable
measures of the parties' success in achieving their shared marketing objectives.
Such measures shall be evaluated on a periodic basis, but not less than monthly.
Upon mutual written agreement to the Marketing and Sales Plan, the Marketing and
Sales plan shall be included in this Agreement as an Exhibit.
3.4 JOINT PRESS RELEASE. The parties will cooperate in good faith in
creating a mutually agreed upon joint press release and other public
correspondence concerning this Agreement for simultaneous national and local
release as soon as possible after the Effective Date. Neither party will issue a
press release or otherwise publicize the terms of this Agreement without the
prior written consent of the other party, except as otherwise required by law,
including any description of this transaction required in any filing with the
Securities and Exchange Commission in connection with a public offering of a
party's capital stock.
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4. GEFA CONTENT, SERVICES AND OWNERSHIP
4.1 CONTENT LICENSING. GEFA will, at its own expense, generate and deliver
to ChannelPoint certain Insurance Product information set forth in Exhibit E in
a format specified therein (the "GEFA CONTENT"). For the term of this Agreement,
GEFA hereby grants ChannelPoint a royalty-free, worldwide license with right to
sublicense to reproduce, distribute, publicly perform and publicly display the
GEFA Content throughout the Commerce Exchange via the Internet as set forth in
Exhibit F (the "LICENSED USES"). GEFA may amend Exhibit F to include changes
mandated by regulatory compliance or as it otherwise deems necessary from
time-to-time upon reasonable advanced written notice to ChannelPoint.
ChannelPoint may make a reasonable number of archival copies of the GEFA
Content. Title to and ownership of all intellectual property rights of the GEFA
Content shall remain with GEFA or its third party licensors.
4.2 GEFA CONTENT MANAGEMENT. ChannelPoint shall designate a ChannelPoint
representative to whom GEFA shall direct any requests regarding the GEFA
Content. GEFA will be solely responsible for creating, managing, editing,
reviewing, testing, deleting and otherwise controlling the GEFA Content via the
procedures set forth below. ChannelPoint shall deliver to GEFA certain tools and
API's to enable GEFA to implement and manage all changes to the GEFA Content
accessible via the Branded Platforms (the "CHANNELPOINT TOOLS"). ChannelPoint
hereby grants GEFA a royalty-free, worldwide license to use the ChannelPoint
Tools during the Term solely to manage the GEFA Content. Upon conversion of the
GEFA Content and any updates thereto, GEFA shall verify that all rating and
similar algorithms that are part of the GEFA Content produce correct results.
Except for any transformation required to convert the content to ChannelPoint's
proprietary data format, ChannelPoint shall not modify or alter the GEFA Content
without GEFA's written consent. GEFA shall be solely responsible for any
liability associated with ChannelPoint's publication and distribution of the
GEFA Content, except to the extent that ChannelPoint, or any third party who
accesses the GEFA Content other than through the ChannelPoint Tools licensed to
GEFA, makes changes or alterations to the GEFA Content that are not approved by
GEFA. ChannelPoint has no obligation to GEFA, and undertakes no responsibility,
to review the GEFA Content to determine whether any such content is accurate or
may incur liability to third parties, provided that, if ChannelPoint becomes
aware of any inaccuracies or potential liabilities associated with the GEFA
Content, ChannelPoint will promptly notify GEFA thereof. Notwithstanding
anything to the contrary herein, if it comes to the attention of ChannelPoint
that any GEFA Content may, in ChannelPoint's sole reasonable opinion, create
liability for ChannelPoint, GEFA agrees that ChannelPoint may remove such GEFA
Content from its systems upon providing written notice to GEFA.
4.3 CHANNELPOINT CONTENT AND CARRIER PLUG-INS. ChannelPoint has acquired
and developed, and intends to continue to acquire and develop, a body of
content, including without limitation, insurance product content, rules,
algorithms, procedures and policy materials (the "CHANNELPOINT CONTENT")
comprised of materials that were either licensed from third party carriers to
ChannelPoint, or developed by ChannelPoint. GEFA and ChannelPoint intend that
certain of the ChannelPoint Content may be made available via Semi-Private
Branded Platform as mutually agreed upon by GEFA and ChannelPoint in accordance
with Section 2.4 above. In this event, the parties agree
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that ChannelPoint shall have the right to solicit third party carriers to make
their content available to enable electronic distribution of such carrier's
insurance products through the Branded Platform ("Carrier Plug-Ins") subject to
Exchange Service Fees payable to ChannelPoint by GEFA pursuant to Section 5.1.
Title to and ownership of all intellectual property rights of the ChannelPoint
Content shall remain with ChannelPoint or its third party licensors.
4.4 OPEN PORTALS AND COMMERCE EXCHANGE SERVICES. In connection with
ChannelPoint's operation of the Commerce Exchange, ChannelPoint shall:
(a) include the GEFA Content in the Service through Open Portals as
permitted under Exhibit F; provided, however, that GEFA acknowledges that,
subject to Exhibit F, ChannelPoint shall retain sole editorial control of the
appearance and format of the Open Portals;
(b) make available all computer hardware and software,
telecommunications equipment and Internet access equipment and services required
for operation of the Service, the Branded Portals and Open Portals, as
ChannelPoint reasonably deems necessary; and
(c) make the Service generally available to GEFA and the GEFA Sales
Team and, if applicable, end users in substantial accordance with ChannelPoint's
Service Level Agreement.
4.5 CONSULTING SERVICES. In consideration for the payment of Consulting
Service Fees specified in Section 5.2 below, ChannelPoint will provide
consulting services to GEFA including education, training, installation,
services, diagnostics, requirements assessments, ratings, configuration
assistance, reporting data extract, systems integration, testing and other
services relating to GEFA's use of the Service (the "CONSULTING SERVICES"),
subject to the terms of the Services Addendum. ChannelPoint agrees to provide
the Consulting Services summarized in Exhibit H as part of ChannelPoint's
initial Consulting Services engagement.
4.6 OWNERSHIP.
(a) ChannelPoint Property. As between GEFA and ChannelPoint,
ChannelPoint or its third party suppliers will retain sole ownership of all
intellectual property rights in and to the ChannelPoint Marks, the ChannelPoint
Content, the ChannelPoint Tools, the Open Portals, the Insure Platform, the
Branded Portals and the Commerce Exchange, including all software, content,
documentation, technology and trademarks used in connection with the Services
and all Service Enhancements thereto, subject to GEFA's ownership of the GEFA
Property as provided in subsection (b) below (the "CHANNELPOINT PROPERTY"). The
ChannelPoint Property includes any modifications, enhancements or derivative
works made to the ChannelPoint Property during the term of this Agreement,
whether or not made in response to GEFA suggestions or requirements. Except for
licenses expressly granted to GEFA under this Agreement, GEFA is not granted any
other intellectual property rights, or any other rights, franchises or licenses,
with respect to the ChannelPoint Property.
(b) GEFA Property. As between GEFA and ChannelPoint, GEFA will retain
sole ownership of all intellectual property rights in and to the GEFA Marks, the
GEFA Content and any
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other information, content, documentation, technology and trademarks that GEFA
supplies or licenses to ChannelPoint under the terms of this Agreement (the
"GEFA PROPERTY"). The GEFA Property includes any modifications, enhancements or
derivative works made to the GEFA Property during the term of this Agreement,
whether or not made in response to ChannelPoint suggestions or requirements.
Except for licenses expressly granted to ChannelPoint under this Agreement,
ChannelPoint is not granted any other intellectual property rights, or any other
rights, franchises or licenses, with respect to the GEFA Property.
(c) Other Intellectual Property. Ownership of intellectual property
rights in and to any technology (other than the GEFA Property and the
ChannelPoint Property) developed, made, authored or conceived by either
ChannelPoint or GEFA, jointly or alone, in connection with and during the term
of this Agreement will be as specified in the Services Addendum or Development
Agreement between the parties under which such intellectual property is
developed, made, authored or conceived. In the event any such technology is
developed, made, authored or conceived by either ChannelPoint or GEFA, jointly
or alone, in connection with and during the term of this Agreement, but not
subject to the provisions of any Services Addendum or as part of the Service
Enhancements, all intellectual property rights in and to such technology shall
be (i) solely owned by ChannelPoint, in the case of technology developed, made,
authored or conceived solely by ChannelPoint; (ii) solely owned by GEFA, in the
case of technology developed, made, authored or conceived solely by GEFA; or
(iii) jointly owned by ChannelPoint and GEFA, in the case of technology
developed, made, authored or conceived jointly by ChannelPoint and GEFA
personnel (including its employees and consultants) for which, where relevant,
such personnel would be considered joint inventors under United States Patent
Act or joint authors under the United States Copyright Act.
4.7 DATA ACCESS AND OWNERSHIP. All use and traffic data concerning all
Policyholders or Leads collected by ChannelPoint through the Service, including
but not limited to impression data, usage summaries and click through activity
collected by ChannelPoint ("IMPRESSION DATA") shall be the sole and exclusive
property of GEFA. ChannelPoint shall be entitled to capture and collect
Impression Data in its operation of the Commerce Exchange and the hosting of the
Branded Portals and ChannelPoint may use Impression Data concerning
Policyholders or Leads in any aggregate form that does not identify any
particular Policyholder for any lawful purpose without a duty of accounting to
GEFA . ChannelPoint will, at no charge to GEFA, provide GEFA with access to (in
a format and frequency mutually agreed to by ChannelPoint and GEFA) all
Impression Data and other Policyholder information collected by ChannelPoint in
connection with the generation of quotes or proposals for a Policyholder or the
enrollment of any Policyholder. ChannelPoint will, at no charge to GEFA, provide
GEFA with monthly reports of Impression Data collected by ChannelPoint in
connection with uses of the Service other than on behalf of Policyholders on an
aggregated basis ("REPORTS") that are (a) ChannelPoint standard or generally
available reports or (b) other Reports that ChannelPoint provides to other
customers at no charge that are not unique or proprietary to such customers.
ChannelPoint will use commercially reasonable efforts to provide other special
Reports requested by GEFA from time-to-time in consideration of a service fee
equal to ChannelPoint's fully burdened costs in creating and providing such
Reports. All Reports provided by ChannelPoint hereunder shall not (i) identify
any particular individual, broker, agent or insurance carrier, (ii) violate
ChannelPoint's
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privacy policy or any applicable law or regulation or (iii) violate the terms of
any agreement between ChannelPoint and any third party; provided that
ChannelPoint will not enter into agreements with third parties exclusively
preventing GEFA from receiving data generated through through the Commerce
Exchange.
5. COMPENSATION AND REPORTING
5.1 EXCHANGE SERVICE FEES AND RELATED CHARGES.
(a) Calculation of Fees. GEFA shall pay ChannelPoint the Exchange
Service Fees consisting of fees and charges for access to the Commerce Exchange,
the Insure Platform license and maintenance services (the "INSURE PLATFORM
FEES"), p.d., q. new applications processing fees and distribution fees for
sales of the Insurance Products through the Commerce Exchange, all as further
defined and established in Section 1 of Exhibit G attached hereto, subject to
the provisions of Sections 5.6 and 5.7 below, and provided that ChannelPoint has
all licenses from applicable regulatory authorities required to receive such
payments.
(b) Minimum Fees; Prepayment. GEFA agrees to generate Exchange Service
Fees on a calendar quarterly basis in accordance with the schedule set forth in
Section 1(e) of Exhibit G. GEFA will pay to ChannelPoint a non-refundable
payment equal to each quarterly minimum within thirty (30) days of the beginning
of each calendar quarter during the term of this Agreement beginning January 1,
2000 in prepayment for the minimum Exchange Service Fees due in each such
calendar quarter (the "PREPAYMENT"), recoverable on a dollar-for-dollar basis
against actual Exchange Service Fees generated during such quarter. ChannelPoint
will not be obligated to refund to GEFA any portion of a Prepayment, even if the
Prepayment is not fully recovered during the applicable calendar quarter;
provided, however that GEFA's obligation to make Prepayments and to generate
minimum Exchange Service Fees under this Section 5.1(b) and under Section 1(e)
of Exhibit G after the calendar year 2000 shall be contingent on the mutual
agreement of the parties that GEFA is receiving new business revenue deriving
from the Service sufficient to justify such Prepayments and minimum Exchange
Service Fees. In the event that the parties fail to reach such agreement prior
to December 31 of calendar year 2000 or of any subsequent year during the term,
the parties will cooperate in good faith to establish revised Exchange Service
Fee rates, minimum Exchange Service Fees and a Prepayment schedule for the
following calendar year.
(c) Payment. All Exchange Service Fees will accrue as set forth in
Section 1 of Exhibit G. In the event that the aggregate Exchange Service Fees
accrued by GEFA during any calendar quarter are greater than the corresponding
Prepayment, ChannelPoint shall invoice GEFA for all additional Exchange Service
Fees owed to ChannelPoint on a monthly basis, and GEFA shall pay all additional
Exchange Service Fees owed to ChannelPoint, within thirty (30) days of the date
of ChannelPoint's invoice, such payment to be accompanied by the report
described in Section 5.3.
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5.2 PROFESSIONAL SERVICE FEES.
(a) Calculation of Fees. In consideration for the Consulting Services
and the Platform Customization Services provided by ChannelPoint, GEFA will pay
Professional Services Fees on a time and materials basis in accordance with the
price schedule specified in the Services Addendum. The Professional Services
Fees do not include any expenses for which GEFA reimburses ChannelPoint under
the Services Addendum.
(b) Minimum Fees; Prepayment. GEFA agrees to issue Statements of Work
sufficient to generate Professional Service Fees on a calendar quarterly basis
in accordance with the schedule set forth in Section 2 of Exhibit G. GEFA will
pay to ChannelPoint a non-refundable prepayment equal to (a) the minimum
Professional Service Fees specified in Section 2 of Exhibit G for the calendar
year 1999 within thirty (30) days of the Effective Date in prepayment for the
minimum Professional Service Fees to be paid in the calendar year 1999; and (b)
each quarterly minimum specified in Section 2 of Exhibit G for the calendar
years 2000 through 2004, within thirty (30) days of the beginning of each
calendar quarter during the term of this Agreement beginning January 1, 2000 in
prepayment for the minimum Professional Services to be paid in each such
calendar quarter (the "PREPAYMENT"), recoverable on a dollar-for-dollar basis
against actual Professional Services Fees generated during such time period;
provided, however, that GEFA's obligation to make Prepayments and to generate
minimum Professional Service Fees under this Section 5.2(b) and under Section 2
of Exhibit G after the calendar year 2000 shall be contingent on mutual
agreement of the parties that GEFA is receiving benefit from the Consulting
Services sufficient to justify such Prepayments and minimum Consulting Service
Fees. In the event that the parties fail to reach such agreement prior to
December 31 of calendar year 2000 or of any subsequent year during the term, the
parties will cooperate in good faith to establish a revised minimum Professional
Services Fee and Prepayment schedule for the following calendar year. If any
portion of any Prepayment of Professional Services Fees is not fully recovered
during any time period to which such Prepayment corresponds, no refund shall be
due to GEFA; provided that, if the failure to fully recover the Prepayment does
not result from GEFA's failure to order sufficient services to recover the
Prepayment, but, rather, results from ChannelPoint's failure to staff the number
of personnel required in any issued Statement(s) of Work or other causes
attributable to ChannelPoint, no subsequent Prepayment of Professional Services
Fees shall be due until the prior such Prepayment is fully recovered, and, if
the Agreement is terminated or expires prior to full recovery of such
Prepayment, GEFA shall be entitled to a refund of the amount of the Prepayment
that has not been recovered at the effective date of termination or expiration.
(c) Payment. Once the aggregate Professional Services Fees accrued by
GEFA in any time period specified in subsection (b) above are greater than the
corresponding Prepayment, ChannelPoint shall invoice GEFA for all additional
Consulting Services Fees owed to ChannelPoint on a monthly basis, as provided in
the Services Addendum, payable within thirty (30) days of the date of such
invoice.
5.3 REPORTING AND INVOICING. GEFA agrees to use diligent efforts to track
Policyholders and Leads who have purchased Insurance Products that had been
quoted or purchased through use of
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the Service. On a monthly basis, GEFA shall provide to ChannelPoint a report
listing by insurance broker or client the Insurance Products sold to Leads
during the prior month, specifying the products, associated gross premiums,
commissions or override payments, designated brokers and other relevant
information relating to such Leads. In addition to the invoices provided to GEFA
under Sections 5.1(c) and 5.2(c) above, ChannelPoint will provide GEFA with
monthly reports listing those insurance brokers and clients that have obtained
quotes or purchased Insurance Products through the Service during the prior
ninety-day (90) period. In addition, the parties shall comply with any special
tracking, reporting or reconciliation procedures agreed to by the parties, if
any.
5.4 AUDIT RIGHTS. ChannelPoint will have the right to engage, at its own
expense, an independent auditor to examine GEFA's records no more frequently
than once per year as may be necessary to determine the correctness of any
report or payment made under this Agreement and to verify GEFA's compliance with
the terms of Exhibit B. GEFA will have the right to engage, at its own expense,
an independent auditor to examine ChannelPoint's records no more frequently than
once per year as may be necessary to determine the correctness of any invoice
provided to GEFA under this Agreement and to verify the adequacy of
ChannelPoint's regulatory compliance procedures with regard to the Insurance
Products.
5.5 TAXES. All fees owed by GEFA to ChannelPoint are exclusive of, and GEFA
shall pay, all sales, use, excise and other taxes that may be levied upon GEFA
in connection with the sale of Insurance Products, the provision of Consulting
Services or other transactions contemplated under this Agreement, except for
taxes based on ChannelPoint's net income.
5.6 ADJUSTMENTS. Both parties acknowledge that the pricing mechanisms and
conditions specified in Section 1(a) of Exhibit G are preliminary in nature and
that certain assumptions have been made to justify the pricing schedule.
Accordingly, the parties agree to negotiate adjustments to the pricing schedule
in good faith (a) prior to the beginning of the third quarter of the calendar
year 2000, (b) at the end of the calendar year 2000, and (c) on an annual basis
thereafter. Any adjustments will be mutually agreed upon based upon
ChannelPoint's revenues generated from the pricing mechanism and the cost
savings, revenues and other benefits derived from GEFA's use of the Services,
the Insure Platform and the p.d.,q platform, including the sales achieved
through the Open Portals and the Branded Portals.
5.7 [...***...].
* CONFIDENTIAL TREATMENT REQUESTED
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6. TRADEMARKS
6.1 LICENSE TO GEFA MARKS. GEFA grants to ChannelPoint a non-exclusive,
nontransferable, royalty-free, worldwide license to use the GEFA Marks (as set
forth in Exhibit F) (i) on the Service to denote that the GEFA Content is owned
by GEFA and as required to publicly display hypertext links as part of the
Service that link to appropriate areas of GEFA's web site and to online
directory information available on GEFA's web site or through a third party web
site designated by GEFA; and (ii) to promote the Service as containing the GEFA
Content in promotional materials including but not limited to brochures,
presentations, advertising, and marketing; provided that: (A) ChannelPoint shall
at all times use the GEFA Marks in accordance with the permitted uses set forth
in Exhibit F, or as otherwise explicitly approved in writing by GEFA; (B) the
nature and quality of all aspects of any Commerce Exchange content which
includes the GEFA Marks, and of all Promotional Materials using the GEFA Marks,
shall conform to quality standards provided in writing to ChannelPoint by GEFA
from time to time; (C) ChannelPoint shall not engage in any action associated
with the GEFA Marks that adversely affects the good name, good will, image or
reputation of GEFA; (D) ChannelPoint shall cooperate with GEFA in facilitating
GEFA's control of the nature and quality of all aspects of the Service using the
GEFA Marks and of all Promotional Materials using the GEFA Marks, to supply GEFA
with specimens of all uses of the GEFA Marks upon request, and to promptly
discontinue any such uses of the GEFA Marks which GEFA deems inappropriate; (E)
ChannelPoint acknowledges GEFA's ownership of the GEFA Marks, agrees that it
will do nothing inconsistent with such ownership and that all use of the GEFA
Trademarks by ChannelPoint shall inure to the sole benefit of GEFA; (F)
ChannelPoint agrees that nothing in this Agreement shall give ChannelPoint any
right, title or interest in the GEFA Marks other than the right to use the GEFA
Marks in accordance with this Agreement and that it will not attack the title of
GEFA to the GEFA Marks or attack the validity of this Agreement; and (G) all
uses of the ChannelPoint Marks shall be distinct from the GEFA Marks so as to
make distinct commercial impressions.
6.2 LICENSE TO CHANNELPOINT MARKS. ChannelPoint grants to GEFA a
non-exclusive, nontransferable, royalty-free, worldwide license to use the
ChannelPoint Marks (i) to promote the Service and GEFA's relationship with
ChannelPoint, as provided in the Marketing and Sales Plan, in promotional
materials including but not limited to brochures, presentations, advertising,
and marketing; and (ii) to publicly display hypertext links to the Service from
appropriate areas of the GEFA's web site; provided that: (A) GEFA shall at all
times use the ChannelPoint Marks in accordance with ChannelPoint's standard
trademark usage guidelines provided to GEFA, or as otherwise explicitly approved
in writing by ChannelPoint; and (B) GEFA shall not engage in any action
associated with the ChannelPoint Marks that adversely affects the good name,
good will, image or reputation of ChannelPoint; (C) GEFA shall cooperate with
ChannelPoint in facilitating ChannelPoint's control of the nature and quality of
all aspects of the Promotional Materials using the ChannelPoint Marks, to supply
ChannelPoint with specimens of all uses of the ChannelPoint Marks upon request,
and to promptly discontinue any such uses of the ChannelPoint Marks which are in
violation of the ChannelPoint's usage guidelines; (D) GEFA acknowledges
ChannelPoint's ownership of the ChannelPoint Marks, agrees that it will do
nothing inconsistent with such ownership and that all use of the ChannelPoint
Trademarks by GEFA shall inure to the sole benefit of ChannelPoint;
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(E) GEFA agrees that nothing in this Agreement shall give GEFA any right, title
or interest in the ChannelPoint Marks other than the right to use the
ChannelPoint Marks in accordance with this Agreement and that it will not attack
the title of ChannelPoint to the ChannelPoint Marks or attack the validity of
this Agreement; and (F) all uses of the GEFA Marks shall be distinct from the
ChannelPoint Marks so as to make distinct commercial impressions.
7. CONFIDENTIALITY
7.1 DEFINITION. "CONFIDENTIAL INFORMATION" means confidential and
proprietary information which relates to GEFA's or ChannelPoint's business,
products and services, including but not limited to data, trade secrets,
discoveries, ideas, concepts, know-how, techniques, software, business
activities and operations, reports, studies and other technical and business
information, including personal Policyholder information. Notwithstanding the
foregoing, Confidential Information shall not include any information which (a)
is known by the receiving Party at the time of disclosure, free of any
obligation to keep it confidential, as evidenced by credible evidence; (b) is or
becomes publicly available through authorized disclosure by the owner of such
information; (c) is rightfully obtained by the receiving Party from a third
party who has the right to transfer or disclose it; or (d) is independently
developed by receiving Party without reference to Confidential Information of
the other Party.
7.2 NO DISCLOSURE. Each Party shall keep in confidence during the term of
this Agreement and for a period of five (5) years after termination or
expiration of this Agreement all Confidential Information of the other party and
that it will not directly or indirectly disclose to any third party or use for
its own benefit, or use for any purpose other than the performance of its
obligations under this Agreement, any Confidential Information it receives from
the other party; provided, however that obligations concerning confidentiality
of personal information relating to any Policyholder or Lead will survive in
perpetuity. Each party shall use reasonable care to protect the other Party's
Confidential Information, and in no event less than the same degree of care as
it would employ with respect to its own information of like importance which it
does not desire to have published or disseminated. Each party may make
Confidential Information of the other party available to those of its employees,
contractors or service providers who have a need to know such information and
who are subject to binding use and disclosure restrictions at least as
protective as those set forth herein. Notwithstanding the foregoing, either
party may make disclosures as lawfully required or requested by a court of law,
or any governmental entity or agency in connection with seeking any governmental
or regulatory approval or in connection with a judicial proceeding, provided
that reasonable measures are taken to limit such disclosure and to obtain
confidential treatment or a protective order and the disclosing party is allowed
to participate in such efforts.
7.3 REMEDIES. GEFA and ChannelPoint each agree that any breach of this
Section 7 would cause irreparable harm or injury to the other Party
significantly in excess of the value received by such other party pursuant to
this Agreement, and that such other party shall be entitled to declaratory,
injunctive or other equitable relief, in addition to any other legal or
equitable remedies it may have, for any such breach.
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8. WARRANTIES AND COVENANTS
8.1 GEFA WARRANTIES. GEFA represents and warrants that:
(a) neither the GEFA Content or any portion thereof in connection with
the Service will: (i) infringe or violate any third party's copyright, patent,
trademark, trade secret or other proprietary rights; (ii) violate any law,
statute, ordinance or regulation, including without limitation the laws and
regulations governing export control; (iii) be defamatory or trade libelous;
(iv) be pornographic or obscene; (v) be outdated or inaccurate in any way that
could mislead, in any material respect, any applicant for Insurance Products or
user of the Services; or (vi) to the extent such may contain code or other
electronic files, contain viruses, trojan horses, worms, time bombs, cancelbots
or other similar harmful or deleterious routines;
(b) all members of the GEFA Sales Team who have access to the Service
and are GEFA employees are fully licensed by the relevant regulatory
authorities to sell insurance products, except to the extent that any failure
to acquire such licenses does not have a material adverse affect on
ChannelPoint or the Service;
(c) it will use best efforts to ensure that all GEFA Sales Team
members who are not GEFA employees are fully licensed by the relevant
regulatory authorities to sell insurance products, except to the extent that
any failure to acquire such licenses does not have a material adverse affect on
ChannelPoint or the Service; and
(d) GEFA will promptly notify ChannelPoint if it receives any
complaint or if it is served with any paper or has knowledge of any legal or
administrative action, investigations or proceeding against ChannelPoint or
involving ChannelPoint.
8.2 CHANNELPOINT WARRANTIES. In connection with its operation of the
Service, ChannelPoint represents and warrants that:
(a) it will not hold itself out as an employee, partner, joint
venturer or officer of the GEFA and, except in the manner and for the purposes
specifically provided in this Agreement, ChannelPoint will not hold itself out
as an agent of GEFA;
(b) it will comply with all applicable federal, state or other laws
and regulations governing the sale of the Insurance Products on the Service as
contemplated under this Agreement, including by holding as a corporate entity,
and causing its employees to hold, all licenses under applicable insurance and
securities regulations in all applicable jurisdictions if required to operate
the Commerce Exchange as contemplated hereunder, except to the extent any
failure to comply with such laws or regulations does not have a material
adverse effect on GEFA or the Insurance Products;
(c) it will promptly notify GEFA if it receives any complaint or if it
is served with any paper or has knowledge of any legal or administrative
action, investigations or proceeding against GEFA or involving GEFA;
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(d) it will not make any representation, modification, alteration or
waiver in connection with its marketing and solicitation of customers for the
Insurance Products, except as contained in the GEFA Content furnished by GEFA
or as otherwise authorized by GEFA; and
(e) none of the text, pictures, sound, video, code or other content or
data provided by ChannelPoint to GEFA or used in connection with GEFA Marks or
GEFA Content as part of the Service and the Deliverables delivered to GEFA
under the Services Addendum (the "CHANNELPOINT CONTENT") will: (i) infringe or
violate any third party's copyright, patent, trademark, trade secret or other
proprietary rights; (ii) violate any law, statute, ordinance or regulation,
including without limitation the laws and regulations governing export control;
(iii) be defamatory or trade libelous; (iv) be pornographic or obscene; (v) be
outdated or inaccurate in any way that could mislead, in any material respect,
any applicant for Insurance Products or user of the Services; or (vi) to the
extent such content may contain code or other electronic files, contain
viruses, trojan horses, worms, time bombs, cancelbots or other similar harmful
or deleterious routines; provided, however that the foregoing warranties shall
not apply to (A) the GEFA Content, (B) the GEFA Marks or (C) to the extent any
ChannelPoint Content was created in accordance with GEFA specifications or
instructions.
8.3 SERVICE WARRANTY AND DISCLAIMER. ChannelPoint shall make the Service
generally available to GEFA and the GEFA Sales Team and, if applicable, end
users in substantial accordance with ChannelPoint's Service Level Agreement. In
the event of any breach of the foregoing warranty, GEFA's sole remedy and
ChannelPoint's sole obligation shall be as specified in the Service Level
Agreement. Except as provided in Section 8.2 or Section 8.3, CHANNELPOINT
PROVIDES THE SERVICE "AS IS" AND EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS,
IMPLIED AND STATUTORY, INCLUDING WITHOUT LIMITATION WARRANTIES OF TITLE,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except as specified
herein or in the Service Level Agreement, ChannelPoint does not guarantee
continuous or uninterrupted access to and use of the Service.
9. INDEMNITIES
9.1 GEFA INDEMNITY. GEFA shall defend ChannelPoint and pay any resulting
damages, costs and expenses finally awarded to a third party or paid in
settlement with respect to all claims, suits or proceedings brought by any
third party against ChannelPoint or its directors, officers, agents and
employees arising from (a) any breach of the representations, warranties or
covenants in Section 8.1, or (b) any claims relating to the provision of the
insurance services offered by GEFA or any claims by GEFA's customers or members
of the GEFA Sales Team relating to use of or access to the Service, except to
the extent such claim arose out of any breach of this Agreement by
ChannelPoint. As a condition of the foregoing, ChannelPoint shall (i) promptly
notify GEFA of any indemnifiable claim (ii) give GEFA sole control over the
defense and settlement of such claims; and (iii) provide reasonable cooperation
and assistance to GEFA in conducting its defense, at GEFA's expense; provided,
however, that ChannelPoint may participate in the defense at its expense; and
ChannelPoint's advance written approval is required for any settlement that
imposes any executory obligation on ChannelPoint (beyond the payment of money
in settlement of the claim) and does not unconditionally release ChannelPoint.
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9.2 CHANNELPOINT INDEMNITY. ChannelPoint shall defend GEFA and pay any
resulting damages, costs and expenses finally awarded to a third party or paid
in settlement with respect to all claims, suits or proceedings brought by any
third party against GEFA or its directors, officers, agents and employees
arising from (a) any breach of the warranties in Section 8.2 or (b) any claim
alleging that GEFA's use of the Service in conformance with this Agreement
infringes any third party's intellectual property right or privacy right,
except to the extent such claim arose out of any breach of this Agreement by
GEFA. As a condition of the foregoing, GEFA shall (i) promptly notify
ChannelPoint of any indemnifiable claim; (ii) give ChannelPoint sole control
over the defense and settlement of such claims; and (iii) provide reasonable
cooperation and assistance to ChannelPoint in conducting its defense, at
ChannelPoint's expense; provided, however, that GEFA may participate in the
defense at its expense and GEFA's advance written approval is required for any
settlement that imposes any executory obligation on GEFA (beyond the payment of
money in settlement of the claim) and does not unconditionally release GEFA.
10. LIMITATIONS OF LIABILITY
IN NO EVENT SHALL EITHER PARTY HEREUNDER BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO SUCH DAMAGES ARISING FROM BREACH OF CONTRACT
OR WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY, OR ARISING FROM
INTERRUPTED COMMUNICATIONS, LOST DATA OR LOST PROFITS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF OR
KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL
EITHER PARTY'S LIABILITY FOR ANY AND ALL CLAIMS OR CAUSES OF ACTION
RELATING TO THIS AGREEMENT EXCEED, IN THE AGGREGATE, [...***...]. THE
EXISTENCE OF ONE OR MORE CLAIMS WILL NOT ENLARGE THIS LIMIT. THE LIMITATION
OF LIABILITY SPECIFIED IN THIS SECTION WILL APPLY REGARDLESS OF WHETHER ANY
LIMITED OR EXCLUSIVE REMEDY SPECIFIED IN THIS AGREEMENT FAILS OF ITS
ESSENTIAL PURPOSE.
* CONFIDENTIAL TREATMENT REQUESTED
16
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11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement shall commence on the Effective Date
and continue through December 31, 2004, and shall automatically renew for
one-year periods thereafter unless either party notifies the other party of its
desire to terminate the Agreement at least six (6) months prior to the
expiration of the then-current term.
11.2 TERMINATION. Either party may terminate this Agreement upon the
material default of the other party under this Agreement or under the
Assignment Agreement between First Colony Life Insurance Company and
ChannelPoint dated September 10, 1999 (the "ASSIGNMENT AGREEMENT"), in which
case for the purposes of this Section 11.2, First Colony Life Insurance Company
shall be treated as if it were GEFA, if such default remains uncured for thirty
(30) days following written notice to the defaulting party specifying the
default in reasonable detail and demanding its cure; provided, however, that
this Agreement may be immediately terminated upon written notice in the event
of a default under either Sections 7 or 8 hereof. GEFA may terminate this
Agreement upon thirty (30) days prior written notice to ChannelPoint in the
event of a Change of Control of ChannelPoint. For purposes of this Agreement, a
"CHANGE OF CONTROL" of ChannelPoint means a: (a) sale of all or substantially
all of the assets of ChannelPoint to a Prohibited Company; or (b) merger,
reorganization, consolidation or other transaction pursuant to or as a result
of which 50% or more of the voting power of the surviving company following the
merger, reorganization or consolidation is transferred to a Prohibited Company.
For purposes of this Agreement, a "Prohibited Company" means any company that,
in GEFA's reasonable judgement, (i) is a competitor of GEFA; or (ii) would tend
to tarnish GEFA's image or reputation through association.
11.3 EFFECT OF TERMINATION. Upon any expiration or termination of this
Agreement and upon payment of all outstanding obligations owed by GEFA to
ChannelPoint, ChannelPoint will remove the GEFA Content from its systems,
except for such GEFA Content as ChannelPoint requires for maintenance of its
systems and archival copies. Termination of this Agreement will not affect any
of the terms and conditions of Insurance Products acquired prior to
termination. Sections 4, 5.1 (solely with respect to Exchange Service Fees
payable for Insurance Products sold prior to the date of termination), 5.2
(with respect Professional Service Fees payable for services rendered prior to
the date of termination), 7, 8, 9, 10, 11.3 and 12 shall survive any
termination or expiration of this Agreement.
12. GENERAL PROVISIONS
12.1 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of Colorado without giving effect to
principles of conflict of laws.
12.2 SEVERABILITY; WAIVER. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way. The
parties agree to replace any invalid provision with a valid provision that most
closely approximates the intent and economic effect of the invalid provision.
The waiver by either party of a breach of any provision of this Agreement will
not operate or be interpreted as a waiver of any other or subsequent breach.
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12.3 HEADINGS. Headings used in this Agreement are for reference purposes
only and in no way define, limit, construe or describe the scope or extent of
such section, or in any way affect this Agreement.
12.4 ASSIGNMENT. Neither party shall have any right or ability to assign
(including any assignment by operation of law), transfer, or sublicense any
obligations or benefit hereunder without the written consent of the other
party; provided, however that, other than in connection with a Change of
Control of ChannelPoint, either may assign and transfer this Agreement in whole
or in part without the consent of the other party in whole or in part to a
parent or subsidiary corporation or to a successor to the entire business of
such party, directly or indirectly, by way of merger, consolidation or sale of
all or substantially all of its stock or assets or to a subsidiary of any such
successor. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.
12.5 DESIGNATION OF GEFA AFFILIATES. ChannelPoint acknowledges that GEFA
may delegate duties or obligations under this Agreement to any GEFA Affiliates
(as defined below), provided that GEFA remains ultimately liable for the
performance of such obligations, and GEFA may designate any GEFA affiliate to
receive the benefits owed to GEFA under this Agreement. For purposes of this
Agreement, a "GEFA AFFILIATE" is any entity in which GEFA, directly or
indirectly, owns or controls more than fifty percent (50%) of the total
outstanding voting power.
12.6 FORCE MAJEURE. Each party will not be liable for any failure to
fulfill its obligations hereunder due to causes beyond its reasonable control,
including acts or omissions of government or military authority, acts of God,
shortages of materials, telecommunications failures (including any systemic
Internet failures and any interruptions in services of Internet Service
Providers), transportation delays, earthquakes, fires, floods, labor
disturbances, riots or wars (a "FORCE MAJEURE EVENT"). If a Force Majeure Event
continues for sixty (60) days or more, the party awaiting performance from the
party suffering the Force Majeure Event may terminate this Agreement
immediately upon written notice to such party.
12.7 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors, and no agency, partnership, joint venture or
employee-employer relationship is intended or created by this Agreement.
12.8 NOTICE. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail, return receipt requested, first class postage
prepaid, addressed as set forth below. If delivered personally, the date on
which a notice, request, instruction or document is delivered shall be the date
on which such delivery is made and, if delivered by mail, the date on which
such notice, request, instrument or document is received shall be the date of
delivery. Any party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section.
(A) If to GEFA:
GE Financial Assurance
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Attn: Pamela Schutz
6610 West Broad Street
Richmond, Virginia 23230
(B) If to CHANNELPOINT:
ChannelPoint, Inc.
Attn: General Counsel
10155 Westmoor Drive, Suite 210
Westminster, Colorado 80020
12.9 This Agreement, including the items attached hereto, sets forth the
entire understanding and agreement of the parties on this matter and supersedes
any and all oral or written agreements or understandings between the parties as
to the subject matter of this Agreement. This Agreement may be modified only by
a writing signed by both parties.
IN WITNESS WHEREOF, each party has executed this Agreement on its behalf,
all on the day and year first above written.
GE FINANCIAL ASSURANCE HOLDINGS, INC. CHANNELPOINT, INC.
Signature: /s/ Joseph J. Pehota By: /s/ Kenneth E. Hollen
---------------------------- ------------------------------
Printed Name: Joseph J. Pehota Printed Name: Kenneth E. Hollen
------------------------ -------------------
Title: SVP - GEFA Title: President and CEO
-------------------------------- ---------------------------
Date: 11/12/99 Date:
--------------------------------- ----------------------------
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<PAGE> 20
EXHIBIT A
SERVICE DESCRIPTION
DESCRIPTION OF INSURE SERVICES
o Electronic individual and group interface to ChannelPoint Commerce
services that enables electronic transfer of captured application
information to the Insure system.
o Product Modeling support for group health, life and disability: individual
term life and long-term care.
o Customizable workflow engine that enables GEFA to codify the workflow
steps and business rules required to process applications.
o Integrated messaging that can automatically generate status messages via
email or fax as applications move through the workflow.
o Underwriting/workflow rules engine to enable routing of cases through the
workflow based on defined risk factors.
o Customizable underwriting desktop that enables GEFA to define a rollup of
risk factors relevant to the lines of business being processed and based
on GEFA business practices.
o Underwriting drilldown to enable individual underwriters to review key
risk factors and view relevant application information from the Insure
desktop.
o Automated generation of acceptance letters (where applicable to the line
of business).
o Integrated rating and product modeling environment to enable final rating
based on risk factors (for relevant lines of business).
o Application installation interface to electronically transfer customer
information into legacy systems.
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EXHIBIT B
INSURE PLATFORM LICENSE TERMS AND CONDITIONS SUPPLEMENT
This Insure Platform License Supplement (this "SUPPLEMENT") governs GEFA's use
of the Insure Platform for the field of use specified in the Agreement on
computer systems owned by or leased to GEFA at any GEFA facility or the
facilities of a GEFA outsource service provider operating the Insure Platform
solely on GEFA's behalf. All terms, conditions and limitations specified in the
Agreement shall apply to the licenses and obligations specified in this
Supplement.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, ChannelPoint grants
GEFA a perpetual (subject to termination as provided in Section 3,
nonsublicensable, non-transferable, non-exclusive right to use (a) the Insure
Platform for internal purposes only and in accordance with the applicable user
documentation provided by ChannelPoint and subject to the restrictions set forth
herein and in the Agreement, and (b) application program interface for the
Insure Platform, through which GEFA may integrate the Insure Platform with and
into other software running on GEFA's computer systems (the "APIS"), solely for
GEFA's integration of its systems with the Insure Platform and to create
application programs that access the API's ("APPLICATION PROGRAMS"). GEFA may
not permit any third party to use or access the APIs or view the documentation
thereto, except that GEFA may permit a third party contractor to use and access
the APIs and associated documentation in order to permit such contractor to
integrate the Insure Platform with GEFA's systems, provided that such
contractors are informed that the APIs are proprietary to ChannelPoint and are
bound by written agreement to maintain the APIs in strict confidence.
ChannelPoint and its licensors retain ownership of the Insure Platform, APIs,
and all copies and portions thereof and all rights not expressly granted herein
are reserved by ChannelPoint. GEFA may not use the Insure Platform or APIs for
any purpose or in any manner not expressly permitted in this Supplement or in
the Agreement.
2. RESTRICTIONS. GEFA may not copy any Insure Platform software except as
reasonably required to use the Insure Platform as permitted hereunder and except
for one copy which may be made solely for back-up purposes. GEFA must reproduce
and include the copyright notice and any other notices that appear on the
original Insure Platform software on any permitted copies and any media
therefor. GEFA acknowledges that the Insure Platform contains certain third
party programs which may include routines to ensure conformity with the terms of
the licenses granted in this Agreement. ChannelPoint shall use commercially
reasonable efforts to inform GEFA of any such routines that come to the
attention of ChannelPoint. Except as expressly permitted under Section 1, GEFA
shall not (and shall not allow any third party to) (i) decompile, disassemble,
or otherwise reverse engineer or attempt to reconstruct or discover any source
code or underlying ideas or algorithms or file formats or programming or
interoperability interfaces of the Insure Platform or of any files contained or
generated using the Insure Platform by any means whatsoever, (ii) remove any
product identification, copyright or other notices, (iii) provide, lease, lend,
use for timesharing or service bureau purposes or otherwise use or allow others
to use the Insure Platform, APIs or any portion thereof to or for the benefit of
third parties, (iv) modify, incorporate into or with other software or create a
derivative work of any part of
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the Insure Platform, (v) disseminate performance information or analysis
(including, without limitation, benchmarks on the APIs) from any source
relating to the Insure Platform, or (vi) permit or encourage any third party to
do the foregoing. GEFA has no right to receive any source code or design
documentation relating to the Insure Platform, except as otherwise provided in
this Agreement and, with respect to design documentation, ChannelPoint shall
provide access to limited design documentation as necessary and appropriate for
GEFA to fully access and use the API's. To the extent that applicable law would
permit GEFA to reverse-engineer the Insure Platform, GEFA agrees to negotiate
with ChannelPoint in good faith prior to such undertaking on the terms under
which ChannelPoint would grant access to the source code. GEFA recognizes and
agrees that there is no adequate remedy at law for a breach of this Section 2,
that such a breach would irreparably harm ChannelPoint and that ChannelPoint is
entitled to seek equitable relief (including, without limitation, injunctions
with respect to any such breach or potential breach) in addition to any other
remedies available at law.
3. TERMINATION OF LICENSE. This licenses granted under this Supplement will
terminate automatically if GEFA fails to cure any material breach of this
Supplement within thirty (30) days after written notice is provided to GEFA
specifying the breach in reasonable detail and demanding its cure; provided that
if such breach is not capable of cure within such thirty-day period, GEFA shall
provide to ChannelPoint within the thirty-day period a written plan reasonably
acceptable to ChannelPoint to cure such breach and be diligently executing such
plan within the thirty-day period. Upon any termination, GEFA shall promptly
cease all use of the Insure Platform and APIs and return or destroy all copies
of the Insure Platform and APIs and all portions thereof and so certify in
writing to ChannelPoint.
4. LIMITED WARRANTY AND DISCLAIMER.
(a) Functionality. ChannelPoint warrants and represents to GEFA that for a
period of ninety (90) days from GEFA's installation of the initial version of
the Insure Platform that such Insure Platform, when operated in conformance with
this Agreement, will materially conform to ChannelPoint's then-current published
documentation for such Insure Platform, as delivered to GEFA. GEFA acknowledges
that the proper operation of the Insure Platform requires dedicated hardware and
software resources of the computer server on which it operates (the
"CHANNELPOINT SERVER"). Accordingly, the warranty provided in this Section 4(a)
is void if GEFA operates any other computer programs on the ChannelPoint Server,
including any GEFA programs that access the APIs, other than the system programs
required for proper operation of the Insure Platform; provided, however, in the
event that ChannelPoint releases a future version of the Insure Platform in
which such restrictions are no longer applicable and such new version is
installed by or on behalf of GEFA, this provision shall no longer apply to GEFA.
This warranty covers only problems reported to ChannelPoint during the foregoing
warranty period.
(b) Ownership. ChannelPoint warrants and represents that it owns all right,
title and interest in or has the right to license the Insure Platform to GEFA
and that the Insure Platform (solely in the form delivered to GEFA) will not
infringe any patent, copyright, trademark, database, trade secret or other
intellectual property right of any third party. In the event of any breach of
the warranty and representation specified in this Section 4(b), ChannelPoint's
sole obligation and GEFA's sole remedy is specified in Section 6 below.
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(c) Year 2000. ChannelPoint warrants and represents to GEFA that the Insure
Platform (solely in the form delivered to GEFA), when operated in accordance
with the documentation, are Year 2000 Compliant (as defined below). GEFA
acknowledges that the capability of the Insure Platform to manage and manipulate
date-related information appropriately depends on the quality of information
imported or input into the Insure Platform, including the presence of adequate
indicators of century in such information. ChannelPoint disclaims any warranty
relating to the quality of any such imported or input information. "YEAR 2000
COMPLIANT" means that the Insure Platform shall be able to provide specific
dates and calculate spans of dates, and to record, store, process and provide
true and accurate dates and calculations for dates and spans of dates within and
between the twentieth and twenty-first centuries prior to, including and
following January 1, 2000, including by: (i) correctly processing correctly
inputted day and date data; (ii) recognizing September 9, 1999 as a valid date;
(iii) recognizing the year 2000 as a leap year having 366 days, and correctly
processing February 29, 2000 as a valid leap year date; and (iv) employing only
four-digit year internal year representations. Any claims brought under this
Section 4(c) must be brought within (90) days after January 1, 2000.
(d) Exclusive Remedies. ChannelPoint's sole liability for any breach of the
warranties specified in this Section 4 (except as otherwise provided herein)
shall be at ChannelPoint's sole discretion to (i) promptly use diligent efforts
to revise the Insure Platform such that it conforms with the foregoing
warranties, (ii) to replace the non-conforming Insure Platform software with
Insure Platform software that conforms with the foregoing warranties, or (iii)
refund sums paid therefor.
(e) Disclaimer. EXCEPT FOR THE FOREGOING, THE SOFTWARE IS PROVIDED "AS IS"
WITHOUT WARRANTY OF ANY KIND AND CHANNELPOINT HEREBY EXPRESSLY DISCLAIMS ANY AND
ALL WARRANTIES OF ANY KIND OR NATURE, WHETHER EXPRESS, IMPLIED OR STATUTORY,
RELATING TO THE INSURE PLATFORM INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CHANNELPOINT
DOES NOT WARRANT OR REPRESENT THAT THE USE OF THE INSURE PLATFORM WILL BE
UNINTERRUPTED OR ERROR-FREE OR MAKE ANY OTHER REPRESENTATIONS REGARDING THE USE,
OR THE RESULTS OF THE USE, OF THE INSURE PLATFORM OR WRITTEN MATERIALS IN TERMS
OF CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. GEFA understands that
ChannelPoint is not responsible for and will have no liability for hardware,
software, or other items or any services provided by any persons other than
ChannelPoint.
5. NO EXPORT. GEFA acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the Insure Platform and APIs. GEFA agrees that
it will not export or re-export the Insure Platform or APIs from the United
States or the country originally shipped to by ChannelPoint in any form, without
the appropriate United States and foreign governmental licenses.
6. INDEMNITY. ChannelPoint shall defend GEFA and pay any resulting damages,
costs and expenses finally awarded to a third party or paid in settlement of
any claims, suits or proceedings brought against GEFA by any third party that
alleges that the Insure Platform, or GEFA's use thereof, infringes any patent
issued as of the Effective Date of the Agreement, copyright, trademark or other
intellectual property right of a third party; provided that GEFA provides
ChannelPoint (a) prompt written notice of
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the existence of such claim, suit, action or proceeding, (b) sole control over
the defense or settlement of such claim, and (c) assistance at ChannelPoint's
request and expense to the extent reasonably necessary for the defense of such
claim or suit. GEFA may, at its own expense, participate in the defense of such
claim with counsel of its own choosing. The foregoing sets forth ChannelPoint's
sole and exclusive obligation and GEFA's sole and exclusive remedy for any
claim of intellectual property infringement or misappropriation.
Notwithstanding the foregoing, ChannelPoint shall not indemnify GEFA for any
claims based on (i) any GEFA or third party intellectual property or software
incorporated in or combined with the Insure Platform where in the absence of
such incorporated item, the Insure Platform would not have been infringing,
(ii) Insure Platform software that has been altered or modified by GEFA or any
third party without ChannelPoint's consent where in the absence of such
alteration or modification the Insure Platform would not be infringing; and
(iii) any use of a superseded version of the Insure Platform for which
ChannelPoint has made available an updated, revised or repaired version which
is not infringing. Upon notice of any claim of infringement or upon reasonable
belief of the likelihood of such a claim, ChannelPoint shall, at its option,
(A) obtain the rights to continued use of the Insure Platform, (B) substitute
other suitable, functionally-equivalent, non-infringing software, or (C)
replace or modify the Insure Platform so that it is no longer infringing.
7. MAINTENANCE SERVICES.
(a) Maintenance Program. Subject to the timely payment of applicable
maintenance fees, ChannelPoint shall provide Maintenance to GEFA for the Insure
Platform. "MAINTENANCE" means ChannelPoint's maintenance services under the
Maintenance Program, which currently consist of: (i) ChannelPoint delivering to
GEFA all updates, modifications, enhancements, and new versions or releases of
Insure Platform which are generally made available to other Maintenance Program
participants at no charge, (ii) telephone support during normal Maintenance
Program hours (currently weekdays from 6am-6pm Mountain Time, excluding federal
holidays), and (iii) error corrections which are generally made available to
other Maintenance Program participants at no charge. ChannelPoint may from time
to time revise its Maintenance Program offerings at its sole discretion.
Maintenance shall be provided solely to the Technical Contacts designated by
GEFA in writing. ChannelPoint will support only the two (2) most recent major
general releases of the Insure Platform, provided that ChannelPoint agrees to
support each major general release for at least two (2) years.
(b) Telephone Support and Error Correction. ChannelPoint shall exercise
commercially reasonable efforts to correct any error in the current unmodified
release of Insure Platform which is reported by GEFA such that the Insure
Platform shall perform in accordance with the applicable user documentation. If
the error was solely within the Insure Platform, ChannelPoint shall deliver the
correction or workaround to GEFA promptly after creating such. All other
corrections may be delivered under the next scheduled error-correction release
under the Maintenance Program. If GEFA reports a problem that is scheduled by
ChannelPoint to be solved in a later incremental release, ChannelPoint may
address such correction in such release. If ChannelPoint demonstrates that a
problem reported by GEFA is not due to an error in the Insure Platform,
ChannelPoint will so notify GEFA and may at ChannelPoint's discretion provide
GEFA an opportunity to have ChannelPoint address the error at GEFA's expense
under ChannelPoint's then-current consulting rates on an as-available basis for
ChannelPoint's resources. If GEFA instructs ChannelPoint that it does not wish
the problem pursued, or if such determination requires effort in excess of
GEFA's instructions,
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ChannelPoint may, at its sole discretion, elect not to investigate the error.
GEFA agrees to pay ChannelPoint at ChannelPoint's standard rates for all effort
expended towards resolution of a problem which is later determined to result
from any cause other than an error in the Insure Platform subject to the
provisions of Section 5 of the Agreement.
(c) Certain Exclusions. ChannelPoint shall have no obligation to offer
Maintenance for: (i) altered, damaged or modified Insure Platform software or
all or any portion of the Insure Platform if incorporated into other software
not furnished by ChannelPoint; (ii) software that is not one of the releases
currently supported under the Maintenance Program; (iii) problems caused by
abuse or misapplication or use of the Insure Platform other than as specified
in the ChannelPoint-published documentation, or; (iv) Insure Platform software
installed on any computer hardware that is not supported by ChannelPoint in
connection with ChannelPoint's published support policies.
8. APPLICABLE PROVISIONS. Unless expressly provided to the contrary elsewhere in
this Supplement or in the Agreement, all provisions of the Agreement, including
the Limitation of Liability provisions specified in Section 10 thereof, shall
apply to all rights and obligations of the parties under this Supplement.
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EXHIBIT C
SERVICES ADDENDUM
Client desires to retain ChannelPoint to provide certain services under
the terms hereof. This Services Addendum is an attachment and a part of the
agreement referring to this Addendum (the "AGREEMENT") between ChannelPoint and
the client listed on such Agreement , and is incorporated therein by reference.
This Addendum sets forth terms additional to, and not in lieu of, the
Agreement. Capitalized terms used but not defined herein shall have the same
meanings as in the Agreement.
1. STATEMENT OF WORK. ChannelPoint agrees to render consulting services to
Client as set forth in a Statement of Work attached to this Addendum
("SERVICES"), which shall include, if applicable, (a) a definition of the scope
of the work, (b) a definition of the deliverable items that are to be provided
to GEFA by ChannelPoint (the "DELIVERABLES"), (c) applicable acceptance
criteria, (d) milestones and target delivery dates, (e) the responsibilities of
each party, and (f) specifications for operating environment, in which the
Deliverables will be used. If the Services are to be provided on Client's
premises (i) Client shall provide safe and adequate space, power, network
connections and other resources as requested by ChannelPoint, and (ii)
ChannelPoint shall adhere to Client's established written guidelines concerning
on-site visits by contractors and the use of Client's computer equipment, if
such written guidelines have been previously provided to ChannelPoint.
2. PROJECT ADMINISTRATION. The Contact for Client shall provide ChannelPoint
all assistance and guidance necessary for the performance of the Services. Such
Contact shall be responsible for the review of the Services and invoices
therefor.
3. COMPENSATION. ChannelPoint shall be paid the fees at the time and materials
rates set forth in Schedule 1 attached hereto for time spent performing the
Services. Upon each anniversary date of the Effective Date of the Agreement,
ChannelPoint may, upon thirty (30) days prior written notice, revise the time
and materials rates applicable to the Services performed during the following
year. Client shall also reimburse ChannelPoint for reasonable travel, lodging
and meal expenses for Services performed outside of ChannelPoint's site which
ChannelPoint is required to incur in providing the Services, in accordance with
GEFA's standard expense reimbursement policies. ChannelPoint shall provide
Client with invoices detailing the consulting hours, fees and expense
reimbursements due ChannelPoint, and shall itemize and provide receipts for
expenses over two hundred dollars upon request. Client shall be responsible for
all taxes associated with the Services and the payment of fees for the Services
except taxes based on ChannelPoint's net income. Client's payment is due within
thirty (30) days of receipt of the ChannelPoint invoice. All prices are in U.S.
dollars except as expressly stated otherwise.
4. LICENSE. Client acknowledges that in order to perform the Services,
ChannelPoint may be required to have access to certain Client software or other
material of Client ("CLIENT MATERIAL"). Client grants to ChannelPoint a
non-exclusive, non-transferable license to use such Client Materials solely as
required for ChannelPoint's performance of the Services hereunder and as
approved in writing by
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Client. Subject to Client's prior written approval, which approval shall not be
unreasonably withheld, ChannelPoint shall have the right to sublicense such
grant solely to the extent that ChannelPoint requires to secure assistance for
the performance of the Services for Client.
5. OWNERSHIP.
(a) Ownership of Deliverables. Except as set forth elsewhere in subsection
(b) below, Client shall be the sole owner of all intellectual property rights
in and to all Deliverables, which rights shall be included in the definition of
"GEFA PROPERTY" as specified in Section 4.6(b) of the Agreement. If any
Deliverable is identified as a "REUSABLE ITEM" in any Statement of Work, then
Client grants ChannelPoint a perpetual, non-exclusive and royalty-free license
to use, reproduce, create derivative works, modify and distribute such
Deliverable in connection with ChannelPoint's business. The Deliverables do not
include the GEFA Property or the ChannelPoint Property, ownership of which is
specified in Section 4.6 of the Agreement.
(b) Ownership of ChannelPoint Property. As between Client and
ChannelPoint, ChannelPoint shall be the sole owner of all intellectual property
rights in and to (i) any invention or innovation conceived or developed by
ChannelPoint during the term of this Agreement in the performance of the
Services, except for any invention or innovation to the extent derived from any
business rules, formulas, rating rules, planning or modeling capabilities,
business logic or workflow configurations used in Client's business or other
information and specifications provided by Client (which inventions or
innovations shall be subject to subparagraph (a) above) or any Joint Inventions
specified in subsection (c) below and (ii) ChannelPoint or third party
technology existing prior to the effective date of any Statement of Work
(including but not limited to Insure((TM)) software any technology used to
provide the and Commerce((TM)) service and the tools that ChannelPoint uses in
providing services to third parties) and all related software, documentation,
computer languages, methods, methodologies and algorithms, and any and all
modifications to any of the above. The items specified in (i) and (ii) above
shall be included in the definition of "CHANNELPOINT PROPERTY" as specified in
Section 4.6(a) of the Agreement. To the extent that any ChannelPoint Property
is included within a Deliverable or is necessary to use a Deliverable,
ChannelPoint grants Client a perpetual, non-exclusive and royalty-free license
to use such ChannelPoint Property only in connection with such Deliverable.
(c) Ownership of Joint Property. All algorithms, designs, drawings,
formulae, know-how, ideas, inventions, processes, software, specifications, and
other forms and types of technology ("TECHNOLOGY"), in each case whether or not
patentable, other than any Technology included in the GEFA Property or the
ChannelPoint Property, that are discovered, made, authored or conceived jointly
by ChannelPoint and Client personnel (including its employees and consultants)
for which, where relevant, such personnel would be considered joint inventors
under United States Patent Act or joint authors under the United States
Copyright Act, shall be the joint property of ChannelPoint and Client, and
ChannelPoint and Client shall jointly own any and all intellectual property
rights associated therewith ("JOINT INVENTIONS"). All Joint Inventions, shall
be owned in equal undivided interests by ChannelPoint and Client, with no
royalty payment or accounting to the other party. The parties will (i) execute
any and all documents necessary to effectuate such equal and undivided
interests to Joint Inventions, (ii) reasonably cooperate with the other party
with respect to providing information and
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preparing and filing any documents necessary, including patent applications, to
secure their rights with respect to Joint Inventions and; (iii) jointly share
expenses incurred in securing rights such as those associated with obtaining
and maintaining patents, copyrights or similar rights with respect to Joint
Inventions.
6. CHANGES TO STATEMENT OF WORK. If Client desires to change any item on the
Statement of Work (including without limitation Deliverables and schedules),
Client shall submit a written proposal to ChannelPoint detailing the changes.
ChannelPoint shall have fifteen business days to notify Client of the resulting
cost and schedule changes and whether ChannelPoint has the resources available
to make such changes to the Statement of Work. If ChannelPoint has adequate
resources to make the change, Client may accept the revisions and the Statement
of Work shall be amended accordingly. If Client and ChannelPoint are not able to
agree to the adjustment in the cost or schedule or other changes in the
Statement of Work, then the Statement of Work will remain unchanged.
7. CONFIDENTIALITY. Each party shall comply with all confidentiality
restrictions set forth in the Agreement with respect to any Confidential
Information exchanged by the parties while ChannelPoint is performing Services
under this Addendum.
8. LIMITED WARRANTY. ChannelPoint warrants the Deliverables to the extent
provided in Section 8.2(e) of the Agreement, and further warrants that the
Deliverables shall conform in all material respects with the specifications and
functionality set forth therefor in the Statement of Work attached to this
Addendum. ChannelPoint shall perform the services in a good and workmanlike
manner. Client's sole remedy and ChannelPoint's sole liability for a breach of
the foregoing shall be for ChannelPoint to reperform the nonconforming services
or correct the defective Deliverable or refund to Client all sums paid therefor.
CHANNELPOINT HEREBY EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND
OR NATURE, WHETHER EXPRESS, IMPLIED OR STATUTORY, RELATING TO THE SERVICES
PROVIDED HEREUNDER AND DELIVERABLES, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF TITLE, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
EXCEPT FOR THE WARRANTIES PROVIDED IN THIS SECTION 8 WITH RESPECT TO THE
DELIVERABLES, CHANNELPOINT DOES NOT WARRANT OR REPRESENT THAT THE DELIVERABLES
WILL BE FREE FROM BUGS OR THAT THE USE OF SUCH WILL BE UNINTERRUPTED OR
ERROR-FREE OR MAKE ANY OTHER REPRESENTATIONS REGARDING THE USE, OR THE RESULTS
OF THE USE, OF THE DELIVERABLES IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY,
OR OTHERWISE. Client understands that ChannelPoint is not responsible for and
will have no liability for hardware, software, or other items or any services
provided by any persons other than ChannelPoint, including without limitation
items supplied by Client.
9. CHANNELPOINT INDEMNITY. ChannelPoint agrees to indemnify and defend Client
for the Deliverables to the extent ChannelPoint indemnifies Client under Section
9.2 of the Agreement. The foregoing sets forth ChannelPoint's sole and exclusive
obligation and Client's sole and exclusive remedy for any claim of intellectual
property infringement or misappropriation.
C-3
<PAGE> 29
10. CLIENT INDEMNITY. Client shall indemnify and defend ChannelPoint from and
against any claims of injury arising from ChannelPoint's use of Client's
premises. Client warrants that the Client Materials and ChannelPoint's use
thereof will not infringe any patent, copyright, trademark or other intellectual
property right of a third party or misappropriate any third party trade secret.
Client agrees to indemnify, defend and hold harmless ChannelPoint from and
against any and all damages, loss, demands, fees, expenses, fines, penalties and
costs (including without limitation reasonable attorneys' fees, costs and
disbursements) incurred by ChannelPoint and arising from any claims, suits,
actions or proceedings brought against ChannelPoint by any third party that
alleges that all or any part of the Client Materials infringe any patent,
copyright, trademark or other intellectual property right of a third party or
misappropriate any third party trade secret except to the extent that the claim
is based on a combination of the Client Materials with the Deliverables.
11. APPLICABLE PROVISIONS. Unless expressly provided to the contrary elsewhere
in this Addendum or in the Agreement, all provisions of the Agreement, including
the Limitation of Liability provisions specified in Section 10 thereof, shall
apply to all rights and obligations of the parties under this Addendum.
C-4
<PAGE> 30
EXHIBIT D
SERVICE LEVEL AGREEMENT
ChannelPoint will make the Commerce Exchange available Sunday through Friday at
23 hours per day, with one downtime period of one hour each of those days. The
hour of the day for such planned downtime will be at the sole discretion of
ChannelPoint. Such downtime period is normally scheduled between 2300 and 0400.
ChannelPoint will make the Commerce Exchange available Saturday for 18 hours,
with one downtime period of 6 hours. The specific hours of such downtime period
will be at the sole discretion of ChannelPoint. Such downtime period is normally
scheduled between1800 and 0400.
The parties agree there will be additional downtime necessary from time to time
to accommodate environmental change issues in the ChannelPoint data center,
during which time it would be impracticable to invoke recovery at an alternative
data center; provided that ChannelPoint shall use its best efforts to give GEFA
advanced notice of such downtime.
The parties recognize that ChannelPoint has no control over response time over
the Internet. ChannelPoint has both a primary and backup link to the Internet
backbone, which both parties agree is reasonable to meet ChannelPoint's
responsibilities to provide service under this Agreement.
ChannelPoint and GEFA acknowledge that the service levels specified in this
Exhibit E are preliminary based upon early commercial versions of the Commerce
Exchange. ChannelPoint and GEFA will work together, as provided in Section 2.8
of the Agreement, to establish more rigorous standards based upon actual GEFA
business volume, GEFA volume commitments for Commerce Exchange business and
service levels established by other similar ecommerce businesses. In addition,
ChannelPoint and GEFA shall negotiate, in good faith, appropriate remedies for
any failure by ChannelPoint to adhere to the standards so established, taking
into account severity, loss of value resulting from such failure and industry
standards; provided that such remedies shall not be any less favorable than
those provided to other similarly-situated users of the Commerce Exchange.
D-1
<PAGE> 31
EXHIBIT E
GEFA CONTENT
<TABLE>
<CAPTION>
CARRIERS/PROFESSIONAL MUST... USING ...
SERVICES ...
<S> <C> <C>
[...***...]
</TABLE>
THE CONTENT LISTED ABOVE MAY BE UPDATED OR MODIFIED DURING THE TERM OF THE
AGREEMENT AS PROVIDED IN SECTION 4.2 HEREOF.
* CONFIDENTIAL TREATMENT REQUESTED
E-1
<PAGE> 32
EXHIBIT F
PERMITTED USES OF GEFA CONTENT / GEFA MARKS
Exhibit F will be developed by GEFA and provided to ChannelPoint within ninety
(90) days after the Effective Date.
F-1
<PAGE> 33
EXHIBIT G
PAYMENT SCHEDULE AND TERMS
1. EXCHANGE SERVICE FEES.
(a) Fee Components. In consideration of the Commerce Exchange Services
and rights and licenses in and to the Insure Platform granted by
ChannelPoint, GEFA shall pay the following Exchange Service Fees,
subject to the provisions of subsections (b) and (c) and (d) below.
(i) GEFA Insurance Products. GEFA shall pay to ChannelPoint a fee
equal to:
(A) for any Insurance Products purchased by a Lead that is
quoted and purchased using through any Open Portal;
[...***...] of gross first year premium paid by a
Policyholder to GEFA for any LIFE INSURANCE Products and
[...***...] of gross renewal premium; or
[...***...] of gross first year premium paid by a
Policyholder to GEFA for any LONG TERM CARE ("LTC")
INSURANCE Products and [...***...] of gross renewal
premium; or
[...***...] of gross first year premium paid by a
Policyholder to GEFA for any Annuity Products and
[...***...] of gross renewal premium; or
[...***...] of gross first year premium paid by a
Policyholder to GEFA for any DISABILITY AND HEALTH INSURANCE
Products and [...***...] of gross renewal premium; or
GEFA will calculate and report and pay commissions due
ChannelPoint no less frequently than monthly.
(B) for any Insurance Products purchased by a Lead that is
quoted and purchased using through any Branded Portal, or
GEFA appointed intermediary, or GEFA Employee service fees
equal to
[...***...] of all first year gross premiums paid by a
Policyholder to GEFA for any LIFE INSURANCE Products (except
for single premium deposit Life Insurance Products) or
[...***...] per policy, whichever is greater; or
* CONFIDENTIAL TREATMENT REQUESTED
G-1
<PAGE> 34
[...***...] of all first year gross premiums paid by a
Policyholder to GEFA for any LTC INSURANCE Products or
[...***...] per policy, whichever is greater; or
[...***...] of all first year gross premiums paid by a
Policyholder to GEFA for any ANNUITY Products and single
premium deposit Life Insurance Products, or [...***...] per
policy, (whichever is less) for fixed annuities or
[...***...] (whichever is less) for variable annuities or
single premium Life Insurance Products; or
[...***...] of all first year gross premiums paid by a
Policyholder to GEFA for any HEALTH OR DISABILITY INSURANCE
Products or [...***...] per policy, whichever is greater.
(ii) Third Party Carrier Products. With respect to any insurance
products provided by any third party carriers through any
Semi-Private Branded Platform, the GEFA shall pay ChannelPoint a
fee equal to:
(A) if GEFA is the Market Maker (as defined below),
ChannelPoint will receive [...***...] and GEFA
[...***...] of the total aggregate distribution fee,
commission or other consideration provided to GEFA by
such third party carrier for such sale (the "THIRD
PARTY COMMISSIONS"); or
(B) if ChannelPoint is the Market Maker (as defined below),
ChannelPoint will receive [...***...] and GEFA
[...***...] of the total aggregate Third Party
Commissions provided to ChannelPoint by such third
party carrier for such sale.
For purposes of this Section, a "MARKET MAKER" means
the party that enters into an agreement with the third
party carrier, pursuant to which the carrier pays
Third Party Commissions for the sale of insurance
products provided by the third party carrier. The
Exchange Service Fees under this subsection (b) accrue
upon receipt of any payment by GEFA under (i) or
ChannelPoint under (ii) and shall be payable on a
calendar quarterly basis in accordance with Section
5.1(c) of the Agreement.
(iii) Insure Platform Fees. In consideration for the rights granted
to GEFA under the Insure Agreement, GEFA shall pay ChannelPoint
the Insure Platform Fees equal to:
(A) for a period of five (5) years after the date of the
first commercial use of the Insure Platform by GEFA,
the lesser of (1) [...***...] of all gross premiums
paid by a Policyholder to GEFA and (2) [...***...], for
any Life, or LTC, or Health, Or Disability Insurance
Products purchased by such Policyholder where the
Insure Platform has performed
* CONFIDENTIAL TREATMENT REQUESTED
G-2
<PAGE> 35
any processing relating to the sale of such Insurance
Product, including, without limitation, processing for
the Insurance Underwriting Process and The Case
Management Process and The Insurance Fulfillment
Process.
(B) on an annual basis after such five (5) year period, a
maintenance fee equal to [...***...] of ChannelPoint's
then-current list price for annual platform fees to the
Insure Platform.
(iv) p.d.,q New Application Processing Fee. In consideration of an
internal use license granted to GEFA by ChannelPoint to certain
software programs known as p.d.,q. ("p.d.,q.") that has been
transferred to ChannelPoint by First Colony Life Insurance
Company ("First Colony") under the Assignment Agreement (as
defined in Section 11.2 of the Strategic Alliance Agreement),
GEFA shall pay to ChannelPoint [...***...] for each new insurance
application that has been processed by GEFA or any of its
affiliates using p.d.,q. after the Effective Date, including any
insurance application processed by GEFA or any of its affiliates
on behalf of any third party pursuant to licenses granted under
Article 4 of the Assignment Agreement. For purposes of
classification, all p.d.,q. New Application Processing Fees shall
be classified as Exchange Service Fees.
(b) Minimum Fees. The minimum quarterly Exchange Service Fees shall
be equal to: (i) [...***...] in each quarter of the calendar year
2000 and (ii) [...***...] in each calendar quarter of the
calendar years 2001, 2002, 2003 and 2004 subject to modification
as set forth in Section 5.1(b) of the Agreement.
(C) Commission Schedules. For each Insurance Product to be sold
through the Commerce Exchange, ChannelPoint and GEFA shall
execute a specific commission schedule that specifies certain
terms applicable to the payment of commissions and are in
general accordance with the rates set forth above.
2. MINIMUM PROFESSIONAL SERVICES FEES.
(a) Fee Schedule. The fees charged GEFA for professional services
shall be based on market justified rates for the skills
deployed. As of the effective date and continuing though
December 31, 2000, the applicable hourly rates for
ChannelPoint's Professional Service Fees are attached hereto as
Schedule 1; provided, however that [...***...].
(b) Minimum Fees. The minimum Professional Service Fees shall be
equal to a minimum of: (a) [...***...] by the end of calendar
year 1999; (b) [...***...] in each calendar quarter during the
calendar year 2000 (for a total of [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
G-3
<PAGE> 36
by the end of calendar year 2000); and (c) [...***...] in each
calendar quarter of the calendar years 2001, 2002, 2003 and 2004
subject to modification and recovery as set forth in Section
5.2(b) of the Agreement.
* CONFIDENTIAL TREATMENT REQUESTED
G-4
<PAGE> 37
SCHEDULE 1 TO EXHIBIT G
STANDARD PROFESSIONAL SERVICES FEES
EFFECTIVE: 8/19/1999
Rating, rules and interface consultants [...***...] hr
Account Manager [...***...] hr
Technical Account Manager
Workflow and forms specialist
Plan Modeler
Web development [...***...] hr
* CONFIDENTIAL TREATMENT REQUESTED
G-5
<PAGE> 38
EXHIBIT H
SUMMARY OF INITIAL CONSULTING SERVICES
As part of the ChannelPoint's initial engagement to provide Consulting Services
relating to the implementation of the ChannelPoint Exchange and the Insure
Platform within GEFA, ChannelPoint and GEFA will cooperate in achieving the
following objectives: [...***...]
In order to accomplish these objectives, ChannelPoint agrees to provide the
following services under the Services Addendum:
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
H-1
<PAGE> 39
[...***...]
GEFA agrees to provide the following assistance in connection with the above
objectives:
[...***...]
TEAM RESOURCES AND PROJECT PLAN
GEFA and ChannelPoint will adopt a design methodology described below in
conducting the activities described in this Exhibit.
[...***...]
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
H-2
<PAGE> 40
TIER 1: CORE TEAM
Objectives: Provide leadership, prioritization, scope of work and other
Requirements Phase planning and analysis for the Work Teams. Core team members
will have clear goals, be the best and the brightest, have 100% commitment and
be strong in process, industry knowledge, and systems skills.
Requirements Phase Commitment: [...***...] (except for host city personnel).
Administrative person would be [...***...] during this period with no travel,
but must be located in host city.
GEFA Personnel
[...***...]
ChannelPoint Personnel
[...***...]
Deliverable: ChannelPoint will deliver to GEFA the high-level requirements for
implementing enhanced versions of the ChannelPoint Exchange (including Commerce)
and Insure products supporting the requirements of GEFA and the insurance
industry with respect to the Products (the "TIER 1 DELIVERABLE").
Timing: The Core Team will make reasonable efforts to hold its initial meeting
no later than thirty (30) days after the Closing Date. ChannelPoint will make
reasonable efforts to deliver to GEFA the Tier 1 Deliverable no later than
thirty (30) days after the initial meeting of the Core Team.
TIER 2: [...***...] WORKING TEAMS PER PRODUCT LINE
Structure: A working team for each of the [...***...] of LTC, Annuities, Life
and WorkSite. Thus, there would be a total of [...***...] working teams. Teams
may work concurrently, seriatim or some combinations, as determined by the
Steering Team and the Requirements Phase work.
Objective: During Requirements Phase, do detailed prioritization, scope of work
and other Requirements Phase planning and analysis for the Product Line Work.
* CONFIDENTIAL TREATMENT REQUESTED
H-3
<PAGE> 41
Requirements Phase Commitment:
o Full time commitment for the requirements phase (roughly [...***...]);
o GEFA Group: occasional travel for coordination and best practice meetings
o ChannelPoint Group: 100% travel during requirements phase
GEFA Working Team Personnel:
Each of the [...***...] Product Line Teams would consist of at least one
full time person from:
[...***...]
In addition, there would be at least [...***...] for each Product Line
from:
[...***...]
Additional Support As Needed from [...***...] and other areas
ChannelPoint Working Team Personnel
A minimum of [...***...] full time persons for each of the [...***...]
working teams
Deliverable: ChannelPoint will deliver to GEFA the detailed requirements for
implementing enhanced versions of the ChannelPoint Exchange (including Commerce)
and Insure products supporting the requirements of GEFA and the insurance
industry with respect to the Products (the "TIER 2 DELIVERABLE").
Timing: ChannelPoint will make reasonable efforts to deliver the Tier 2
Deliverable to GEFA no later than [...***...] after the date on which the Tier 1
Deliverable was delivered to GEFA. Both parties recognize the deliverable date
will be subject to prioritization and scoping of the high level requirements.
TIER 3: BUILD
Objectives: ChannelPoint's build and implementation for GEFA of enhanced
versions of the ChannelPoint Exchange (including Commerce) and Insure products
complying with the requirements set forth in the Tier 2 Deliverable.
* CONFIDENTIAL TREATMENT REQUESTED
H-4
<PAGE> 42
Deliverable: ChannelPoint will deliver to GEFA enhanced versions of the
ChannelPoint Exchange (including Commerce) and Insure products complying with
the requirements set forth in the Tier 2 Deliverable and will perform the
necessary installation services at the licensed GEFA sites to implement such
enhanced versions of the ChannelPoint Exchange (including Commerce) and Insure
products (the "TIER 3 DELIVERABLE").
Timing: ChannelPoint will make reasonable efforts to deliver the Tier 3
Deliverable to GEFA on date mutually agreed to based on the Tier 2 specific
requirements.
PROJECT MANAGEMENT
The relationship will evolve through various stages. The ChannelPoint and GEFA
Teams activities will be carried out via a phased approach, each of which will
be based on a [...***...] process.
REQUIREMENTS PHASE. In the Requirements Phase of the relationship, ChannelPoint
and GEFA Teams will focus on:
[...***...]
CHANNELPOINT BUILD PHASE: CHANNELPOINT Team builds the prototypes and actual
model in stages for its core technology and the GEFA Team provides assistance in
the form of feedback, additional information, validation of ideas and
requirements, brainstorming alternatives around obstacles. The work in this
phase encompasses the confirmation of business requirements, the creation of a
detailed design related to the new system, and the definition of the technical
architecture.
GEFA CUSTOMIZATION PHASE: GEFA Team customizes the enhanced ChannelPoint core
technology and modifies or customizes its existing systems to use the core
technology efficiently within its business. The ChannelPoint team will lend
assistance in the form of feedback, additional information, validation of ideas,
and brainstorming alternatives around obstacles.
In addition, as provided in the Strategic Alliance Agreement, ChannelPoint will
provide professional services to GEFA on this GEFA Customization Phase.
TESTING PHASE. The work in this phase encompasses ChannelPoint's deployment of
the system in a pilot implementation in GEFA's environment in Alpha and Beta
testing in order to assess the readiness to proceed with full rollout in the
Deployment Phase. GEFA will provide assistance in the form of
* CONFIDENTIAL TREATMENT REQUESTED
H-5
<PAGE> 43
feedback, additional information, validation of ideas, realistic test cases,
brainstorming alternatives, etc.
DEPLOYMENT PHASE: This phase encompasses ChannelPoint's rollout of the selected
hardware and tested application to full complement of GEFA's Intermediaries.
GEFA will provide assistance in the form of communications and associated
interface with Intermediaries.
H-6
<PAGE> 44
EXHIBIT I
CHANNELPOINT SERVICE ROADMAP
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
I-1
<PAGE> 45
EXHIBIT J
JOINT PLANNING ACTIVITIES
SUMMARY
GEFA and ChannelPoint agree to cooperate in the definition, planning and
prioritization of enhancements to the Commerce Exchange services and the Insure
Platform for application to the life, long-term care and annuity insurance
markets. This relationship is also expected to result in industry distribution
channels and customers having access to rate quotes, illustrations and proposals
and policy information to enable the purchase and administration of Insurance
Products via the Commerce Exchange.
OBJECTIVES OF THE RELATIONSHIP
Primary Objective: Enhance the ChannelPoint Commerce Exchange e-commerce
platform and Insure Platform client/server software products for both to be
internet enabled with increased functionality
As part of ChannelPoint's ongoing product improvement process, ChannelPoint
plans to enhance the Commerce Exchange and Insure Platform (and the technical
capabilities) to create a web based service for insurance carriers to be able to
execute electronically the following processes in support of the customer
engagement and fulfillment process (the "Core Technology"). The service will
enable carriers and their Intermediaries to transact the customer engagement and
fulfillment process in a significantly improved environment.
General industry goals of the improved environment include:
[...***...]
ChannelPoint will rely upon GEFA's expertise in order to assess the requirements
associated with the insurance goals identified above. Examples of relevant
insurance business processes include the following:
* CONFIDENTIAL TREATMENT REQUESTED
J-1
<PAGE> 46
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
J-2
<PAGE> 47
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
J-3
<PAGE> 48
DEFINITIONS
"BROWSER" means market accepted releases of Microsoft's Internet Explorer,
Netscape and their successors and other general accepted browsers.
"APPLICATION PACKAGE" means the insurance or other Product application in
electronic or image form, any payment made with application, information for
1035 exchanges, authorizations to process the application, including the
electronic signature, and any other documents required by a carrier to accompany
the application such as medical information.
"PRODUCTS" means Fixed Life Insurance (whole life and term), Variable Life
Insurance, Long Term Care Insurance (LTC), Fixed Annuities (Deferred and
Immediate), Variable Annuities, Disability Insurance and Dental Insurance,
unless otherwise specified.
"INTERMEDIARIES" means producers, Brokerage General Agencies/Agents, Brokers,
Banks, Worksite Enrollers and Securities Brokerage Firms and other like
distribution channel personnel and entities, including GEFA's captive agencies.
J-4
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary Date of Formation State of Formation Percentage Owned
<S> <C> <C> <C>
ChannelPoint Insurance Services, Inc. January 25, 1999 Delaware 100%
ChannelPoint eCommerce Exchange Insurance
Agency, Inc. December 15, 1999 Delaware 100%
Gold Acquisition Corp. January 14, 2000 Delaware 100%
LifeLink Acquisition Corporation March 1, 2000 Delaware 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 24, 2000, relating to the financial statements and the
financial statement schedule of ChannelPoint, Inc., which appear in such
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Broomfield, Colorado
March 24, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 20, 2000 (except for Note 12 as to which the
date is February 1, 2000), with respect to the consolidated financial statements
of InsurQuote Systems, Inc. included in the Registration Statement (Form S-1)
and related Prospectus of ChannelPoint, Inc. for the registration of its common
shares.
Salt Lake City, Utah
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001046993
<NAME> CHANNELPOINT, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,693
<SECURITIES> 15,335
<RECEIVABLES> 11,713
<ALLOWANCES> (274)
<INVENTORY> 0
<CURRENT-ASSETS> 40,533
<PP&E> 12,538
<DEPRECIATION> (2,682)
<TOTAL-ASSETS> 74,524
<CURRENT-LIABILITIES> 17,952
<BONDS> 131
0
14
<COMMON> 17
<OTHER-SE> 32,952
<TOTAL-LIABILITY-AND-EQUITY> 74,524
<SALES> 0
<TOTAL-REVENUES> 5,498
<CGS> 0
<TOTAL-COSTS> 12,159
<OTHER-EXPENSES> 46,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (52,351)
<INCOME-TAX> 0
<INCOME-CONTINUING> (52,351)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,351)
<EPS-BASIC> (4.60)
<EPS-DILUTED> (4.60)
</TABLE>
